NEWS BLOG (WSAU) Income inequality will be the issue of the day. It’s expected to be the driving theme of President Obama’s State of the Union speech later this month. He’ll build on the groundwork that Occupy Wall Street and the fast-food protesters laid.
You will hear, repeatedly, that the rich are getting richer and the poor are getting poorer. The ‘wealth gap’ has never been wider. (Whether this is true isn’t clear, since people’s incomes tend to swing wildly during a lifetime. IRS data suggests that the typical American will be in three tax brackets during their lifetimes. That certainly suggests a great deal of income mobility, upward and downward).
The unanswered question about income equality is, “so what?”
In almost every job I’ve held, I’ve worked for someone who’s been rich. As I’ve built an audience and attracted more listeners, they’ve become richer. And my expectation is that I’ll be rewarded out of some of the excess that’s flowed to my employer. But make no mistake about it, the system is set up so that ownership captures the lions share of growth. My expectation is only to get some of what I helped create. And as I have greater and greater success, the gap between what ownership gets and what I get will likely grow wider, not narrower.
And that’s as it should be. A worker isn’t a partner with the owner -- they’re a laborer. They don’t bear any of the huge expenses and risks of opening a business. And the person who takes the risks and puts of the capital deserves the biggest reward, even if it turns them from a millionaire into a multi-millionaire.
Only once in my career did I work for ownership whose competence was in question. It was a publicly traded broadcast company. Their stock, which I bought through an employee purchase plan, fell from $18 to $2 a share. I grumbled when the CEO got a “performance bonus” from the Board of Directors in the form of a multi-million dollar stock option. But even this is self-correcting. That same CEO costs himself a huge bonus if he can’t raise stock price. And if he’s still stuck at $2, soon enough he’ll be forced out.
Pat Buchanan made an interesting observation about income inequality. As one of Richard Nixon’s speechwriters, he got to travel to China with the President in 1972. China had almost perfect income equality then -- everyone had nothing. The people rode their bicycles to work, wearing their dark blue Chairman Mao jackets with their little red books in the vest pocket. Compare that to the China of today. There are new millionaires with sports cars, a growing middle class in upscale housing and a consumer-based lifestyle, and there are others still wearing their blue jackets and pedalling to work. A byproduct of China’s growth has been an increase in inequality.
I’d like to hear a comprehensive argument against income inequality. If there’s concern about the money-class dominating the political process, well, yes and no. It’s still the common man -- the poor and middle class -- who go to the polls to cast ballots. Both the political left and right seem to have access to large amounts of money for their candidates.
I’m suspicious that two of the things driving this debate are envy and jealousy. The person I work for has a bigger home and drives a nicer car than me. And time spent on those observations is better spent thinking about how to make yourself more successful. There will always be someone who has more than you. Setting your own goals and working towards them is more productive. Base emotions won’t change the income gap, and are likely to lead to bad policy too.