Income redistribution or Redistribution of Wealth is a term defined as “a government policy to redirect income to a targeted sector of a country's population”
Mr. Dwight R. Lee, Professor of Economics at University of Georgia, in his article on redistribution, has discussed the federal government’s policy of Income Redistribution, and also has pointed out the flaws, as well as the shortcomings of the policy and the system. After giving a detailed review to the article and other research I have come up to the point that agrees with MR. Lee, that the current general policy of income redistribution is not efficient enough to meet the aimed goal.
The very first image of the policy and its implication is very impressive, but as you go into details and statistics, you mind changes, as discussed by Mr. Lee “The unstated implication is that income was originally distributed by someone. But no one distributes income. Rather, incomes are determined in the marketplace by millions of people providing and purchasing services through voluntary exchanges, and government transfers necessarily limit these exchanges. That explains the quotation marks around the term “redistribution.”
The other side of the picture shows us the truth that the wealthy largely get their wealth or increase it by means of government action, usually in the form of favorable legislation, as mentioned by Mr. Lee the example of the tariffs that were imposed on steel imports in year 2002 to save steelworkers’ jobs. A survey carried out afterwards showed that these tariffs took away the jobs of about 200,000 employees. As the industries had to pay higher price for the steel required for their production, they had to cut down their human resource so as to balance cost of production. This figure was much higher than the number of jobs that were saved. In addition, consumers price for the products containing steel also increased, which again reduced the purchasing power of the consumer.
In my opinion, the current government policy covering the social security is highly inefficient as the basic purpose that is to serve and support the lower segment of the society, and this purpose fails as a fix percentage of amounts are allocated for the payments. This amount does not have any check on the correlation with the wealth of the poor. If we look at the medical facilities for this segment, the current policy require one to be at the age of 65 or above. Statistics show that the poverty rate of this age group is quiet low. What about those below 65, as in America, health graph is showing a drastic downfall especially in middle aged people. Middle aged people are mostly strugglers with big responsibilities and there are no policies to facilitate them.
This policy should be reviewed and essential changes shall be brought in. such as ‘In Kind’ transfers, or Non- Means – tested- Cash transfers, that are the transfers in the form of subsidies or housing, skilled training, energy etc. shall be categorized and synchronized, I do not intend to say that these transfers are worthless, yet the aimed purpose of these is not met. The major beneficiaries of these transfers are those who truly come under the heading of the labor or working class, yet they are mostly the non-poor. Government should identify the righteous beneficiaries and allocate resources for the survival and development of those. It should implement a tax system efficient enough to regulate the cycle of distribution of income from rich to poor. This could lead the country to another level of development, as the most important aim of development efforts is to reduce poverty, which can only be attained by economic growth and by income redistribution.
Only some federal and state policies have positively effected the income distribution and welfare, but most of the time the benefits to the poor are overstated because they fail to address the conflicting effect of the benefit programs on the earning actions of the beneficiaries. As for example, talking about transfers payments, the recipients who are employed lose a large share of their transfer payments. There is no doubt that the percentage of national income transferred through government programs has increased significantly, yet there is no evidence that this distribution of income has brought parallel benefits to the poor.
http://www.econlib.org/library/Enc/Redistribution.html
