Author: Will Wilkinson

Vice President for Research at the Niskanen Center

20 thoughts

  1. I would go further. You are pathetic for finding this pathetic. A society built on the idea of equal opportunity, which I assume is a bedrock principle of our nation, simply cares about the principle of equal pay for equal work. That’s what underlies this inequality argument and has little to do with impugning anyone with bad motives. Rather, it’s impugning people with ignorance if anything.
    It is impossible to look at the growth in inequality (which now mimics the graphs of the 1920s) and not see this as an affront to basic fairness unless you are writing or speaking from ignorance. There is no possible way to explain how the same work today is worth 2, 3, or 4 times as much as the that work in the 1950s or 1960s. There is no possible way to explain how an average worker whose productivity has skyrocketed while his nation has prospered is not given a proportional piece of that larger pie while the economic elites see their incomes climb at record rates.
    I assume all who argue against redistribution policies are not doing it to increase inequality but simply out of an ignorance of our nation’s basic notion of fairness. It’s simple. If you work in an organization, no matter how big, and it prospers partly because of you, then you are entitled to part of that prosperity. The growing evidence of income inequality quite simply is the evidence that many are getting cheated out of what is rightfully theirs.
    Of course, this can never be perfect but you’d think that given our continued prosperity and growth we could at least provide decent health insurance for everyone and have more generous student loan programs and unemployment insurance and the like. And at the very least you’d think people would not simply whistle past growing inequality as if it has no meaning. I have never heard a compelling argument why we should put up with all our prosperity filtering to the very top. It’s ludicrous, does nothing for growth or incentive, and belies our very basic notions of fairness.

  2. KJ, thank you for your stunning example of malicious bad faith.
    Assuming you really do care about “equal pay for equal work,” let me point out that this principle directly conflicts with the redistributive effects of a progressive marginal rate taxation scheme. Here’s an illustration. Imagine your basement is flooded. You need a plumber. Plumber A works part-time and will fix your problem for $200. Plumber B works full-time and will also fix your problem for $200. Because Plumber B works full-time and does more jobs, he pays tax at a higher rate. So Plumber B may net $150 after tax while Plumber A nets $170. Both did the same job, but different pay. (More likely, Plumber B, by virtue of his additional experience, did a better quality job.)
    These two sentences are inconsistent: “There is no possible way to explain how the same work today is worth 2, 3, or 4 times as much as the that work in the 1950s or 1960s. There is no possible way to explain how an average worker whose productivity has skyrocketed while his nation has prospered is not given a proportional piece of that larger pie while the economic elites see their incomes climb at record rates.” Your second sentence contradicts the first.
    Your allegation that workers are not compensated for productivity gains is simply false. Take a look at a graph of median total worker compensation (wages + benefits) vs median worker productivity. You’ll see that, with the exception of the past several years, both have moved in lockstep. The slight recent divergence helps explain why unemployment is relatively mild in spite of the current economic conditions. Some deliberately try to mislead by comparing *median* worker compensation with *mean* worker productivity. You wouldn’t try to do that, would you? Of course, if productivity is outpacing total worker compensation, then you’d expect the share of national income going to labor to decrease, and the share going to capital to increase. This has not occurred; the ratio has been stable for decades at approx 70 labor / 30 capital.

  3. It is indeed pathetic. Unfortunately, the last eight years have produced a massive backlash against those policies that say, in the ‘90’s, would have at least been given intellectual audience by the left. But due to the fact that these free market ideas have been associated, even if only rhetorically, with the current breed of conservative (neoconservative Republican), they have lost their legitimacy in polite society. Indeed, even where once liberals could disagree with free market philosophy yet still engage with it respectfully, as a set of ideas it has become as loathsome as eugenics, perhaps worse. The very mention of “profit” is used by politicians and media alike to elicit mob frenzy, and even the allegedly hippest satirist on record, Stephen Colbert, invokes the “market” as though it were some obsolete pagan deity. Yes, Will … A world where Naomi Klein is the toast of the town, and Milton Friedman’s name is synonymous with tyranny is truly and utterly pathetic.

  4. KJ – I think the argument (if we can ignore the falsities in your post that Blake has already dealt with) is that there are two competing goods: one is growth of the economic pie the other is equality of division of the economic pie. Despite wishing it were not so, these are competing goods: the more equal you make the distribution, the slower the growth up to and including negative growth.
    So the question is, is it better to have equal shares of poverty or unequal shares of prosperity? Your answer is, clearly, “equality uber alles” though I suspect that you feel people who point out the tradeoff in future prosperity necessitated by your preferred policies are just being “mean spirited” or some such.
    Also, Will, perhaps I’m just more sympathetic to the Right’s arguments about worker safety being designed to hurt small businesses, but it is a fact that workplace regulations of various sorts are often championed by big business (lobbied for, advertised for) *precisely* because it helps them create barriers to entry in their industries and hurts their smaller competitors. Some people in favor of policies that increase inequality are no doubt after personal gain (“Yes please! Lower my taxes, I like money!”) but I find it hard to believe there are as many folk lobbying for inequality-promoting policies *because* they promote inequality as there are people lobbying for regulation because it hurts some businesses.
    That is, the rich guy might say “Yes! No more taxes!” but he probably doesn’t say “Yes! No more taxes! Finally I will be able to increase my lead over the poor!” He’s more after his own total gain, I’d imagine, than he is over his relative gain. Of course, to the extent that “being rich” is the state of being “richer than someone else” these may be ultimately be the same thing, but I doubt the rich fellow is thinking in those explicit terms. At least some of the people in favor of regulation *are* thinking in the explicit terms or hurting others.

  5. KJ-
    I hate to pile on, but for someone quick to toss around charges of ignorance, you come across as rather ignorant yourself.

    A society built on the idea of equal opportunity, which I assume is a bedrock principle of our nation, simply cares about the principle of equal pay for equal work.

    Setting aside your powers of perception which allow you to discern “bedrock principle[s] of our nation” and our “nation’s basic notion of fairness” I’m afraid you just have this all wrong. Pay is an outcome. Equality of opportunity says nothing of outcomes, only that we should all have an equal opportunity to enter into employment (and other) contracts as we see fit, to accumulate human capital based on our expectations and proclivities, and to start or invest in any venture we believe has potential. To repeat, opportunity says nothing of income, wealth, or any other outcome.
    This, I think, is the heart of Will’s question: “Why do this? What’s the problem to which this is the solution?” Because we do value equality of opportunity, and we have enshrined equal protection in our constitution, the burden is on those who take issue with outcomes to demonstrate they originate from unequal treatment or unequal opportunity.

  6. It’s hard to find anyone who even tries to fairly understand the ideas behind the recent American right’s preference for policies that do in fact tend to allow greater income inequality. Am I wrong to find this pathetic?
    This is a fair criticism. However, there is a coherent argument to be made here. As many on the left would crassly say, “the Republicans are bankrolled by big business.” To put it less crassly, you do often have to follow the money to figure out why a policy is being enacted. Remember economics 101: politicians follow incentives.
    Of course there are plenty of legitimate reasons for liking a flatter tax code. But there is a partial truth to the whinings from the left. Unfortunately said whinings can often short-circuit honest argument.

  7. KJ, If there were a button you could push that would destroy (not redistribute, just literally remove from existence) half the wealth of the richest 1%, would you do it?

  8. You’re right that imputations of bad faith constitute a bad argument.
    It’s better to argue the facts. Here are some:
    The US taxes 28% of GDP (local, state, federal combined). European countries tax 30-50%, average 40%. The social programs that those taxes pay for result in far less inequality.
    But long-term growth, EU versus US, is *the same.*
    Are you arguing that if Europe had taxed and spent less, they would have been kicking our economic asses for the last thirty years?
    If lower taxes and smaller government yield faster growth, that’s what the facts suggest.
    Do you care to make that argument?

    1. Steve,
      Sure, I’ll make that argument. Europe was trashed after the war and remains, to this day, poorer on a per capita basis. They should have converged and continued converging. Instead, we continue to attract capital that, all else being equal, should be able to find more productive homes elsewhere. But everything else hasn’t been equal since the 70s; the Europeans have, one way or another, throttled back growth such that they have not converged but, rather, remained static relative to us.

  9. Sorry I couldn’t respond earlier but all these comments are easily rebutted.
    First off Blake. You misunderstood me and I see I wasn’t clear on who I was referring to when I said the same work is worth 2, 3 or 4 times as much. I was thinking proportionally and referring to the corporate managing class who has seen their compensation skyrocket while doing little more or little better than their counterparts from the recent past. I meant this as a comparison to the average worker who has not seen such growth in compensation.
    Your plumber example is silly. I’m not advocating for resolving this only through tax code and besides those two plumbers are receiving equal money for equal work for their first 40 hours of work. If Plumber B chooses to work more I don’t see it as much of a problem that he takes an extra 2-7% hit on his paycheck as he moves up the income ladder. Also, this ignores my main complaint that the plumber will do an important job in 1960 and after taxes take home 25% of what some upper level manager while in 2005 he’ll take home 10% of some equivalent upper level manager. That’s the problem with inequality not some plumber who works an extra job.
    And Blake, you wouldn’t try to deliberately mislead by dismissing median growth in favor of mean growth? You seem like a smart guy and you must know that the use of the mean completely hides any inequality problems as the old story of Bill Gates walking into a bar and raising the mean income perfectly illustrates. Median growth in wages is clearly what matters in an argument about inequality. Mean growth masks the problem away. Look up a chart on Median Wage Growth vs Productivity Growth and check out the startling fact that productivity growth has grown steadily while wage growth has stagnated since the early 70s. Your plumber B has certainly been hit by this trend as the productivity gains have clearly gone to only a few. Calling the use of median wages misleading takes some chutzpah, considering how mean has always been the standard way to mislead someone with stats and that’s especially true when trying to explain away growing inequality.
    And then we have Blighter trying to tell me that equality is synonymous with stagnation. That’s just silly free market fundamentalism that has no evidence. Just because you want to believe it doesn’t make it true. There is undoubtedly a very complex sweet spot but just as giving everyone the same salary would be disastrously inefficient so would be a return to a true laissezfaire system. See Steve Roth above for a very simply debunking of such a market fundamentalist idea as more equality equals less growth. Silly.
    Chmcclellan, I figured the use of assume would allow me to state my perception of a bedrock principle of our nation. Maybe you disagree, but mocking me seems a bit over the top. And then your explanation sort of sums up the 1% of Americans who think of themselves as Libertarians. You really think that most people in this country, who do good work, are simply content with their wage being determined by how good they are at working out a contract. Come on! Why do you think lawyers are loathed. They represent exactly what you are describing which replaces the value of what you do with your ability to extract as much as possible from your adversary. Obviously contracts are important and the basis for all our transactions just as they should be, but the point is we work out policies that mitigate the impersonal, adversarial, and quite often UNEQUAL nature of bare contracts.
    And can this be anymore tone-deaf: “opportunity says nothing of income, wealth, or any other outcome.” Really? You are saying there is no direct connection between opportunity at age 25, say, and wealth or income at age 60. The idea that we can’t use growing inequality according to the numbers to prove that actual inequality exists strikes me as a rejection of empiricism. It may not be complete proof but it is striking evidence that you just can’t sweep away as unimportant.
    And Brian, NO! That struck me as a stupid question that apparently is relying on the same silly assumptions that Blighter uses.
    This has been fun and I apologize for being so strident. I was just taken aback by the use of the word pathetic in Will’s post.

  10. KJ — Of course enforced equality of economic outcome is synonymous with stagnation. I challenge anyone to point to an example that did not produce stagnation. All systems that enforce equality of income will fail when they are forced to compete with systems that don’t. That’s why they close their borders and forbid the exportation of capital. I’m going to guess that you don’t have a lot of experience as a business owner. Whether we like it or not, money is a powerful motivator. Enough people will do a better job for a shot at more money that the systems that reward them will prosper competitively.
    Will, I think a good example of your premise is the abortion debate. Abortion proponents show a marked tendency to argue that anti-abortionists secretly wish to control the sex lives of chattel women. Abortion opponents, to be fair, have a tendency to argue that abortion proponents condone murdering babies. Both sides tend to discount the other’s position on whether and when a fetus is a human being — not just to disagree with it, but to ignore the fact that the position even exists in good faith subjectively.

  11. While I certainly agree with your premise, I think we need to be careful with these kinds of arguments. It’s a tempting narrative to explain Europe’s sluggish growth rates by pointing at their economic policies largely rooted in a culture of Fabian socialism, but this story outright ignores an absolutely critical variable: population.
    Look at the world through the lens of GDP growth per capita, and you’ll find yourself looking at a radically different world. European and American growth rates are about the same. Brazil and Japan look to be roughly on the same trajectory. China’s growth spurt looks ever more impressive, India’s becomes much less so.
    Now, I don’t think GDP per capita is everything, because I think people tend to underrate the effect that population has on consumer choice, and thus economic well being. Even though Oslo is “richer” than New York, as a consumer you’re much better off in the city. Even though Cambodia and Uzbekistan are both tremendously poor, I’d much rather live in Cambodia (yes, I have been to both places; no, probably not long enough to get a completely informed perspective).

  12. KJ gets to the meat of the issue, although not in the way he intends, I think.
    “It is impossible to look at the growth in inequality (which now mimics the graphs of the 1920s) and not see this as an affront to basic fairness unless you are writing or speaking from ignorance.”
    The important point here seems to be “fairness”. The Right looks at a policy and says “Policy X advances fairness” while the Left sees the same policy and denounces it- “policy X is the veritable acme of unfairness!” In this situation, it seems easy to conclude that the other side of the debate could only be motivated by idiocy or malice. Neither side has time to ask “what is this fairness thing?”
    If we replace “fairness” with its definition, as defined by each party, then the two statements cease to contradictory, and become merely tradeoffs. A little reductionism can go a long way here. KJ is right, failing to see the monstrous unfairness in the Gini coefficient is simply ignorant…. provided, of course, that you share his definition of “fair.”
    We’d probably see a dramatic increase in the quality of discourse about inequality if we could ban the use of “fairness” as a descriptor for policies and distributions.
    KJ- would you say this is accurate? Some of the people with whom you disagree have shiny degrees from fancy institutions and work full-time in this very field- their ignorance would seem to be unusually narrow in scope and deep in effect. Or are we all somehow unusually evil? It seems hard to avoid the conclusion that the disagreement is definitional.
    p.s. glad you’re back, Will. My condolences on moving to Iowa.

  13. K., I basically agree with you that the issue is fairness, and that fairness is an evaluative concept, but I sure do think it would be a mistake to eschew fairness in gaging the success of policy. I think the key thing to look at is that fairness has both substantive and procedural dimensions. So we want to look at both process and outcomes. I’m sympathetic with the idea that life just isn’t fair, that “fairness” is undefinable, and that however you define it, some degree of unfairness is practicably ineliminable (and maybe even that life sometimes *should* be unfair, if that makes any sense). But it seems to me a grave error to suppose that once we have a “legitimate” procedure or set of rules in place, there’s nothing to say about the outcomes that flow from it, or about whether such outcomes commend modifications to those procedures.

  14. We’d probably see a dramatic increase in the quality of discourse about inequality if we could ban the use of “fairness” as a descriptor for policies and distributions.
    Aye. It’s a largely arbitrary concept. Rawls tried to get at a good definition with “Would you want to be randomly born into society [X] ?”, but even here he relies on the silly notion that there are cosmic Mulligans. I will not, AFAICT, be reborn as somebody who will end up with crappier skills. What’s “fair” about my paying as if I might be?

  15. Where in the block quote is there an imputation of bad faith? I’m not seeing it. Seems to be a straightforward argument about economic policy. It may be right or wrong, but I just don’t know where you get the “bad faith” idea from.

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