Is inequality actually a problem?

What do people really want?

Imagine you are a recent college graduate, with a degree in mechanical engineering. You are pleased to be offered a job with a salary of $100,000. You accept the offer and start work.

Meanwhile, a classmate, also an engineer, gets a similar offer at the same firm. Your classmate starts in, too, also at $100,000. After the first day on the job, you two go out after work and celebrate your mutual success.

You work hard and at the end of the year are delighted to receive a handsome raise, to $150,000. You pat yourself on the back and congratulate yourself for finding such a wise employer.

But then you learn that your classmate has received a bigger raise, to $200,000. You can’t see that your classmate did anything conspicuously better than you did.

How do you feel about your employer now? How do you feel about your own situation? Are you happy at receiving a 50 percent raise in one year? This is very unusual, and puts you in the top tier of mechanical engineers. Or are you unhappy because you didn’t receive the 100 percent raise your classmate got?

The point of this exercise is to examine a concept that has vexed discussions in America from the first days of the republic. The Declaration of Independence asserts that “all men are created equal.” It’s not clear exactly what Thomas Jefferson intended in writing this sentence, nor what the signers of the Declaration understood in approving it.

But it is clear he was writing in the context of politics. Jefferson’s friend and fellow Virginian George Mason had just written Virginia’s declaration of rights, in which he said, “All men are by nature equally free and independent.” Jefferson didn’t want to plagiarize, so he put the sentiment in his own words, confident that his readers would recognize that he was speaking of political rights – and not, for example, economic condition.

Yet words take on lives of their own. Jefferson’s assertion of equality fueled the drive for political democracy in America in the early nineteenth century, but it escaped the political realm into the economic sphere when Gilded Age critics complained of the growing gap wealth gap between the rich and the rest.

Since then, inequality has been a consistent bugbear of pundits, and the inequality cited is much more frequently economic than political. To be sure, occasional vague claims are made that Jeff Bezos wields too much political power, but these are hard to demonstrate. If anything, Bezos these days is on the defensive. And anyway political complaints lack the emotional punch of saying Bezos is simply too rich. Politics is a very part-time concern for most people, whereas economics – making a living – is an everyday challenge.

But what is the basis for the complaint? Only a willful misreading of America’s founding documents yields an argument against economic inequality, so that’s no good. There is no law in America against being rich.

Is there a moral argument against it? In certain religious traditions, sort of. Without actually condemning wealth, Jesus said it was easier for a camel to pass through the eye of a needle than for a rich man to get into heaven. Many religions mandate tithing – taxing wealth – or its equivalent. This isn’t a condemnation of wealth per se, only a requirement that some of it be used to help others. But in America, religion isn’t supposed to be the basis for public policy.

Other arguments might be operational. Does great wealth have negative consequences for society? Are the poor poor because the rich are rich?

In American history, that’s a difficult argument to make. The periods when the rich were getting richer were times when the poor were getting richer too, albeit not as fast.

Reconsider the scenario described at the beginning of this piece, with a couple of changes, based on actual facts. This time you are working at Amazon in 2018 for $10 per hour. Jeff Bezos announces a new company minimum wage of $15 an hour. You happily accept the fifty percent pay increase. Then you read that during 2018 Bezos’s fortune increased by 100 percent, from $80 billion to $160 billion, as a result of the increase in the share price of Amazon. Are you still happy? Do you think Bezos is a good boss, or a bad one?

Needless to say, you are entitled to your own opinion, whatever that might be. You might very well conclude that no one should be as rich as Bezos. On the other hand, you might be satisfied that your life is better than it was – 50 percent better, economically. And it might occur to you that your success is related to Bezos’s success – that you’re better off because Amazon is able to afford your pay increase.

There’s no single answer to the question of whether inequality is really a problem. If great disparities in wealth offend your sense of justice, then it’s a problem for you. But is it a problem for anyone else? That’s their call.

Finally, try this one: You are the president of the United States, and your economic advisers present two alternative strategies. The first would make everyone 5 percent better off each year indefinitely. The second would make most people 10 percent better off, but a few people 20 percent better, and some 50 percent better off. (For the sake of the exercise, assume the strategies could be implemented and they would perform as promised.)

Which would you choose? Which do you think the American people would choose?

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