Is Inequality Worth ‘Fixing’?

Jim Huffman Dean Emeritus, Lewis & Clark Law School
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New York Mets third baseman David Wright will earn $19.3 million this season. The Mets clubhouse manager earns about $80,000 per year. Wright makes 240 times as much as the guy who is there to provide for his every want and need.

Wright makes $117,000 per game. Beer vendors at Citi Field, if they are really good, can make as much as $200 per game. Wright makes 585 times as much per game as the beer hawkers at the Mets’ home stadium.

The minimum MLB salary is $500,000. The average is $3.39 million. The highest paid MLB player (Zack Greinke of the L.A. Dodgers) will earn $26 million this season to pitch in maybe 30-35 games. Greinke will make 325 times what the clubhouse manager earns and nearly 800 times what the beer vendor makes.

This is some serious inequality. But where’s the outrage? Why is there no picketing of major league ballparks, particularly when you consider that the average cost for a family of four to attend a game at Citi Field is $230, only $50 less than a new HP Chromebook 11 laptop computer.

Speaking of HP, Meg Whitman makes about $16 million per year as the company’s CEO. And she is just one of dozens of highly paid CEOs. According to a recent Associated Press/Equilar study, the average annual CEO compensation at America’s largest companies is now $10.5 million. That is 257 times the salary of the average worker in those same companies – not much different than the disparity between David Wright and the Mets’ clubhouse manager.

Progressives, inspired by Thomas Piketty’s proposal for a global wealth tax and an 80 percent income tax top rate, are in high dudgeon over these enormous CEO compensation packages. Buy why? It makes sense that a shareholder might be upset at the high pay of the CEO of a company in which he has invested, but why all the indignation over CEO pay in general? And why are there not objections to David Wright’s $27 million, or Kobe Bryant’s $30 million, or Oprah Winfrey’s $77 million (down from $165 million the year before according to Forbes)?

Simple envy is part of the explanation, but there are 61 million more reasons to be envious of Oprah Winfrey’s income than of Meg Whitman’s. A more generous explanation for outrage over the fact that CEOs make 257 times as much as the average worker they employ is a belief that it is simply unfair that a few people make so much more than most people.

Of course that claim applies as much to Oprah as to Meg, so if we can justify taking 80 percent of what CEOs make we will have to work up some outrage over how much Oprah and other celebrities make.

That progressives are upset over CEO compensation but not about the fact that Hillary Clinton is paid $200,000 for a single speech (according to the New York Times) or that her husband, the former president, earned speaking fees totaling $13.4 million in a single year (according to CNN) suggests that what really motivates them is neither envy nor fairness, but rather an anti-business fervor founded on bad economic theory.

Just as a minimum wage makes some useful tasks not worth paying for, an effective ceiling on income makes some broadly beneficial (and often high risk) activities not worth doing. It is not surprising that political pressures to raise the minimum wage and to severely tax higher incomes have emerged at the same time. Both policy proposals are of a piece, rooted in a failure to understand the vital connection between individual freedom and social prosperity.

The more we manipulate and reorder the results of free exchange among employers and employees, the more we suppress the incentives to be productive. To be sure, regulations to guarantee worker safety and wealth transfers to aid the truly needy are necessary to a fair and productive society. But redistributing wealth simply because some people have “too much” will, in the long run, serve only to kill the entrepreneurial spirit that has made our lives healthier, safer and more comfortable, not to mention given us the chance to enjoy Oprah on television and watch David Wright make great plays at third base.