How Much Inequality Is Too Much?

 

Very few on the contemporary left, for example, would argue that Kobe Bryant should be paid the same money as a player who's a tenth as good or that the president of a national labor union should make the same money as a 9-to-5 researcher in the back office or that the CEO of JP Morgan Chase should make the same as a teller. 

 

It's true that progressives occasionally say they want to "put an end to economic and social inequalities" as Bill de Blasio put it in his inauguration speech, but they don't actually mean that. What they mean is want to reduce inequality.  

 

So the idea that progressivism is a stalking horse for egalitarian socialism is nonsense. But it's nonsense with a great capacity to frighten people in a country that believes deeply in merit. Sure, some affluent Americans bristle at inequality talk because they're afraid of losing their wealth from redistributive policies. But the wider fear is that left is against merit -- and wants to hold back or punish the truly exceptional among us in order to elevate more mediocre or slothful people. 

 

Kurt Vonnegut famously channeled these fears in his 1961 sci-fi story, "Harrison Berregon," where a handsome, strong, and brilliant man is forced to wear weights and other handicaps as part of a futuristic society's misguided pursuit of equality. Ayn Rand novels are filled with similar scare stories. 

 

But these fears belong to another era, when communist ideals really did hold sway among large swaths of the American left. That era is past, and we're in a different moment. The mainstream left doesn't have a problem with inequality per se. It has a problem with extreme inequality. Our problem is not that JP Morgan's Jamie Dimon makes a lot more than a teller; it's that he makes 500 times more. Our problem is not that a few members of the Walton family are billionaires. It's that their combined net worth of some $100 billion is greater than the combined net worth of the bottom third or so of all-Americans. And so on. 

 

All of which raises a good question: How much inequality is too much? 

 

That question isn't really asked right now because inequality is so extreme -- and seems so entrenched -- that the broad goal of less inequality, a lot less, seems adequate. You don't need a detailed road map when the right direction is crystal clear. 

 

But the question is important for a bunch of reasons. Organizations of every kind -- from small nonprofits to multinational corporations -- face the question in a practical way, when they establish pay scales. How big should the gaps between the top and bottom workers be? And societies face this question in charting fiscal and social policies: how much leveling is desirable? 

 

There are a few parts of this question that are easy to answer. For instance, it's easy to make an argument that the floor should be raised for everyone at the bottom, so nobody endures excessive hardship -- a goal that can be achieved easily in society as a whole through government policies, or in organizations or professions, through minimum salaries. The NBA sets a minimum base salary for all players, based on seniority -- which is currently $490,000 for rookies and $1.3 million for players who've been around for at least ten years. Making any less, presumably, would feel like hardship to players sitting on the bench with guys who are routinely paid over $10 million. 

 

Where things get tricker is dealing with the wealth at top. Raising the floor would do a lot of good, but it often won't stop vast fortunes from piling up. 

 

Limiting pay in some situations for those at the top clearly makes sense. Peter Drucker suggested that the pay gap between workers and executives should not be more than 20 to 1, with wider chasms putting at risk a company's morale and productivity.  And there have been many variations on this argument.  

 

Related to this, it also makes sense to fairly share wealth among those who contribute their labor and those who risk their capital to create that wealth. The person who put up the money for the business is crucial, but so are the workers who actually operate the business day-to-day. It isn't right if capital scoops up all the winnings simply because it can, thanks to a weak labor market or other factors. 

 

Where things get trickier is dealing with wealth at the top that doesn't pile up thanks to the exploitation of those at the bottom. Mark Zuckerberg is a good example. He created a product that now has a billion users with a relatively small and very well compensated number of employees. Putting aside the questions of how Facebook may or may not invade our privacy and misuse our data, it's not clear that Zuckerberg exploited anyone else's labor to get where he is or claimed an unfair share of the winnings (especially since hundreds of Facebook employees became millionaires from stock options.)

 

While one can make a good argument for taxing Zuckerberg at a higher level to finance upward mobility for others less fortunate, even a huge tax hike is not going to stop somebody like him from being astronomically richer than the rest of us.  

 

Likewise, strong new rules on how the wealthy use their money to influence our democracy are eminently in order, but these rules aren't going to stop the rich from being crazily rich.  And, realistically, no array of rules can stop their wealth from translating into some degree of social and political influence. 

 

So, when all is said and done, it seems that a sensible campaign "against" inequality might boil down to five practical demands:

 

1. To raise the floor for everyone at the bottom

2. To moderate pay gaps within organizations with tighter rules on executive pay

3. To more equitably share wealth between capital and labor, mainly by facilitating union organizing

4. To redistribute enough wealth to adequately provide opportunities for all

5  To limit how much the wealthy can influence democratic life

 

If this agenda is ever largely implemented, we'll no longer have too much inequality. But, yes, even after successful reforms of this kind we'd still have a lot of rich people and a lot of inequality. And that would be just fine.