THEY WORK HARD FOR THE MONEY, SO YOU BETTER TREAT 'EM RIGHT. I didn't have any luck getting anyone to join my last crusade, and I've given up on it myself, so here's another, inspired by the Tyler Cowen Times op-ed on inequality that J. flagged this morning: I'm willing to accept a considerable level of income inequality as a price we pay for a dynamic economy. But can we please, please banish from discourse the idea that people who earn much more money do so because they work so much harder? Cowen says that "the high earners are working hard for their money and perhaps they are having less fun," and attributes inequality to "highly motivated breadwinners." He then argues that "inequality of happiness is usually less marked than inequality of income," and that "a man earning $500,000 a year is not usually 10 times as happy as a man earning $50,000 a year." Which may or may not be true. But isn't it even more true, and demonstrably true, that inequality of work effort is less marked than inequality of income? Isn't it unarguably true that a man making $500,000 a year is not usually working 10 times as hard as a man earning $50,000 a year? There are people who work very, very hard, 80 hours a week or more. Some, not all, of them are rewarded for it. Fine. But do they work five times, ten, twenty times harder than someone who works only forty hours a week? They may "work smarter," they may work more efficiently, if, for example, they have a support staff that takes care of all the crap. But they don't work harder. And there are only so many hours in the week. And no one works harder than the poorest people in America. No one works harder than someone who gets on a bus at 5:30 in the morning and an hour later gets to a hotel where she cleans rooms for $5.15/hour, then takes another bus home, picks up her children, makes dinner and gets ready to start all over again. It is, frankly, disgraceful to pretend that the difference between that person and Jack Welch is somehow related to Jack Welch "working harder." (Robert Nozick used the "Wilt Chamberlain example" to justify inequality -- if in a free exchange, people are willing to pay money to see Wilt Chamberlain play, why shouldn't he be entitled to whatever they're willing to pay him? And I don't disagree with that. But even Nozick didn't pretend that Wilt Chamberlain earned whatever he earned -- which was probably paltry compared to what the backup center for the Knicks makes today -- by virtue of working harder.) And higher-income people, even those who work 80 hours, often have far greater control over their time and the nature of their work. They are more likely, for example, to be able to decide for themselves that they want to go to their kid's soccer game, then work from home in the evening. Cowen cites this study showing "that from 1965 to 2003, less-educated groups experienced a bigger boost in free time than more-educated groups" to support the point that "the high earners are working hard for their money." What the study showed is that everyone's leisure time went up from 1965 to 2003, which is good, but that men with less than a high-school education now work an average of 38 hours a week while men with more than a high school education work 43 hours a week. The education difference for women is similar, but hours of market work for women in both education groups has gone up, and "non-market work" -- e.g. housework -- has gone down. Does this bit of data really prove that "high earners are working hard for their money"? First, high school completion is at best a poor proxy for earnings inequality, especially on a 40-year time series during which the returns to education increased dramatically and the composition of high-school dropouts and graduates changed. In other words, perhaps this proves that being a high-school dropout is now more likely than in the past to lead to being unemployed. Or, more likely, the cohort that did not finish high school skews much older -- since many more men in the 40s and 50s didn't finish school -- and therefore they are now more likely to be retired. I see no indication that this data is adjusted for age. Finally, the authors of the study themselves describe this finding as a "discrepancy between the time-series and cross-sectional evidence on income and leisure." (This is a very methodologically complex paper, and anyone who likes that sort of thing is encouraged to dig more deeply into it.) If we're going to have an honest debate about inequality -- how much we're willing to accept, how much we care about absolute vs. relative levels of income and wealth -- it must begin by stripping the debate of the idea that those very high earners are somehow that much more virtuous and harder working. They are not.
--Mark Schmitt
