Income Inequality – Part Three: Individual Choice

Eric Andersen Eric Andersen 8 Comments

Share

In Part One I agreed with Sen. Bernie Sanders (D-VA) that income inequality was a problem but disagreed with him for not differentiating its moral from its immoral causes.

In Part Two I shared how consumer choice made Taylor Swift wealthy and how each transaction left individuals better off than they were before. Each transaction was a “win-win”.

In this post I address the inequality created by poor decisions. While income inequality created by government favoritism is unjust there is nothing immoral about allowing individuals the freedom to make their own decisions. The freedom to make a good decision must necessarily be accompanied by the freedom to make poor one. Our growth in learning and character are stunted when we are deprived of the consequences of our decisions.

Educational Impacts
educationSometimes our economic problems are the result of our own decisions and we are left with no one to blame but ourselves. Studies are clear, our level of education will impact our earning potential. If I drop out of high school I only have myself to blame.  My decision to not attend or finish college is a personal choice and in most cases will impact my future earnings.

Character Impacts
Staying married has an impact on wealth accumulation. Married households have higher earnings than divorced ones.  Some individuals develop the character to work hard and exercise delayed gratification while others do not.  Each of us have different investing and saving habits.  Some choose to spend everything they make while others choose to live on less than their means. Our decisions will always have consequences. Consequences are an important part of our education. Individuals desiring to self-govern need these consequences to learn from and not be deprived or protected from them.  There is no such thing as limited government without self-government.  External and internal government are directly related to each other and exist in inverse proportion.

Age Impacts
We note here that in most income inequality studies age is often left out. Shouldn’t individuals in their 60s have more wealth than individuals in their 40s? The same goes for incomes. All things being equal one with forty years of experience should be earning a higher income tmentor 4han one with twenty years of experience. A 40 year old man has ten times the experience as a 20 year old. Unfortunately this is seldom taken into account.

It should be noted the while each of us are created equal and should be treated equally under the law we were not created economically equal. We are not equal in talent. Taylor Swift and Lebron James will always have skills I can never acquire. Our personality traits are a defining characteristic of our humanity and as such are never to be subjected to the jurisdiction of government.

Mobility
All said, if workers were stuck in the income quintile in which they began and remained for the course of their career we would have reason for outrage but that doesn’t appear to be the case.  See a 2005 Federal Reserve study. 60 percent of Americans move up or down one full income “quintile” each decade. Only a quarter of the middle class stays in the middle class over a ten-year period. Nearly half of all people in the top quintile “fall out” of the top during a decade and are replaced by men and women from the lower quintiles.

Next: Part Four – Income Inequality and Government

Eric Andersen is a member of the Central Committee of the San Diego County Republican Party and is the Co-Founder of the Republican Liberty Caucus of San Diego County and im2moro.com. He is a former Rock Church Citizen of the Year.

Share

Comments 8

  1. The author leaves out the most important choice. The choice not to be born to rich and influential parents. A 2011 study by Edward Wolff and Maury Gittleman found that the wealthiest 1% of families had inherited an average of $2.7 million from their parents.

    The advantage is not just about the money that is inherited. They also pass along social and cultural capital that help their kids capture the scarce supply of highly-paid jobs. Even rich kids who do not receive a college degree are 2.5 times more likely to wind up as high-income adults than poor kids who do receive a college degree.

    Of course there is also the choice to not get a “small loan” of one million dollars from your father, like Donald Trump did.

    The truth is that most of the rich and super-rich in America were born on third base thinking they hit a triple.

    This article is flawed because everyone does not have the same access and opportunities.

    Educational impacts- First, the achievement gap between students with income in the top 10% and students with income in the bottom 10% is 30-40% wider among children born in 2001 than those born in 1975, and is now twice as large as the black-white achievement gap. You can say that dropping out of high school is a personal choice, but you also have to look at the reasons a person drops out and the demographic of the people who are dropping out at higher rates. Studies show that as the gap between poor and middle-class incomes grows, the less likely it is that low-income students, particularly boys, will graduate from high school. That is just high school. Now think about college which is increasingly expensive and presents many other challenges.

    Character Impacts- It is true that you can make a large amount of money and have poor spending and saving habits that impacts your wealth. But to say that the poor inherently make choices to have bad investing and saving habits ignores reality. Most poor people don’t have the money to save or invest. They live paycheck to paycheck and sometimes paycheck to the next paycheck. At the same time they have to pay all of the hidden costs of being poor. If you can’t afford the first month’s rent and security deposit you need in order to rent an apartment, you may get stuck in an overpriced residential motel. If you don’t have a kitchen or even a refrigerator and microwave, you will find yourself falling back on convenience store food, which—in addition to its nutritional deficits—is also alarmingly overpriced. If you need a loan, as most poor people eventually do, you will end up paying an interest rate many times more than what a more affluent borrower would be charged. A nonfunctioning car can also mean lost pay and sudden expenses. A broken headlight invites a ticket, plus a fine greater than the cost of a new headlight, and possible court costs. Or you may have to rely on public transportation and the opportunity lost by that time investment. Simple things like having to do laundry at the local laundromat are more expensive than having a washer and dryer, and require more time.

    Age Impacts- The author is assuming that those on the bottom get to grow old. A study at the University of California Berkeley divided the population into lifetime earning levels and found that men born in 1930 who reached age 50 had a life expectancy of another 26.6 years if they were in the lowest income bracket and 31.7 years in the highest bracket. But projections for men born in 1960 showed no improvement for the lowest earners — and an additional seven years for the highest. In three decades, the life expectancy gap had widened from about five years to more than 12.

    Lower-earning women actually have declining life expectancies in simulations that compared the 1960 cohort with those born in 1930. Those in the top earnings bracket who reach 50 can now expect, on average, another 41.9 years. The gap by income has surged from four years to more than 13.

    Mobility- The U.S. lags most comparable nations—including France, Germany, and even Canada – when it comes to social mobility.

    Overall this article and series is concerning because it perpetuates the ideology that poverty is caused not by things like low wages or a lack of jobs and education, but by the bad attitudes and faulty lifestyles of the poor.

    In this view the poor are shiftless, irresponsible, and prone to addiction. They have too many children and fail to get married. So if they suffer from grievous material deprivation, if they run out of money between paychecks, if they do not always have food on their tables—then they have no one to blame but themselves. This attitude is dangerous and contrary to many of the facts and realities about income inequality in America.

  2. Thanks Chris. The biggest reason for this situation is sick, cavernous GREED. Trickle down has resulted in massive money hoarding. The ratio of CEO pay to their employees is hard to fathom compared to 40 yrs ago. When these freaks make more in a week than most of us make in a lifetime you have to wonder what their life outlook is.

  3. Post
    Author

    Chris,
    “The choice not to be born to rich and influential parents”

    While being opposed to the immoral and unjust acquisition of wealth, I find nothing immoral, unbiblical or unconstitutional in inheriting it, nor have you pointed any out.

    “The truth is that most of the rich and super-rich in America were born on third base thinking they hit a triple.”

    So?

  4. Eric,

    The author is making the claim that the reason people are not wealthy is because of poor choices. My point is that when someone receives an inheritance that is not a choice. People cannot choose which parents they are born to. This must be addressed in the income inequality discussion.

    “The freedom to make a good decision must necessarily be accompanied by the freedom to make poor one. Our growth in learning and character are stunted when we are deprived of the consequences of our decisions.” As I pointed out, rich kids who do not receive a college degree are 2.5 times more likely to wind up as high-income adults than poor kids who do receive a college degree. When a poor child who makes good decisions and is able to earn a college degree is still less likely to have a high income than a rich child who does not achieve that level of education; that is inequality.

    Since the playing field is not level, the argument that the reason for income inequality is about choices fails.

    I could go further to say that the rich are also not penalized in the same way for bad decisions as the poor. In the author’s previous article he uses Taylor Swift as a straw man example; I could use Paris Hilton or Kim Kardashian in the same way. Or we can look at current presidential candidates. Trump’s poor decisions led to 4 bankruptcies. When Trump files for bankruptcy he continues to increase his wealth while poorer families are wiped out. Carly Fiorina made very bad decisions at HP. She was taken advantage of by Steve Jobs and championed a disastrous merger. She left with a huge golden parachute and was set for life. Most poor people who make bad choices in their jobs leave on unemployment struggling to survive.

    The problem with the fact that rich people in America were born on third base thinking they hit a triple is the attitude it creates. It is the attitude that permeates all of these articles on income inequality. Let’s look at the past front runner in the Republican Party and the current one. Currently, as I pointed out, Donald Trump says that he got a “small loan” of a million dollars from his dad. He would make it seem that he walked down the street, got a $255 payday loan, and because he was so smart he turned it into a billion dollars. In reality he got a million dollars and had little risk in growing it. No matter what he wasn’t going to be out on the street wondering how he would survive. The former front runner Mitt Romney said that he “inherited nothing.” By the time his father died, in 1995, Mitt Romney was already a very wealthy man. So yes, he did give away his inheritance to charities and, notably, to his children — both common means of avoiding the brunt of the estate tax. Prior to this he attended the most prestigious private school. He then spent a year at Stanford and finished his degree at Brigham Young, at which point he was accepted into Harvard Law and then the very exclusive joint law/business degree program. When that happened his father was a cabinet secretary. In all this time he didn’t have to work or even go into debt. Why? Because he survived and paid for everything by selling stock Romney received from his father. Neither he nor his wife worked. She stayed at home with the children. They lived off of the stock. Yet, according to Mitt he is a completely self-made man.

    This is the attitude that not realizing you were born with a privilege creates. And it means that everyone else is just not as smart, doesn’t work as hard, and makes poor choices, etc. They are the takers and moochers. It glamorizes the myth of the “self-made man” and minimizes the many other factors that enable wealth, things like tax breaks and other government policies that help the really rich get ever richer. This ignores the other side of the coin, that the opportunity to build wealth is not equally or broadly shared in our society.

  5. Post
    Author

    Chris,
    I’m not sure you read the whole post. The author agrees that inequality exists. He merely asks us to discern its moral from its immoral causes and to address the inequality there.

    Do you agree or disagree with his ethical distinctions? Did you read any of the others?

    “In the author’s previous article he uses Taylor Swift as a straw man example”

    You have made a statement but I don’t believe you have supported it. Please explain why you disagree with property rights and rule of law.

  6. The premise implies that there is a moral justification for people to live in poverty, for children to go to bed hungry, or for there to be a high level of income inequality in society. Is it moral for one person to have more than they could ever need and another to struggle with nothing?Matthew 19:24: “Again I tell you, it is easier for a camel to go through the eye of a needle than for someone who is rich to enter the kingdom of God.”

    I had a very long comment in the other article that supported my comments on Taylor Swift. No one says Taylor Swift is not talented. No one says that the demand for her talents doesn’t result in her having a high income. But that has nothing to do with the enormous problem of income inequality in our society, the shrinking middle class, or people living in poverty. That is why it is a straw man argument.

Leave a Reply

Your email address will not be published. Required fields are marked *