Thursday 11 August 2016

For an egalitarianism of respect

Last night, debate teams from Victoria University at Wellington and from Canterbury squared off to debate the moot, "This house would ban people with university degrees from marrying each other."

It was great fun. Vic had the affirmative and did a fantastic job with it. Canterbury won, partially because the affirmative wasn't able to show it would be enforceable without substantial offsetting harms.

Matt Nolan, of TVHE fame and who's finishing up his thesis on inequality, was one of the the panellists after the debaters had finished; I was the second. I've copied my speaking notes below, but delivery varied a bit. I think the debate was videoed; I'll update this post with it when it's available.
You might have come in tonight scratching your heads a bit about tonight’s moot. The proposed policy is obviously absurd: a far more intrusive extension of the state into people’s lives than most people would ever consider appropriate.

I’m Head of Research with the New Zealand Initiative. I proposed tonight’s moot because it gets to something more fundamental about inequality than we usually talk about in public debates.

We see a lot of newspaper stories about ever-rising income inequality. As Matt’s explained, and as we show in a report coming out later this year, inequality in measured income rose in New Zealand in the late 80s through mid 90s, partially because of real changes in wages and salaries, and partially because measured income inequality in the early 1980s didn’t include the company cars that some people got and other people didn’t. But, depending on the measure, it’s been flat or declining since then. Poverty remains a real issue. But inequality – there seems to be less there there.

If you track New Zealand Herald headlines with the word inequality in the title against the data on inequality – there’s no basis in the data for the changes in reporting. But it is following international trends. I think we have imported American narratives that might suit their data, but do not suit ours. I also wonder how much of the domestic concern with inequality is driven by dysfunctional Auckland housing markets: when Council makes it really hard to get new housing built, we get bidding wars for existing housing that fuel both xenophobia and resentment of those who might outbid you.

But the failure of inequality to rise here hardly means there is nothing to worry about. There are a lot of things to worry about.

First off, rising incomes at the top in the US seem to reflect greater returns to high levels of skill: those who are able to manage large complicated firms that operate multinationally provide services of immense value to their shareholders. New Zealand’s lagging top incomes then are a worry when we think about overall productivity and economic growth: rather than signalling egalitarian norms, it could rather be telling us that New Zealand’s top talent is more valuable to companies overseas than to firms here, and that’s not something to take lightly over the longer term. In New Zealand, people worry over CEO pay ratios where CEOs earn around 17 times average earnings; in America, it’s more like 250 to 300 times. Would New Zealand really be a worse place if somebody built a company here requiring that kind of talent to run?

But leaving that to the side, there are two broader worries, one of which motivated tonight’s moot.

First, inequality is about more than just earnings potential. Status is about a lot of different things. Those of you watching the Olympics will have noticed that there is huge variation in natural talents, partially a product of training and hard work, partially due to lucky genetic endowments. Some work really hard to make the most of the talents they are given; others don’t; and still others, like me, could never, no matter what, compete on that kind of stage. I caught a great Bill Murray tweet suggesting that a normal person be put into the mix in each Olympic event to show just how far these superhumans are from the rest of us. But it is strange how that would make us more greatly laud the winners, when doing the same thing with natural talents leading to higher earnings would have many instead damn the most able. 

Imagine that, before you were born, you were given a choice: you could have no sporting talent but business skills that would ensure high earnings, or you could be an Olympic athlete with more limited earnings potential but huge recognition for your abilities, or you could be a musician who never earns much at all but has a hugely successful love life. If people vary in how attractive they find the different options, trying to equalise earnings without thinking about the other margins doesn’t necessarily help equality in overall happiness.

Second, and more worryingly, to my mind, and what motivated tonight’s moot, is that one of the underlying reasons for differences across people has a good chance of increasing inequality over the longer term. In short, people are increasingly likely to partner up and have kids with others who are a lot more like themselves than was the case a few decades ago. Work in 2014 in America showed that American household inequality is 20% higher than it would be if couples paired randomly. Much of the story of 20th century America is smart kids moving off the farm to the big city, and their kids marrying other college grads.

Society then starts bifurcating.

Previously, when couples were less alike, kids across different couples would be more alike. Kids wind up looking like the average of their parents, with a bit of pull towards the mean. When the highly educated with strong earnings potential marry each other, whether or not they wind up in work or in the home, the kids of different households not only start out with very different starting points – and not just for the income reasons that people usually point to.

It is right and important that society, whether through government or through charitable efforts, mitigate some of the effect of poor luck of the draw when it comes to baseline ability – and work hard to make sure that everyone has access to the best education possible so that starting disadvantages are not compounded.

Increasingly assortative pairings means that people have less opportunity to interact with others with strongly differing backgrounds. This is again pretty obvious in America, where urban liberals lack of interaction with, and consequent disdain for, the cultural norms outside of those places helped fuel the Trumpist backlash. Just because I generally share those urban liberals’ views doesn’t mean I don’t see the problem here.

This will become more important if New Zealand follows American trends toward like being more likely to marry like.

Urban Kiwis are fewer generations away from the paddocks than are their American counterparts, and that helps maintain a certain egalitarianism of respect, but that won't last forever. We already are seeing strong pushes to legislate and regulate against the lifestyle choices of those outside of the urban elite. You hear it in trendy Wellington cafes, where well dressed rich folks drinking high calorie mochaccinos speak with disdain about how others drink Coke or eat at McDonalds. It's an inequality of respect.

Poverty is real and important. When it comes to inequality, I think we need a renewed egalitarianism of respect for the choices others make about what is best for them. The more cocooned we are in bubbles away from those who make different choices than we do, the more hesitant we should be to cast judgement.

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