Feed on
Posts
Comments

A lesson Progressives never learn is that they can’t have their cake and eat it too. There is no realm of our social lives that they refuse to understand this less than when it comes to inequality. It is simply impossible to make the world more equal, and efforts to do so will unleash consequences that are absolutely dreadful. Treating everyone equally under the law requires the acceptance of unequal outcomes. Trying to make outcomes as equal as possible requires treating everyone unequally under the law. It is not clear from a preference standpoint matter that being treated unequally, or having outcomes emerge unequally are any different or worse (I can argue for the former being worse, but I do not wish to do that here). It’s like arguing that peanut butter is worse than Nutella.Furthermore, the Progressive obsession with income and wealth inequality totally obscures the fact that lots of other forms of inequality matter and probably much more than income inequality: power, fame, good looks, musical talents, and so on.

The point of today’s post is to show you how a popular attempt to make outcomes more equal does precisely the opposite. The working assumption here is that the kind of inequality that matters is income, which again is far from clear. Progressives love the mantra, “Equal Pay for Equal Work.” Here is one example:

In order to build a great socialist society it is of the utmost importance to arouse the broad masses of women to join in productive activity. Men and women must receive equal pay for equal work in production. Genuine equality between the sexes can only be realized in the process of the socialist transformation of society as a whole.

Introductory note to “Women Have Gone to the Labour Front” (1955), The Socialist Upsurge in China’s Countryside, Chinese ed., Vol. I.

Given this proclivity you would hope that the Progressive policies try to do just this. Imagine a world with two tax rates, 10% on all income up to $50,000 and 30% on all income over it. Now imagine two school teachers. Each teacher earns $40,000 and each teaches science and each teaches 5 classes per day. Let’s call these teachers Huey and Duey. Both Huey and Duey spent the same number of years in school, have the same intellectual aptitude, have the same college debt, live in similar houses, have the same number of kids, etc. — i.e. they are identical in every aspect except one. Huey takes care of his in-laws and so needs some extra income to support them, while Duey has no such obligation.

One day, the school Huey and Duey teach at ask each of them to take on one more class, and that they would be paid $10,000 for teaching the class. How much will each of these people take home from teaching that one extra class? $9,000 each. However, there is a fly in the ointment. Huey, in addition to teaching at this current school, gives tutoring lessons to students from around his neighborhood in his free time in the evenings and on weekends. This income already adds up to $10,000. So before the offer to teach a new class, Huey earns $50,000 while Duey earns $40,000.

Think of what happens now when the offer of $10,000 to teach a new class comes in. For Duey, the guy with one job, he gets to keep $9,000. But for Huey, he does not get the same reward at all. Since he is already making $50,000, every additional dollar he makes above it is taxed at the “progressive” 30% and not at the original 10%. Thus, for teaching this class Huey gets to take home $7,000.

Let’s review. Huey and Duey are identical in every respect. Each is asked to teach the same new class under the same conditions. Yet for Duey, he is paid $9,000 for the opportunity while Huey is paid $7,000. So Huey is paid 22% less for doing equal work in progressive mecca. How could it be? In an effort to create the egalitarian system they cherish so dear, the act of using income taxes to achieve it creates the very problem they are trying to solve. And this problem gets far more severe the more income tax brackets we have and when we recognize the different family and income situations of the millions of people in the population. For example, if Huey was married to a spouse with a similar income while Duey was not married but just living with a woman with the same income, the Huey family would receive less for equal work. For example, if Huey owns his own home outright and has paid for it all in cash and Duey mortgages his house up to the hilt (mortgage interest lowers the amount of taxable income) then Huey would receive less for equal work (so that wouldn’t even require Huey to be a harder worker). If Huey decided that he would take all of his earnings from teaching as cash, while Duey decided he would like half as cash and half as subsidized health insurance, again Huey would receive less for equal work. If Huey was receiving income from the interest paid on his accumulated past thrift while Duey spent every penny of his prior income, Huey again would be compensated less for equal work.

Instituting a progressive income tax in the name of equality produces neither the income proponents hope to generate nor the equality they claim motivates them. We’ll demonstrate in future posts the former claim. Given this evidence, on what grounds would Progressives continue to support such inefficient, unfair and inequality prompting policies? Well, it cannot be on grounds of efficiency and fairness, any thoughtful person would have attempted to inquire into the effects of the policies they espouse. But no such thought is forthcoming, and I can only conclude that their true concern is with the act and imagery of progressive taxation, with the associated power to tell others that their income is not theirs, with the political implementation of the greed and envy that we were taught as children were the domains of immature and irresponsible children – these seem to be beyond moral concerns, beyond economic concerns, beyond philosophic concerns, but rather in the realm of the religious. And before anyone accuses me of adhering to liberty like a religious zealot, notice that I am not running around claiming liberty is efficient, or claiming liberty promotes income equality, and the like (despite the happy coincidence that theoretically and empirically it seems to do both, that is not why it is important).

5 Responses to “Unequal Pay for Equal Work”

  1. Harry says:

    The equal pay for equal work want to do far more than pay Huey and Dewey equally for the same work, something every free employer would want to do anyway. Doing that is hard enough even if Huey and Dewey produce something easily measurable. It gets tougher when Huey and Dewey are teaching different classes, with students of different backgrounds and abilities. Suppose Huey flunks thirty percent of his Bastiat class, but Dewey gives straight A’s to his? Should Huey be paid less because his students took Econ 103 with Professor Blinder, but Dewey’s students took Econ 103 from Professor Rizzo?

    Fortunately, in our example, we do not have an inspector from the Department of Labor intervening.

    But the equal pay people want to do far more than that.

    Suppose Louie, a lumberjack, makes $45 per hour driving a skidder and fells forty old-growth Redwoods per day. He has a high school diploma and is certified to operate heavy equipment, and he is an ex-army Ranger and can lift a Chevy Volt off its rear tires.

    Should we pay Louise, a summa cum laude graduate of Smith, the same per hour as an aide to Senator Schumer? Should the pay Czar take into consideration that she had been previously been treated poorly by Senator Specter?

    So many decisions, so little time for the Pay Czar.

    Come to think about it, shouldn’t Congressmen be paid the same as Senators?

  2. ckr says:

    E.J Dionne, op-ed columnist from the Washington Post, can safely be described as one of your ‘progressives’. But he is slowly coming around to your point of view — he seems to have had an epiphany in this column: (http://www.washingtonpost.com/wp-dyn/content/article/2010/12/15/AR2010121505673.html)

    “Even among socialists – I’m talking about real ones – almost all now acknowledge the benefits of markets, no longer propose state ownership of the means of production, and accept the inevitability of inequalities in wealth and income.”

    The argument is a little weak – after all, what is a ‘socialist’ if not someone who supports ‘state ownership of the means of production’ and opposes ‘inequality in wealth and income’. I suspect Mr. Dionne is actually referring to himself and those of a similar persuasion. But if that’s the case, it’s still great progress for the ‘progressives.’ But his cognitive dissonance is demonstrated in the very next sentence:

    “What they oppose is the rise of extreme inequalities that are antithetical to both a healthy democracy and a healthy market economy.”

    I don’t understand how you can hold both views simultaneously. The irony is that any remedies of ‘extreme inequality’ are what would really be ‘antithetical to both a health democracy and a healthy market economy.’

  3. Harry says:

    It was wrong to put Louise into a government job. Instead, make her in charge of lumber inventory at the sawmill of the same lumber company Louie works at. The question is whether a progressive bureaucrat ought to be involved with how much each is paid.

    Another problem to consider: should the lumber company have to pay the same workmen’s comp premium for Louie and Louise?

  4. Harry says:

    In digressing I did not mean to ignore Wintercows several excellent points. The most profound to me is that equality before the law and equality of outcome are mutually exclusive.

    Happily, I did not have to learn Rawls cirumlocutions before taking my comprensive examination for a degree, and I am happy not to have wasted time with him.

    We who have consciences care about the helpless. That subject has been explored long before Aristotle and Plato, who helped lay the foundation for thinking about justice and freedom.

    Merely because Bertrand Russell, or Rawls, or any post-Aristotlean happens to have a better theory of physics does not excuse them from clear thinking.

    True, empirical knowledge can confirm or deny whether any utopian theory is effective. But even the most effective system is wanting if it denies freedom. That’s one of my axioms. I’m happy to defend that, so let’s not pussyfoot around blaming insurance companies for our inability to protect ourselves from loss.

    Great clear thinking, Wintercow.

  5. […] Allowing transfer courses to substitute for our most difficult core course requirements and to have those grades simply show up as “pass” rather than for a grade. We allow these courses from almost any institution in the country. For example, it is possible for a student to take our difficult intermediate macro course at a local community college. Instead of taking it here and risking getting a C or worse, they take it somewhere else. So long as they pass, their transcript will simply say, “Pass” and they get the credit for taking the course with no adverse impact to their GPA. Indeed, what this does is actually make the impact of good grades in other easier classes larger. So if this student takes Advanced Underwater Basketry and gets an A, that A helps their GPA more than it does for a kid who does not take advantage of this opti0n. Sounds a lot like our progressive income tax system. […]

Leave a Reply

immediate vortex