Deciding how much equality America can afford

previously published in the Terre Haute Tribune Star, 14 June 2015


How much are we willing to pay for equal opportunity? Cultural values are ideas that are broadly held that people use to decide what is good, right, proper and just. As individuals, we typically do this as part of “common sense.” In public policy, we often find we need to balance competing or even conflicting values.
                                                                                                                                                                                                                                                                                 
Individuals are faced with resolving competing values. For instance, family is a common value, as is hard work and material success. Yet, devotion to family can be challenged by demands of the workplace, and workplace success can be challenged by family obligations. Individuals typically find a balance that works for them, and different individuals will balance those competing values differently. Sometimes a promotion is turned down for family reasons. Public policy, however, does not generally permit each of us to have our own policy.

There is much discussion over the last few years about rising economic inequality in the United States. There is no question that economic inequality, as conventionally measured, is increasing; the effect of its rise is beginning to add up and is undermining structures that create equal opportunity, such as education, enrichment programs, access to tutoring, even “middle class values.” Without making measurement the subject of this essay, trust me when I say, if we examine wealth, the picture is even worse. Income, even today, is distributed far more equally than wealth.

Policies impact economic inequality. Progressive income taxes reduce it. The tax changes ushered in by President Reagan in the early 1980s, that reduced income tax progressivity, led scholars at the time to predict a rise in income inequality. The busting of the Professional Air Traffic Controllers Organization (a union) by President Reagan signaled a tilt in public policy against unions. Changes since then, at both the federal and most states levels, such as reducing income taxes, property tax caps, and so-called right-to-work laws all contribute to increasing income inequality.

Do Americans no longer value equal opportunity? I see no evidence of that. Many would argue that the rich and corporations have bought our politicians. While the rich have always had a disproportionate ability to influence politics, I think what has happened is a slow and until recently not-so-noticed tilt of the balance in favor of another core American value: Wealth creation or free enterprise.

Just as individuals can value equally their family and their work, in reality people try to balance them but it’s difficult. At different times individuals may tip the scales in work’s favor and family is neglected. At other times family demands may result in missed opportunities at work. For nearly 40 years America’s public policy has favored the value of wealth creation and free enterprise over equal opportunity. Just as some individuals over time spend increasing time at work and less with family, they only realize it when they don’t know their kids and have missed those milestone moments because of work.

The undermining of equal opportunity in the U.S. is finally so glaring that researchers can predict individual’s economic place based on the zip code they grew up in. When one’s origin is that predictive then the reality of equal opportunity is nothing more than a myth.

Progressive income taxes, higher taxes on capital gains, inheritance taxes, robust unions, social safety nets, especially Social Security, and public education among others all help create the reality of equal opportunity. Those things also reduce the creation and accumulation of private wealth; in short, they reduce the efficiency of the economy. Taxes transfer potential private wealth into the public sphere where it can be used to maintain the reality of equal opportunity.

There is no question that reducing taxes, especially on the rich, weakening unions, hammering away at all things public, especially education which is often the largest portion of state budgets, will increase the efficiency of the economy and the creation of private wealth but at a social cost of greater inequality. Virtually all Americans would agree that equal opportunity is valued and so is free enterprise and wealth creation. The challenge is in balancing the two.


Perhaps the 2016 election will provide a platform for just such a debate. Savvy listeners will hear it but don’t expect the candidates to admit that their favored policy positions have any downside whatsoever, any costs to either economic efficiency or to equal opportunity. Every voter will, in essence, be deciding how much equality America can afford.

Politics suppresses issue of income inequality

previously pubished in the Terre Haute Tribune Star, 4/29/2012

It’s looking like a major theme of this year’s presidential election will be “fairness,” with a focus on income inequality. Of course, no serious discussion/debate about income inequality is going to occur as that will be swept aside in the theater of presidential politics.

Unfortunately, Democrats are framing the “debate” in terms of who has money and who doesn’t and increasing taxes on the haves while Republicans will counter with charges of class warfare, class envy and spending and tax cuts.

I’ve spent 25 years studying economic inequality. It’s too bad the topic isn’t discussed like a public health issue; don’t politicize the condition, politicize the solutions to it.

Yes, high income inequality negatively affects everyone, not just those on the low end of the income scale. Like pollution it negatively affects everyone, not just poor people (although it may affect them more).

Below, I am going to refer to data from The Equality Trust (www.equalitytrust.org.uk). “The Equality Trust is an independent, evidence based campaign working to reduce income inequality in order to improve the quality of life in the UK.” They use international comparisons of mostly western-industrial democracies (Japan and Singapore are included) to make much of their case. For most of the comparisons, they measure income inequality as a ratio of the proportion of total income received by the top 20 percent of households to the bottom 20 percent of households. The data they present are graphical and easy to understand. Basically they are correlations between income inequality and incidences or rates of other things.

Income inequality is associated with negative physical and mental health. Singapore shows the highest level of income inequality with the U.S. close by in second, but the U.S. has the highest infant mortality among the compared countries (by a wide margin). As income inequality increases, so does obesity.

People like to chant that the U.S. is No. 1. Here are things the data show the U.S. is No. 1 in: obesity rates; drug abuse; prisoners per 100,000 population; murder rate (more than 50 percent higher than our closest competitor). The U.S. also has the highest rate of mental illness.

All these disparate “No. 1s” have one thing in common, our high level of income inequality. And it is not that we have really, really poor people, it is that our rich are so much richer than everyone else. The distance is astounding, creating very separate societies and realities.

No doubt many are thinking, “well, I’m not obese, I don’t know anyone who has been murdered, no one I know is in prison, I don’t use drugs and I am not mentally ill and don’t know anyone who is.” I’m not finished.

The graph for high school dropout rates and inequality shows data for the U.S. 50 states. And sure enough, the states with lower levels of income inequality have lower rates of high school drop-outs while those with higher drop-out rates also have higher rates of income inequality. Indiana is in the bottom quarter of drop-out rates and in the bottom quarter of income inequality. I wish they had a graph of the 50 states with the other international states.

Births to teens is easily the highest in the U.S. and we have very high income inequality. None of your family may be having babies while teens, but it is willful blindness to deny high teen birth rates don’t affect us all. And no doubt related to teen births is the association between income inequality and the UNICEF index of child well being. We lose our No. 1 rating there. Israel, New Zealand and the U.K. rate worse.

If these examples are not enough to convince you that income inequality negatively affects us all, then how about this: The more unequal a society is, the less likely people believe others can be trusted, so even if you trust others, others don’t trust you. Much of the experienced degradation of community and social life in the U.S. can be linked to increasing levels of income inequality.

I urge anyone interested in income inequality to visit The Equality Trust. There is more explanation of the observed associations as well as proposed remedies. Doing so won’t make you a liberal or want to vote Democratic, if you are worried about such things. Indeed, income inequality and its correlated “pathologies” are factual. It is the remedies we should be arguing over, not politicizing whether to acknowledge the problem.

Is there sound justification for income inequality?

Previously published in the Terre Haute Tribune Star, January 27, 2007

Income inequality is growing in the United States. So what. Does income inequality, per se, translate into anything the larger society should be concerned about?

Examining societies cross-culturally, there is a relationship between the degree of income inequality within the society and the stability of the society. Once inequality gets to a certain point, the society shows more instability. The distribution of income in the U.S. looks more like that found in developing countries than in other industrial democracies.

Income inequality in the United States has been increasing since the 1980s. Are we seeing increasing signs of political and social instability? What I see is more evidence of beliefs and political trends that will support increasing income inequality in our society.

A special report by the “Tax Foundation” on American attitudes on tax and wealth released in April 2006 asked a cross-section of 2,017 adults the following question: “Do you personally favor or oppose completely eliminating the estate tax — that is, the tax on property left by people who die?”

Sixty-eight percent of respondents favored elimination. The authors are surprised given that only about 1 percent of taxpayers are ever hit with this tax. Had that fact been provided in the question, the responses might have been different. Nevertheless, the report suggests that taxes on wealth (property and large sums of money) are viewed as more unfair than taxes on income or sales tax.

Could this signal a change in beliefs about income inequality as well as who should pay for the government services and infrastructure in our society? Sixty-three percent of respondents indicated that the 42.5 million taxpayers who file a return but pay no tax is unfair, that everyone should pay something. Whether the respondents thought those 42.5 million were rich or poor, we don’t know because, again, the survey didn’t provide facts for people.

Work of the kind that required one’s own sweat and labor once was a moral aspect of material success. Those who worked hard were viewed as deserving of whatever they got. But it is pretty clear now, with things like lotteries, stock markets, and the windfall of inheritance, that beliefs have pretty much changed. The Tax Foundation report, I thought, had an interesting insight. Taxes should only be on things that people directly influence like work or sales taxes on what you buy. Those things that are not the result of one’s direct behavior, like rising residential property values, the stock market, or an inheritance, shouldn’t be taxed as much or at all. In short, tax effort not windfall.

In my classes I find growing acceptance on the part of students of a sociological theory of inequality and “stratification” (structured inequality) that doesn’t carry the day when one balances the evidence for it against other theories of inequality and stratification. Nevertheless, this theory “sounds right” because it fits (and apparently is fitting better and better) with an ideology that is more accepting of (growing) income inequality.

In short, the “functional” theory of stratification holds that people who are more highly paid deserve it because they hold the most important positions in society. Talent is rare and in order to motivate the talented to take on the training and added responsibility the important positions require, it is necessary to reward them more than others.

But there is more. Those at the top are also morally superior to others because they recognize their importance to the society and act not out of self-interest but in the wider interests of the society. Those in the middle and below act out of self-interest. Of course, this says nothing about the holders of municipal bonds, large stock accounts, owners of institutional investing firms, or those who inherit vast fortunes like Sam Walton’s children.

If this is sounding good to you, yes, it is a great justification for the higher pay and perks of those at the top. “For the good of society, CEOs must be paid more.” If so, they should get together and fund a think tank of sociologists to study and refine this theory of inequality and stratification.

The problem is that the growing income inequality is also due in part to the growing amount of “income” that comes from investments. It is hard to argue that one’s investments are made with the greater good in mind and not one’s self-interest. These difficult arguments are why we need that think tank. I’d call it the Union of Radical Defenders of Political and Economic Stratification, or U-R-DoPES.