Income Inequality .... Rich or Poor .... It's All Relative

Does it matter that some of us have more material things than others, assuming we all have more than enough to live comfortable lives? The answer is yes.


Notable & Quotable tells us why. It's human nature at work

[D]oes income generally grow faster for people in the lowest fifth of the population or people in the highest?

It's the lowest, because many of those people are young, low-paid people just starting out on their careers, while many of the richest fifth are older people at the peak of their pay, about to retire. That is to say, the category "poorest fifth" may not seem to show much change, but the people in it do. Income mobility is far from dead: 80 per cent of people born in households below the poverty line escape poverty when they reach adulthood.

None of this is meant to imply that people are wrong to resent inequality in income or wealth, or be bothered about the winner-take-all features of executive pay in recent decades. Indeed, my point is rather the reverse: to try to understand why it is that people mind so much today, when in many ways inequality is so much less acute, and absolute poverty so much less prevalent, than it was in, say, 1900 or 1950. Now that starvation and squalor are mostly avoidable, so what if somebody else has a yacht?

The short answer is that surely we always have and always will care more about relative than absolute differences. This is no surprise to evolutionary biologists. The reproductive rewards went not to the peacock with a good enough tail, but to the one with the best tail. A few thousand years ago, the bloke with one more cow than the other bloke got the girl, and it would have cut little ice to try to reassure the loser by pointing out that he had more cows than his grandfather, that they were better cows, or that he had more than enough cows to feed himself anyway. What mattered was that he had fewer cows."

Summing Up

So now we know the theory of relativity applies to how much we have compared to our 'rich' neighbor.

And not compared to people in general or the rest of the world.

In terms of simple human understanding and envy, we want more relative to what others have.

And the politicians do everything they can to exploit that fact all the time, thereby making our society weaker as a result.

That's my take.

Thanks. Bob.