Income inequality

In a couple of recent posts, the Daily Howler made an interesting observation: There’s much discussion of income inequality, but what’s really needed is more explanation of why it’s a bad thing.
Given the clichés the right has been pumping into the media the past 30 years, he may have a point. Ever since Reagan, we’ve been informed that the only way to grow the economy is to cut taxes, any sort of safety net is stealing money from hardworking wealthy people, and that taxing wealthy people is bad because they’re the Ayn Randian superhuman ultra-wealth producers who deserve everything we get.
Echidne offers some thoughts here. Here’s my shot.
First off, income inequality doesn’t have to be a problem. If a rising tide lifts all boats but some get lifted more than other, so what? If we’re all doing well, what does it matter if some people do better?
Only that’s now what we’ve got. The current situation is one where the rising tide is lifting the boats of the already rich and no-one else’s. People are going broke, losing houses, unable to find work. Jobs with good pay are morphing into salesclerks and barista work. Seniors have to work longer, families need to put in more hours and that’s just to break even. Almost all the economic gains of the past few years (and there have been some) flow away from workers and towards executives and owners.
I don’t think it’s fair. I also don’t think it’s good for the country to have steadily increasing numbers of people——including able, educated, skilled people——struggling just to keep their heads above water.
That wouldn’t be a big deal, even so, if it was all the result of people’s life choices——if the super-rich worked super-hard while the rest of us were sitting around too stoned and lazy to do more than eat chocolates and watch game shows. But again, that’s not the case. The growth of income inequality isn’t because of the invisible hand of market forces, it’s because the game is rigged.
Consider one of the problems, which is outsourcing jobs overseas, to where the work is much cheaper. That pits American workers against people willing to work for pennies a day——and who can at least sort of manage to live on that. And if the workers get an urge to ask for more, they have no unionization rights, plenty of people willing to slap them around——and occasionally US pressure keeping overseas wages down.
In an article I read a while back, one CEO asserted that if Americans expect to be paid 10 times as much as people in Nigeria or Vietnam, they should be 10 times as productive. It’s a given in free-market circles that pay for labor is never unreasonably or unfairly low, only unfairly high: If unionized labor makes more than non-union, obviously it’s the union pay that’s “wrong.”
Of course, CEOs these days make 40 or 50 times what CEOs did at the time I was born; they make a lot more than CEOs overseas. But (assuming they mean everything they say), that’s totally different: They really are 40 or 50 times as good as guys used to be.
Some might point out (I have, frequently) that for that to be true, CEOs would actually have to be, well, competent. Only studies (from such capitalist bastions as Business Week) have shown consistently that CEO pay has nothing to do with CEO performance. Do well, they get bonuses and stock options; do poorly, they get bonuses and stock options. If the company under-performs, it’s because the economy was bad, so the execs shouldn’t be penalized; if it does well, it’s because they’re geniuses so they should be rewarded.
Time and again, in multiple corporations front-line workers get their salaries trimmed or their retirement accounts gutted, while executives get bonuses and golden parachutes. Not because of some inexorable force of the market, but because they’ve got the power——and, I’m sure, have convinced themselves they deserve it. I mean, how could they get so rich if they weren’t so talented?
And that’s not even touching on the added clout the rich have on public policy through lobbying, campaign contributions and government connections.
Income inequality is a problem. I hope I’ve offered a reasonable explanation for why.

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One response to “Income inequality

  1. Pingback: Links of interest « Fraser Sherman's Blog

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