After making $25,000/year the past few years, making $300,000/year seems excessive. How could someone making $300,000 claim they are barely getting by?
Ah but my expenses are not the same as those of a $300,000 salary. Perhaps those expenses look something like this: $5,000 housing, $5,000 transportation, $5,000 food, $5,000 entertainment, $5,000 investment/saving. You see, making $300,000 you can still live "check to check", complain you are being taxed too high, barely getting by.
Even a raise to $500,000/year won't help- you can buy the things all your friends have- a bigger house in a better area, better car, more trips, etc.
To a person wandering the streets, without a home, I have too much. I'm greedy, selfish for having a beer, watching movies on my TV, typing on my laptop.
To me, $1,000,000/year is a lot. But, if it was a reward for a CEO that created millions of jobs in a fair and sustainable way, would it be so excessive? Or for a scientist that created a some sort of cure? Or a hedge fund manager who had a good year? When is it justified?
Our judgment of how much is too much is clouded by our comparison to others and ideas of what we are entitled to (American Dream).
So how much is too much? I don't pretend this is an easy question or that I have an answer. I suspect some people would say there's no such thing as too much. You work hard and reap what you sow, by following the rules or being clever enough to skirt them. You sacrifice to get where you are and are entitled to your rewards. Even less individualistic people make arguments for some degree of income inequality because it provides incentives for people to "not all just be janitors".
On the other hand, some people argue the degree of income inequality has grown too large and is starting to have negative effects on the economy- for everyone. Venture capitalists like Nick Hanuer recognize in order for capitalists to be wealthy, they need consumers to buy their products. If people are too poor to buy, how can capitalists stay in business?
Then there is the argument, people must be okay with income inequality because people keep working for these huge corporations. Well, as Joan Robinson and others have argued, workers don't have any say as long as there is cyclical unemployment. If you have a $50,000/year job at a bank and are angry the CEO gets 100x more than you do a year what are your options? Quit and hopefully 1)find another job 2) another job that has a less than 1:100 ratio.
So how much is too much? I'm not sure, but I think stagnant money or capital creating capital for capital's sake is a waste and has better uses for the present that could boost the economy and the standard of living for people.
Valuing
For me, the income question is not one of identifying selfish, greedy bastards but a question of how we value people and people's work.
The allocation of income and wealth is grossly distorted and I believe that is an economic problem. The way markets reward work in the aggregate is a source of market failure- an externality that needs correcting.
As Solow argued in "Hedging America" markets can be quite astounding at times. It is nice to go to Jewel and buy wine from Spain whenever I want to at a reasonable price. Even Marx recognized the power of markets and Lange proposed using markets in socialism to re-create the price mechanism. That said, correcting market failures should be the focus- at least for now.
We can't depend on people to realize they have too much money and to start redistributing it to those who have less. The allocation issue has to be addressed systemically- rewards for work and redistributive policies.
So if markets produce income inequality and we like markets (sometimes) then how do we proceed?
1. Try to address how markets reward and allocate work.
It is amazing how discredited the idea of laissez faire is- we know markets don't work well all the time and they need various interventions to function. But yet merely suggesting interventions should be taken in the way markets allocate income is fiercely resisted by even moderates.
Attract more talent and skills to more productive occupations (teachers, scientists creating cures) and make less productive occupations like Wall St. less attractive.
Abba Lerner offered a national wage plan that would increase the share of national income going to labor via the cycle:
↑employment→ ↑business confidence→ operating at high
level of capacity ↓markup → ↑competition → reduced degree of monopoly
2. Think about and explore tools and instruments to address existing income inequality.
Redistributive policies like taxes haven't done so well recently at addressing income inequality. Loopholes and money have prevented them from functioning properly.
Where is a good place to start?
Big "think" people like Robert Reich and Gar Alperovitz have some ideas. They identify not just one source of inequality but many, and utilize a set of tools to address each issue.
-Put Wall St. on a leash
-Fix the tax system
-Utilize community based organizations and cooperatives
-Improve the lives of workers
-get money out of politics
They both recognize people live in an economic environment, not a bubble. Which I think is a necessary condition if we are thinking critically about these issues.
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