Mises Daily

A Modest Proposal for Income Equality

The equality of men — what a noble ideal! Who could even think to oppose such a glorious cause? It is the inequalities between man and man that are the source of virtually all the evils that have afflicted our society from time immemorial. And it is only by their removal that we can hope to avail ourselves of the perfect harmony and brotherhood that has heretofore remained but an unfulfilled promise of mankind. That all men should be equal — what possible objection could be raised against such a worthy aspiration? Truly, a more unassailable principle could hardly be conceived.

And yet, strangely, an overwhelming number of people have come to resist this simple idea. With reference more specifically to the principle in a pecuniary sense, there are some who would contend not only that income equality is ineffectual in attaining the higher ends just adverted to but that it is rather income inequality that is most conducive to the achievement of these ends. Other than in the case of those who are led to oppose the idea of equality by the bit of their self-interest, the preponderance of such misguided thinking among the public is a phenomenon that does not easily admit of explanation. It is the object of the following discourse to disabuse these unfortunate souls of whatever curious notions may have misled them so egregiously into adopting so preposterous a belief.

To this end, it should prove helpful to clarify what exactly is meant by the principle of income equality — confusion on this point is perhaps the most common source of error. To begin with, let us be perfectly clear that the principle of income equality does not mean actual income equality. We who espouse income equality in principle are certainly not so obtuse as to push for income equality in practice. No one is ridiculous enough to assert that a man who works two hours a day should receive the same total remuneration as a man who works ten. The basest of fools could see that such a system, besides being grossly immoral, would bring about the swift disappearance of all work and production, it being in the self-interest of every individual to work as little as possible when reward is made independent of labor. Of course, there is a small minority who in fact endorse precisely this strict interpretation of income equality and who would have no compunction in resorting to the use of tyranny to overcome the objection just raised, but the defense of such political outliers does not concern us here.

The view of the respectable egalitarian is more nearly approximated by a policy of equal wage rates whereby all individuals are paid the same rate per hour of work. The man who works ten hours a day would appear to be justified in laying claim to five times the income of the man who works only two. But even this system can be easily demonstrated to involve injustices in distribution. In the first place, those who work the same amount of time are remunerated equally regardless of how difficult the work is. A man who subjects himself to crushing manual labor in a coal mine would only earn the same income as a man who idles away making occasional accounting entries in a cubicle so long as they worked the same number of hours. Again, to the immorality of rewarding backbreaking labor at the same rate as the work of a sinecure must be added the practical objection that this would inexorably cause a shortage of labor in difficult fields of work and a surplus of labor in less-arduous fields. The rates of remuneration would have to be equal only for jobs of equal difficulty and adjusted upward in the case of more difficult work.

Again, prima facie, this would appear to provide a solid foundation for an equitable distribution of income. And again, it falls short of distributive justice. A man having to work night shifts would be hard done by in being paid only the same rate as another man doing the same work during regular working hours. An adjustment would again have to be made in favor of night-shift work to answer moral and practical objections. Likewise factors such as work conditions, physical danger, mental stress, and travel requirements would all have to figure in the calculation, and even this would not exhaust all the adjustments required to achieve perfect justice.

Needless to say, the principle of income equality actually necessitates a great deal of income inequality. So in fact we egalitarians may be said to uphold a policy of income inequality — but only in the sense that any reasonable person supports income inequality. To say that we support income inequality in this respect is akin to saying we support the happiness of mankind — a belief so commonplace as to be trivial and in no need of explicit statement. However, it is important to distinguish between this particular type of income inequality, which is arrived at using principles of justice, from that which arises out of purely selfish motives — which is to say that income inequality is morally and practically defensible and even necessary, but only inequality actuated by egalitarian motives: inequality in the spirit of equality.

Having solved the problem of achieving justice in the distribution of income, we must now turn to an issue of practical consideration, the neglect of which would overturn the entire system, however perfect it may be with respect to its morality. This is the question of value. A man who works longer hours, at more difficult tasks, and at greater physical danger to himself than another man may be presumed to deserve greater remuneration, but a system that distributes income without reference to value can by no means ensure that the work is productive of goods and services useful to society. A man who spends every waking hour engaged in digging a hole in the ground with his bare hands may be rewarded handsomely in such a system owing to the difficulty of his job, but his work may not be of any benefit to anybody. A man who tirelessly devotes his life to memorizing the phone book would likewise receive an income entirely out of proportion to the value created by his work. If we generalize this effect, it is not difficult to see how such a system would inevitably degenerate into one where a great number of people would be employed in producing goods the difficulty in the production of which was matched only by their uselessness to the consumer for whose benefit they are produced.

Thus, owing to strict practical limitations, remuneration must be fixed relative to the value of the goods being produced and then adjusted according to whether the inconveniences peculiar to the production of each good require greater remuneration to call forth the requisite number of workers. The resulting wage rates may come into conflict with the moral guidelines laid down previously. A man with greater natural abilities than another may be able to demand greater remuneration due to the greater value of the goods he produces though both may work the same number of hours at the same level of exertion. A man who uses tools to produce a greater quantity and quality of goods would also be able to command a higher level of pay than a man working with his bare hands, though the latter may be at greater pains in carrying out his work.

Finally, all of these incomes are subject to constant fluctuations independent of the level of skill and exertion exercised in the technical operations of each particular occupation. In a world where the needs and preferences of society are continuously changing, the values of goods are in a permanent state of flux. The income of any worker is thus liable to increase and decrease accordingly as the goods he produces become more or less valuable to society. There is a certain justice as well in rewarding a man for doing a job well in producing highly desired and useful goods as opposed to basing his reward on how great a difficulty he incurred in producing an object of utter worthlessness. But whatever the merits of a system of distribution may be, it should be clear that, unless wages are made to depend on value, no check short of compulsion could possibly ensure that individuals are employed in producing goods of value to the members of society.

In brief, the principle of income equality can be expressed as that distribution of income which begins with equal wage rates but makes adjustments based first on the value of the goods produced and then on the difficulty, physical danger, inconvenience of working hours, mental stress, and travel requirements that serve to deter workers from the required lines of employment.

Now if only there were some miraculous system by which all these adjustments could be effected automatically and in precisely the right proportions without recourse to the endless deliberation and intervention contemplated in the preceding discussion — a system that worked, so to speak, as if guided by an invisible hand — we might well let it operate and be done with it.

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