Friday, January 24, 2014

Inequality’s Not the Real Problem



According to a large and even growing amount of commentary, the first political issue for 2014 has been chosen.  It is economic inequality, usually shortened to “inequality.”  What is that really about?

In its dictionary definition, inequality refers to differences.  People in the United States vary from each other in many ways.  They look differently, act differently, have different backgrounds, have different values, and want different things out of life.  They are, in a word, different from each other.  As a result, Americans are not all in the same economic spot.  That has always been the case.  From the days of imported English gentry and indentured servants, through the times of plantation owners and slaves, on to the era of rail barons and abused early industrial workers, and following through to the age of Gates, Jobs, and millions in electronic sweatshops, economic inequality has been the norm in America.  That is an expected legacy of the country where the idea of legally sanctioned personal freedom was first implemented and, ever since, has had a tradition of and shared cultural belief in its citizens being freer than in almost any other place with any government at all.  Countries with less liberty have always been more equal, and, indeed, two in the last century with great economic equality were Maoist China and the Soviet Union. 

Prosperity, also, has been and remains a strong American circumstance, which continues.  Despite the Great Recession and the permanent jobs crisis, as of 2012 United States per capita income trailed only Qatar, Luxembourg, Singapore, Norway, and Brunei, which combine for fewer than 14 million people.  Even median family income, showing the common-run much better, as of 2010 trailed only Luxembourg, Norway, and Switzerland, with also about the same population as greater Los Angeles.  With money this spread out despite great individual differences, it is hard to maintain that economic inequality is bad in itself.

Yet recently, we have seen another effect, along with the loss of jobs, of automation, globalization, and efficiency – more wealth being concentrated into fewer and fewer people.  At the same time, jobs lost in the recession have not come back.  A New York Times Economix blog post, earlier this month, gave a clear view of that.  A chart showing the percentage of adults employed showed around 63 percent from January 2007 through July 2008, then a steady flow to between 58% and 59% in late 2009, where it has been ever since.  That explains how, while the unemployment rate has gone way down in the past five  years, so many people have left the work force that the chance of working has not improved at all.  Accordingly, the AJSN (American Job Shortage Number) still shows the country over 19 million positions short, about 4 million more than before the recession.

It is no random twist of fate that the recent concern about economic inequality has coincided with frustration about these lost jobs not coming back.  So what should we be doing?  Raising the minimum wage, usually mentioned in editorial pieces about inequality, is not the answer.  As of three years ago, it took annual earnings of $506,533 to get into the top 1% - how much closer would even $15 per hour be to that than $7.25?  Neither is confiscatory taxation, if it would pull down the wealth of people, often with unusual drive, intelligence, aptitude, education, and personal interests, who own businesses employing dozens, hundreds, or more.  While trickle-down economics is not the answer – few doctors or lawyers, for example, help American employment through their work – destructive envy is not either.  It is time for all to realize the problem is not that some people have, and capitalize on, more opportunity than others, it is that the jobs crisis is not going to end.  When we unite behind that idea, we can find solutions we can live with.

8 comments:

  1. Wealth concentration (greed) Is the largest problem in this country. It is fed by capitalism which has run its course in the USA. You should begin writing about the alternatives available.

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    1. What is the equality goal, and how does this government have the authority to establish an equality metric, then implement laws to achieve it in the USC?

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  2. You read my mind! Mentioning that as a problem in tomorrow's post. As for alternatives, what do YOU think? Thanks, James

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  3. First of all the tax code should tax gross receipts or find a flat minimum rate and penalize what capital out of some estimated $28 to $32 trillion, remains offshore.

    End corporate welfare, tax breaks and farm subsidies, tax ALL income the same, End the tax deductability of all political contributions.

    Tax the export of jobs, tax extraordinary business or personal income/profits extraordinarily as even our founding fathers favored but never codified.

    Just these adjustments are not the product of envy but logic, morality and pragmatism. Tax war profits. Tax paper profits realized in the buying and selling of businesses.

    Regulate with a fine tooth comb all securities, big bank and insider benefits to wall street and banks. Tax paper profits higher than profits from productions and services.

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    1. I couldn't have stated it better, especially the line about ending corporate welfare, tax breaks, farm subsidies, and taxing all income the same, whether from wages, capital gains, etc. Securities, banks and so forth should be regulated through microscopic pores.

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  4. So many falsehoods, it's hard to know where to start. A few:

    1. You state that " As of three years ago, it took annual earnings of $506,533 to get into the top 1% - how much closer would even $15 per hour be to that than $7.25? "

    Huh? the idea is not to get everyone to the 1%, it''s to get the lower (middle) class up to a living wage. For that, $15/hr would do nicely, thank you.

    2. " Neither is confiscatory taxation, if it would pull down the wealth of people, often with unusual drive, intelligence, aptitude, education,... "

    Yeah, like Paris Hilton, or the children of Sam Walton? I could live with a reasonably low taxation of income, as long as estate taxes were about 90%. What did Sam Walton's kids do to earn their money, other than to win the genetic lottery?

    3. "Even median family income, showing the common-run much better, as of 2010 trailed only Luxembourg, Norway, and Switzerland, "

    And we've now (as of 2014) fallen behind a couple of others, including Canada. And if you factor in the better government services provided in most of Europe (even with the higher taxes), our advantage slims down even further. We're sinking slowly but steadily, as median wages in this country are down over the last 15 years, and stagnant over the last 30. At this rate our inequality will soon approach the levels of several of the Latin American countries we used to joke about.

    4. "...economic inequality has been the norm in America."
    Not true. e.g. From the 1940's to the 70's the top 1% made about half of what they now make, as a percentage of total personal income. Returning to those days would be quite satisfactory for most of us lefties. Or do you not want to return to those days of Socialists like Dwight Eisenhower?

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  5. the top 1 percent own 40 percent of U.S. wealth,
    the bottom 80 percent own just 7 percent of America's wealth
    http://www.businessinsider.com/inequality-is-worse-than-you-think-2013-3

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