Relative Status Matters

June 11, 2017, from Da Lat, Vietnam

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This post is about balance, the balance of relative status, the balance of inequality. The US is out of balance.

When I started grammar school, I became vividly aware that the sophistication, demeanor and clothing of my family did not compare to that of many of my classmates’ families. My parents both worked in a textile factory. Neither had a college education. Our used car always had dents my father couldn’t afford to have repaired. Jerry’s father owned a successful plumbing business. Glenn’s father was an optometrist and he lived in Emerywood. My home was a small rectangular house with shabby furniture and a garden behind, in which we raised vegetables which mom put up in mason jars for the winter. My brother and I shared a bedroom. Glenn’s large home had a garden too, but it was a flower garden. He had his own bedroom.

We always had enough. For most of our childhood, our parents had secure factory jobs. Although they never had three months of savings, we  never had to worry about “enough” food or ability to have clothing or transportation. They even found the $130 to buy me a trombone when I begged to be in the band. While having enough was necessary, of course, it wasn’t sufficient. I was painfully aware of our relative status, how it felt to me, and how I imagined we were viewed by my friends and their parents, who never chose to invite my parents to their social events.

Later, when I was a Vice President of a bank, I remember feeling troubled when one of my peers was promoted to Senior Vice President and I wasn’t yet. I’ve just finished The Broken Ladder by Keith Payne. I recommend it to everyone, especially those who argue (for a variety of reasons) that inequality doesn’t matter. Payne shows with dozens of examples and studies, that in fact, it matters greatly. Inequality is a matter of relative status. Relative status matters.

Payne makes the point in his book that relative status is more important than pay–at least up to a point. If my boss at the bank had offered me a choice, stay as VP for a while with a 20% increase in pay, or become an SVP with no pay increase, I would have chosen the latter, without hesitation. Wouldn’t you?

Throughout my career, I always had “enough,” but I was always aware of my relative status. I am not unique. Relative status matters to most everyone. The feelings I described as a child were during a period of much lower US inequality. How much greater the feelings now among our citizens today, when we are so out of balance! Steadily increasing inequality across the last 30 years has exacerbated this troublesome reality for the current generation.

I don’t dispute the way many other ways people prefer to talk about inequality without using that word. As long as they are trying to make life better for the working man and woman, it’s all good. But I continue to argue that high inequality will continue to be a major problem, even if everyone has “enough, and even if we all have dependable jobs and steady wage increases. If everyone had their income doubled, we’d still have a big problem. Inequality, already high, would be even higher in that scenario, because doubling for the high incomes would be so much more than doubling for the low incomes.

Study after study shows that high inequality carries with it high levels of negative health outcomes, more crime, more drug abuse, even reduced life expectancy, along with lower levels of happiness. This is true when comparing New York (high inequality) to Iowa (lower), and also when comparing the US (high) with Sweden (moderate to low).

Various inclusions and exclusions of sources of income or redistribution result in different Gini coefficients. For the US, these range across various methods to a high of about .5 today. Regardless of method, no one disputes that inequality has risen dramatically since the 1970s and is now equal to that of the “Robber Baron” era in the 1920s. When the public thinks CEO pay should be 4.6 times that of the average employee and the reality is that it is 350 times, we are in dangerous territory.

If you’re riding your bike and lean too far to the left, you’ll fall over. If you lean too far to the right, you’ll fall over. To have a safe journey, you have to maintain balance within a  range that prevents trouble.

No one wants total equality. At some low level of inequality, the motivational benefit of increased inequality outweighs the negative costs. But at this point, we have the opposite problem. The costs outweigh the motivational benefits to our society.

Our national policy should prioritize steadily reducing inequality through political action, until we find the balance that is right for our country.

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