Which policy is most likely to reduce inequality?

Which policy is most likely to reduce inequality?

• A. Increasing payroll taxes on the middle class
• B. Reducing education spending
• C. Eliminating all transfer programs
• D. Job training for low skilled workers

Answer: (D)

Policies that reduce inequality by raising the earnings potential of those with the smallest skills focus on expanding human capital and improving access to higher-paying jobs. Job training for low-skilled workers does exactly this: it increases skills, makes them more productive, and raises their wages. When a worker can move into higher-paid roles, the gap between low-skilled and higher-skilled workers narrows, which lowers overall inequality and can improve mobility. By contrast, raising payroll taxes on the middle class lowers after-tax income for a broad group without directly boosting the earnings of the least advantaged; cutting education spending reduces opportunities for low-income students to improve their future earnings; eliminating transfer programs removes direct cash support that helps reduce poverty and inequality.

Policies that reduce inequality by raising the earnings potential of those with the smallest skills focus on expanding human capital and improving access to higher-paying jobs. Job training for low-skilled workers does exactly this: it increases skills, makes them more productive, and raises their wages. When a worker can move into higher-paid roles, the gap between low-skilled and higher-skilled workers narrows, which lowers overall inequality and can improve mobility.

By contrast, raising payroll taxes on the middle class lowers after-tax income for a broad group without directly boosting the earnings of the least advantaged; cutting education spending reduces opportunities for low-income students to improve their future earnings; eliminating transfer programs removes direct cash support that helps reduce poverty and inequality.