Class Mobility and Socioeconomic Inequality

The recent popularity of “I am the 99%” identifications, and its counter-movement, “I am the 53%,” have publicized a number of common arguments over wealth inequality in America. Most “53%” posts are expressions of a popular defense of inequality: that one’s prosperity is one’s own responsibility, and that one’s socioeconomic class is largely a result of one’s individual choices. This is a more adversarial expression of the general idea that the possibility of class mobility justifies wealth disparity between classes, and those who are capable earn the just rewards of achievement. This is the American Dream: with hard work and a willingness to take risks, anyone can succeed. Therefore, programs designed to level the playing field are basically unjust interference in a fair Darwinian sorting system.

I have always been suspicious of the underlying premises of this justification, and it seems to me that those concerned about the negative effects of wealth inequality too often grant them: certainly, class mobility would justify it, but there are barriers to success, and it’s very harsh for those who can’t reach the top, etc. It’s a fair argument, given those premises, but it’s not even necessary to grant them at all. Class mobility does not justify wealth inequality, and it could not, ever.

Let’s consider a very basic question: does it really follow that the possibility of becoming the boss justifies the privilege of bosses? Or: does manumission justify slavery, and ennoblement justify serfdom? If some class distinction is inevitable, then we need to determine whether the relationship between the upper and lower class is just in itself, rather than how easily one could join an upper class with a dubious claim to legitimacy. One might claim that this is a matter of degree: certainly, market meritocracy is more just than slavery or serfdom since (among other reasons) class mobility is greater under it. Since this debate is so often intersects with a discussion of welfare programs, one would have to contend with the evidence that stronger social safety nets tend to promote class mobility. Risk-taking becomes easier as the price of failure declines. If we measure the justice of a political economy by the ease of changing one’s station within it, those closer to welfare states are factually more just than those closer to propertarian minarchy. As public health researcher Richard Wilkinson put it: “If you want to live the American Dream, move to Denmark.”

But of course, it might be the case that the market really is a meritocracy, and so positions at the top are entirely justified by the greater virtue of those who occupy them. It’s an unnecessary detour to discuss whether any particular wealthy person really earned their fortune. What matters is what “merit” even means in this context, and how success relates to it. If merit is wholly a matter of one’s personal strengths, success is the result of a fair competition. However, if the relationship between success and merit requires that only a minority of people ever reach the top, the case is less clear. In that case, the existence of a majority of “losers” is responsible for the rewards of the “winners.” As it turns out, the very nature of a market economy requires exactly this.

One definition of merit revolves around entrepreneurial initiative. Anyone in America has the freedom to start their own business and be the boss and make the big money, after all. It’s worth noting that the position of the employer is not just one of (potential or actual) wealth, but of power: the owners of property set the terms for others’ use of it, so ownership of a business allows one to set the terms for those who work at it. We are right back to the above noted cause for doubt about mobility justifying inequity: being able to move into a position of power does not in itself justify that form of power. There is a very basic reason to doubt this justification when it comes to employment, as a principle of legitimate power we recognize is the necessity of the consent of, and accountability to, those over whom power is exercised.

Most people are simply not going to become successful entrepreneurs, even if everyone tried. The high failure rate of new businesses attests to that. Looked at from a high enough macroeconomic perspective, the accretion of large firms with many employees out of an economy of small firms is a long-run outcome of market competition and the elimination of inefficiency from redundancy. Functional economies don’t have more chiefs than braves. However, the injustice of inequity here has less to do with enjoyment of wealth or the sufferings of those who are out-competed than a lack of independent agency: most people will need to work for someone else in order to get by, and so the consent of an employment contract is inherently tainted by dependency. Being able to choose some other patron is a poor guarantee of the accountability and fairness of employers when there are always going to be many more potential employees than employers, in general, need. Unless you think that running a business which is able to sell more goods and services than other businesses imparts the legitimacy to rule over others, this is an undesirable outcome.

Putting the facts of comparative class mobility in this context reveals something disturbing about this necessary minority of employers. Since welfare programs give employees more flexibility by enabling them to securely take the risks needed to better their station, they off-set the dependency of employees. Greater independence of employees, enabled by welfare programs, requires employers to offer better compensation to attract employees, and may cause them to face more competition from aspiring entrepreneurs. It follows that, whether any particular employer is exploitative or fair, the more dependent employees generally are on employers, the less employers have to pay to retain employees, lowering costs and raising profits. The power to set the terms of employment thus goes hand-in-hand with prosperity: the success (in terms of wealth) of employers correlates with the desperation of employees. By simple supply and demand, a glut in the labor market can cause this desperation as much as the shredding of welfare programs. The more people looking for work, the lower wages can go; or in other words, the more “losers” there are, the better the “winners” do. This is the point where the meaning of merit as a personal virtue becomes muddy, since individual initiative and business acumen gets an entrepreneur much farther the more people are desperate for work.

Another form of merit does not seem to raise this question of power because it is available to both employers and employees: if you work hard at developing a trade or cultivating specialist knowledge, you can get a better job. Skill, here, is merit. It’s possible to make the right choices in education and training to be highly employable by virtue of one’s skill. Arguably, entrepreneurial initiative and business acumen are subsets of this definition of merit, but possessing the merit of a “marketable skill” seems to even the odds between employers and employees. If your skillset is in demand, then employers will need to offer better compensation to retain you. Thus, it is up to the individual to make sure they have made the right choice of vocation.

I can think of only one skill which would absolutely guarantee the security of this path: precognition. If you can learn to see into the future, you can be forewarned of any changes in technology or the labor market which would render a skill obsolete, and retrain accordingly. After all, what is “marketable” or “highly employable” is not even easy to figure out in the present, much less for the future. You can excel at a great number of skills and have a hard time finding employment if no one wants to retain them. It is more correct to place the emphasis on “marketable” than “skill” in this definition of merit, then: skilled employees have the same merit as a well-made car, or alternately, a well-made buggy-whip. No wonder, then, that arguments in this line so often devolve into reverse-prognostication about what someone should have studied in school, or what jobs someone should have taken, easy calls to make given the acuity of hindsight.

In the end, then, this definition does not sidestep the issue of power nearly so well as it originally seems. It implicitly relies on the existence of a “seller’s market” for skills. Customers rarely like the prices this involves: it is never in the interests of employers to have to pay more to retain an employee. The trend, then, is always to either make some skill obsolete through technology, or to make it incredibly common. Merit, here, obliges one to tailor one’s whole life towards making oneself a more desirable product for another’s consumption, and hoping that they still have a taste for you when you’re done. We don’t even need to think about the Red Queen’s treadmill of the employment market to see problems with this. Just think about what it would be like everyone did (presupposing that everyone could) make the “right” vocational choices. How much could, say, bioengineering majors expect to make after graduation if there were ten times as many people in their graduating class with their degree? How easy would it be to find employment? All else being equal, the economic security and prosperity that comes to those who have a skill increases the fewer other people have it. Merit, here, explicitly requires that not everyone make “the right choices,” since the right choices are those few others are making. This makes it hard to justify the rewards of the employable few, since again, the fewer “winners” there are, the greater the prizes. A marketable skill is a rare skill, and rarity requires that few people have such skills.

What is it that we are ultimately trying to justify with these kinds of arguments? Generally, those who forward them focus on the rewards of the victors rather than the suffering of the rest, which is the general concern of those uncomfortable with great wealth disparity. I don’t think that concern for the have-nots necessitates hatred of the haves. I don’t begrudge the prosperity of those who have worked hard, who have mastered a useful skill, who provide a good service, etc. I simply doubt that the appropriate price of failure, in this contest, is abject destitution. If the prosperity of the “winners” is actually based on their being out-numbered by the “losers,” as seems to be the case, then why should we accept that the necessary majority of people who haven’t made the “right choices” should labor longer, earn and afford less, suffer worse health, and worry more about their future? If “the world needs ditch-diggers,” why should a “ditch-digger’s” life be marginal and insecure? What justifies that?

This is part of a new category of shorter posts than I usually publish. I usually feel the need to write longer posts, and this makes writing seem like a daunting task. By creating a new classification of short posts, I can compartmentalize this completely irrational stumbling block and get writing more often!

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4 thoughts on “Class Mobility and Socioeconomic Inequality

  1. “In that case, the existence of a majority of “losers” is responsible for the rewards of the “winners.” As it turns out, the very nature of a market economy requires exactly this.”

    Exactly: this system is in fact set up on the premise that there will be losers, who guarantee the structure. Founding fathers of capitalism such as Adam Smith understood this clearly, which is why they invariably (as did Smith) recommended a strong separation between private and public life, and a substantial support network (a “social welfare safety net”) to prevent the losers from literally dying in the streets. I often wish modern conservatives would take Adam Smith into account on this topic; but then they might have to actually deal with the need for remediation of poverty and suffering caused by capitalist competition.

    • It would also be great if people would put Smith in historical context. How often will you hear an argument against regulation along the lines of, “bureaucrats don’t know better than entrepreneurs how to make good products,” with an assurance that the market will sort everything out? This is a direct reference to the original point of the “invisible hand” concept, as a refutation of the heavily regulated mercantile/guild system, as typified by the policies of Jean-Baptiste Colbert. People of the time were seriously concerned that absent these controls there would be no way to ensure product quality and favorable trade balances for national fortune. Smith’s insight was that consumer choice and competition could ensure that good products prevailed. But not all regulations are equivalent to those of guilds. No one actually cares whether bureaucrats know better than businessmen how to make quality products, we care about using force of law to prevent pollution, workplace abuses, and unsafe products, problems for which consumer choice may not be a decent check. It would make as much sense to complain about bureaucrats knowing better than regular people how to conduct personal affairs in an argument against laws against fraud or assault.

      Thanks for your commentary!

  2. “No one actually cares whether bureaucrats know better than businessmen how to make quality products, we care about using force of law to prevent pollution, workplace abuses, and unsafe products, problems for which consumer choice may not be a decent check.” — Exactly: one of bureaucracy’s too-little-acknowledged virtues is that when correctly implemented it can serve as a sort of ersatz for procedural justice. The stop is first-level, not micro-level (consumer choice). A way of producing the same effect through consumer choice would be to ensure that every consumer had both ALL relevant details about the healthiness, production methods, distribution, and so forth of every single product and its elements, AND was able to choose a different way of satisfying their need for this product, thus creating an adverse economic impact on the manufacturer.

    “Look for the Union Label”–and in a digital world, it might be possible to catalogue this type of thing, although you’d also need to supply substitutes.

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