While the economic meltdown did considerable damage, two interesting side-effects were that it led to serious consideration of economic issues and gave rise to a loose movement critical of business as usual. Not surprisingly, one core point of political and moral concern is the income inequality in the United States and other countries. While such inequality has always been present, what has made this an ever greater concern is that fact the disparity has significantly increased.
While income has been increasing in the United States, it has been especially great for the top 1%. Their after-tax income increased 275% from 1979 to 2007. This is in sharp contrast with the increase enjoyed by the other economic classes. The next economic class, the top 20% (excluding the top 1%) had a 65% increase in earnings. Those in the bottom 20% also saw an increase, but this was only 18%.
Given that all the classes saw an increase in after-tax income, it could be wondered why there might be any ground for concern. After all, if everyone is making more, then things would seem to be good.
The obvious reply is, of course, that while everyone is (on average) getting more, some people (the 1%) are getting very much more. In terms of income share, the lower 80% saw a decline of 2-3 percentage points while the folks in the top 20% enjoyed an increase of 10 percentage points (thanks mostly to the gains of the 1%). This does seem to provide some grounds for concern.
To use an obvious analogy, imagine a business. Suppose that everyone got raises, but Sally(already the highest paid) got 275%, Bob 65%, and Sam 18%. While getting a raise is good (actually, being employed at all is good these days), Sam might have some concerns about why Bob and Sally got so much more. Bob would also probably be somewhat concerned about the fact that while he got more than Sam, he got far less than Sally. After all, such disparity does provide at least some grounds for worrying that something is not right. Perhaps, for example, Sally’s raise was the result of her connections and some (or much) of her increase was taken from what was actually generated by Bob and Sam.
However, Sam and Bob’s concerns could be unfounded. After all, each person might have received exactly the deserved raise. Perhaps, for example, while Sam was somewhat more productive, Sally was vastly more productive. Or perhaps Sally invented something that the company patented and was properly rewarded. As long as Sally exceeded Sam and Bob based on a legitimate standard or standards (such as productivity or inventing things), then the disparity could be reasonably justified on the basis that it was earned fairly. This also assumes, of course, that Sally, Sam and Bob were working under comparable conditions. If, for example, Sally was given an abundance of assistance and support while Sam was required to do without, then this would be a relevant factor.
Turning back to the general income disparity, perhaps the 1% earned their 275% increase by simply outdoing the lower classes in ways that would legitimately justify the disparity. As might be imagined, there is considerable dispute over what justifies income. Fortunately, this is a relative situation in terms of comparing the classes. As such, whatever standards (such as productivity or inventiveness) that are used to justify an increase could be applied to all the classes (with some likely exceptions). As such, if the 1% did proportionally better than the 99% in terms of these standards, then the disparity could be justified. Provided, of course, that the conditions were comparable.
One common way to justify the disparity is to point to the massively profitable start up technology companies. These companies, such as Google, have created quite a few millionaires (and some billionaires). So, for example, it could be argued that someone like Mark Zuckerberg earned his billions through his efforts. In contrast, it could be contended that the young people of Zuckerberg’s age who died in service to their country legitimately earned considerably less (even taking into account the “free” funeral). After all, they could have created Facebook and become billionaires instead of going off to die in foreign lands. The same underlying principle would, of course apply across the board. For example, while Mitt Romney makes vastly more than most Americans, it could thus be asserted that he justly earned his large income. Those who elected to be firefighters, police, teachers, nurses, professors, electricians and so on also earn their money, but they justly earn considerably less. As such, the disparity is justified.
Of course, one might suspect that this sort of stock justification is circular. Those who make more income are justified in making more because they make more. Likewise, the 1% are justified in their 275% increase because they made 275% more income. This seems to boil down to saying that they earn more because they earn more. This is like is like questioning a person who has taken a huge slice of cake and being told that her slice is big because it is a big slice. This sort of circularity fails to satisfy. What is needed is not just an appeal to the obvious fact that people who make more do make more, but rather some justification for the disparity.
One way to counter this is to argue that I have it wrong. The correct view, at least when it comes to earned income, is that people like Mark Zuckerberg generate vast amounts of money and hence are entitled to a significant cut of that money because of the value they generate. This is not, it could be argued, circular. It is like a cook who makes a bigger cake-his slice would thus be bigger. Those who do not create as much profit, such as Captain Jesse Ozbat (killed on May 20, 2012 at the age of 28) justly earn less. Sticking with the cake analogy, those who bake small cakes get smaller slices.
While this might seem to justify the disparity, it actually seems to simply reveal the foundation of the disparity. To be specific, the broader disparity exists (in part) because of the disparity in value placed on specific jobs. So, for example, Zuckerberg became a billionaire because of the way he was rewarded for what he does. Likewise for the millionaires Mitt Romney and Barrack Obama. Those who are mere teachers, professors, soldiers, electricians, plumbers, roofers, farmers and so on are rewarded to a vastly smaller degree because of the far lesser value placed on what they do. This disparity at the individual level obviously enough provides the foundation for the disparity that exists when considering the various economic classes in the United States. It is, I think, not unreasonable to inquire whether or not the value system that governs income is just or not. It might, of course, be quite just-but this is not something that can simply be assumed.