President Obama made American economic disparity a major theme of his 2014 State of the Union Address: “Today, after four years of economic growth, corporate profits and stock prices have rarely been higher, and those at the top have never done better. But average wages have barely budged. Inequality has deepened. Upward mobility has stalled.” There was oft-embraced reality in the president’s political jab. People seem to feel the American Dream’s maybe a bit wilted.
And the fears of dwindling class mobility extend beyond the Dems. Two years ago, the NYTimes quoted then-Presidential candidate Rick Santorum as saying, “[Movement] up into the middle income is actually greater, the mobility in Europe, than it is in America.” The National Review echoed that sentiment. The Times story also pointed out that American men raised in the bottom fifth income percentile were 42% likely to remain there as adults, compared with just 30% of British men or 25% of Danes in the same circumstances.
The American Dream tells us we can accomplish what we set our minds to, that we can raise ourselves up by our bootstraps, that the market rewards grit and pluck. The barriers to this fantasia are increasingly severe for those born into poverty.
Economic disparity, which we can look at more precisely through income inequality, raises a few important questions. The first is whether inequality itself, even severe inequality, is contrary to justice. Does the knowledge that others make far more than I do affront my dignity? Obviously, it shouldn’t, provided I earn enough to meet my needs, those of my family, and have a bit more.
This brings us to our second question. Where does income inequality become problematic? Catholic Social Teaching maintains that all men have the right to do work that provides for their family’s needs and security. Unemployment is a “social disaster” (Laborem Exercens, 18). Those at the very bottom of the American income spectrum are treated unjustly, not because their wages are unequal, but because they are so low as to be undignified. Entrenched economic disparity becomes problematic when it traps men in a dignity-less income band.
The core question: who is responsible for lessening the persistent cycle of low-income families?
The clearest answer might be companies themselves. The State, while responsible for protecting the poorest, is not responsible for creating jobs for each citizen. Rather, the State should “sustain business activities by creating conditions which will ensure job opportunities, by stimulating those activities where they are lacking” (Centesimus Annus, 48). The State’s emphasis on job creation shouldn’t be confused with an emphasis on the creation of profit, although jobs are often a result of increased capital.
The State can also do its part to decrease programs which keep the poorest in cyclic poverty. The Economist has an interesting piece looking at US social programs and how they’re structured: “In emphasising anti-poverty measures rather than social policies for all, America is more keen to raise the floor than to mind the gap.” Programs that fight poverty and focus exclusively on those with less, the piece argues, are generally less efficient than social programs (education, healthcare, etc) which include every citizen, rich and poor alike.
Subsidiarity, the concept that decisions and change be effected at the most localized level possible, also demands that economic disparity be addressed at the level of individual companies. If companies create a path to economic movement for value-creating workers, they allow an equitable exchange while providing a path out of poverty. Again, the argument is not for making wages or economic incentive “more equal,” but for making it more just.
Finally, solidarity works both ways. The universal right to work is not the right to be given a job. Workers must apply themselves and ensure their exchange with employers is equitable.
Although opportunity is probably best implemented at the individual business level, there is a legitimate concern around economic disparity at the national level since the U.S. stacks up relatively poorly against other high-income countries.
The GINI Coefficient is an internationally-recognized indicator of economic inequality within nations. A GINI Coefficient of zero means complete income equivalence. A GINI Coefficient of one means a single individual owns all the income of a given nation with no distribution whatsoever. Nations with low GINI Coefficients (more income equality) tend to be in Europe and Scandinavia. Canada also has a low GINI Coefficient. The US has a very high GINI Coefficient; it’s at about 0.42 post-tax today and higher than that of most other wealthy nations. In real terms, the bottom 80% of Americans own just 7% of the nation’s wealth.
In addition to primary efforts by business and regional government, Subsidiarity among the community of nations would seem to point to the need for the national government to provide better leadership in lowering US economic disparity. This sort of leadership is best implemented, as mentioned earlier, by government support for a business-friendly environment coupled with robust and equitable social programs to encourage upward mobility out of poverty.
The United States is the wealthiest nation on earth, a reality that makes its economic disparity all the more troubling
It’s the Church’s focus on the value of private property ownership that drives its belief in “The Universal Destination of Goods.” Private property is necessary and ownership should be open to all, but “the right to private property is subordinated to the right to common use, to the fact that goods are meant for everyone” (Laborem Exercens 14).
So increasing private ownership alone, though necessary, shouldn’t be our ultimate goal. Unfettered capitalism isn’t itself a moral system. With that in mind, we’ve argued that action is most effective at the local business level. How might a business act to distribute the wealth it creates more equitably? Ideas include employee ownership/earned stock options, expanding employee mobility into management ranks, and increasing non-monetary benefit programs to help raise workers out of the sticky bottom bands of wealth.
In a recent issue of INC magazine, Scott Leibs studied companies providing innovative employee benefits and tried to discover their bottom-line impact. He cites some interesting results from a 13,000-employee medical services company: “A few years ago, [Paul Spiegelman’s] companies began offering a new health benefit -- the opportunity to see a registered nurse within two hours, either at work or at home. There was an almost immediate payback: in just four months at Beryl, for example, 71 insurance claims were avoided and 246 work hours were saved (equating to an estimated $18,000 in wages) as employees got immediate care rather than having to visit a doctor.” The piece also quotes Spiegelman as saying, “Historically, companies have relied on their financials as leading indicators. But employee satisfaction, customer satisfaction, attrition rates, and similar metrics should serve as your leading indicators, with financials becoming your lagging indicators.
Economic Disparity’s clearest impact is on the poorest. Relative disparity within a wealthy nation that has a low GINI Coefficient is far less problematic than disparity in a nation which has the super-rich and the extremely poor. America has a serious obligation to its poor precisely because the nation is so wealthy.
I propose a set of steps moving forward.
• That businesses create real employee mobility programs and clearly communicate how those programs work to entry-level employees. Reward work inputs with clear, transparent rewards.
• That businesses provide benefits and non-monetary compensation to improve the lives of employees and allow greater upward mobility.
• That the wealthiest in the US heed their responsibility to the poorest by charitable giving, not simply as an act of generosity, but as one of justice.
• That the U.S. national and state-level governments consider broad-based, comprehensive social programs rather than siloing the poor into programs exclusively for, and perpetuating, the poorest. That government also encourage business to provide real paths to upward mobility and earned improvements in living standards by employees through incentives for those providing quality, high-potential jobs.