Eye on income inequallity

In order for capitalism to work, we need some level of income inequality. However, many economists say that income inequality is a bad thing.
Income inequality is at a new high, not having been this apparent since the 1920s.
On one hand, economist Branko Milanovic says that inequality isn’t healthy for the society or economy. It undermines the idea of equal opportunity.
“It makes some people excluded or poor and unable to actually…go to school, complete studies, and contribute to society,” Milanovic said. It hurts the broader economy by disallowing a segment of society to be as productive as possible.
According to economist Thomas Piketty, inequality is likely to grow, because capitalism tends to reward the capitalists first, while the middle class gets a very small portion.
Milanovic says that “the elites start dominating the political discourse and even political decision-making, and then they enforce their own privilege.”
And yet, some level of income inequality is needed to make capitalism work.
Wanting to be at the top provides an incentive for people to be hard workers.
“If your society has a lot of inequality because a lot of your producers have done very well selling your products…that kind of inequality is not harmful in general. But if you have inequality because your poorer people don’t have enough economic opportunity…that is a big problem.”
The United States did have equality once. After World War Two, much wealth was destroyed, giving a more equal ground between middle and upper classes.
Employee stock ownership and profit sharing are what Harvard economist Richard Freeman recommend to close the inequality gap. Milanovic suggests large estate taxes and more equal labour taxes, while economist Tyler Cowen says we need to improve education and lower the cost of health care to gain a more equal stance.