That is how I see much of the Left/Liberal view on income inequality. For example, Kevin Drum has written extensively on this topic and from what I can see he doesn’t tell us why this is so important. He writes things like, “it is toxic” and so forth, but never explains why. Now Ezra Klein has jumped in and written several articles on it. Klein writes,
The inequality conversation, which I often push, is an important one, but the left needs to decide what it is about inequality they don’t like. There are questions of justice, and there are also a number of problems that inequality can generate — lack of social cohesion, reduced economic mobility, class resentment, even ill health, to name just a few. But I tend to think the focus on inequality as a cause rather than an effect is wrongheaded. What worries me about inequality isn’t what it does, but what’s doing it, namely, a decades-long decline in worker bargaining power and the resultant redirection of productivity increases and corporate profits away from compensation and salaries.
He does point to some problems, but basically they almost all amount to, “it isn’t fair” (with ill health being the one exception). I find this kind of reasoning similar to what I see with my son, “He’s got more and it isn’t fair!” I expect this from my son as he about to turn 9. From adults, and well educated ones at that, it is a bit disappointing.
We see this even more plainly in the second article I linked too,
WHY INEQUALITY MATTERS. My friend Will Wilkinson is puzzled over the excess concern liberal economists express over inequality. He gets why they’d care about each individual’s well-being, but not why they’d worry about the gap between Tom and Bobby, assuming both of them have enough. I’m no liberal economist, but I sometimes play one on the blogs, so let me take a crack at it.
[snip]
To make the conclusion a bit clearer, liberal economists believe growth should be better shared, that the bottom quintiles are not getting enough due, possibly, to the inequality wedge. They don’t share the assumption that Tom and Bobby have enough, and they particularly dispute that, if they did, it would signal the end of the conversation.
The thing is, some level of inequality is probably necessary from an incentive stand point (I’m not going to get into this part of it, if you want to know why I think this way, follow the link). There is a “grown up” reason to be concerned about income inequality that deals with economic growth (see here, here here and here), but this doesn’t seem to be the problem for many on the Left. The people on the Left are concerned about collective bargaining, the decline of unions and union memberships, and stagnant wages.
And that last one brings up at least one issue I have with much of this discussion. Why focus on just one part of an employees pay and one that has recently not been a big focus in terms of news and politics? From an employers prespective the wage/salary that an employee is paid is only part of the cost of hiring that employee. There are also benefits which include 401k matching funds, and more importantly health care benefits. Could it be that wages are “stagnant since the 70’s” because health care costs have been rising pretty fast? That is, do these inequality warriors even think of looking at total compensation when looking at income inequality? My guess is no. Why is this important? Because health care benefits are likely the same for the highly paid CEO and the middle class cubicle jokey. As there are more cubicle jokeys and that they make less than CEOs, the health care benefit would tend to flatten the income distribution.
And here is another thing one should consider with income inequality from a dynamics perspective: immigration, in particular illegal immigration. If you add 800,000 low skilled workers to the population every year, then you might have increasing income inequality. Is this bad in the sense of Klein and Drum? I don’t see how, these illegal immigrants really, really want to be here. Sure their earnings put them at the bottom of the income distribution, but at the same time they are entering voluntarily.
Also, there is another issue that probably wont sit well with people on the Left/Liberals when it comes to inequality. What role does the rise of female headed households (or even single parent households) play in terms of income inequality? After all, if a woman gets divorced and has 2 kids and the husband was the primary source of income, then you’ve just added an additional household to the lower end of the income distribution. So, is single parent households part of the problem and if so, wouldn’t some of the Republican policies on promoting “traditional” households be the answer?
Overall, I find the discussion of income inequality by people on the Left side of the spectrum to be amazingly shallow. It sounds like a variant of the things I hear children complaining about in terms of who has more gum drops.
