Imagine a society where everyone has equal access to quality education and healthcare. Imagine that in this society every hardworking adult earns enough to own a house, a car, and put a decent meal on the table for their family. Imagine this society still has a number of relatively wealthy individuals who can afford luxuries such as private jets and exotic vacations but who otherwise have no more than anyone else when it comes to the basic essentials.
In this society, to what extent does income inequality still matter? If everyone’s basic needs are satisfied, does it matter that some individuals have even more? Obviously, this is not the type of society we live in, but it raises an important question. Have we been too narrowly focused on income inequality when we should really be focused on a more fundamental issue: ensuring everyone has access to a minimum level of basic goods and services such as education and healthcare and an equal opportunity to earn a respectable living?
There has been much discussion about the magnitude and direction of income inequality, its implications for democracy and economic growth, and so forth.
Much has been made of the first question. Do bankers who take excessive risks that contribute crucially to a severe economic recession deserve government bailouts and big bonuses? Do CEOs who destroy shareholder value and cut jobs deserve outsized compensation packages?
The question of whether some individuals deserve high incomes is significant in many ways, not least of which is its role in the proper alignment of individual incentives with the creation of social value. But from a moral standpoint, this is really a question of who deserves to have access to the luxuries that great wealth can buy—who deserves to have sports cars instead of regular cars or mansions instead of average-sized homes?
But what of the other question? Does the hardworking construction worker or store owner or accountant deserve to lose his or her income, home, and access to healthcare in an economic recession? What is at stake here is more than just access to luxuries. What is at stake is whether a portion of society is denied access to the basics such as healthcare, food, and housing.
It is still important to address issues of unfair compensation at the top of the economic spectrum, and tools such as thoughtfully designed regulations and taxation systems can mitigate these types of inequities. However, we should not lose sight of the more pressing and crucial issue of access to basic essentials. The well-being or continued suffering of millions of people depends on our ability to address this issue, as does the characterization of our society as a fair and just one.
About the Author
Kyle Chan holds a degree in economics from the University of Chicago. He has worked in China and India, and is currently employed as a management consultant in London.
