Posts tagged with: Gini coefficient

income-inequalityIn his recent State of the Union address, President Obama has signaled that income inequality will be his domestic focus during the remainder of his term in office. The fact that the president considers income inequality, rather than employment or economic growth, to be the most important economic issue is peculiar, though not really surprising. For the past few years the political and cultural elites have become obsessed with the issue.

But what should Christians think, and how should we approach the issue? Should we also be concerned? And if so, what should we do about it?

Here are ten points about income inequality that every Christian should understand:

Much has been made of income inequality in the United States this election season. Income inequality exists in the United States, more so than almost any other developed nation. Around sixty years ago, America’s Gini coefficient–the best measure of income equality, where zero represents the least inequality and one the most–was .37. Today, it is .45.

These numbers are startling, especially for a country that so proudly proclaims all men to be “created equal.” But, as Matthew Schoenfeld points out in The Wall Street Journal, income equality is a far cry from the equality the Framers preached in the Declaration of Independence.

Schoenfeld’s article, titled “Air Jordan and the 1%”, transposes the issue of income inequality from the public policy arena to the basketball court. For many people in and around public policy, a rising Gini coeffecient is enough to call for economic redistribution. Of course, this narrow reasoning doesn’t hold up in other arenas, as Schoenfeld’s basketball analogy points out:

And that brings us to Michael Jordan, who starred for the Chicago Bulls from 1984 to 1998. In 1986, the Bulls’ median player salary was $300,000. The team’s lowest-paid player made $135,000, and its highest-paid player made $806,000. The team’s Gini coefficient was 0.36. But Jordan’s superstardom increased the team’s popularity and revenues, and by 1998 salaries looked different. The median income was $2.3 million, the lowest was $500,000, and the highest (Jordan’s) was $33 million. The Gini coefficient had nearly doubled, to 0.67.

Jordan’s salary of $33 million consumed over half the payroll, but everyone was better off. The median player in 1998 made more than seven times what the median player made in 1986, while the income of the lowest-paid player in 1998 quadrupled that of his 1986 peer.

Schoenfeld’s analysis calls to mind a line from Alexis de Tocqueville’s Democracy in America. In the book, de Tocqueville claims, “Americans are so enamored of equality that they would rather be equal in slavery than unequal in freedom.” Equality is certainly a necessary virtue, one that ensures that all can enjoy basic rights and freedoms. But it is not equality alone that generates human flourishing. This is what the Framers, de Tocqueville, and the 1984-1998 Chicago Bulls got right. Humans require freedom and opportunity to fully tap into their inherent creative potential. To return to basketball:  Every successful offense is built around creating the best shot, and the opportunity for a slam dunk always trumps a prayer from half-court.

An interesting report in The Economist on the rise of flashy and free spending entrepreneur “gazillionaires” in India and China and how they are perceived:

In much of India, life is getting perceptibly better each year. Wealth per person has vaulted by 150% in the past decade, from $2,000 to $5,000. Many Indians think the nation’s entrepreneurs deserve some of the credit. In Dharavi, a slum outside Mumbai, an illiterate mother called Aruna sits in her tiny one-room flat, which is home to ten people. Asked how she feels about the rich, she says: “They have worked hard. And we must work hard, too.” Her eldest daughter has a job entering data at a bank. The next one is studying diligently. The family may be near the bottom of the ladder, but it sees a way up.

But this in China:

The perception that commercial success often depends on political ties makes inequality in China more galling. In the mid-1980s Chinese incomes were more evenly distributed than India’s—hardly surprising, since China was nominally communist and India is afflicted by a caste system. But now China is less equal than India, with a Gini coefficient of 0.4 to India’s 0.37. China has 800,000 dollar millionaires, but also 400m people who live on less than $2 a day.