Do Business Leaders Have a Responsibility to Address Wealth Inequality?

During the COVID-19 pandemic, the rich have continued to get richer while the poor have continued to get poorer, evident of the crippling wealth inequality in the United States

According to the Pew Research Center, in 2018, the highest earning 20% of families made over half of the total income in the United States. This is just one example of the growing income inequality gap in the United States. Between 1989 and 2016, the income gap between the richest and the poorest families doubled. This problem has only been further exacerbated by the COVID-19 pandemic, which has caused many low-income families to lose their jobs during the original shutdown in March, while many of the richest billionaires have added trillions to their wealth. Business leaders not only have a social responsibility to help low income families, but will also benefit from this aid themselves. Through providing aid, businesses can ensure a strong customer base for their products as well as a greater potential body of talent to hire.

Businesses have the ability to alleviate the wealth inequality issue in a number of ways. One option is funding early education. Early childhood education helps children become better communicators and sets up their learning skills for the rest of their education. According to a study of the Early Head Start program, there were small, but present effects on children’s health, behavior, and cognitive skills as a direct result of earlier education. The rate of return on tax dollars spent on education is higher the younger the person is, and the rate of return is more than $16 on each dollar spent on childcare and education programs in the early years. An example of a company that has invested in early childhood education is PNC Financial Services. Through the Grow Up Great program they launched in 2004, they’ve supported over 2 million kids across the United States through grants to organizations that support the arts and sciences in early education. The business, in turn, benefitted through positive marketing from this move, and this serves to show just one of the potential benefits a company can receive as a result of staying more involved in their communities.

Another way that corporate entities can help is by offering higher education opportunities for their employees. Getting a college degree greatly boosts a person’s job and income prospects, and in this day and age when automation is taking over the sectors of the job market often held by those without higher education and specialized knowledge, opportunities for these criteria are crucial. Researchers from Georgetown found that the overall lifetime earnings of an individual with a college degree are significantly higher, especially for those with a degree in a STEM field. Serving as a prime example of this win-win method, Starbucks has partnered with Arizona State University to offer college education at little to no cost to employees. Companies offering money towards their employees’ educations know that this will potentially encourage these employees to stay at the company for a longer time, allowing them to leave a positive mark on the brand with the help of their new education.  This has benefitted workers by allowing them to gain new skills, while Starbucks has benefitted through increased productivity and better performance. 

Lastly, business leaders can help provide fairer wages for employees. This is through the concept of a “living wage” for lower income individuals that ensures that they will be able to pay their bills each month. It’s important to recognize that this living wage must be adapted based on geographical location, as different places have different prices for the same living standards. Businesses can also financially incentivize good work, with more lenient and generous raises for productive and efficient blue-collar workers..

It’s important to note that while business leaders have the ability to voluntarily support programs to better their employee’s positions, the government has a major responsibility in bridging the wealth inequality gap as well. A nationwide healthcare program to decrease skyrocketing costs and lower insurance premiums, especially for people with preexisting conditions, would have a positive impact on all Americans, but specifically those with lower incomes. According to Frederick Zimmerman, a professor at UCLA’s Fielding School of Public Health, "And actually, what's happening to the health of wealthier people is that it's remaining relatively stagnant, but the health of the lowest income group is declining substantially over time”. Lower income individuals often find themselves struggling to pay for basic necessities if they have underlying health problems that they have to get treatment for. However, higher earning individuals do not have this problem. Furthermore, encouraging competition between healthcare providers will ensure that rates drop to stay attractive to consumers. 

Both government and business leaders should continue to tout the Earned Income Tax Credit, which helps incentivize low income individuals to work without costing employers more money or creating inflation. According to the Center for Disease Control, the EITC helped to lift 5.7 million people out of poverty in 2017 alone. This program has already aided many American families, but the government must continue to expand it and business leaders should ensure that employees are aware of this opportunity. This program also has attractive benefits for employers: over 30,000 jobs and $5 billion in sales were created as a result of the program in California in 2007. 

Businesses have a great deal to gain from ensuring more equal opportunities to low income employees. As poverty can often last for generations, business leaders can help alleviate poverty in their employees by providing educational opportunities that will create more attractive job prospects for them and their families. And what better time to get on board with supporting employees than during a pandemic? 

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