Intermediate Microeconomics and Its Application 12th Edition by Walter Nicholson,Christopher Snyder

Exercise 15

Many people think that wage inequality is too extreme in the United States (and possibly in other countries). How would you judge whether there is ''too much'' inequality? If you decided that inequality were too large, what kinds of policies might you propose to change it? For example, what supplyand demand-oriented policies might have a significant impact on wage inequality? What are potential shortcomings of using such a market-based approach? Suppose instead that you opted for a more direct tax/transfer scheme to level wages. What are some of the potential pitfalls to such an approach? More generally, should one focus on wage inequality per se or perhaps on the related problem of poverty and low incomes?