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A Solution to Income Inequality

Time and time again, we are bombarded with charts and graphs displaying the immense income gap between the top 1% of Americans and the bottom 99%, normally with a negative connotation of how this “issue” needs to be fixed.

Main political figures such as Senator Bernie Sanders from Vermont has advocated against this wealth gap, claiming that it is the Robin Hood effect in reverse. Quote, “The reality is that since the mid-1980s there has been an enormous transfer of wealth from the middle class and the poor to the wealthiest people in this country. That is the Robin Hood principle in reverse. That is unacceptable and that has got to change.” (source)

Except that’s a lie. It’s not even close to true. To address Sander’s analogy, the “Robin Hood” effect in reverse makes no sense at all. Robin Hood is famous for stealing from the rich and giving to the poor. The Robin Hood effect in reverse would be the rich stealing from the poor, which isn’t the case.

According to fortune.com, there are 34 million individuals with a net worth of at least 1 million, placing them in the top 1% of the world. Every single one of those individuals (excluding maybe a generous 1,000 people who accumulated their wealth through theft*) gained every dollar from a willing customer. They created a new app; invented a new restaurant chain; managed a fortune 500 company; performed open-heart surgery, or did something else revolutionary. Every single one of them fulfilled a need and gained financially from it.

But is this okay? To answer that question, let’s take a reverse look at it from a different perspective: Is income equality acceptable? Many, including myself, would argue no.

I do not believe that the world is fair, but it seems “fair” to me that a neurosurgeon with 15 years of special training should earn more than a cashier. I even think they should earn more than a degree-holding secretary. Interesting enough however, I am not the one that sets every person’s wages: the people do.

The neurosurgeon earns more because there aren’t many that can do what he does. Not many are willing to pursue school for an additional 15 years. Many don’t have the money, or just don’t have the time to become a surgeon. Because there aren’t many like him, he is in low supply, raising the price of his services and therefore giving him a larger paycheck. If that isn’t fair, I don’t know what is.

We could go on all day comparing jobs to each other and deeming which one should be making more money, but in the longrun, it is good that we have higher paying jobs than others – I don’t think many would argue with that. But a consequence (in my mind, a positive consequence) of that is that some people will make more money than others.

I believe that the income gap should be decreased to have the top 1% closer to the bottom 99% – but the way we do this is not by taking the 1%’s money. The way we do this is to encourage people to join the 1% – entrepreneurship, education and life-choices all play a huge role in this. According to Ron Haskins for the Brookings Institute, follow these three rules and you have a 98% chance of joining the middle class: Complete high school, work full time (at any job) and wait until you’re at least 21 to get married and have a baby. As reported by the U.S. Census data, only 2% of people that followed these rules remained or fell into poverty.

As addressed above, life isn’t fair. It is fully honorable to be a zoologist, but don’t expect to be making millions of dollars a year like the founder of the biggest smartphone brand. Engineers who design and build bridges are going to make more money than a fry cook. Pilots who fly airplanes are going to make more than someone who cuts hair. This is an effect of capitalism. Capitalism, the only economic system in the history of the world to every lower the number of people living in extreme poverty worldwide by 80 percent in 40 years (source). Capitalism, the economic system that decreased world poverty from 94% in 1820 to 17% now (source)b. The answer to the income inequality problem is not take more money from the people that make this world a better place, but to encourage more people to join them.

* I only included this estimated statistic to eliminate the claim of “what about the people that make their money immorally, such as through theft, drug-trade or a sex-ring?”. Of course people who gain their theft illegally should not be included in our statistics, which is why I discredited 1,000 people. I believe that that number is extremely high, due to the fact that wealthy criminals were most likely not included in Fortune’s poll.

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