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19 February 2014

Wealth inequality calls for permanent aid

The richest 85 individuals in the world have as much wealth as the poorest 3.5 billion, according to estimates in a recent report released by Oxfam, an international development organization. Driving through the areas around campus, one can see the polarization of wealth in the Miami area firsthand. The transition from dilapidated apartment complexes to luxurious high-rise hotels is evidence of how wealth inequality affects many areas in South Florida.

Wealth inequality is a growing problem in the United States, and there are steps that can be taken to reduce it. Barack Obama’s recent fixation on increasing the minimum wage, however, is a short-term solution to a long-term problem. Wealth inequality will not be solved by small wage hikes, or even by the redistribution of wealth from Maserati drivers to Metro riders. Instead, a comprehensive commitment must be made to higher standards of education and training in inner cities if real progress toward greater wealth equality is truly to be achieved.

On Jan. 28, when President Obama delivered his State of the Union address, he called on companies to provide workers with higher wages. Additionally, he informed the country that he had signed an executive order raising the minimum wage to $10.10 for applicable workers under new federal contracts. If the president were able to pass a minimum wage bill for all workers, the Economic Policy Institute estimates that 21.3 million individuals would receive a wage hike.

Although this may sound great, the bigger question is this: Why are there so many individuals who receive less than $10.10 per hour? The root of the problem lies in the failure of the educational system to properly prepare and train many of its citizens for today’s knowledge-based economy.

In Miami-Dade County, according to the Florida Legislature’s Office of Economic and Demographic Research, of people who are 25 years of age or older, only 77.6 percent graduated with at least a high school diploma. Compare this to the 85.5 percent in Florida as a whole, and one can see that greater educational attainment should be a high priority.

Furthermore, household income for workers over 25 who are paid the minimum wage is on average $42,000, showing that a minor increase in minimum wage would not affect individuals at or below the poverty level as much these policies intend.

The minimum wage law may have broad support because it is a politically popular thing to do, but its intentions are misguided and present only a short-term solution to the dilemma of rising wealth inequality in the U.S.

If politicians are serious about closing the gap between the richest and poorest citizens, then a substantial investment must be made into the education and training of Americans and South Floridians. Anything else would only be a temporary reprieve.

Paul Ryan is a junior majoring in economics and finance.