The Limits to Equality
Al sells shoes. Fred collects garbage for the same salary. Are they equal?
Hubert works 50 hours per week to make $50,000/year. Biff works 32 hours per week to make $50,000/year. Are they equal?
Sarah works in downtown Manhattan for $60,000/year. Beth gets paid the same amount but lives in a southern city with a much lower cost of living. Are they equal?
Bill is 22 years old and has $200,000 in his portfolio. Robert is 65 years old and has $200,000 saved up for retirement. Are they equal?
Sally works in a grimy industrial city for $40,000/year. Susie works in a beautiful resort town for the same amount. Are they equal?
Stephen is a tenured college professor making $60,000/year; he gets summers off and the occasional sabbatical. Charles writes software for $60,000/year working fulltime at a very stressful occupation. Are they equal?
Charlotte works as a teacher for $30,000/year, gets summers off and a very generous retirement plan. Brenda makes $40,000/year working full time in the private sector, and has to contribute to her own 401(k) plan in order to have retirement money. Is Brenda better off?
Humphrey has climbed the corporate ladder making a steady climb from $40,000/year to $80,000/year over ten years. Joe started his own business, losing both money and sleep over the first few years, but now is making $100,000/year. Is Joe better off?
The ideas in this chapter and the surrounding chapters would do much to reduce income disparities, but they will not eliminate them. As shown above, complete income equalization does not produce complete equality! This is the inherent flaw in attempts at setting a maximum income, such as a steeply progressive income tax. Not all jobs are equally pleasant. There is a time value of money; money gained now is worth more than the same amount promised later. There needs to be compensation for the risks taken for starting new ventures and creating new products. And finally, old people need money in the bank to offset their loss of productive capacity. Any study of wealth distribution that does not break down by age group (and take into account the annuity value of Social Security and other retirement plans) is bogus.
No government has the information needed to determine these offsets. Different people place different values on luxury, location, timeliness, leisure, and security. The best we can do is to let people try to equalize their lot by free choice.
True inequality will remain, as some are more talented, ambitious and/or lucky. But to stifle such people is to deprive society of the fruits of their labor. It is better to buy a skilled brain surgeon a nice new car than to have the brain surgeon work on his own car with time he could be doing brain surgery. Prosperity and efficiency are important; equality is not the only value.
But even if equality were the only virtue, it is still much to be said for letting the talented and ambitious earn above the norm. To do otherwise is to lock our society into a type of caste system. The corporations started by tycoons past become permanent institutions. It took a system that allowed Bill Gates to get rich to provide IBM with real competition. And if we let some other talented programmers to keep more of their wealth, they might have a better shot at starting the company that gives Microsoft some real competition.
I don’t know what the exact limits to equality are, and I don’t have to know. I do know that there are steps toward greater equality that are also steps toward greater freedom, justice and prosperity. After taking these steps, we can step back and think about the tradeoffs.
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Copyright© 2003, Carl S. Milsted, Jr. All rights reserved.