What Income Inequality Has NOT Done

| March 29 2013
Christopher Cook

If you’ve paid attention to the political left and the things they say for more than five minutes, you know that “income inequality” is, for them, a grave concern. They want it to be a grave concern for you, too—especially if you are in a lower income quintile and you vote.

On the face of it, anything more than academic interest in the subject, or concern on the margins, should be absurd. After all, a burger-flipping teen isn’t going to make as much money as a carpenter, and a carpenter isn’t going to make as much money as a neurosurgeon. This is as it should be. Any other scenario wouldn’t comport with the reality that varying levels of experience, education, and demand for a good or service create differing levels of value  in the marketplace. Attempting to level incomes is foolish and quixotic, and—as we saw with the 110 million people killed by statists in the 20th century—requires massive force even to try.

All but the most hardened communists should recognize this, and if pressed, most will agree that a hairdresser shouldn’t get paid the same as cardiac surgeon. So then, the subject is changed to the size of the gap. It’s okay to have a gap, we are told, but the gap mustn’t be too large. But what size gap is the most desirable? Does anyone know for sure where that sweet spot is?

On Tuesday, James Pethokoukis posted a short summary of some recent scholarship on the subject—scholarship that suggests that income inequality may simply not produce the kinds of negative ramifications for society about which so many intone.

In fact, there are several things that income inequality appears not to do.

1. It does not appear to have any appreciable impact on economic mobility. One’s ability to escape the bottom income quartile has varied since World War II, but not by much, and there does not appear to be a direct correlation between decreases in mobility and increases in the income gap.

2. Income inequality has not caused economic stagnation. In fact, some periods of strong growth correlate with periods of increased inequality.

3. Increased inequality “probably has not lowered college-graduation rates, increased single parenthood, or pushed up murder rates (though it may have had small effects on life expectancy and infant mortality)”

Pethokoukis concludes his brief post thusly:

So what are the public policy implications of Winship’s essay? As the author rightly notes, you can question the linkages between income inequality and various problems while still working to improve economic growth, health care access, education, and economic mobility. But a knee-jerk, emotional response to the rise in inequality could lead to rash policy decisions, such as cranking up marginal tax rates or further penalizing investment income.

That’s my bottom line. Here is Winship’s: “There is simply very little evidence to suggest that, within the range of inequality that modern countries have experienced and the range seen in our country over the past century, income disparities between the rich, middle class, and poor merit the intense attention lavished on them by the left.”

Both conclusions seem sound. There simply is no indication that a larger income gap produces a series of negative effects on the economy or people in lower income cohorts. Pethokoukis’ point that we should not go off half-cocked and start making policy based on a problem that doesn’t appear to exist is well taken.

To that point, I would add that we simply do not know what the ideal amount of income equality is—or even if there is such a thing at all. Maybe, if the gap were to grow even larger, we would discover that in spite of the size of the gap itself, the economic circumstances that produced the gap somehow benefitted all cohorts. In other words—all cohorts might see their incomes rise faster than ever, but the cohort at the top to a greater degree that the others. In such a scenario, obsessing over the gap while ignoring the fact that everyone’s lot had improved to previously unknown levels would miss the true takeaway.

Winship’s point that “income disparities between the rich, middle class, and poor [do not] merit the intense attention lavished on them by the left” is true on the merits. That being said, none of the facts in evidence on the subject will change the minds of true believers on the left. The left’s obsession with perceived inequalities will never go away, for the simple reason that this obsession is fundamental to their belief system.

There are a lot of characteristics that define the left, of course, but there are four core, sine qua non characteristics that make the left what it is:

  1. Statism
  2. Utopianism
  3. Collectivism
  4. Equality (of outcome)

In this case, #4 is the operative characteristic.

The right looks at the natural inequality of man—some are smarter, faster, better looking, more determined, healthier, etc.—and sees a fact of life. We on the right feel compassion for those who get a bad deal in the genetic lottery. We seek to help those who cannot help themselves (note: people on the right give more to charity than people on the left do). But we also recognize that no amount of wishing or tinkering can change this basic fact of life. Some of us are born with more (or less) desirable traits; some of us make better (or worse) choices; some of us have better (or worse) luck. We can try to mitigate the impacts of this to some degree, but we cannot change it, and we cannot ever equalize outcomes. Attempting to do so requires the exertion of massive force, and the more we try, the more force is required. Liberty and human rights are always casualties in such an effort.

The left, for its part, sees natural inequality as a problem to be eradicated. They believe that with the right amount of tinkering—and force, tragically—the unequal outcomes that result from natural inequality can be smoothed out and equalized. It doesn’t matter to most lefties that this is not actually possible, or that the force required to try crushes freedom, innovation, and individuality. Their belief is undergirded by a utopian impulse and utopian faith. The state is the vehicle by which to realize that utopia, and in that utopia, we will all work together and no one has to suffer the indignity of knowing that someone else has more than they do.

I am trying, and failing, to imagine any ideology of the left that does not include leveling of outcomes as a primary objective. To them, it isn’t a matter of whether it makes for good policy, it is an existential mission objective. Thus, even if we somehow were to beat inequality down to the point where the difference between income cohorts were much smaller, the true believers of the left would still obsess over the gap. They would expand the Y-axis of the graph until a tiny gap looked huge and then talk about what a terrible crime it was.

That doesn’t mean that Pethokoukis and Winship’s analysis isn’t useful; it is, especially for convincing independents and more marginal lefties to rethink their concern about income inequality. But for the hardcore true believers, no rational argument can replace their obsession, for it is essential to their worldview.

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