Income inequality

With the budget debacle seemingly behind us, spending still outrageously high and ObamaCare still a shit show, albeit one that will no longer be challenged by the Pusillanimous GOP, which should really be called the Gimpy Old Party, because it’s filled with intellectually challenged halfwits, the progtards have turned their attention to “income inequality.”

See, the progtards have chafed vaginas because the rich people are apparently getting richer, while the poor are apparently getting poorer, and everyone from Pope Francis to Barack Obama is losing bowel control because of this. So the progtards are planning to do something about it. They are planning to make “income inequality” the cornerstone of their collective campaigns this year, promising to take away money from those money hoarding rich people and give it to the poor.

It’s their usual mantra. It doesn’t matter whether those “greedy rich” got their money through hard work or political connections. They have, and others have not, and therefore what they have must be taken away by government force.

The great Walter Williams penned an essay about income today. Income, he says is the result of productivity and the value placed on it.

Except in many instances when government rigs the game with crony capitalism, income is mostly a result of one’s productivity and the value that people place on that productivity. Far more important than income inequality is productivity inequality. That suggests that if there’s anything to be done about income inequality, we should focus on how to give people greater capacity to serve their fellow man, namely raise their productivity.

What does this mean? There’s been  a story circulating on the web about a college professor who showed his class exactly what this means in practice. Unfortunately, the story is false, according to Snopes, but the idea of the story is solid.

An economics professor at a local college made a statement that he had never failed a single student before but had recently failed an entire class. That class had insisted that Obama’s socialism worked and that no one would be poor and no one would be rich, a great equalizer. The professor then said, “OK, we will have an experiment in this class on Obama’s plan”. All grades will be averaged and everyone will receive the same grade so no one will fail and no one will receive an “A”…. (substituting grades for dollars – something closer to home and more readily understood by all).

After the first test, the grades were averaged and everyone got a “B”. The students who studied hard were upset and the students who studied little were happy.

As the second test rolled around, the students who studied little had studied even less and the ones who studied hard decided they wanted a free ride too so they studied little. The second test average was a “D”! No one was happy.

When the 3rd test rolled around, the new average was an “F”.

As the tests proceeded, the scores never increased as bickering, blame and name-calling all resulted in hard feelings and no one would study for the benefit of anyone else.

To their great surprise, ALL FAILED and the professor told them that socialism would also ultimately fail because when the reward is great, the effort to succeed is great, but when government takes all the reward away, no one will try or want to succeed.

Human nature will always cause socialism’s style of government to fail because the world has producers and non-producers (makers and takers).

It could not be any simpler than that.

So what happens when money is substituted for grades and the professor becomes the boss?
The owner of an engineering firm that designed and manufactured widgets told his workers who had insisted that Obama’s socialism worked and that no one would be poor and no one would be rich, a great equalizer, “OK, we will have an experiment at this firm on Obama’s plan.” All pay will be averaged and everyone will receive the same pay, divided equally after all profits were calculated.
After the first payday, the pay was averaged, and everyone – from the lowliest, illiterate janitor to the most brilliant engineer got exactly the same salary. The engineers did what they did best, and the company made a profit, which was divided equally among all employees.. The engineers didn’t get as much as they usually got, so they were not happy, and the janitors and secretaries got way more than they normally did. They were happy. As the second pay period rolled around, the lower paid, less educated workers did even less, because they knew they were guaranteed the same salary as the engineers and managers, who got their education and produced the widgets for the company’s profit. But the engineers and managers didn’t want to put forth the effort they normally had for less money, so fewer widgets were produced that pay period, and the company didn’t make as much of a profit as usual. Everyone got less money but it was still divided equally. No one was happy, but no one got more than anyone else, no matter their work ethic, education or knowledge.

When the 3rd pay period rolled around, the new average was barely enough to feed everyone’s family.  The producers in the company knew they weren’t going to make as much as they did before, so they stopped producing. Why should they put for the effort when their pay was being cut? The company’s profit margin decreased further, and the paychecks shrank. As time went on, the pay never increased as bickering, blame and name-calling all resulted in hard feelings and no one would work for the benefit of anyone else.

To their great surprise, the company closed down and their former boss told them that socialism would also ultimately fail because when the reward is great, the effort to succeed is great, but when government takes all the reward away, no one will try or want to succeed.

Look, I know the above example is a bit cheesy and out there, but it does serve to illustrate a point. Income (when unfettered by crony capitalism), is a measure of one’s effort and productivity. The harder the work, the greater the reward. You take away the reward, and you take away the incentive to achieve and produce. You take away from the productive and you give that money to the indolent, and you take away the incentive to work.
You know why a doctor makes more money than a McDonald’s fry cook? Because the doctor went to school, worked his ass off and developed an in-demand skill. Not everyone can be a doctor, but fry cooks are a dime a dozen.
Supply and demand, boys and girls. Those whose skills are in demand will cost more to hire. That’s just basic economics.
But the moment a government tells a doctor that his labor is worth no more than a fry cook’s and prevents the doctor and his customers from setting their own values on the exchange, that doctor will likely put forth the effort that’s only worth $8 per hour. Why bother? His labor isn’t worth any more than a fry cooks, despite the schooling and hard work.
What will happen to the producers once the government starts taking away their profits and redistributing them to “the poor” who haven’t produced anything? Think back to the examples above.
Equality sounds like this awesome idea, but not at the point of a gun.
And equality of outcome (that’s what income is – the outcome of your work) is not the same as equality of opportunity. One allows everyone an equal chance to earn as long as they work hard, and the other simply appropriates and redistributes the work of those who worked hard to those who do not. Is that what we call justice?
There should be no such thing as “income equality,” because there’s no such thing as labor equality. There will always be people who are smarter, more innovative, harder working or more determined. Give those people the incentive to put their considerable skills to work, and you will see the economy thrive. Take away those incentives and tell them their hard work is worth no more than the work of a janitor, and you’ll be living in the dark ages before long.

10 responses

  1. Ironically, most of the ‘progtards’ (you do know how to turn a phrase!) screaming about this the loudest and most prolifically, are themselves in the top percentile of wealth and income.

    Huh……

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  2. Just saw a photo of a bumper-sticker I’ve GOT to get. It reads:
    OBAMACARE – Because Grandma is “shovel-ready”!

    That said, I agree with PavePusher here. These bleeding-hearts think that the guy pushing the snow-shovel should be paid the same as the CEO because HE sweats and the latter doesn’t–at least not where you can see it.

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    1. OMFG!!!!!! LMAO

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  3. An actual teacher whom i know personally told me about the time when an outspoken Marxist in one of his classes got the highest score on a test. He announced to the class that he was going to implement socialism in grading and give everyone the average score, but only if the Marxist student agreed to it. The student shut up for the rest of the semester.

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    1. That’s a fabulous teacher!🙂

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  4. An excellent piece Nicki. I am a doctor, and my largest single payor is Medicare, which covers over 40% of the patients I see. Add Medicaid, Chip, Tricare, Champus and other government programs and this covers about 70% of my patients. They all pay a severely discounted fixed rate which I have not negotiated and have no control over. When I have paid my office staff, rent, malpractice insurance, continuing education, etc, my hourly wage is not much more than the fry cook. If you think this is hyperbole, I assure you I have done the calculations and it is not. I have not limited the number of these government-insured patients I see, but many physicians have out of necessity. I am still blessed to make a good living from the 30% of patients who have private insurance, and the fact that we average 70-80 hours of work weekly. For everyone who thinks “poor rich doctor…boo hoo”, I can honestly tell you that in our little Montana town any mechanic, plumber, electrician, or carpenter bills more per hour than Medicare pays a physician. When there was talk of “universal payor” insurance at the Medicare rate I thought my head might explode!
    When idiots yammer about “healthcare as a “right” of all Americans” I want to scream! We indeed are a wealthy enough nation that no one needs go without medical care, but it it NOT A RIGHT! A “Right” is something that you are free to do for yourself, like speak freely, assemble, defend yourself, and not quarter soldiers in your home. A “Right” is not something that someone else is required to do for you, else that someone else becomes nothing more than a slave because his labor has no negotiable worth. If everyone had a “right” to food, than farmers would be compelled to grow it for whatever the government wished to pay. If everyone had a “right” to own a home then builders would be forced to build. For anyone who thinks healthcare is their “right”, you had better hope nobody declares your profession as everyone’s “right”, for you too will be nothing more than a slave to their “right”.
    Although I love the job I do as a physician, the government intrusion takes much of the joy out of it, and I would not have pursued it as a career had I known what would happen to this once-noble profession. I am not encouraging my children towards medicine. Their are many other careers that have not been declared peoples’ “right”.

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    1. Alex, I fear a lot of doctors will feel as you do, and that will open the door to much quackery and substandard care.

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    2. Besides, I get the feeling that pretty soon almost anything will be declared a right. People NEED housing. People NEED food. People NEED clothing. So the should have a right to them.

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  5. Oops; got off on my own little rant… Anyone who wants too see the results of “income equality” need only look at the Korean Peninsula; same people, just divided by ideology and a minefield since 1953. In the South is economic freedom with its resultant income disparity. In the North is Socialism with its required income equality…and millions starving each year. But they are equally starving. Be careful what you ask for…

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  6. pappad
    Jan 16, 2014 @ 13:45:44

    Just saw a photo of a bumper-sticker I’ve GOT to get. It reads:
    OBAMACARE – Because Grandma is “shovel-ready”!
    I have to get one of those.

    Alex,
    I also practice medicine though I am a Nurse Practitioner. When you figure in the 15% less I get reimbursed for diagnosing and treating the same problems that you as an MD treat it gets even worse.

    Figure in the 21% cut that already happened. The 24% cut that was supposed to happen Jan 1 2014, and another 16% cut on top of that, on an hourly basis I make less than my friend who works as an LPN.

    She has health insurance, set hours, and a retirement program. I have set costs such as you mentioned. Its easy to burn through more than 50% of generated income just trying to keep an office open. I work on average 15 to 16 hour days. Most often six or seven days a week.

    More and more I am pushing the doc I work with to start incorporating a concierge practice into our model.

    “If everyone had a “right” to food, than farmers would be compelled to grow it for whatever the government wished to pay.”

    Or get paid to not grow it, or plow it under.

    Better stop here. Farm Subsidies anyone?

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