Sarah Maricle Ayers: Rhetoric and ‘income inequality’

As the Florida gubernatorial campaign heats up, now is the time for voters to steel themselves against the wild policy claims that will undoubtedly spring forth.

One issue in particular likely to be raised is income inequality, which has astonishing misconceptions attached to it.

Chief among them is that income inequality is a problem that requires a governmental solution. Income disparities are an inevitable outgrowth of free markets, because of differences in human behavior. When people are free to make their own choices, the income landscape will naturally have variability. In order to preserve that economic autonomy, policymakers must resist the allure of socialistic micromanaging.

Those who champion income equality often falsely present the issue as a cost-free endeavor. They freely rile up covetous attitudes among the electorate, yet come up short on details. It is irresponsible to implore voters to support income redistribution policies without fully exploring and disclosing what society gives up in the process.

A second misconception is that income is static. Contrastive income quintiles usually reflect people in different stages of their lives. In addition to many other practical influences, such as education and the knowledge and skills required by a job, higher income groups often consist of older workers who have accrued more relative employment value.

Further, studies frequently cited in the media contain flaws. They fail to analyze income post-taxation. Income gaps are often evaluated in terms of pre-tax amounts, but when real take-home income is considered, the disparities noticeably shrink. There are good reasons to analyze income levels, such as monitoring growth, but misrepresenting differentials as part of a populist agenda isn’t one of them.

It is also false when it is suggested that middle- and lower-class Americans have experienced zero income growth over the last several decades. A dismal picture of unconscionable divide is often created by cursory comparisons of previous household incomes to modern ones. But household size has been shrinking, and these similar incomes are now achieved by fewer workers than before. Therefore, when household composition is considered, per capita income growth is shown to have risen significantly.

Philosophically, income equality policies are a call for central planning. They imply that the government has more, or better, information than citizens in managing the labor market. This is nothing new. Countries around the globe have long been preoccupied with cultivating an outward appearance of financial evenness, and supplanting private coordination of economic activity for public. In the 1960s, Cuba implemented a system of wage scales and quotas to narrow income gaps. Worker pay did level out, but overall economic desperation sank to unimaginable depths.

Austrian economist Friedrich Hayek wrote in 1977 that, “Prices are an instrument of communication and guidance which embody more information gaps than we directly have. … The whole idea that you can bring about the same order based on the division of labor by simple direction falls to the ground.” Incomes, just likes prices on goods and services, act as signals to regulate the employment marketplace. If income loses its ability to act as an incentive for rational decision-making and becomes a governmental tool for social change instead, every bracket loses wealth. Free markets aren’t perfect, but a centrally planned labor market would cause a wholesale dismantling of productivity and the nation’s standard of living.

Misconceptions abound on the issue of income equality, and some of the rhetoric expressed in the Florida gubernatorial race may seek to perpetuate them. Floridians should arm themselves with facts in advance of the upcoming debates to make a more informed vote.

Sarah Maricle Ayers has a B.S. in economics from Florida State. She expects to graduate from FSU’s MBA program in December. Contact her at smaricleayers@gmail.com.