King 1 Ryan King Dr.

KT Magnusson ECON 2010 Fall Semester 2013 Poverty in America in Relation to Microeconomics Poverty is without a doubt one of the largest problems in America right now. From what I have learned throughout my course in microeconomics, it almost directly relates to it all. Factors such as outsourcing, creative destruction, monopolies, and even how markets are structured and ran all contribute to American poverty. It is only getting worse with time as well. The rich are getting richer and the poor are getting poorer and the only way to stop it is to eliminate this cycle to more equally distribute the wealth. So what can we do to eliminate poverty or even at least reduce the rate of it even more? In my personal opinion I believe that companies in America need to stop outsourcing, need to raise wages, and stop piling on to wealth that they dont necessarily need. True it is not illegal to do this, as long as these companies stay clear with antitrust laws, but I believe it is more of a moral dilemma. Why pay the workers more money if I can just save more money for myself? This kind of attitude I believe is a major contributor towards the reason why a good portion of the American population is in poverty. I found one topic very interesting during my studies; creative destruction. Yes it is always a good idea to innovate and create new things but at what cost? Being an aspiring engineer I never thought it would hurt economy to make something to make the world a better place. I

King 2 never looked at it that way. My thinking is that by making something newer and easier it would make people not work as hard for something, but not put someone out of a job completely. Not only does it put people out of work, it destroys companies and technologies that are deemed no longer considered necessary. Monopolies may also crumble from this, which arent always necessarily a bad thing other then everyone in that industry loses their jobs. From the losses of these monopolies though, new opportunities may come about. The creation of all the new technologies may warrant an opening of a new production facility. This may facilitate new jobs at higher wages which could contribute toward our poverty problem. Monopolistic type companies I believe are hurting the poverty problem even more. When companies can make prices and not worry about other companies competing with them I believe that they have much more control over how they pay their workers. If a company can just pay minimum wage and still get the same amount of work done then why should they pay more? Especially when they dont have to worry about what other companies are paying their employees. This also causes allocative efficiency when they dont put all of their resources in the best uses possible. This ultimately creates an efficiency, or deadweight loss for American society. Income inequality is the sole reason behind poverty in America. Like it is said in the article, most of the wealth in America is within the top one percent in average wages. Why is this though? Just from the knowledge I have gained from this course I learned that one reason is because some people dont come across the same opportunities as others. This is due to a number of reasons. People are never born the same. We have different abilities, come from different backgrounds, and have more or less opportunities present themselves in our lifetimes. All of these factors influence income inequality. It is no surprise that someone who is uneducated will

King 3 earn less money over their lifetime versus someone who has a college degree. Because of so many technological advances it is almost crucial of employers to hire someone who has education to come work for them because of how complex their product may be. The educated person will know how to work more efficiently due to all of the training they had in school and will in the long run benefit more to the company versus someone who lacks education. Also because educated workers are often more rare to find then uneducated ones, it raises wages for those with degrees increasing income inequality even more. Discrimination is greatly demonstrated in American poverty. It wouldnt be fair to say that poverty is equally distributed among ethnicities and races because Hispanics and African Americans combined make up about fifty percent. I found it very interesting that there was even a market ratio that factored how much less a minority would make compared to a white man. This discrimination is driving up the poverty rate even more. When someone who doesnt discriminate when hiring someone, are often driven out of the industry by someone who does discriminate because that industry will be paying less in wages. When these industries get ran out that just makes jobs even scarcer, resulting in even more poverty. Conclusively I have learned that microeconomics greatly affect the way poverty is handled in the United States. Through many programs such as Temporary Assistance for Needy Families (TANF) and the Supplemental Nutrition Assistance Program (SNAP) it has helped immensely. But economic changes will be needed in order to completely get rid of poverty. Businesses need to take into account when budgeting to keep employees out of poverty. I believe that if the government does not have to intervene and help as much as they do now then that as a result would allow government to help such businesses prosper even more by assisting them with the money they saved from not having to provide government subsidy programs.