Paul Krugman has been hired to help the City University of New York and its Luxembourg Income Study Center to study income patterns and their effect on inequality.
I believe we can save CUNY the $225k it's about to pay PK for two semesters of distinguished professoring, and much of what it allocates on behalf of the Income Study Center, by taking a pragmatic approach to the income inequality issue:
For starters, our medium of exchange---the dollar, here in the U.S.---is created by the Federal Reserve. And, yes, those who possess the power to print dollars try to---and, alas, do---influence their "distribution". Among other things, the Fed subscribes to this theory they call the "wealth effect". They believe that if, through the printing of money, the lowering of interest rates and bank reserve requirements, etc., they can create wealth for people, people will become more active agents on behalf of the economy.
And while you can argue that the Fed's manipulations of the past had boosted asset prices of, say, real estate in the mid 00's, and stocks today, the fact remains that a dollar is not, by itself, wealth---true wealth is earned, or created, by its holders, or its holders' benefactors, as opposed to something that gets distributed by some central body. The dollar itself is simply the currency we use to trade wealth amongst ourselves. We use it to buy goods and services produced by individuals who wish to by goods and services produced by other individuals. Its "distribution" is ultimately determined by the production of goods and services. And, therefore, those who produce the goods and services the rest of us hold most dear will of course earn a greater proportion of what those who measure such things manipulatively term "the national income".
So where would "inequality" legitimately enter the discussion? Well, certainly not to the extent that those who produce desirable goods and services receive more "income" than those who don't. That of course should be a great extent. The only place where "inequality", in an income context, would rightly be addressed is where government intrudes onto the marketplace to create a competitive advantage for its supporters. Could be via regulations favoring one producer over another (like, say, big banks over small banks), the subsidizing of a particular group (handing it your tax, or newly printed, dollars), or the tariffing the products of a favored group's foreign competition. These are situations where the playing field has been made unequal---where the politician takes from the consumer and gives to the politically-influential producer. The consumer gets hit hard, and thrice: First by the tax, then by the inflation (when we're talking money printing), and then by the purchasing of a more expensive and/or inferior product when compared to what would have been available in an unobstructed market.
(We could also address the inequality resulting from asset price inflation caused by easy-money Fed policy [i.e., those who own assets reap the benefits], however, as we observed in the mid 00's, such "wealth" is generally ephemeral and self-correcting.)
Beyond that, we could talk about inequality of opportunity. Here the focus would be on anything that obstructs the non-producer from becoming a producer---such as the minimum wage. The minimum wage has to be the most discriminatory---against disadvantaged folks---law on the books. A forced wage above what entry-level labor can profitably produce essentially kills the opportunity for those who lack experience and education. Employers are forced to hire only those individuals who bring the skills that would justify paying the mandatory minimum. Leaving the unskilled without the opportunity to learn, to grow, and to one day become producers who find themselves the subjects of some academic think tank that has completely lost sight of how the real world works.
So then (abandoning pragmatism for the moment), there is something that can be done to reduce inequality in America: Eliminate the politicians', and Fed officials', ability to help their friends and hinder their friends' foes. Of course that---the separation of commerce and state---won't be accomplished with the stroke of a legislator's pen. Alas, the fire chiefs here are truly the arsonists.
Yeah, we could get into the fact that an income inequality institute is about to pay class-warmonger Paul Krugman $25,000 per month (of course some will say that's a pittance for a bloke of his stature)---or that Krugman has accepted it---but that of course speaks for itself. And it speaks to why folks like Krugman, institutions like CUNY, and politicians keep the income inequality farce alive --- it's profitable...
P.s. There's some interesting reading in the links featured in the article I linked above with regard to what's expected of Krugman in return for this "remarkably generous" (in his own words) package...