A Personal Note on Inequality

Today I’m going to get personal. The reason? To see if readers have had similar experiences.

There were about 450 students in my high school graduating class. I don’t remember a single one I would call “poor.” Only one would I call “rich.” All the rest were squarely within the 20 yard lines. Socioeconomically, we were all very much alike: solidly middle class. We went to school together, played sports together and socialized with each other. Since my school was segregated by law at the time, all of the students were white.

Now let’s run the tape forward and approach the time of normal retirement. At this point I made five observations.

School is out.

First, I made a rough calculation that between 5% and 10% of our class was earning about half the class income. Obviously, my calculation was far from precise, but I believe that the inequality of income within my high school class was similar to the inequality we observe in society as a whole.

Second, I have no idea why this happened. The highest earners in my class were not necessarily the ones with the highest grades or test scores. They were not the ones I would have predicted were I making such predictions when I was young. A few of my classmates had the opportunity to enter their fathers’ businesses and I suppose this gave them a leg up. But this was less than 10% of the high-earner group. Also, just about everybody who is doing well got there through hard work and perseverance. None of my classmates won the lottery.

The surprising thing is that I don’t know why the distribution of income among my classmates looks the way it does. I know why the high earners are high earners ― in the sense that I know how they are earning an income. But I don’t know why everyone else wasn’t equally successful.

Third, if my subjective impressions are correct, when we were in school only one child had parents who were in the top 1% of the national distribution of income ― the group that Paul Krugman is always railing about. Yet by the time of retirement, that group included 20 of my classmates, or more.

Fourth, I don’t know anyone in my class who thinks the distribution of class income is unfair. If you read Paul Krugman, Joe Stiglitz and similar commentators, you get the feeling that they think some great injustice has been done to create inequality in society as a whole (but without ever saying what that injustice is). My class includes Democrats and Republicans, liberals and conservatives and a few libertarians like myself. But I’m pretty sure that regardless of political beliefs, no one in my class thinks that what their classmates are earning is the result of some general unfairness.

Finally, I don’t know anyone in my class who regards this as a problem that needs correcting. If we were to have an expensive reunion that couldn’t be paid for with normal fees, I’m sure that those who have more would chip in and underwrite the expense. But that would be voluntary and everyone would expect it to be voluntary. It’s noblesse oblige.

Here is my theory. Our basic notions of what is fair and unfair and which problems need correcting and which ones don’t are actually very similar when we are talking about people we all know. It is only when we are talking about abstractions and amorphous groups of people ― people that we don’t know ― that political ideologies pull us apart.

What do you think?

Comments (40)

Trackback URL | Comments RSS Feed

  1. Ken says:

    Interesting.

  2. Roger Waters says:

    John,

    My experience is the same, although went to high school later, we were not segregated, and my high school in Washington, DC was rather integrated. At this time we have a pretty broad distribution of people and I would say most are in the middle class, although a small percent could be classified as very low income – but this is mainly due to their voluntary choice of occupation, which they knew would be low pay but rather easy work that they liked. Many went into federal government civil service, and one made it to the senior executive service level of civil service – and, having worked there all his career, retired after 30 years and is at full pay, doing very little but traveling, enjoying himself, and doing some consulting.

  3. Tom says:

    My experience has also been similar.

  4. David R. Henderson says:

    John,
    Interesting post. I’m curious how you know the data. I don’t have a clue about how I would find such data for my much smaller graduating class–about 90 students.

    • Roger Waters says:

      Please attend your next reunion, and just ask around. My graduating class was smaller than yours.

  5. Miguel F says:

    I believe that you are correct when stating that political beliefs drag us apart when we talk about abstracts. When talking in general terms people normally assume that it is something wrong in the system that compared to others makes them worse off. They claim this is unfair. But, when judging known cases it is different. Talking about specifics, many people will defend their position, and will find fair arguments to explain why others are worse off. Depending on which perspective we take, broad or narrow, determines our view on the subject.

  6. Breck says:

    Are you aware of a new book about income inequality? “Capital in the Twenty-FIrst Century” by Thomas Piketty, is apparently all the rage. John Cassidy has a long article in “New Yorker” about it and there was a book review in WSJ about it as well. Apparently capital is to blame for income inequality; those who receive a majority of their income from invested capital are doing much, much better than those who rely on wages for their income. No mention that this is as it should and must be, if our economy is to grow. Who would risk capital in uncertain investments is you could do better just by taking a job? Anyhow, the author describes income inequality as a catastrophe waiting to explode. He is apparently thinking of the French revolution (he’s French) when common people were starving while the monarchy lived in luxury. That’s not the situation in the U.S. today. Even those we label poor are doing quite well by any standard. Instead of starving, we have an obesity problem. Virtually every home has indoor plumbing, air-conditioning, TVs, running water, and other modern conveniences. And we all know why some of us are wealthier than others — smarter, harder working, willing to take risks, better education and so forth. Luck has nothing to do with it. The really poor also know why they are poor, and it has nothing to do with the 1% taking more than their share.

    There is a lot to talk about on this subject, but I agree with your thinking.

  7. Thomas says:

    I agree with your conclusions. People who know each other or are familiar with each other, even small groups of strangers, would interpret fairness differently than grouping people as a whole.

    • Matthew says:

      There is also an issue when you talk about large, abstract groups of people, they tend to have one or few voices trying to represent them while not necessarily representing them accurately.

  8. Sophie says:

    The fact that you were in a middle class high school, which was segregated, means that in your times all of your classmates had exactly the same opportunities to progress, if they so desired. Of course there would be some who had an advantage and some with disadvantage, but in general all your graduating class could do whatever they desire. In your high school graduating class there was no inequality. The problem is when we broaden the scope. In a low class high school, or in a segregated high school, they didn’t have the same opportunities you or your classmates had. And that is where inequality exists, and that is the problem that must be addressed.

    • rex says:

      Let me give you two examples to support your position.

      1. My parents came to America with nothing. Neither graduated from elementary school. they could not speak, read, or write English. they managed to accumulate over 3 million in real estate assets.
      2. when I was young, my parents did not have the skills to assist with my homework. I managed to obtain a phd in economics.

      What liberals fail to realize is that markets redistribute wealth. My parents started with nothing, but because they had a strong desire to accumulate wealth, they managed to use the market to do just that.

      I can think of many rich families who have fallen from grace. Can you think of any other society where it is so easy for lower income families to accumulate wealth yet so hard for upper income families to maintain their wealth? Please don’t tell me Cuba! The beauty behind markets is that it is easy to move up the latter, hard to stay at the top, but its not a zero sum game. As the wealthy are falling and the poor are climbing, the overall pie is expanding. God bless the market.

      Let me ask you. Do you believe that if my parents had chosen to go the welfare route, they would have he money they have and I would have a phd?

      PS… Let me be blunt. DC is run by the 2 percent. Do you think for one second (even a nanosecond) that the 2% is going to willing redistribute their wealth to the 98%? A more plausible scenario is that the 2% will use their political muscle to prevent markets from chipping away at their wealth.

      • Vince says:

        The PS aspect of that comment is the most telling and accurate. Take the Keystone Pipeline. I was talking to a patient of mine from the Midwest and along the Mississippi. He was telling me about all the trains going up and down the tracks bordering the river carrying oil and who controls those trains and rails. These are a lot of the same people who are in the administrations ear about keeping the pipeline from being built. Why – not because of environmental concerns but because it will severely cut the train traffic and revenues.

  9. Don Crawford says:

    You captured it perfectly. Similarly imagine if anyone began talking about how unfair it was that some classmates had done so well and how some more of their money should be taken from them to be given out to everyone else. That kind of Robin Hood talk would be seen as promoting crass envy.

    • Roger Waters says:

      Precisely. Whatever happened to the biblical admonishment against envy, and all the problems that it foments?? Why doesn’t anyone talk about that?

  10. Peterson says:

    Although inequality is an increasingly heated problem, we have to figure out whether or not inequality hurts opportunities. The fact that more children whose parents are in the top 1% of national distribution of income does not necessarily prove the society has become more unequal. We probably just create more successful people.

    • Roger Waters says:

      Yes, good point. What I want to know is how to get two siblings of mine to be more successful, rather than wallowing in low-pay jobs? Both are by choice, one is very bright and could do better, and I have not figured out why they have no ambition? Neither complains about it, one likes to take it easy, and the other is a union organizer that likes to foment revolt and I think keeps his job just to pay bills so he can protest in his spare time.

  11. Fernando L says:

    It makes me feel uneasy when there is a discussion about inequality, especially in this country. As a foreigner is really hard for me to understand why there is so much discussion about it. Yes, there are some people that have vast amount of income and they earn more than the so called 99 percent. But, this is disproportionate. If we were really analyzing this problem correctly, we would find out that those individuals living in poverty in this country, live in conditions better than 50 (just to say a number, but I believe it is much higher) percent of the world population. A poor in this country lives significantly better than the rich in some other countries. It disgusts me when people criticize the system that according to them leads to inequality, because they ignore the fact that the system that they so loudly criticize, is the one that gives them a quality standard of living.

    • Roger Waters says:

      Thank you. A friend of mine made the same point, she from a relatively poor country (although the government has plenty of income from oil), and she said the same thing – that our “poor” have it better than her middle class.

  12. Yancey Ward says:

    The difference is the difference in ambition.

  13. Stan says:

    John,
    You demonstrate the old adage in economics: Advocating for a different distribution of income is very subjective and not the purview of the economist, any more than anyone else. Stiglitz and Krugman are not experts in this matter.

  14. Ralph G says:

    According to Marx, Capitalism is the main cause of Communism. Marx claimed that the income distribution will enrage the masses and will lead to a revolution. That is why many are talking about inequality and how bad it is for society. They are magnifying a consequence of capitalism, income distribution, to support their ideas for a new system.

  15. Ron says:

    John, I grew up in a much poorer section than you. It was the dying coal mining region of N.E. Pennsylvania. There were families living in one room cinder block cellars and others living in one room backyard sheds. Some lived over the “beer gardens” where their families worked. We all played hide-and-seek, baseball, walked to school together and hardly recognized any differences. It was all white with not so P.C. jokes about our Polish (“Pollack”)and Catholic friends and neighbors. Only “Gerald Johnson” wore the same dirty white collared shirt to school nearly every day and had a distinctive smell.

    We all considered ourselves to be in the middle class (even Gerald). No one was unionized, no one was a CEO. When a promotion or job change occurred we all felt good for the family moving up in life. Of course, back then nearly all parents lived for the upward mobility of their children. Few parents expected the American Dream in their lifetime, but always thought every child could be president of the United States.

    Today, I fear our welfare system is so pervasive that getting ahead by taking from others is now an acceptable process. It is no longer education, hard work, and dedication…is it collective voices headed by welfare pips that promote envy and a “life track” of voting for wealth redistribution to get any economic gain.

    Of course, I sit here today retired on a Florida beach (3 homes, 8 properties and economic security) hearing the words of my Welsh grandmother sending me from her home with a coal stoked stove and heating to the only bathroom – an outhouse in the backyard.

    My parents would be shocked at how their plan worked when they dedicated their lives to the next generation.

    I have lived the American Dream of upward mobility. Unfortunately, too many are locked into poverty with the satisfying crumbs the welfare state feeds them. They have no relationship with family, friends, or neighbors getting ahead economically. John, they can not relate to your story or mine. They are full of hopelessness and envy promoted by “national leaders” with the message that racism,sexism and other ..isms that defeats them before they can start. They believe they are victims that only community organizers and government can help.

    Obama had the chance to change those mental recordings with the story of his own life. But alas, that great opportunity is another missed chance for a president we all hoped would unite the nation. Instead, he rules as an oppressed minority, excusing all his problems on racism and reinforcing the victimhood of those he should be elevating.

  16. charlie bond says:

    Good morning John,
    Does the mere fact that you mentioned race as a factor in equality say something about whether we have yet achieved that equality in our minds? You did not mention eye color, height or good looks–although you clearly excelled in the latter.
    Cheers,
    Charlie Bond

  17. Earl Grinols says:

    What is unfair is this: I do not have the physical ability of Robert Griffin III (Heisman Trophy winner, quarterback for the Washington Redskins) or of LeBron James in basketball. No matter how hard I try, I cannot match their football and basketball talent. Neither can I paint like Picasso. Just because they came from the families they did, they got more than I did.

    Thus they earn more than I do.

    I want equal pay for equal work–I will cover equal canvas with my paint as Picasso. I want the same pay for my paintings as his.

    What could be unfair about any of the above?

  18. Jimbino says:

    I graduated high school a National Merit Scholar and college as Valedictorian. My first rocket-science job as a physicist paid very well, but my opposition to the Vietnam occupation and a move to work in Germany (someone had to replace von Braun) schooled me about the stupidity of working 9 to 5, and when I returned to work in the USSA, I took page from the German playbook, which sensibly values long vacations every year and encourages such indolence by taxing real work in spades.

    As a result, in the full 40 years of my professional working life in the USSA, Europe and Latin Amerika, I have worked only some 13 weeks per year and taken 39 weeks vacation, on average. I feel that such a life of leisure and travel was virtually forced on me by the USSA socialist tax code, which, especially in the form of Obamacare, keeps trying to tax the hell out of single, childfree males. It’s quite fortunate for me that I have been able to apply the knowledge gained from my great education toward gaming the system.

    I have intentionally kept my wages low, since I refuse to participate in the USSA gummint’s program of taxing the highly skilled and baby-free guy at a marginal rate of some 60% and then applying his wealth so taxed to the mis-education of the kids of the breeders in awful public schools.

    Who is John Galt?

    Of course, my advice to any young man is to avoid marriage, kids, cats, dogs, a full-time job and insurance of any kind like the plague. If he does, he will never complain.

    But with regard to your survey of classmates, I’m sure that I bring down the income level of my high-school cohort, which had 14 National Merit Scholars. Only the female breeding leaches in my cohort will have given less service to society, and today I would probably be miserable if I hadn’t learned to apply my skills to gaming the system.

    • Ron says:

      I can see it now. Raj is holding up the sign to this “Sheldon-like physicist” (from the show Big Bang Theory for those not watching current culture TV) … “SARCASM.”

      My guess is that Jimbino brought back the German work culture and is a self-made success.

    • Jay says:

      ^ Jimbino is my favorite.

  19. Gordon Johnson says:

    In earlier times most of us knew the importance of saving some of what you earn, even if you only earn a little. As more and more people grew up to spend more than they earned, thanks to easy credit cards, is it any wonder that inequality has increased. Like obesity and lung cancer, personal choice does enter in. Those who save a little are mathematically certain to be unequal to those who borrow and use what they might have saved to pay interest. A society that incentivizes debt will be a society with increasing inequality.

  20. bob hertz says:

    Even people who have identical incomes during their working life have very different net worths at age 65….due in some cases to health problems, in other cases due to their savings habits.

    Another big difference has to do with job security.
    If you start 100 persons at age 25 as unionized teachers, I would estimate that about 70 of them will retire with relative middle class security.

    But if you start 100 persons as insurance agents or real estate brokers, about 20 of them will retire rather rich, and another 20 or 30 will be poor as church mice.

  21. Greg Scandlen says:

    Two thoughts —

    In my experience people who get ahead do so by working more than a 40-hour week. On top of their regular job, they hold another job on weekends or they invest in real estate or they sell things on the side. The idea foisted by unions that no one should ever work more than 40 hours has led to ridiculous expectations. What economy has ever prospered that way?

    People resent intrusive government FAR more than they resent other people’s wealth. Only the government is telling us what we may not do and what we must do — ALL THE TIME. No rich guy has ever bossed me around like that.

  22. Tom says:

    My father died at a young age leaving a pregnant wife with five children under the age of seven. I had friends who had more than me but none who had less. Even so, that’s just the way things were.

    It wasn’t until Oprah got her big TV show that I actually was made aware that I came from a disadvantaged and dysfunctional family. Its all perception.

  23. Wanda J. Jones says:

    John and Friends:

    Let’s turn it around. Who are the people who most want to blame the 1%? It’s those who are unable to, in any way, “blame the victim,” even if the victim is uneducated, lazy, addicted, unable to leave the hearth, and trained in dependency. People who are trying their best don’t need to blame others–they emulate them. Krugman obviously thinks he should make more and that Warren Buffet should make less. Capitalism is not a zero sum game. It “lifts all boats” for those who are in it. I find it very hard to understand how a person can compare socialist and capitalist countries and want to emulate the former.

    Wanda J. Jones
    San Francisco

  24. Richard Bensinger says:

    My personal observation is the problems created by inherited wealth vs new wealth. I have no problems with the Bill Gates types who create industry, etc – they can make as much as the market will bear. I have a problem with the inherited wealthy, who spend vast amounts to manipulate the political process so they can keep their wealth and few of whom are productive citizens (you know some of their names but many are hidden). Check out the Forbes list and see how many just inherit vast sums. Our society is rapidly approaching the structure of the late 1800’s due to this issue. The success of the “death tax” publicizers allows the wealthy to remain comfortable in their inherited palaces – most of who contribute only to political causes the goal of which is to maintain their wealth.

  25. Raymond Wooldridge says:

    I think your observations are (as always) on target, but your comment about segregation and white, while true, will destroy its effect in liberal circles.

  26. allan (formerly Al) says:

    Did anyone read the book The Millionaire Next Door? The author makes a point that it is not just what you earn that counts, but how one spends their money. The millionaire next door might just have been a small business owner that was not recognized by others as a millionaire. Comparing the millionaire next door to those others of equal income they found the millionaire to be more frugal with his expenditures.

  27. Dave Anderson says:

    Gregory Clark’s “A Farewell to Alms” seems to undermine the debate about recent changes in income equality, whether in the last 100 years or the last 20. Here is Clark’s summary statement from the “Introduction: The Sixteen-Page Economic History of the World”:

    Whatever its cause, the Industrial Revolution has had profound social effects. As a result of two forces— the nature of technological advance and the demographic transition— *growth in capitalist economies since the Industrial Revolution strongly promoted greater equality*. Despite fears that machines would swallow up men, the greatest beneficiaries of the Industrial Revolution so far have been unskilled workers. Thus, while in preindustrial agrarian societies half or more of the national income typically went to the owners of land and capital, in modern industrialized societies their share is normally less than a quarter. Technological advance might have been expected to dramatically reduce unskilled wages.

    After all, there was a class of workers in the preindustrial economy who, offering only brute strength, were quickly swept aside by machinery. By 1914 most horses had disappeared from the British economy, swept aside by steam and internal combustion engines, even though a million had been at work in the early nineteenth century. When their value in production fell below their maintenance costs they were condemned to the knacker’s yard.

    Similarly there was no reason why the owners of capital or land need not have increased their shares of income. The redistribution of income toward unskilled labor has had profound social consequences.

    Clark, Gregory (2008-12-29). A Farewell to Alms: A Brief Economic History of the World (Princeton Economic History of the Western World)(Kindle Locations 344-355). Princeton University Press.

    This summary of the basic argument is of course elaborated later in the book, especially Chapter 14. Clark also replies persuasively to critical reviews at http://www.econ.ucdavis.edu/faculty/gclark/Farewell%20to%20Alms/EREH%20response%20-%20revised.pdf. I’ve attached this response because its kind of fun, and reminds me of your own enjoyable cut-and-thrust style.

    With this background in focus, I think the current debate about equality changes — don’t we need to add this historical perspective that the largest movements of the last 200 hundred years have been in favor of the unskilled?

  28. Bill McInturff says:

    John

    There are ENORMOUS differences by ethnicity on the questions raised in this article. African Americans have profoundly different views than White Americans, so, it may not be surprising “no one” in your graduating class would think that – and I assume (maybe incorrectly) that your high school was in Texas or a boarder South or Southern state – and, again, there are sharp regional differences by White by region. The kids I graduated with from Wayland High School in Massachusetts probably would have different views than your classmates.

    BTW, I really enjoyed The Millionaire Next Door and The Millionaire Mind. The research they did and the books they wrote about high net worth people and their common values is really interesting.

    What you would especially enjoy is their chapter about “welfare” — ie, the consequence when these high net worth people subsidize their children through adulthood and the terrible consequence it has on the kids.

    It is a devastating portrait of the consequences of being supported by others.

  29. Phil Gausewitz says:

    John,

    It is interesting that in all of the thoughtful comments you stimulated there is no mention of the fact that the whole issue is phony; driven by †he desperate need of the Democrats to change the discussion away from Obamacare and their other failures and promoted by their media supporters.

  30. Tony Grady says:

    John,

    I found your article, A Personal Note on Inequality, fascinating. I admit that I was taken back by the fact that you attended a segregated high school. But then I realized that this fact actually made the group that you were talking about rather homogenous and an excellent example of how such a group progressed over the course of their careers with all other factors being equal. Thus your research results do show how with equal beginnings, the outcomes will not be the same.

    I have an idea that you might consider. What if you took the segregated black high school, your contemporaries at the time, and performed the same analysis. It would be interesting to see if the distribution you saw in your high school was the same for them. I think there might be some excellent analogies that could be derived from this endeavor that would show more of the fallacies of the current claims to inequality.

  31. Mai says:

    De-Clutter- I know you love your Snowbabies but trust me
    collections and knickknacks (no matter how nicely displayed) turn buyers off.
    Don’t scrimp on ambience; hire a professional “Stager”.
    There are currently 10 Mineral Spa facilities located in Truth or Consequences Historic
    Hot Springs District.