Wednesday, January 17, 2007

A Bigger Piece of the Pie

Last weekend, when I was perusing the Allspark forums, I came upon this thread, that brought an article to my attention. It explores the question of "Why Income Inequality Matters."

Now, I've written about issues of economic justice before, especially in regard to the minimum wage (but also touching on issues such as affordable housing), so naturally an article like this catches my interest. It is a fairly complex piece, and worth reading in its entirety, but there were a couple of elements that were especially interesting.
  1. The article suggests that the wider the gap between rich and poor, the more likely violent crime is to result. Unless people in lower-income levels can see a meaningful path towards higher-income levels, they are likely to decide that "playing by the rules" doesn't help them.
  2. Discontent among the lower-income levels seems to be more closely related to the size of the gap between themselves and the higher-income levels than it is to the actual size of income.
In the discussion that followed on the Allspark, one person suggested that point 2 was a bit odd. If he had an income of $100,000 (he says), it wouldn't matter to him if his neighbors made twice as much. I think that this is a valid point, especially since $100,000 is several times my current annual income. However, if $100,000 was the "lower-income" level, and most people made twice as much, it seems likely to me that the costs of goods and services would rise to the point where $100,000 paid for very little. In fact, this is one reason why many people advocate against raising the minimum wage, and there is a legitimacy to that argument (although I do not believe that raising the minimum wage would create problems to the extent that its opponents claim).

The problem isn't so much with the minimum wage, per se, but with the fact that those in the upper-income brackets retain so much of the nation's accumulated wealth for themselves. I'm perfectly fine with suggesting that people need meaningful rewards to encourage productive work (a point also made in the article). But there is something wrong with the fact that the average CEO makes 430 times as much as the average worker (as of the time this web site was posted, which I earlier cited in this post)! There is plenty of money out there in our society that more people could get the things they need to get by. The problem is distribution. Having a bigger pie isn't really as helpful as making sure that those who are getting just a sliver of pie can get a bigger piece.

For pointing this out, I have been accused of socialism (where the government exercises control over the production and distribution of resources) and I do not entirely refute the accusation, although I don't believe I'm advocating quite as radical a form of socialism as my opponents claim (I'm not suggesting that the government control production, for starters). I'm certainly not advocating communism (where all workers share economic resources equally. The distinction between communism and socialism is often misunderstood.). There must always be something "higher" to ascribe to, in order that workers be motivated. This is just human nature.

Indeed, one could argue that this is part of the reason why Microsoft's products are often inferior to its competition. Once you've hit the top, there isn't as much reason to keep trying so hard. They seem to have accumulated far more from their legal battles in recent years than they have out of their own ingenuity. They still remain powerful, of course. Money is a form of power, and if you have enough of it, you have power to ensure that you can keep it as you work toward getting more. But if you don't have any money, you don't have very much power to get yourself out of that situation. When the gap between rich and poor is so wide that it seems impossible to achieve any of the higher aspirations human nature motivates us toward, despair sets in. And that is positively tragic. Something must be done to narrow the gap.

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