Inequality: Can't Live With It, Can't Live Without It

In my last post I looked at the question of how to calculate the just or living wage, using figures from Father Ryan’s classic text A Living Wage brought up to date by adjusting for inflation. Commenter Restrained Radical, however, thinks that in merely adjusting for inflation I was being too stingy:

Adjusting for inflation isn’t necessary the best way to adjust Fr. Ryan’s figures. Real GDP per capita grew faster than inflation. In other words, Americans got wealthier. Using Fr. Ryan’s figures today adjusted for inflation would be appropriate if real GDP per capita was stagnate for 89 years. In 1919, GDP per capita was $805. If you only adjust for inflation, that would be $9,897 today. That’s somewhere between Cuba and South Africa. So $6.15/hour would be an appropriate living wage for a family of 5, in Cuba.

If instead we adjust for unskilled labor wage increase (4.24% annualized since 1919), $1,400 to $1,500 then would be $56,388 to $60,416. That’s probably closer to what Fr. Ryan had in mind.

In 2008, median household income in the United States was $52,029. If Restrained Radical’s interpretation is correct, then it would seem Father Ryan was advocating a kind of Lake Wobegon society, where everyone has the right to an above average income.

On one level, the desire to make the living wage relative is understandable. After all, if in specifying how much is sufficient to support a man and his family one must use a universal standard, then the minimum level will have to be so low as to be practically irrelevant in the modern world. St. Paul says that “if we have food and clothing, we shall be content,” and presumably the quality and variety of food and clothing he had in mind are somewhat below what we today would consider adequate.

On the other hand, if the living wage is relative to the standard of living of a given society, then it is probably not possible to have a society in which everyone receives a living wage. Suppose, for example, that we say wages are unjust if they are below the tenth percentile (or, to be more in keeping with Father Ryan’s text, if they are below the forty-eighth percentile). Well, no matter how rich a society becomes there is always going to be a bottom ten percent. And by definition the wages of the bottom ten percent will be below the tenth percentile, and hence unjust. On this view, then, unjust wages are like your shadow: as you move forward it follows right behind you. Which would give new meaning to our Lord’s statement that “the poor you will always have with you.”

The only way to prevent their from being a bottom ten percent or bottom forty-eight percent, etc., is for there to be absolute equality, something which has never and can never been achieved by any society on earth. Much has been made in recent years about growing inequality or about differences in inequality between the United States and Europe, but the truth is that even the societies we think of as highly egalitarian are highly unequal. Attempts to achieve real economic equality have been uniformly disastrous, starting with murder and ending in mass misery (and, ironically, more inequality; Communist North Korea, for example, is probably the most unequal society on earth). So it seems we are stuck. We have a strong intuition that having less than average is just plain wrong, but there is nothing we can do to prevent it.

0 Responses to Inequality: Can't Live With It, Can't Live Without It

  • Many countries use some percentage of median household income as a measure of poverty. That’s workable but arriving at an appropriate percentage is difficult. Ideally, we’d ask everyone, “Assuming you have no assets and receive no government assistance, at what income level would you consider yourself poor?” Then adjust for geography, household size, assets, and maybe age to determine who to help.

  • Mike Petrik says:

    LOL. I’ve known people who had next to nothing and would never consider themselves poor, and I’ve known people who consider themselves in horrible financial distress because they cannot pay private college tuition. I really doubt that there is any practical room for subjectivity in the analysis.

    I think the real point of Blackadder’s cogent essay is that there is a difference between attacking income inequality as such versus attacking poverty. There is a far greater political consensus in favor of the latter than former, and it is exceedingly difficult to attack the former without making making the latter problem worse.

    I have often proposed this simple thought experiment. Posit a world with three families, the Kings, the Queens, and the Princes: This world can organize itself into two different societies with two different outcomes. Assume the rules of neither society involve slavery, coersion, dishonesty or other intrinsic evil. In the first society the standard of living outcome is Kings 100, the Queens 15, and the Princes 10. In the second society the standard of living outcome is 5 for each family. Which society is preferable? In my experience the responses are revealing.

  • RL says:

    I’ve known people who had next to nothing and would never consider themselves poor, and I’ve known people who consider themselves in horrible financial distress because they cannot pay private college tuition. I really doubt that there is any practical room for subjectivity in the analysis.

    So very true Mike. It was a heartening thing to hear my kids talk about helping the poor, especially when we would drop off bags of clothes and toys at St Vincent de Paul. However, they never made any connection to our shopping there.

    Really, our nation is probably too wealthy for its own good. As Catholics we customarily say grace before meals. It’s a good and an ancient practice. Gratitude for life and every little blessing *should* permeate our souls. I fail at it and I’m confident others do too, though how wrong headed is it of us as a society to not only be ungrateful for things like food, clothing and shelter – presuming their existence and availability – and then debating whether a cell phone is a real necessity. We can’t even be grateful for little technological gadgets in their own context. We assume they are core to our existence. We are so friggin’ spoiled…

  • R.C. says:

    One small additional note.

    Please keep in mind that income and wealth are not the same thing; and that income and productivity aren’t quite the same thing although they’re more closely related than income and wealth.

    At one point Restrained Radical said, “Real GDP per capita grew faster than inflation. In other words, Americans got wealthier.” This is not quite right; Americans started producing more, and presumably their income increased by some amount also although it needn’t be exactly proportional. And if their cost of living didn’t increase at the same rate as their income, then their wealth increased, in proportion to the degree that their disposable income was disposed in liquid or illiquid forms.

    Anyhow, a failure to appreciate these distinctions can lead to distortions in the conversation about “living wage.” A person with zero income can live quite nicely — ask Teresa Heinz Kerry, for example; at the time of the 2004 elections she’d been able to report tiny income and no “wages” for several years running — if they have sufficient liquid wealth to live off of.

    Indeed, the term “living wage” itself contains the distortion to some degree by focusing on “wage” rather than something like “wage plus net wealth divided by remaining life expectancy.” (Not exactly a phrase which rolls trippingly off the tongue!)

    Of course, the difference between one region’s cost of living, and another’s, comes into play. And there is the problem of determining what, exactly, constitutes the “living” of which one is measuring the cost, and how accurately one can gather information about wealth and income.

    In the end, the topic is sufficiently complex that subsidiarity comes into play: It is better that people closer to the problem (and, especially, people not insulated from the consequences of the policy decisions they make) be the ones who make policy on such issues. And it is preferable that their policy affect only a small group of persons on the same “level” of organization as they, but that they be free to observe the consequences of alternative policies on other peer groups implementing those policies, allowing all groups on a given level to make informed decisions about which policy is best. This, of course, was the fundamental truth (and thus, the Catholic truth) behind American Federalism…back when it still existed in a robust way.

    It is because of this subsidiarist logic that I am nearly libertarian about federal policy, a mainline conservative about state policy, a moderate or centrist about county-level or metropolitan-area-level policy, a mild authoritarian about township- or neighborhood-level policy, and a benign but occasionally totalitarian divine-right monarch within the bounds of my household.

    But I am digressing. My main point is: The topic is complicated enough as it is. Subsidiarity helps with that at a systemic level; but in the meantime, watch out you don’t make it more complicated by conflating productivity with income or income with wealth.

  • RC, you’re right which is why consumption may be a better measure of poverty than income. Though, with the poor, the two are usually fairly closely correlated.

    Re subsidiarity: I’d agree to the extent that local government can and does fulfill its obligations. Many towns cannot or will not either because they don’t have the finances or they don’t have the political will. That doesn’t automatically mean that welfare should be a federal program but it does mean that the federal government needs to play a role.

  • Jasper says:

    I know people who have excess wealth, and it can almost be a curse at times. Their lives become so occupied with money.

    There should reasonable help from the state/federal governments for people who need assitance, like housing, food, etc. But, charaties for instance, do a lot of good, our parish is always helping the poor. Helping poor people should not be solely a government issue…if you want a healthy society.

  • R.C. says:

    In any event, government at whatever level should supplement, not displace, private charity.

    Otherwise it is another instance of “bad money crowds out good money”; with the problem of neediness in no way helped, but with good and morality-reinforcing means replaced by questionable and corruptive means.

    Sadly, I believe that government assistance to the needy does, in fact, crowd out private assistance, at very nearly a one-to-one proportion when exercised at the federal level. I suspect that proportion improves at the lowest levels, when the folk being helped can personally meet on the streets the persons who are helping them.

    If I am right about that, then having the federal government get involved when there is a failure of local government provision (which failure itself should only occur when there is a failure of local private provision) is counterproductive: It crowds out not only the remaining good local private money and any possibility of private money from adjacent communities, but also crowding out local government money, which is the least-corruptive type. As with nearly every other occasion when government acts outside its core mission, it fails to solve the problem while creating new ones.

    That, of course, is a generalization. But it’s the kind of generalization which makes the safest starting-point for the consideration of policy.

  • R.C. says:

    Jasper:

    You state: “Helping poor people should not be solely a government issue…if you want a healthy society.”

    Exactly.

    Or, well, no, I take that back. What you said is a very good start, but it could be amplified, and the principle clarified, as follows:

    If you want a healthy society, helping needy people is not primarily or even secondarily a government issue.

    It is primarily an issue to be addressed by those who know the needy person in question, including their church.

    It is secondly an issue to be addressed by their local community government, as a source of assistance to their family, friends, and church.

    It is thirdly an issue to be addressed by the government of the county or metropolitan area in which they reside (providing backup assistance to family, friends, church, and community)…in the minority of cases that the problem wasn’t adequately handled at the community level or lower.

    It is fourthly an issue to be addressed by the state in which they reside (providing a tiny additional layer of backup to the family, friends, church, community, and county/metro area)…in the rare cases it couldn’t be handled at the county/metro-area level or lower.

    It is, fifth and least importantly, and with the least burden and the least control, a responsibility of the federal government to provide some additional assistance, should all the other levels of assistance somehow, in very rare cases, fail to get the job done.

    Over the course of fifty years, if one were to keep track of all charitable handouts given in a particular neighborhood, one ought to find that fully half of the assistance was provided by friends and family and church; another 25% by the community, another 10% from the county or metro-area, another 6% from the state, and the last 4% from the federal government. Or some such numbers, anyway: Those precise numbers would vary, but I offer them in order to exhibit the general principle.

  • Sadly, I believe that government assistance to the needy does, in fact, crowd out private assistance, at very nearly a one-to-one proportion when exercised at the federal level. I suspect that proportion improves at the lowest levels, when the folk being helped can personally meet on the streets the persons who are helping them.

    If government ceased all assistance, private assistance isn’t going to pick up anywhere near 100% of the tab. You may get a better ratio at the community level, but I don’t think there will be much difference between higher levels of government. Given the same rights and obligations, a state as large and diverse as California won’t act very differently from the federal government.

    Is it more in keeping with subsidiarity for private institutions to ration goods and services or to provide cash and leave the allocation decisions to the individuals and families? Is it better to give someone a can of corn or to give him a food stamp to buy whatever food he needs? I think it’s clearly the latter. Private institutions are well suited to offer goods that people want to get rid of (second-hand goods and surplus goods). They’re also good at providing services run by volunteers. But cash assistance is preferable to the provisioning of marketable goods and services.

    If we’re giving the poor cash, the cheapest cost avoider when determining who needs cash and how much is the entity that has access to income, asset, and consumption records which is always the government (usually the state is the lowest capable level in this regard though even the state would probably need higher level cooperation to keep track of interstate commerce). That still doesn’t necessarily mean the government needs to be the distributor. I suppose private institutions can hand out checks if the governments makes its records available to private institutions but then there’s the privacy concern. On the one hand, we may not want to disclose such information. On the other hand, the shame may incentivize the poor to work their way out of poverty. If privacy, is a concern, the government should also be the distributor of financial assistance.

  • R.C. says:

    RR:

    Oh, I don’t doubt that there are obvious advantages to using government; e.g., that they know about people’s incomes.

    And, in fact, if one is using government to centralize the collection on voluntary donations, which are then turned over to the poor under the banner of “the generosity of your fellow citizens,” then some of my concerns go away.

    But government usually does not collect voluntary donations; it levies taxes. It does not grant unexpected gifts identified as the extraordinary kindness of other persons; it allows persons to claim their “entitlements” from a government controlled by the politicians for whom they may later vote.

    This has an altogether different “vibe” from the anonymous contribution slipped under the door by a neighbor.

    A person who gives voluntarily increases in charity and grace and magnanimity in the process; he learns to love. A person from whom his daughter’s potential college savings are taken by a guy for whom he didn’t vote learns no love in the process.

    The charity worker who collects voluntary donations sees the goodness of human beings reflected in every dollar. The taxman sees that human beings will do pretty much what you tell them to do, when you point a gun at them.

    The charity organization is founded by people on a mission to love others, whose message to potential donors awakens the donors’ consciences. The government is filled with politicians who see political advantage whenever they can wring money from people who won’t vote for them anyway, and send it to their home constituents in order to purchase their immediate gratitude and their eventual re-election vote.

    The recipients of voluntary charity learn humility and gratitude and the fact that their fellow men aren’t all bad…and if that charity comes through a church ministry, they learn on a visceral level to associate provision with the body of Christ. The recipients of “entitlements” learn that if you vote for the right guy, that guy will take a nightstick to some people you don’t know, and you can get those people’s money. They also often learn that it’s other people’s responsibility to subsidize their bad decisions, and that when they’re in need, it’s because the world owes them and isn’t paying up like it ought. And they often lose self-respect while not learning humility, because leeching off others is very different from benefiting from the generosity of others.

    In countries where the Church is the primary or only source of assistance, the Church is therefore central in the life of the community, and everyone can think of a time when they, or a relative, owed much to Christians. In countries where the state is presumed responsible for most or all assistance to the poor, the Church is an inexplicable and irrelevant sidecar to society with no obvious purpose or role.

    So I think that one of the problems when government gets too involved in this stuff is that it’s bad for the soul of the taxpayer, bad for the soul of the taxman, bad for the soul of the politician who organizes all of it, bad for the soul of the guy who voted him in, bad for the soul of the recipient, and tends to undermine the Church’s rightful position in society, which is bad for society in the long term.

    Whatever the advantages of government knowing people’s incomes, then, I think these disadvantages probably outweigh them.

    And, really, if I had a choice between a private firm (required by law to respect my privacy) knowing my income, and the government (required by law to respect my privacy) knowing my income, I might be happier with the private firm. After all, if they decide to violate my privacy, I can sue the pants off them. Their deep pockets might make it difficult, but those same deep pockets might bring me a lot of relief, if I win.

    But suing the government can be trickier, if they decide to change the law in a way that violates my privacy: Sovereign immunity may apply. Bringing a lawsuit over the content of the laws against the guys who make the laws is rather like assaulting a mental hospital with some bananas and a package of mixed nuts.

Follow TAC by Clicking on the Buttons Below
Bookmark and Share
Subscribe by eMail

Enter your email:

Recent Comments
Archives
Our Visitors. . .
Our Subscribers. . .