Glaring Inequalities

It is difficult if not impossible to argue with at least a few of the statements made in this article: • Fully employed workers not earning enough to lift themselves out of poverty is bad • Wide disparities in income create unhealthy class tensions • A nation with the "objective conditions for correcting these harms" should be able to address it. On the other hand, it not difficult to argue with many of the other statements made, the statistics or studies used to support them or the conclusions you reach. A central question regarding the "greater good" has to be “For whom?” And a second question ought to be whether focusing on income inequality is the best path toward the greater good. I know the title of this magazine is "America" - but I do not believe your interest in the greater good is limited to this nation. Is your definition of “greater good” limited to the nurturing of better paying American jobs perhaps through “a viable civic space for collective bargaining?” Is that concern limited to the middle class in this country who are seeing categories of jobs shipped overseas? What of the workers in less developed nations who may be climbing out of poverty via the job that was transferred from America? The current structure of the global economy facilitates the movement of capital, resources and jobs across the globe at speeds inconceivable just a few years ago. It has redirected high paying manufacturing jobs from the US and Europe to developing nations. In the process, it has hurt the middle class in developed countries which in large part grew up around these jobs while creating the beginnings of a middle class in countries that never had one. It is not clear to me that stopping this flow is possible nor in the best interest of the “greater good.” You cite the OECD’s superior rates on “income equality” and “social transfers” but ignore their unemployment and debt. The high levels of social transfers you praise are unsustainable given their demographics and economic growth rates. They may well eliminate all income disparity at this rate by eliminating income in general. Instead of artificial attempts to take the global economy back 40 years, why don’t we seek solutions that grow the size of the income pie and make sense for different regions at different stages of their economic growth? In the United States, we need to improve education to graduate a workforce that can be successful in the 21st century economy while retraining workers to find jobs that are still here. Expanding collective bargaining makes sense for the developing economies where workers’ wages are depressed and the industries can/should pay them better. Ironically, in the US, collective bargaining that did a fantastic job of creating a middle class during the 20th century can as easily be an enemy of the common good as a friend (see the rules built into almost every teacher’s union contract in the US which help prevent the very progress we so desparately need.) I am not a fan of extreme income inequality. When people are poor, starving or suffering, it is tragic and sinful. Those to whom much is given, much is expected. The rich have an obligation to share the gifts they have the fortune to receive – they are the stewards of those gifts, not the owners. But I think the greater good is better served by putting more focus on improving the position of those in need and less on making income inequality the target for action or measure of success. And while it may mean that the days of highly paid auto, tire and steel workers in the US are gone forever, the middle class in China is now over 100 million where it did not exist 12 years ago (Brookings Institute Study). That has to be part of any greater good calculation.

It is a commonplace in contemporary economic thinking that there is an imbalance between the supply of and demand for skilled labor in the United States. If addressing inequality in any substantive way is your goal, then a coherent answer has to include what to do with an educational system that is simply not meeting the demands that a postindustrial economy has placed upon it. There are no simple solutions--one doubts that "races to the top" or STEM curricula alone will fix things, but condemning the successful in this society is, if nothing more, demagogy. Inequality is self-defeating. A society that distributes its rewards only to a small group will never generate sufficient demand to maintain long-term growth. That is the lesson one learns from looking at Latin America. It is enlightened self-interest--as opposed to the unenlightened self-interest currently on offer from our right-wing brethern in Washington.

To the editors, Inequality in the world is the lowest it has been in the history of mankind in terms of material goods and medical services. Each year it is getting better as the free market system has produced wonders in most of the world. Here in the United States the poorest of our people live better materially and health wise than all but a few of 100 years ago. The poorest get substantial support in our system in terms of material goods. That does not mean that all are more productive than past generations but that they have access to material things and health care that was not available to past generations. Innovation has produced an incredible number of goods and services that were not even dreamed of a couple generations ago but which are considered basic rights today. That said, there is a disparity in material goods/services as well as a large difference in culture and moral behavior between the lowest and the highest that didn't exist 60 years ago. This does not mean that the lower quintiles have less than previous generation only that the upper 30-40% has an incredible array of things available to them that was not available in the past. And it will probably get wider but not because of any conscious plan or policy by anyone to make it so. Three relentless trends are driving this inequality. Two are described in Charles Murray's book, Coming Apart which I suggest that every writer for this magazine read so they understand what is driving this disparity in the United States as well as in many other countries in the world. Otherwise one gets a false impression of the underlying forces operating in our society and many other First World countries. This false impression will lead one to recommend things that have no relevance for the real underlying problems. Based on what I have read in America in the last three years not one on going author as well most of the occasional authors seems to understand what is going on.The first thing that Murray has identified may be a genetic thing. The educated, smart and rich are marrying the educated, smart and rich. They meet in the best colleges and universities or the best jobs and get married and have children that are financially better off and then continue the process over again as the children go to the best universities and meet people like themselves. This phenomenon started in the late 50's and early 60's and is well entrenched today. Of course there are exceptions to this as some drop out of this pattern and others enter it. This is described in detail in Murray's book as he identifies the zip codes where these educated and financially well off live. Ever wonder why Bill and Hillary bought a house in Chapaqua. It is number 5 in the country in this zip code pecking order. The other phenomenon that is driving inequality is that about 40% of children are born out of wedlock and a large percentage of them grow up in a one parent household, mostly fatherless. This means that there are tremendous financial strains on the raising of these children and a very high likelihood that they will be dysfunctional. Such families often lack basic social and moral habits that contribute to success. Again this is described in Murray's book. This trend started in the late 60's and it has reached the point that 40% of the children today are in this situation. Again there are exceptions of those who escape this type of environment but a high percentage continue on in this life style. A third force that is operating is that for a few, one's actions can affect a much larger number of transactions than was ever possible before. For example, many small businesses literally sell to every continent. Just 30 years ago nearly every business would have been confined to the US and probably to one local area of the US. So even small businesses are global which makes some of the products and services they make and distribute available to billions of people so the skills of some individuals are having an effect world wide. For some the productivity of their skills has dramatically increased in terms of effect while for others nothing has changed. A house painter or local dry cleaning service is not much more productive than they were 50 years ago but a good web designer may have clients all over the world. A good example, a guy has a good time at the local zoo and emails all his friends with photos. This starts him thinking on how to make this more efficient and a short time later Twitter is born and is now a world wide phenomenon. There are certainly other forces operating but if one looks for a bogey man that is causing whatever inequality that exists they will most likely end up making things worse. The do gooders often have no clue as to what will help and we end up with policies and programs that have very negative unintended consequences. Some of the efforts from the do gooders who complain about inequality are directly responsible for the policies/programs that led to the entrenching of this inequality in our society. The following statement is incredibly naive

It has taken decades to establish this dangerous disparity in American life; it will take decades to unravel it.

If you do not understand what is causing something how are you to correct it. What get's in the way is the blinders of politics which prevents one from seeing or even wanting to see just what is happening.

The admonition of Paul VI in Populorum Progressio is relevant: "...the individual who is animated by true charity labors skillfully to discover the causes of misery, to find the means to combat it, to overcome it resolutely." Caritas in Veritate contains a similar message: "Charity does not exclude knowledge, but rather requires, promotes, and animates it from within." The editors' prescription for change starts with "restoration of progressivity to tax structures." But the Organization for Economic Cooperation and Development (OECD) reports that "household taxes are more progressive in the U.S. than in most E.U. countries." (OECD 2012, "Income Inequality and Growth: The role of taxes and transfers. OECD Economics Dept. Policy Notes, No. 9, January, 2012.) The U.S. Treasury notes that the Bush tax cuts made the tax code more progressive, since taxes on low-income households were cut more than the taxes on high-income households. The changes taking effect in 2013 and 2014 make the U.S. system even more progressive--perhaps the most progressive among OECD countries. Our tax system has many flaws, but lack of progressivity is not one of them. If the first element of the proposed strategy is so flawed, one begins to wonder if there are other weak points. And if knowledge is clearly not the basis of this proposition on taxes, what is? The editors call for improvements in educational attainment. Literacy is the entry point for opportunity in any advanced economy. In other nations, especially developing nations, literacy has advanced. But it has actually declined in the U.S. over the past thirty years. The U.S. Department of Education reports that twenty percent of American adults are unable to perform basic tasks involving printed material. Specifically, they have trouble completing a job application, understanding written instructions, reading a basic health bulletin or apartment lease.("Literacy for Everyday Life: Results of the National Assessment of Literacy. NCES 2007-480). A Pew Research Center report, "Wealth Gaps Rise to Record Levels Between Whites, Blacks, and Hispanics," shows the straightforward connection between literacy skills and household incomes. Of adults with Below Basic literacy skills, most lived in households with less than $20,000 income. The poverty threshold in the survey year was $18,810 for a family of four. The data consistently shows that higher literacy skills correlate with higher incomes. Are we to pay for, or pay more for, an education system that leaves twenty percent of our adult population unprepared to engage in any but the most menial employment or to navigate in a complex society? This, and the drop-out rates of our urban schools, should call for urgent change--what business people would call a "green field" strategy--moving expeditiously to build a new system with funds that formerly supported the old, rather than spending time and money trying to fix the existing system. The editors point to the rich man who was indifferent to Lazarus. The lesson is worth repeating in every age and in every civilization, as today in ours. But by custom in America, for more than one hundred years, the fortunes of the wealthy have returned to society. Consider that the largest fortune ever assembled by one man, that of John D. Rockefeller, was in large measure donated back to society by him and his son and grandchildren. Almost all of the wealth of Andrew Carnegie was donated back to society before his death in 1919. The current charities of Bill Gates and Warren Buffett (the wealthiest Americans today) are not a new phenomenon, but the continuation of an American tradition that predates our income tax system. The wealthiest have often been leaders in philanthropy, not hoarders. Today, our strategies for promoting the common good might be more effective if we concede that some, perhaps many, among the much-despised one percent are concerned about the condition of their fellow man, participating in efforts to improve conditions (more than ninety percent give to charity, compared to sixty-eight percent of the general population) and willing to lead or join in any well-conceived plans to solve problems. When a reporter asked Albert Einstein how he had made some of his great scientific discoveries, he answered, "I challenged an axiom." Let's put aside the axioms, rely on knowledge, and move forward.

Mr. Cosgrove, Enjoy the ride. And yes, Acadia is beautiful. Few are aware that major advances in the training of America's physicians over the past century, the growth of our independent colleges and universities, the establishment of public health departments and public education systems in many states, are also legacies of Rockefeller, Carnegie, Rosenwald, Stanford, Hopkins, Mellon, and so many others. Peace.

Professor Killoran, Thanks for the note on "Five Dollar Day." The book presents much of value, especially on the "human resources" aspects of the plan and the Sociological Department that accompanied it. To fully understand the Five Dollar Day, however, one must understand the broader business case or business rationale for it. That is not sufficiently covered in the book. Perhaps it is definitive for some purposes, but I had to dig deeper to develop the complete picture. More importantly, I now appreciate the depth of your conviction, acquired in years of studying and teaching history, that "Almost to a man they (the business tycoons of the late 19th/early 20th century) denied workers the right to join unions and they embraced the 'Gospel of Wealth'," and that there were "very few" exceptions. That is sad. First, this sweeping general indictment is inaccurate. It accuses, without foundation, many whose stories I was able to find, including some who pioneered employment practices and benefits applauded in many businesses today. Second, it judges many by a standard that did not exist in their day. Most states did not recognize a right to form unions as bargaining agents until well into the 1900s, and federal law was at best ambiguous until the Clayton Act of 1914 clarified that such organizing was not a criminal violation of the Sherman Act. Catholic teaching became clear with Rerum Novarum in 1891, after most of the "robber barons" were dead, retired, or near the end of their careers. Third, your indictment fails to acknowledge the complexity of human nature and the organizational behavior and interactions of corporations, governments, and non-profits. Ida Tarbell understood these complexities. She took a careful, comprehensive view of John D. Rockefeller and the Standard Oil and criticized much. She also devoted an entire chapter to "The Legitimate Greatness of the Standard Oil Company," and separately described Rockefeller's character, listing qualities such as "instinct for opportunities, the courage to seize them...the patience to stick by enterprises until they had justified his faith...cautious in trade yet daring, quick to seize yet ready to wait." She wrote of his quiet charity to individuals and organizations. Somehow, you missed all that in spite of reading Tarbell's work "many times" and assigning it to your students. (You wrote to me, "We must have read a different Ida Tarbell if you find her anything less than critical of JDR.") It is Tarbell's ability to see the good and the bad and appreciate the importance of it all, that set her apart form Henry Demarest Lloyd and so many others who tackled the same subjects. It was Tarbell's ability to sort out the complexity that made her one of the first great investigative reporters. It made her work uniquely valuable to legislators and other officials. None of the students brought to your attention the passages you missed? Interesting. Admitting the complexity of a subject by acknowledging that it does not fit neatly into the axiom, is the first step in discovery. That ability to deal with complexity, to acknowledge multiple aspects of a question, is vital in social justice work, as historians especially should appreciate. Charles Francis Adams was president of the American Historical Association in 1901 when he wrote, "only when understood historically...can any issue be understood in its manifold relations with a complex situation." Only by admitting the complexity, and seeking full understanding with a mind that is open to knowledge, can we carry out the mandate of the encyclicals to "make sure the laws and institutions, the general character of the commonwealth, shall be such as of themselves to realize public well-being and private prosperity...to benefit every class in the State, and amongst the rest promote to the utmost the interests of the poor...to serve the common good...(to) solicitously provide for the welfare and comfort of the working classes...to act with strict justice...toward each and every class alike." (Rerum Novarum). Surely, this is complex work. But I acknowledge your conviction as you have explained it. Thank you.

While accepting the need to do something about inequality, I struggle with the question of how best to address it both from a practical standpoint (will the suggested policies in fact have the effect of reducing inequality) and from the standpoint of justice (do the suggested policies adequately consider the rights of all parties including employers, the wealthy, etc.). Several of the proposals made by the editors set my alarm bells to ringing. Increasing the minimum wage sounds good, but the potential disemployment effects cannot be ignored (might the EITC be a better way to accomplish the same end?). "Collective bargaining" in the public sector has resulted in unsustainable retirement obligations that are increasingly crowding out the social services the editors call for, and I would argue that teachers unions are one of the biggest obstacles to the educational attainment the editors also call for. I don't have any real answers. I suspect that a focus on education is a good place to start. Some of the other specific proposals make me very nervous.

Before increasing the minimum wage, we should eliminate the shameful practice that allows organizations (most of which claim to be charitable enterprises) to pay subminimum wages to employees with disabilities under Section 14(c) of the Fair Labor Standards Act. Many of these organizations are tax exempt, have a competitive advantage in bidding on government contracts, and have excellent marketing departments that know how to spin what they are doing into positive PR. Policies, tax dollars enrich Goodwill execs http://watchdog.org/83209/policies-tax-dollars-enrich-goodwill-execs/ An End to Legalized Discrimination: A Demand for Justice and a Call for Action http://nfb.org//images/nfb/publications/bm/bm12/bm1208/bm120808.htm

How hypocritical for the Federal Reserve Board to be bemoaning the income and wealth inequities after doing so much to create those inequities. The Fed spurred speculation and the housing bubble with artificial low interest rates. When the bubble inevitably burst, so did the dreams of those supposedly helped by government policy. The Fed is the lender of last resort to those too big to fail. But it has been ongoing Fed policy to create those too big to fail behind closed doors. Then with the opening of the famed revolving doors , those conferring monetary benefits exchange places with those receiving benefits. Supposedly, this is not for the citizen to comprehend because of complexity. But citizens should be rightfully cynical about these rent seekers. Evil flourishes in the darkness and behind Fed doors. Only a free economy with minimal government manipulation can be transparent.

A few points late in this conversation. I know a lot of people talk about inequality as if it was in itself a bad thing. But, it is only a possible surrogate for bad things. The bad is deprivation of some good, not a comparison with how someone else is doing. For example, if the very best athletes make many millions and the second tier athletes make just a couple of million, and the gap is widening between the very best and the second tier, that is no obvious negative effect to the good of the second tier. On the other side of the scale, if the inequality between the middle class and the lower class is getting greater, it may not be the right solution to focus on the difference but to look at the needs of both. Both may be doing worse, or better, irrespective of the inequality. Also, as pointed out below, the inequality measure is very dependent on what geographic area is being considered. Is it really more Christian to oppose free trade to reduce the inequality in our own country at the expense of the workers in the developing world? There is no doubt that inequality across the world is improving dramatically, with the largest ever increase in a global middle class (especially is Asia). Shouldn't we favor policies that most rapidly reduce the worst deprivation across the world? Another term I hear used a lot is a "just wage" and the related term "minimum wage". A just wage is a good concept in theory, but is it a good for an employer to pay a father of a large family more than a father of a small family for the same work or less still for a single man or woman? Surely the first father needs more, but it hardly seems fare. And should a wife, whose husband is also working, get less for the same work because she needs less? Shouldn't the employer set his wage based on the value the worker is bringing to the business rather than try to be a judge of the worker's personal needs? If he doesn't, his business will soon become unprofitable and he will have to shut down, with a loss for all the workers. Better for the government to focus on things like high tax allowances to address the needs than put this on the employers or the whole business. Doubling or tripling the child tax credit would be a greater help to the poor families (and encourage families to stay together) than a more blunt instrument like a minimum wage. So much in economics is frustrated by unintended consequences and neglecting incentives and the fundamentals of supply and demand. For example, Obamacare is almost certainly going to reduce the number of full-time jobs (over 30 hours) and increase the number of companies that stop growing beyond 50 employees for these businesses to keep their costs under control. Why wouldn't a successful businessman open a second company to do the same thing once his business hits 40 fulltime workers? Didn't the inventors of Obamcare think of these incentives? Even the Unions are complaining about this unintended consequence. And it is not easy to fix without other negative effects on jobs. I think the focus on inequality or minimum wage in government policy has not worked. Certainly, the focus on equality in the last century caused untold suffering. Isn't it the moral thing to pragmatically look for solutions that work? The breakdown of the family (unwed mothers, no fault divorce, and wide acceptance of sex outside marriage) and illiteracy (despite massive increases in dollars for education) are much more likely to cause deprivation of goods (and inequality) than a low minimum wage or a "flatter" tax system.

The same commenters defending the huge inequality in our nation would be supporting the divine right of Kings. They are the same part of the Church that stood with Franco, Pinochet, Mussolini, who out of fear of communism made a deal with Hilter, A concordat I believe it was called, knowing full well what the Nazis would unleash on the world. But after all they did protect the "Makers"

Until glaring inequalities in performance between various groups in the areas of Science, Technology, Engineering & Mathematics (STEM) are remedied, glaring economic differences between groups will necessarily remain. Abilities in these areas are essential to maintain technologically advanced societies and achieve economic success. What, if anything, can be done to eliminate these inequalities?