Wednesday, January 22, 2014

The Myth Of Income Inequality

The latest distraction rhetoric is a resurgence of what is currently termed "income inequality".

"Income inequality" is described as the disparity and inequity between the various economic "classes" (the proper term under the US's classless society is "income brackets"). The theory is that different socio-economic demographics now have a larger difference in current median income levels. The so-called "middle class" now has a median income much lower than 5 years ago, and the nation's overall median income level has dropped from over $54k per year to approximately $51k a year.

In addition, the theory casts a dark shadow over the differences in earnings between business owners & leaders, highly-skilled workers, skilled workers, marginally-skilled workers, and unskilled labor.

The ideology is predisposed to the false hypothesis that all people are entitled to an equal outcome or consequence despite differences in effort, capability, and potential. It ignores the very real sociological law that people are created equal, each with different individual talents and abilities, and thus have an equal starting potential or opportunity. However, individual choices, efforts, and merits change that potential over time.

That is why, in American society, we have upward mobility. If you want to better your life, you can. You just have to be willing to sacrifice the effort required to get there. Nothing free is worth the price. Nothing worthwhile is ever easy. 

Income potential, wages, etc. are a product of several factors. For one thing, it is driven by economies of scale.

In other words, labor is a resource. That is why it is called "human resources" or "HR", formerly known as "personnel". In a company, there is only so much capital (money) budgeted to pay for labor. There are only so many positions. The company can produce only so much. That means the employees have to be allocated by task, mission, and purpose according to their skills. If one area requires more people than are available from the company's labor pool for a task that requires a specific skill-set, the company will then search to purchase labor that has that skill-set. It will probably be willing to pay more for it than it would for the lower-level unskilled labor. A laborer within that unskilled population who has done the extra effort to learn those skills through school outside of work hours is more likely to get promoted, with a raise, than the guy who does his 9-5, content with his station at the company.

Here is where the laws of supply and demand factor in.

20 years ago, people skilled in network technology, computer programing, and computer electronic engineering were highly marketable. There were more jobs opening up for people with those skills than there were people skilled in those fields. The supply of talent, skill, and ability was lower than the demand. The wages (price of that skilled labor) dictated a decent wage. However, a high school dropout without a GED would probably not be able to fill that position. They may be able to push a button, wait a few minutes, then pull a basket off of a hook when the fries were done cooking, though. The fry friers even have a little alarm that sounds. Limited reading and math skills are required. The number of people capable of doing that work are far more numerous than the positions available. (Do not discount the number of more skilled people with college degrees who find that work "beneath" them. They are still capable of  doing the work).

As more and more people began seeking the knowledge and skill-sets to do that computer related work graduated, the more the market was flooded with capable people. The supply grew faster than the demand. The price (wage) dropped. You no longer had 4 jobs for 3 qualified people. You now had 20 jobs for 30 qualified people. However, you still have over 1,000 people who qualify for every fry-station employee at fast food restaurants.

There is no way that a burger flipper who calls in sick twice a month and runs out the door at "quittin' time" deserves the income that a License Professional Counselor makes. Being an LPC requires a masters degree in the field. It doesn't stop there. An LPC is required to do a year's worth of practical experience internship in order to qualify to take the licensing examination, called the "NCE". Once the NCE is passed, the LPC has to do a certain number of direct contact hours, continuing education/professional development hours, and research hours under the supervision of a senior LPC or a fully licensed and qualified PhD. Then, after 6-7 years of collegiate study and what could be 3 years of intern level experience, the LPC can qualify to be a fully-licensed LPC and open his or her own office.

A burger-flipper doesn't even require a GED. He just needs to know how to wash his hands and follow rudimentary instructions for safety and company policy, tell time well enough to show up to work on time, and know how to put on his uniform. That requires far, far less skill than to be the lowest ranking private in an infantry platoon, who makes less per hour than the burger-flipper.

In summary, income inequality is due to the merits of the labor pool. That means it is up to each individual to make himself/herself marketable and in demand for the jobs that merit those higher wages. You can put the kid down in front of a book, but if the kid refuses to put forth the effort, the kid won't read. If the kid refuses to read, the kid probably won't learn. If the kid doesn't learn the skills and knowledge that will make him or her competitive, he or she isn't worth anything more than the market is willing to pay for unskilled labor.

So, there isn't really any "income inequality". There is just an increased disparity in effort and merit. You deserve the income you are willing and capable of earning, based upon your own merits, efforts, and skills.

Those cries of "income inequality" are borne of hallucinations, lies, and fairy tales. You want to make more, earn it. Go to school. Work hard. Manage your money and make a few sacrifices. Take some calculated risks. Quit expecting others to give you what you haven't earned.