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In every society there will be those who are better off than others.There are people who are poor and people who are rich. The American way of life for a long time was to have a society where the majority of the people are not poor or extremely rich, but rather in a middle class.It also increases the productivity (and therefore, income) of those whose “jobs are enhanced by machines”; these groups are the “winners.” However, technology eliminates the jobs of less-skilled (already lower-paid) workers by providing a more productive, albeit less “human,” alternative and forcing workers into lower-paying service jobs; these workers are the “losers.” There is a clear schism widening between those benefiting and those being harmed by technology, and it is reflected in increasing income inequality.
The first-place winner, Solomon Polansky of the Blake School in Minneapolis, received an additional $400 and was offered a paid summer internship at the Minneapolis Fed. productive output has soared while the number of labor hours has remained constant.
The Luddites’ concerns are not without merit and remain relevant today in the United States. Ongoing technological advances enable these productive strides, but also drive increasing income inequality by spawning two very distinct groups of winners and losers: those who benefit from technology, such as inventors of technology and workers whose productivity is enhanced by technological advance, and those who are negatively impacted through substitution of labor by technology.
The best way to demonstrate the new trend in income distribution is to look at the salaries of CEO's compared to that of the average worker and how they changed in the last thirty years.
In 1970 the average annual salary in America was $32,522.
The poorest fifth of the population actually began to make less money while the wealthiest still enjoyed considerable growth of income.
This trend is leading America into an age of huge income gaps between the very rich and the poor.Thus, their marginal revenue has increased, and the price the firm will be willing to pay, in salary, will also increase. These traders’ incomes therefore increase with the addition of technology. Technology leads companies to, inevitably, eliminate the workers whose labor has been replaced by a more efficient process in order to remain competitive in their markets. businesses worked the same number of labor hours (194 billion) in 2013 as in 1998, yet productive output increased 42 percent over that same time frame. However, income inequality goes hand in hand with wealth inequality, as excess income allows one to invest in other capital, such as stocks and bonds, leading to the accumulation of wealth. Thus, these workers’ income has dropped to zero, forcing them into other lower-skill industries, such as food and restaurant services, that already have an ample supply of workers and thus driving wages downward. From the time after World War II until 1973 the graph of annual growth rates of household income looked like a picket fence, meaning that the poorest fifth of the population income grew at about the same rate as the wealthiest fifth and everyone in between.From 1973 to 1993 that graph begins to look more like a staircase with the farthest left stairs being underground.These factors of production include physical holdings (land, money) as well as intangibles (labor time, creativity).If an entrepreneur or inventor can successfully develop and market a desirable invention, the market will reward him/her by offering tremendous profits.This spring the Minneapolis Fed held its 27th Annual Student Essay Contest, which is open to all high school students in the Ninth Federal Reserve District.The contest drew 269 essays from schools throughout the district. Other top essays can be found at under the Student Resources section of the Community & Education tab. The third-place winner received an additional 0, and the second-place winner an additional 0.