Every Friday at noon, a swarm of students descend upon Wheeler Hall abuzz with excitement. Though they represent an array of majors, one would hardly guess so by the singular topic of their conversations. That’s because these students have temporarily put their test tubes and problem sets aside to enroll in one of UC Berkeley’s most popular courses — “Wealth and Poverty” with Professor Robert Reich.
As Secretary of Labor under the Clinton administration and the Chancellor’s Professor of Public Policy at Berkeley’s Goldman School, Reich’s resume has set this scene like clockwork over the years. Yet, unsurprisingly for someone of such political celebrity, what his students experience after settling into their seats is not an objective analysis of poverty in America. Rather, Reich’s economic narrative excludes evidence that counters his redistributionist aims.
Having completed the course last year, I will critique Reich’s central claim that income inequality is widening in America. In doing so, I will demonstrate that things are much more complex than the polarizing picture of “haves versus have-nots” that the professor portrays. I encourage current “Wealth and Poverty” students to similarly supplement Reich’s research with their own to read between the lines of his copious charts.
Last spring, Reich started his course by projecting several graphs showing widening income inequality in America. While the professor is correct that wages for low-income households have stagnated since the 1970s while flourishing for high-income ones, these statistics don’t tell the entire story. First, the bottom fifth of incomeearning households usually only have one working family member while the top fifth have more than one. Moreover, fewer than one-third of households in the lowest quintile have a family member working fulltime, while more than three-fourths of families do in the top quintile. Finally, only one-third of households in the bottom quintile are headed by someone between the ages of 35 and 54 — when workers typically earn their lifetimes’ highest wages.
In plain English, the evidence shows there is a correlation between how hard one works and the amount of money one earns. Unsurprisingly, most people enter the working world with lower incomes and are upwardly mobile until retirement. So unless we want to heed the Communist call to absolute income equality, our system of incentivizing work hardly seems unfair.
Furthermore, a low income is not equivalent to a low living standard. Most Americans have other means of money than simply income, like selling property or redeeming insurance policies. Thus, many economists agree that household consumption is a more accurate measurement of economic well-being than income.
In fact, when analyzing consumption, one sees that the gap between the rich and poor is severely less stark. Whereas the average income of the top fifth compared to the bottom fifth is a ratio of 15 to one, for consumption the ratio is only four to one. Because of the large amounts of economic freedom that Americans enjoy, rich and poor alike have more access to affordable food, shelter and technology today than ever before. Is this really the inegalitarian image that Reich has in mind?
Certainly the professor is correct in one respect: there are fat cats that rig our system to their own economic advantage. But, one must ask how exactly these thieves steal from a marketplace that functions through voluntary exchange between buyer and seller. The answer is found in the institution with the monopoly on violence — the government. Through its countless bailouts and subsidies to big business, the federal government regressively redistributes wealth from poor to rich to the tune of billions every year.
Even worse, the state not only pursues policies that benefit the rich but also continues others that systematically discriminate against the poor. Sin taxes on alcohol and tobacco disproportionately hurt the impoverished. Failing public schools render poor children unequipped with the skills needed to flourish in our competitive economy. The War on Drugs imprisons hundreds of thousands of minorities for nonviolent crimes. This is the work of the state, not the work of the millions of high-income individuals that toil hard and honestly for their paycheck.
Indeed, if we want to reduce poverty in America, we should not persecute the investors that drive the economy forward but rather the government that holds the poor back — and certainly not give it more power! The philosopher Bertrand de Jouvenel once noted that “redistribution is in effect far less a redistribution of free income from the richer to the poorer, as we imagined, than a redistribution of power from the individual to the State.” Until redistributionists like Reich understand this, we will continue to live in the very inegalitarian society that they decry.