The rising income inequality isn’t going to stop

income-inequality

You hear a lot these days about the rising income inequality, and the strains it causes in our society. People talk about curbing this trend, but I’m not sure it is possible.

As a rough approximation, let us assume that income is proportional to the amount of value a person produces in the market. Thus, we can talk about productivity as a proxy for income. The rising income inequality means that the most productive individuals in society are distancing themselves from the least productive individuals.

This makes intuitive sense. With each scientific discovery, and with each technological innovation, we enable the most knowledgeable and most productive individuals in our society to become even more productive. However, those without the knowledge, skills, and/or motivation will still exist. As innovation continues, the distance between the most productive and the least productive will increase. And if innovation accelerates, this gap will accelerate.

I can’t see how a innovative society can avoid a rising income inequality. There are two options that I see. The first is the stop innovation by changing policy, increasing taxes for businesses, etc. The second is to figure out how to raise the productivity of the least-productive individuals in society. IMHO, the first shouldn’t be an option. The second is a tough challenge, and I don’t think we can rely on the market/capitalism. Instead, we need government programs, improved education, etc. There must be a way, but with the growing income inequality, we obviously haven’t figured it out yet.

(photo credit: slate.com)

P.S. This is post number #76 in a 100 day blogging challenge. See you tomorrow!

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2 thoughts on “The rising income inequality isn’t going to stop

  1. you’re forthright that your analysis is rough, but it’s even rougher to follow it. there’s been incredible pressure on wages even as productivity overall has skyrocketed. just because the market only values certain work at $8/hour, doesn’t mean that it such work isn’t valuable or productive. in fact, there’s a great argument that exactly this low-paid work — picking crops, cleaning up, cooking food and so on — has been an incredible profit boon to companies and also beneficial for the consumer economy as a whole.

    • Wow, you are right — one of the problems with writing late at night is that I sometimes end up writing gibberish that is incredibly hard to follow. I edited it just now in an attempt to improve it.

      I’m not trying to say that certain work isn’t valuable. I strongly believe that we need people picking crops, cleaning, cooking, maintaining public infrastructure, etc. I am only taking a look at productivity across our population over time. I am sure that with innovation, the most productive will become even more productive. I am less sure of the least productive will become more productive over time. However, it is an important problem that needs to be tackled. I’m not sure we are doing enough as a society here, and I feel that a purely capitalistic system will do little to solve this problem.

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