“Unequal” does not mean “unfair”
John C. Goodman writes for The Independent Institute:
If you and I have different incomes, is that unfair? Strange as it may seem, the chattering class is full of people who think equality and fairness are the same thing. Conversely, they assume that inequality of income is unfairness, per se.
In a study for the National Center for Policy Analysis (NCPA), economist David Henderson demolishes this notion. Most inequality, Henderson shows, is the result of choices people make—including the choice to work—not the result of unfairness or accidental events over which people have no control.
For the moment, let’s forget about the top 1%, or the super-rich, and focus on the vast majority of people. Henderson concludes that inequality has increased over time—with the top fifth of the income distribution now receiving about 12 times as much income as the bottom fifth. But that’s mainly because the top fifth spends vastly more time in the labor market earning a living. In fact, if you divide income by the number of weeks of work, the difference between the top and bottom fifth is only 2 to 1.
Granted, we are living in tough times with millions of people involuntarily out of work. But the numbers I just cited come from the period before the Great Recession, when we had virtual full employment. In other words the 12 to 1 difference in income exists largely because some people choose to work and others do not to. . . .
And you may think all the blame belongs on leftists (Democrats), but this is not entirely true. Republicans have a hand in it, too:
Virtually every major Republican tax bill in modern times has made the tax code more progressive—as the burden of taxation has consistently been shifted to higher income taxpayers. In fact the United States now has one of the most progressive tax systems of industrialized countries. Also, freer economies produce more equal incomes and they tend to confer their greatest rewards on those at the bottom.
But the more important point is that the entire obsession about unequal incomes is misplaced. As David Henderson explains:
The income distribution should be judged not by how equal it is, but by how people obtained what they have. Inequality due to government-granted privileges, in the form of subsidies, quotas and so forth, is arbitrary and unfair, while inequality due to income earned through work and investment is just.