I have a problem with inequality, and with equality.
In this blog I take a tour of the inequality landscape, through its ups (bad)
and downs (good).
For the blog’s title I’ve transposed the
famous tripartite slogan of the French Revolution – Liberty, Equality and
Fraternity – and placed equality first. Equality may have played second fiddle
to liberty in late 18th century France, but not now. The current focus of many politicians,
commenters and perhaps voters – mostly Democrats –is predominantly on
inequality, not as much on liberty and little on fraternity. Except to close
them on campuses.
This is hardly surprising. The liberal media
is awash with explanations of how widespread and multi-faceted inequality has
become; and how it needs to be thwarted before something really nasty happens. Such nastiness might happen, but I haven’t
found any quantitative evidence showing that inequality per se actually has caused economic damage. The
Nobel-laurate Professor Angus Deaton makes this important point in his quote at
the top of this page. It’s a consequence not a cause.
Technical
literature examining inequality includes a growing number of qualitative
discussions about the harm of inequality, but next to no quantitative findings seem to exist about inequality directly causing economic and socio-cultural loss. No matter, we just know from our gut that rising inequality will eventually cause some sort of revolution.
The possible consequences of rising inequality have more to do with issues surrounding equity, fairness and lack of opportunity rather than higher unemployment, weaker income increases and lower GDP growth. Whatever its status, the perception of increased inequality in its many forms may lead people to feel threatened and upset. Politicians have capitalized on these feelings, as we know all too well.
The possible consequences of rising inequality have more to do with issues surrounding equity, fairness and lack of opportunity rather than higher unemployment, weaker income increases and lower GDP growth. Whatever its status, the perception of increased inequality in its many forms may lead people to feel threatened and upset. Politicians have capitalized on these feelings, as we know all too well.
When I Googled inequality, 20.3 million results were immediately referenced. Google’s
ngram viewer shows that mentions of inequality in the vast array of literature it
searches grew by 29% between 1980 and 2000. A recent Pew
survey found that 82% of
Americans think inequality is either a very or moderately big problem.
Inequality is not a
new issue. Paleontologists suggest that after settled agriculture became
widespread in the Fertile Crescent and beyond about 10,000 years ago,
inequality steadily rose. The owners of land were much richer and wealthier
than the people who worked on it; their houses were much larger. It was
certainly alive and well during the Middle Ages when Kings, Queens, Dukes and
Duchesses ruled the west. If inequality has been present for virtually all of recorded
human history, is it really always a problem or more a feature of human society
that may even have made a contribution to humanity’s stunning progress? In the
minds of capital “P” Progressives, this notion borders on blasphemy.
The general view is inequality, beyond some unstated level (that’s lower
than the current one), detrimentally affects our modern society, causing a
host of problems. For progressives, we have already arrived at this level. If
asked when it started, November 8, 2016 is an often mentioned answer. Inequality
has become a crucial, often-stated crisis that must be remedied now. No one in
an ivory tower, think tank, public office or sidewalk café knows what degree of
inequality will spawn their feared difficulties, but many citizens believe
inequality shouldn’t continue to rise, as it has since the 1970s.
How much inequality (or for that matter,
equality) should we accept as a society is the
ultimate question. What kind of inequality should be our primary focus? And how
should it be allayed? Predictably, there are many answers depending on one’s socio-economic,
political and cultural perspective.
During the past two years the progressive
media and politicians have expanded the scope of inequality beyond its historic
confines of just unequal distributions of income and wealth. In researching
this blog I counted 11 different, inter-related varieties of inequality that
have gained attention and may be candidates for remedy. There are, undoubtedly,
more.
Less realized is that eradicating all
inequality in its myriad of forms although conceptually beneficial would likely
impinge on our freedom as well as our fraternity. Very few folks think about
these effects, despite there always being
unintended consequences. For some progressives – including many who’ve
expressed interest in running against our sardonic, zero-sum, bullet-point
president in 890 days– remedying
inequality requires imposing significant redistributive taxes on income and
wealth. Such taxes can reduce inequality and also pay for new equality- stimulating
programs.
Talismanic programs that progressive Democrats
believe they must hold close and subscribe to if they want to get support from
their base include: universal single-payer healthcare (e.g., Medicare for All),
government guaranteed
jobs, higher minimum wage (based on a living
wage), free college, legalized marijuana and less restrictive immigration rules.
These dramatic programs will cost hundreds of billions of dollars to implement
and will significantly broaden government’s presence in our everyday activities.
More strategically, they will also need to surmount the likely herculean
challenge mentioned in numerous surveys, including a Gallup poll, that two-thirds of
respondents believe “big government” is the main threat to the nation’s future.
One does not diminish inequality with small government.
The seeming sincerity of politicians like Elizabeth
Warren, Cory Booker, Kirsten Gillibrand, Kamala Harris, Chris Van Hollen, and Bernie
Sanders to drastically reduce inequality is both endearing and concerning.
Their urgency reminds me of Kurt Vonnegut’s short story “Harrison Bergeron.”
“Harrison Bergeron” satirically addresses the
quest for equality. The story describes the US 120 years into the future. It
starts, “The year was 2081, and everyone was finally equal, they weren’t only
equal before God and the law. They were equal every which way.” Total equality
has been nationally mandated by the passage of the 211th, 212th and 213th
Amendments to the US Constitution. Ultimate equality is vigorously enforced by
the “unceasing vigilance of the US Handicapper General [H-G],” Diana Moon
Glompers. She keeps the nation filled to the brim with equality so it will not
edge back “to the dark ages with everybody competing against everybody else.”
Beautiful people are forced to wear masks, or
in the case of Mr. Bergeron, a hideous Halloween disguise; strong, athletic
people have weights attached to their bodies; smarter than average folks wear
headphones that blast screeching, loud, terrible noises every couple of minutes
into their heads. By law, every above-average person is handicapped by the H-G
back to the mean. Everyone is equal in every way. Vonnegut’s story is a clever illustration
of Aristotle’s famed adage, the worst form of inequality is to try to make
unequal things equal.
But back to the present…
The standard measure of income and wealth
inequality is the Gini
index, aka the Gini. The Gini numerically
calculates the degree of inequality in in a specified distribution of income or
wealth. Corrado Gini, an Italian statistician and sociologist, first described
his innovative means of quantitatively measuring inequality in his 1912 paper Variability
and Mutability (or as they say in his old country, Variabilità e mutabilità).
The Gini index varies from zero, signifying perfect equality in the distribution
of income or wealth, to 100%, representing total inequality. The higher the index’s
value, the greater is the inequality. The US Gini for income has steadily risen
during the past four decades.
I’ll now describe some of the forms of
inequality, beginning with income inequality.
Income. In 2015, the US Gini index for income
inequality was 45.41%, according to the Chartbook
of Inequality, an impressive assessment of inequality in
25 nations. The top 1% of households received approximately 20% of the pre-tax income in
2013. The CIA World Factbook ranks
the US Gini index 41st most unequal for family income distribution out of 156
nations; Finland had the most equal income distribution with a Gini of 21.5%;
Lesotho had the most unequal, at 63.2%.
Solutions for alleviating income inequality
converge on imposing new fiscally redistributive taxes that can also fund augmented
government programs to assist poorer and less fortunate people. As David Brooks
put
it, progressives generally prioritize and believe in expanding government to
enhance equality. However, every politician knows raising taxes is hardly ever
an easy lift, no matter whether she/he is a Democrat, Republican, Libertarian
or Green party member or an independent. During the past several decades the
rare increases in federal income taxes have been passed to directly fund new
programs or mitigate budget deficits, not to remedy inequality per se. Because
of the needed increases in tax revenues to equalize income distribution, every
state-based effort has failed so far when people have voted on reducing income
inequality. Yours
truly and others have mentioned that the 2017 Tax
Cuts and Jobs Act passed by our Republican-led Congress in December is not
going to reduce income and/or wealth inequality; instead, it will clearly
increase it. So it goes.
Tax increases that are targeted by
progressives to improve equality by redistributing income and wealth from the
rich to the rest of us include a financial transactions tax (a tax on every
stock, bond and derivative sale), a wealth tax (e.g., the international 80% tax
on estates of $500,000 or more than that Thomas Piketty recommended) and greater
income taxes for upper income people. Higher sales taxes have also been
suggested at the state level. Other programs advocated to improve equality
include raising minimum wages especially by using a “living wage,” one that is
sufficient to provide the necessities essential to an acceptable standard of
living.
According to the San Francisco Living Wage Calculator,
the living wage in SF is $19.63/hr for a one-adult household, $44.19/hr for a
one-adult, two-child household. In annual terms these living wages are about
$41k/yr and $92k/yr respectively. The current SF minimum wage is $14/hr, the
highest in the US. Several labor unions, including the American Federation of
Teachers, advocate basing minimum wages on a living wage.
Progressives also have promoted universal
Basic Income (BI) programs that unconditionally provide monthly stipends to
individuals. Finland has run a BI experiment
since 2016 that has given 2000 unemployed Finns with 560 Euros ($660) a
month, with no strings attached. Participants didn’t have to prove they were
looking for work, and if they did find work they were allowed to keep on
receiving the money. The Finnish government prematurely ended this experiment
in late April, principally due to its large cost. The banner waved by BI promoters
is now at half-staff. It’s hard to imagine it ever flying at the US Capitol.
Wealth. Wealth and income are different. Wealth
refers to the stock of assets held by a person or household at a single point
in time. Income refers to money received by a person or household over
some period of time, say one year. Here’s a synopsis of wealth inequality,
which is closely related to but distinct from income inequality. The US wealth
Gini is 80.1%, ranked 6th most unequal, behind
Switzerland, out of 139 countries. The Gini of global wealth distribution is close
to what the US Gini is, 80.4%. Wealth inequality in the US, as elsewhere, is much
higher than income inequality. The richest 1% of Americans own
(account for) 40% of the country’s wealth (total net worth). In 2014, the richest 30
individuals in the US owned about $792 billion, while the bottom half of
Americans owned 1.1% of our country's wealth, also about $792 billion. So 30
people own as much assets as 157,000,000 people. That’s big-time inequality.
The old faithful, granddaddy gauges of income
and wealth inequality, have been supplemented since before the last election. I
found nine (9) other inter-related, mostly bitter flavors of inequality: 3
types of educational inequality (by achieved level of education, by gender and
by fiscal indebtedness); dental; healthcare; criminal justice; sex;
generational; and employment.
Education. Great news, more people are now attending and
graduating from post-secondary schools than ever before. In fall 2017, 20.4 million
students attended American colleges and universities, constituting a 33%
increase since fall 2000. In 2017, 34.6% of young adult females and 33.7% of
young adult males have completed at least 4 years of college. Female graduates
have outnumbered male graduates since 2015. This is one important area, among others,
where females’ performance supersedes males.
Overall, this increase in college graduation
has provided alumnae, and the nation, with significant, lasting benefits.
Nevertheless, the majority of young adults does not attend or graduate from
college despite all the media attention on college attendance. Employers’
demand for high-school graduates has atrophied. Yet federal, state and/or local
governments haven’t created broad-based, effective vocational, skills-based
training programs for high-school graduates.
Employment opportunities have become
increasingly unequal. Unemployment numbers illustrate the disparity. The
unemployment rate for people who have a B.A. or higher is currently
2.1%, 1.8% lower than the general unemployment rate. The unemployment rate for
high-school graduates is 4.3%, twice as high as for college graduates. For
people who don’t have a high-school or GED degree, the unemployment rate is 5.9%.
A final facet of education-based inequality
is the debt owed by students who attend colleges and universities. For quite a
while, critics have characterized this as the “student debt crisis.” There’s no
doubt that students – whether they graduate or not – are carrying more loans
and thus more debt as tuition has continued to increase. It’s not clear whether
it’s a crisis or not. College students’ median
loan debt is $14,400. The average student loan debt for students who have
graduated from public
universities (where 77% of high school grads go to
college) is $25,500. In addition, some people have complained that there is
student debt inequality because women carry a higher debt burden than men. This
“inequality” exists for one simple reason; more young women are going to
college than men. Last fall 11.5 million females attended colleges and universities
versus 8.9 million men.
It’s important to put rising student debt
into some perspective. Most college graduates receive a financial reward from
having a college degree, higher incomes. The average bachelor’s degree holder
earns about $32,000 more per year than the average high school graduate. Bachelor’s
degree holders make about $1 million in additional earnings over their lifetime
according to the Association of Public Land Grant Universities.
Dental. This attention-getting headline, “How Dental
Inequality Hurts Americans,” alerted me to a previously unrecognized facet of
inequality. People are suffering because Medicaid doesn’t provide its recipients
with dental care. Other inequalities may seem more important and have more
widespread impacts; but tell that to someone whose mouth is filled with pain.
Can’t we just brace ourselves and strengthen gum control?
Healthcare. Unequal access to healthcare has been a key
socio-economic issue. One of the major goals of the Affordable Care Act (ACA)
was to decrease the number of Americans without any health insurance coverage,
an embarrassing, costly reality in our rich nation. The ACA succeeded. American
healthcare inequality has steadily declined since 2013; three years after
President Obama signed the ACA. In 2013 the share of
people without health insurance was 18%. By 2016 it was 10.9%. In 2017, after
the Republican Congress and the president stilted coverage and reduced funding,
the percent of Americans without coverage increased to 12.2%. This is a
senseless misfortune. It also has energized progressives’ push to enact their
universal, single-payer Medicare-for-All healthcare plan once they get back in
political power. I’ve discussed
how this proposed plan may not be the cure-all Sen. Sanders and his compatriots
envisage.
Criminal
justice. Inequities
in the implementation of the US criminal justice system for people of color
have been noted since before the 18th century. Most recently, the acquittal of
Travon Martin’s killer in Florida and police tactics that killed Michael Brown
in Ferguson, Missouri and Eric Garner in New York City have brought these
inequities front and center. Significantly more people (usually men) of color
are prosecuted and jailed than white people. The figure below shows this
on-going criminal justice inequality.
Source: Wikipedia
Sex. Yes, sex inequality, or rather inequality of
opportunity for having sex. Inequality’s scope is thus broadened once again. This
is hardly a new issue, but it came out from between the sheets and briefly into
the forefront of the media spotlight several weeks ago when an incel man (that’s
an involuntarily celebrate person, for the thankfully uninitiated) mowed down a
bunch of Toronto pedestrians, killing 10 of them while driving his van on a
sidewalk. This horrible incident was portrayed by some as a problem that might
be settled by making a “Case for Redistribution” of sex, as New York Times columnist Ross Douthat mentioned.
If we can contemplate redistributing income
and wealth (see above), why not sex. This reasoning did not go down well with
others. Slate writer Tyler Zimmer’s response to
the Toronto incident and Douthat’s column was: if we’re serious about sexual
fulfillment, we should worry more about economic inequality, and not sex robots
(that Douthat suggested as an antidote, perhaps in jest).
The LGBTQ community has made remarkable
progress in increasing the awareness of others about the discriminatory
practices and harms brought on their members. Laws and regulations have been
changed to rectify these inequalities as a consequence of their efforts.
Generational. When you think about it there will always be
generational inequalities. Because each generation (retiring Baby Boomers,
adult Gen Xers, early-career Millennials) is by definition at different stages
of their lives, relative to other generations. Nevertheless, Millennials’
status has is occupying a fair amount of attention, as they ascend into demographic
and commercial prominence. Several stories appeared close to Mothers’ Day
making note that nearly 25% of Millennials between the ages of 24 and 36 lives
at home with Mom (and Dad), nearly double the 13.5%
rate for that age group in 2005. Geographically, multigenerational households
have formed, as expected, in the country’s most expensive rental markets. More
than 30% of millennials live with
their parents in New York, Los Angeles and Miami. What cities are lowest on the
living-with-mom list: Austin, Seattle and Denver that aren’t cheap, but are
attractive enough that Millennials are willing to leave the nest for them,
despite their cost. These Millennials’ location choices echoes Laurence Peters’
quote; In spite of the cost of living, it's still popular. On the other end of
the generational divide, Baby Boomers have been retiring in
droves, roughly 10,000 per day. Boomers are facing inequities from employers
and service providers who maintain ageist practices.
Employment. I already mentioned the disparity of
employment for people with different levels of education. Other issues,
including age, gender and race/ethnicity inequalities, also are present in the
nation’s labor market. In the first quarter of 2018 the average unemployment
rate for all workers was 4.3%; for White people
it was 3.9%; for Black/African Americans the rate was 7.3%; for
Hispanic/Latinos it was 5.4%; and for Asians it was 3.0%. Unemployment rates
for teenagers are more than three times as large as the overall rate: White
teenagers’ unemployment rate was 12.1%; Black/African-Americans was 24.8%, the
highest of any published rate; Hispanic/Latino teenagers had a 14.4%
unemployment rate; Asian teenagers, 6.6%. Men’s overall unemployment rate was
4.6%, women’s was 3.5%.
Although the Q1 women’s unemployment rate was
below the overall rate, they are far less frequently employed in the tippy-top
echelons of American corporate enterprise. There are merely 26 women CEOs of
S&P500 companies. Their
presence as corporate CEOs has grown slowly during the past decade. Women also
remain far outnumbered by men in the corporate board rooms of American; only
21% of S&P500 company board seats are held by women.
Unlike typical workers, the compensation that
CEOs receive has continued its escalation rapidly to thermospheric heights
previously unseen. Here’s the 2017 report of
the top 200 best paid CEOs of publicly-traded companies. Interestingly, the
salary of Mindy Grossman of Weight Watchers International (WWI), the 22nd
highest paid CEO ($33.4M, that unbelievably represents just 32% of the highest paid CEO), has the highest CEO
pay ratio. Her compensation is 5,908 times greater than the median salary at
WWI. Also fascinating, the CEO with the second highest CEO pay ratio, 4,987, is
a woman, Margaret Georgiadis, CEO of Mattel ($31.3M). Louis Hyman, a professor
at Cornell, accurately portrayed the
real-life inequality of these CEOs’ compensation as, “It’s grotesque how
unequal this has become.”
But what about the remaining 3.9% of American
workers who still can’t find a job, a low rate that we haven’t seen for more
than 17 years? The progressive wing of the Democratic Party has come up with a
potential answer: give them guaranteed government jobs at decent wages. Critics
have said such a program could be seen as a kind of a very large hammer in
search of a nail. Proponents haven’t yet offered a means of paying for such
guaranteed jobs, just like Republicans blithely declined to specify how they
were going to finance the tax “reform” act they passed into law last year. The
US labor market would be fundamentally altered if such guaranteed jobs were
actually offered by the federal government in ways it hasn’t been since
Franklin D. Roosevelt initiated the Works Progress Administration’s programs in
1939, amid bread lines and 15% unemployment.
After examining these facets of inequality I
remain convinced that our current state of inequality is a consequence of many inter-laced
socio-economic forces, including laws, regulations and most importantly collective
and individual behaviors. Some of these forces can be changed, some must be
changed. Some have been changed. Many haven’t been changed.
Because every imaginable future with less
inequality is not equally possible, difficult but reasoned priorities must be
made. I don’t want some Diana Moon Glompers to be legally enforcing strict equality
across the board that I think might be preferred in some very leftish quarters.
I also don’t subscribe to blanket adoption of absolute equality as a feasible
or even reasonable political goal. The quixotic plans of capital “P”
Progressives to dramatically redistribute income and wealth are fraught and, I
believe, destined to be politically unsuccessful, as they have been in the
past. Some observers who ascribe to a more realistic, measured course of action
call such plans infeasible
and political
suicide. I have recounted
these large challenges and risks. Progressives’ push for very expensive, large government
programs that might reduce some forms of inequality ultimately rest on a
foundation that a few public decision-makers have oracle-like insight to
justify spending hundreds of billions of dollars to achieve government-led
quests to unspoiled equality. I find that prospect impossible to vote for.
Although there’s no magical threshold of
equality that will consequently effect more opportunities to more people, I do
believe it’s important and wise to provide more public resources to people who
need them but don’t have them. These beneficiaries will ultimately improve not
just their lives, but all of ours. America has eventually done this for the
vast majority of our history. The current administration’s efforts to decrease
wholesale economic and cultural equality should be stopped. So by all means
make sure to vote this November 6th, and in the on-going primaries to throw these
Republican con artists out.
I also think Plato’s characterization of
democracy is an apt one: Democracy is a charming sort of government, full of
variety and disorder and dispensing a sort of equality to equals and unequals
alike. If Democrats prudently chose to not dive into the deep left end of the
political pool, and can gain some measure of actual political power in
Washington and elsewhere after November, cutting back the administration’s
ill-founded hydra of increased inequality will be a superb, initial start to
increasing equality, liberty and fraternity.
