What Does “Income Inequality” Even Mean?

 

Income inequality is complex beyond our ability to understand it. For example, I live near Houston, TX. Houston is a less desirable place to live than, say, Austin. Austin is in the Hill Country and has a much better climate than does hot, humid Houston. Moreover, Austin is a fun place to live; its unofficial motto is “Keep Austin Weird.”

As a result, two hypothetical workers – one in Austin and one in Houston – doing the same work, are unlikely to receive the same pay. Austin workers are typically paid less because part of their “total income package” is getting to live in Austin. Houston workers need additional incentives to induce them to suffer through six months of miserable weather each year.

Now consider the tens of millions of jobs in the United States. Each has its own pluses and minuses: level of education required, cost and difficulty of the education, on-the-job risk, job security, retirement plan, mental and physical demands of the job, year-end bonus, travel requirements, training opportunities, prospects for advancement, overtime, management quality, quality of co-workers, company stability, flexibility of work hours, child leave, sick leave, vacation, commute, state and local taxes, quality of area schools, local crime rates, area housing. The list is endless.

All these factors add up to wildly different total income packages that every individual must assess when looking for a job or deciding whether to change jobs. Who has the knowledge to make each person’s decision for him or her? Who has the wisdom to decide whether package A is unfair compared to package B and to adjust the two packages to make them equal?

What does “equal” even mean when we’re trying to compare, say, one job with generous sick leave vs. another with flexible working hours? If I have a chronic medical condition, a generous sick leave policy might be vitally important to me. On the other hand, if I’m healthy and in good physical condition but have two kids, I’m likely to want flexible working hours far more than sick leave.

So, differences in employment factors can’t even be objectively compared because our different circumstances mean that we value each of them differently.

Oh, and employment factors are constantly changing as consumer demand shifts, new technology is introduced, company fortunes rise or fall, a new mayor or governor is elected, new schools are built, old schools are closed, and on and on.

Are the total income packages of Joe, the Vermont country carpenter, and Joan, the Dallas neurosurgeon, “unequal?” I. Have. No. Clue.

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  1. Mark Camp Member
    Mark Camp
    @MarkCamp

    Well done, Fulmer.

    • #1
  2. Stina Inactive
    Stina
    @CM

    You have no idea what you are talking about.

    This is not what is meant by income inequality. This is cost of living differences. We make around $80k. To transfer it to say, DC, the equivalent pay would be about $130k. That is equal… it gets us the same lifestyle in DC that we get where we are.

    Now, my hubby is a great worker with a good skillset that is in demand, but we have an understanding. He doesn’t uproot our family to a new city without at least cost of living parity.

    When the left is talking about income inequality, they are largely talking about people with so much money you can hardly conceive of the ways it can be spent. They do not see money being trickled down to the “lesser” people, when plants are closed, downsizing happens, and CEOs get 6 digit bonuses at the pleasure of the US Government and “stimulus” bills.

    All of this flies in the face of De Toqueville’s description of America, where her youth had far more parity in wealth – the haves were not that much better off than the vast majority of the have-nots. When wealth concentration is referred to, they are very much talking about zero-sum games because the lesser people with their own capital – skills, ideas, and good work – are either owned by a large business (Disney and her Imagineers, where all their private work created during their employment is owned by Disney) or are hamstrung by government regulation that is only overcome by large amounts of money – that they don’t have.

    • #2
  3. Randy Webster Inactive
    Randy Webster
    @RandyWebster

    “Income inequality” is a term only a leftist would use.  Anyone else would understand that it’s a natural concomitant of a capitalist system.

    • #3
  4. Richard Fulmer Inactive
    Richard Fulmer
    @RichardFulmer

    Randy Webster (View Comment):

    “Income inequality” is a term only a leftist would use. Anyone else would understand that it’s a natural concomitant of a capitalist system.

    It seems to me that material inequality is the inescapable result of material progress regardless of the economic system. If a new product is invented, it cannot possibly be instantly distributed to every person on earth. So, the first time someone invented something – the stone club, perhaps – inequality instantly appeared in the world.

    • #4
  5. Richard Fulmer Inactive
    Richard Fulmer
    @RichardFulmer

    Stina (View Comment):
    When the left is talking about income inequality, they are largely talking about people with so much money you can hardly conceive of the ways it can be spent.

    People don’t resent the rewards that come with real achievement; the wealth earned by a Lebron James, a Bill Gates, or an Oprah Winfrey does not send mobs into the streets armed with pitchforks.

    What people do resent is wealth amassed by swindlers. What they resent even more is a political system that institutionalizes wealth transfers to swindlers.

    Unfortunately, many of the regulations at all levels of government in the United States do just that. For example, licensing laws limit the number of people allowed to do various jobs, zoning restrictions benefit current land and building owners, regulations limit competition in government-favored industries, and tariffs benefit favored domestic producers at the expense of consumers and other producers.

    The government is in the business of selling special privileges, and the wealthy can afford to buy most of their merchandise. We need to restore the rule-of-law under which people are treated equally.

    • #5
  6. cirby Inactive
    cirby
    @cirby

    “Income inequality” translates to “envy is good, as long as you’re poor.”

    Because that’s all it is.

    Envy.

    That’s the one emotion I’ve never really been interested in having.

    It seems to do more damage than the rest put together.

     

    • #6
  7. DonG Coolidge
    DonG
    @DonG

    Yes, income inequality is a BS statistic.  Most single variable metrics are useless in a multi-variable world.  Income is just one of *many* considerations/compensations for employment.  No economy has true equality.   If the incomes are the same, the people with power and skill figure out how to have more stuff.  Just look at prisons.  Everyone has the same income, yet life is not the same.

    • #7
  8. Richard Fulmer Inactive
    Richard Fulmer
    @RichardFulmer

    cirby (View Comment):

    Envy.

    That’s the one emotion I’ve never really been interested in having.

    I’m jealous.

    • #8
  9. OmegaPaladin Moderator
    OmegaPaladin
    @OmegaPaladin

    I’ve never understood income inequality.  I wanted to have a lot of money.  If Bill Gates has a lot more than me, so be it.  Unless he is being a jerk and constantly flaunting his wealth in front of me, it does not matter to me.

    • #9
  10. TBA Coolidge
    TBA
    @RobtGilsdorf

    Income inequality means we’re not Communists. 

    • #10
  11. PHCheese Inactive
    PHCheese
    @PHCheese

    cirby (View Comment):

    “Income inequality” translates to “envy is good, as long as you’re poor.”

    Because that’s all it is.

    Envy.

    That’s the one emotion I’ve never really been interested in having.

    It seems to do more damage than the rest put together.

     

    So true. Yes some people are more gifted than others with God given talent but the envious person ignores all the hard work, time and dedication put into developing those talents. Not many people have become rich working 9 to 5. Also a person on welfare has it better than a king three hundred years ago.

    • #11
  12. I Walton Member
    I Walton
    @IWalton

    TBA (View Comment):

    Income inequality means we’re not Communists.

     There was huge income inequality in the Soviet Union and China.  That kind of income inequality occurs everywhere government exercises excess control, including the US. 

    • #12
  13. Old Buckeye Inactive
    Old Buckeye
    @OldBuckeye

    I think our inequalities–of any sort–start with our choices.  To claim income inequality because another person made different choices that resulted in a different outcome does seem like envy, or possibly regret. 

    It’s also a matter of our natural-born talents and ideas and our willingness for risk. When the pet rock craze hit and that guy made big bucks on a simple idea, I’ll bet a lot of people thought “why didn’t I think of that?” Well–you didn’t and he did. Good for him, but it doesn’t diminish anything for you. The great thing about living in the US is that you had the same opportunity if you’d made the same choices he did, whether that was a career path, taking risks, moving to a certain area, or eating ramen noodles for a year. 

    • #13
  14. Full Size Tabby Member
    Full Size Tabby
    @FullSizeTabby

    I Walton (View Comment):

    TBA (View Comment):

    Income inequality means we’re not Communists.

    There was huge income inequality in the Soviet Union and China. That kind of income inequality occurs everywhere government exercises excess control, including the US.

    “Income” in communist or socialist economies is often of a non-monetary kind – special access to goods or services, exemption from certain rules or laws, etc. 

    Even in a free market system, “income” may be in non-monetary terms, as noted in the OP – employer provided services or goods (friends of ours have worked in specific retail outlets in part for the employee discount they received), work flexibility, schedule predictability, etc.

    So even trying to capture what is “inequality” in income is practically impossible.  

    • #14
  15. The Reticulator Member
    The Reticulator
    @TheReticulator

    Randy Webster (View Comment):

    “Income inequality” is a term only a leftist would use. Anyone else would understand that it’s a natural concomitant of a capitalist system.

    I’m opposed to leftists, and I use the term income inequality. It’s an important concept if we want to preserve our system of limited government.

    • #15
  16. Randy Webster Inactive
    Randy Webster
    @RandyWebster

    The Reticulator (View Comment):

    Randy Webster (View Comment):

    “Income inequality” is a term only a leftist would use. Anyone else would understand that it’s a natural concomitant of a capitalist system.

    I’m opposed to leftists, and I use the term income inequality. It’s an important concept if we want to preserve our system of limited government.

    I should have said “in a pejorative sense.”

    • #16
  17. DonG Coolidge
    DonG
    @DonG

    Stina (View Comment):
    When wealth concentration is referred to, they are very much talking about zero-sum games because the

    Wealth distribution is a negative-sum game.  Wealth has to be destroyed in the process.  In addition, the free market ensures that the people who are most productive with capital get capital.  In a system where capital is controlled by people unable to be productive there is a general loss of prosperity.  For example, the Stalin took farm land from experienced and productive (wealthy) farmers and gave it to his friends that did not know how to farm.  20 million people then starved to death.  The takeaway, is that more general prosperity can be had by giving control of capital to those people most able to turn it into productivity. 

    • #17
  18. The Reticulator Member
    The Reticulator
    @TheReticulator

    Randy Webster (View Comment):

    The Reticulator (View Comment):

    Randy Webster (View Comment):

    “Income inequality” is a term only a leftist would use. Anyone else would understand that it’s a natural concomitant of a capitalist system.

    I’m opposed to leftists, and I use the term income inequality. It’s an important concept if we want to preserve our system of limited government.

    I should have said “in a pejorative sense.”

    I think income inequality at high ends of the Gini coefficient tends to be a bad thing. Capitalism gives us prosperity and high Gini coeffficients, which gives us socialism and constricted lives. Some of our founding parents seemed to understand that better than we do now, even though they didn’t exactly have “socialism” back in those days.  

    • #18
  19. Sweezle Inactive
    Sweezle
    @Sweezle

    I sometimes hear “income inequality” discussed in reference to men earning more than women. A much simpler definition politically.

    • #19
  20. Mark Camp Member
    Mark Camp
    @MarkCamp

    Randy Webster (View Comment):

    “Income inequality” is a term only a leftist would use. Anyone else would understand that it’s a natural concomitant of a capitalist system.

    I once heard a non-leftist use it.

    (He claimed it’s a natural concomitant of a capitalist system, which is very true and needs to be said.  So I am glad that non-leftists would use it.)

    [EDIT: Just read the above comments where you were judged for this minor error of expression and repented of it. I apologize for accusing you again, and do hereby ask your forgiveness].

    • #20
  21. RushBabe49 Thatcher
    RushBabe49
    @RushBabe49

    I prefer “earning inequality”, which implies differing talents and motivations. Instead of asking a wealthy person how he got wealthy, and emulating that behavior, leftists use the power of government to forcibly confiscate that wealth and distribute it to those who have not earned it (with a generous cut going to government in the process).

    • #21
  22. EDISONPARKS Member
    EDISONPARKS
    @user_54742

    It means whatever you can make it mean to fit into your narrative of:  “the (R) man is screwing you over dude” … never mind you or your parents have never been more prosperous or have ever had more creature comforts ever …. the notion that some hypothetical “rich guy” somewhere has a bazillion more dollars than you should really piss you off enough to vote (D)!!!

    • #22
  23. Full Size Tabby Member
    Full Size Tabby
    @FullSizeTabby

    Back to the semantics of the question of the title: What does the phrase “income inequality” mean?

    Knowing what the phrase means requires us to know what the individual terms “income” means and what “inequality” means.

    The original post, my earlier comment, and other comments raise all sorts of problems defining “income.” Cash or monetary payments? Non-cash benefits (medical and other insurance, product discounts, access to bulk purchasing benefits (one company I worked for negotiated with some car dealers bulk discounts on employee automobile purchases; another company negotiated with cellular telephone providers significant discounts for telephone service; yet another employer offered to employees use of the employer’s member ship in a private club inside Disneyland), “free” or subsidized on-site food)? Scheduling benefits? Working environment? Community environment? [The OP notes that most people consider the “scene” in Austin to be preferable to the “scene” in Houston. But what if “housing” is someone’s top interest. In Houston a person can buy much more house for a given dollar amount that the person could buy in Austin.] 

    Other comments have noted problems with defining “inequality.” How much inequality is “inequality? 10% difference from top to bottom? 200% difference between top and bottom? 1000% difference between top and bottom? Who gets to decide how much inequality is “inequality”? Do we factor in, as suggested by @cm (Stina), regional “cost of living” differences? But who decides what goes into a “cost of living” difference? The “basket of goods and services” I buy as a retired empty nest couple is different than the “basket of goods and services” purchased by my 30 year old next door neighbors with three small children. The “cost of living” difference between our little town in north central Texas and a major coastal metropolitan area may be very different for me versus my next door neighbor. Do we factor in inherent genetic differences? The previously cited Lebron James was born with genetic factors that are very different from what I was born with. No matter how hard I worked, I was not going to grow beyond a height of 5 feet 8 inches. Do we account for those genetic differences in calculation “inequality”? I have mental analytical abilities driven by genetics quite different from most people’s. Do we factor that difference into “inequality”? If so, how?

    So, we can’t define “income” and we can’t define “inequality.” In other words, we can’t define the individual terms, which means that we can’t define the phrase. Therefore, the phrase is meaningless.

     

    • #23
  24. Richard Fulmer Inactive
    Richard Fulmer
    @RichardFulmer

    Full Size Tabby (View Comment):
    So, we can’t define “income” and we can’t define “inequality.” In other words, we can’t define the individual terms, which means that we can’t define the phrase. Therefore, the phrase is meaningless.

    But whatever they mean, Elizabeth Warren and AOC are going to fix ’em.

    • #24
  25. Randy Webster Inactive
    Randy Webster
    @RandyWebster

    Richard Fulmer (View Comment):

    Full Size Tabby (View Comment):
    So, we can’t define “income” and we can’t define “inequality.” In other words, we can’t define the individual terms, which means that we can’t define the phrase. Therefore, the phrase is meaningless.

    But whatever they mean, Elizabeth Warren and AOC are going to fix ’em.

    Of course.

    • #25
  26. Mark Camp Member
    Mark Camp
    @MarkCamp

    Full Size Tabby (View Comment):
    Knowing what the phrase means requires us to know what the individual terms “income” means and what “inequality” means.

    That’s not true. “Income” and “inequality” have no inherent meanings, so it is logically impossible to know those meanings.

    Your assertion is an example of a common fallacy called reification–mistaking an abstract thing for a concrete thing.

    To use these two terms to communicate ideas, it is necessary, and only necessary, to specify and agree to some arbitrary, logically valid definitions.

    The consequence of looking for a inherent meanings which doesn’t exist is that we will never take the first necessary step of agreeing to a specific definition.

    This happens a lot on Ricochet.  It results in nothing but frustration.

    • #26
  27. Valiuth Member
    Valiuth
    @Valiuth

    Listen, it is very simple. Income inequality means “I’m not being paid enough, and I think I should be paid more.” Whose fault is it that I’m not being paid enough, well it is either the fault of the rich or immigrants, maybe the worst offenders being rich immigrants. So the government should tax them more and give me more money, or force Them to pay me more. 

    • #27
  28. Django Member
    Django
    @Django

    DonG (View Comment):

    Stina (View Comment):
    When wealth concentration is referred to, they are very much talking about zero-sum games because the

    Wealth distribution is a negative-sum game. Wealth has to be destroyed in the process. In addition, the free market ensures that the people who are most productive with capital get capital. In a system where capital is controlled by people unable to be productive there is a general loss of prosperity. For example, the Stalin took farm land from experienced and productive (wealthy) farmers and gave it to his friends that did not know how to farm. 20 million people then starved to death. The takeaway, is that more general prosperity can be had by giving control of capital to those people most able to turn it into productivity.

    I just recently heard De Blowsio(sp?) say, “There is plenty of money in the country. It’s just in the wrong hands.” That’s all there is to it: You have more money than I have, and that ain’t fair. It doesn’t go any deeper than that.

    • #28
  29. Justin Hertog Inactive
    Justin Hertog
    @RooseveltGuck

    Stina (View Comment):

    When the left is talking about income inequality, they are largely talking about people with so much money you can hardly conceive of the ways it can be spent. They do not see money being trickled down to the “lesser” people, when plants are closed, downsizing happens, and CEOs get 6 digit bonuses at the pleasure of the US Government and “stimulus” bills

    Yes, this is what the left says. But what do they really mean, or, what do they want? The left’s agenda requires a massive and reliable revenue stream. The amount of revenue will be determined by the circumstances. If healthcare, free college, enterprise zones, corporate welfare, abortions, gender reassignment, a bridge to nowhere, whatever, cost more than what they thought it would, they will tax and redistribute more. If that means a VAT, so be it. If that means carbon taxes, so be it. That’s the reality. Income inequality complaints are just a wedge to get taxes on the table. If more revenue is needed (as if anyone thinks it won’t be needed), additional revenue raising legislation will be passed later to “broaden the tax base,” as they say, that affects the middle and upper middle class. I don’t buy the Alexis de Tocqueville stuff for a minute. Bernie can say he’s going to tax corporations, but the corporations can pass the costs on to customers. Customers can’t pass the costs on to anyone else. We’re stuck paying the bill.

    When the federal income tax was first pitched to the American people, everyone was assured that only the wealthiest people would pay. How far we have come from that. Or consider Social Security, the flat tax that started out very small. How far we have come from that.

    income inequality is unspeakable horses—t coming from progressives. Absolute hokum, balderdash, cant, bunk.

    I recently heard Marc Cuban characterize Democrats’ policy agenda as “trickle down taxation.” Wonderful turn of phrase.

     

    • #29
  30. Keith Rice Inactive
    Keith Rice
    @KeithRice

    When I first heard of the Gini coefficient in a college course on world development (c. 2007) I thought it had some value. But when I saw it applied to economies where individuals are relatively wealthy it immediately stunk of commie propaganda.

    • #30
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