Reflections on Income Inequality

                                             

The Connecticut Mirror, an online newspaper, recently featured a very long two-part article that argued that Connecticut was at the top of the list when it came to income inequality. In short, a chart showed that in Connecticut the top 1% averaged $2.4 million of annual income, while the average income of the remaining 99% was only about $56000 per year. In other words, the average income of the top 1% was 46 times the average income of everyone else in the state. Only neighboring New York State had a greater degree of income inequality.

The article went on to explain that income inequality on such a scale was a bad thing despite the fact that at $56000, the average income of the 99% was higher than practically every other state in the Union. Nevertheless, according to the experts cited in the article, income inequality leads to many undesirable consequences. The implication was that it would be better to live in states like Alabama, Mississippi, or West Virginia where the 99% averaged about $35000, and the gap between the wealthy and everyone else was much narrower.

I wanted to write a long post giving a reasoned response to the article but then decided that it would be of little use. What good would it do to question the assumptions and the figures used, no matter how mistaken, misrepresented, or misunderstood? For most who complain about income inequality, it is a gut or emotional matter and not subject to reason.

I have to admit that my belief that income inequality is not necessarily a bad thing but maybe even a positive thing is an equally gut reaction based mainly on my own personal life experience.

Many years ago while still in college, I got a summer job as a door-to-door salesman peddling one-volume encyclopedias in various neighborhoods in New York City and its environs. Those days and encyclopedias are long gone, but even today college students knock on my door during the summer break to get me to sign petitions and otherwise support various environmental concerns.

Every day, the boss would drive us out to different neighborhoods and give us lead cards filled out by parochial school students who thought they were entering a raffle to get a free encyclopedia. We would patrol a neighborhood, knock on doors, and hope to gain entrance so we could make a presentation and ultimately a sale. It was not easy even though the books which only cost $40 could even be purchased on the installment plan.

The top salesman in our group was a Chinese immigrant from Taiwan. It was hard to tell how old he was but even though he spoke with a slight accent, he was obviously more cultured and mature than the ordinary college freshman. Somehow, while the rest of us would be happy with one or two sales a day, he would usually make three, four or five. It was the same book but he somehow was more adept or motivated than the rest of us. That summer he made far more in commissions, but rather than complain, we could only admire his skill and success.

Realizing that I was not much of a salesman, I completed my college education and went on to graduate school to prepare for a teaching career. Eventually, I got a teaching position at a new Catholic college in Connecticut where all the young teachers were equally poor. After seven years, circumstances forced me to leave teaching and pursue another career.

Since I lacked work experience and had too much formal education, my only option seemed to be in sales. I became an insurance salesman and mutual fund peddler, in those days it was a job only a cut above encyclopedia salesman. It was a time before such financial salesmen (most were men) morphed into financial planners and PBS personalities.

It was not easy and most who entered the field quickly failed and dropped out. But it was obvious that those who succeeded usually worked harder and smarter, or were more skilled and motivated. Of course, the field attracted crooks and schemers who would shine for a while but then go on to greener pastures or fall into disgrace.

It was tough for me but I saw others click right away. Fortunately, I had a very supportive wife as well as five small children for motivation. It took a couple of hard years, but I was able to build a good practice that turned out to be very lucrative. I was even able to recruit  and train a handful of people who were as poor as I was when I started but who eventually became even more successful than myself.

I always tried to listen and learn from the successful. Perhaps the greatest mistake I made as a financial advisor occurred when I took my own advice. I had bought some Apple stock for my retirement plan at $20 per share. Some time went by and it had risen to $30 and I thought I should sell and take my nice 50% profit. I finally acted when I read the company’s annual report and saw that Steve Jobs, the company’s head man, was making $20 Million per year. Why did the company pay him so much? How could it make money paying salaries like that? Who deserves to make that much?

Now I realize that my Apple shares would have been worth a fortune today if I had held on. Jobs, a master salesman, was worth much more than $20 Million. He was the driving force in making Apple one of the largest and most respected companies in the world. In the process, he not only provided thousands of well-paying jobs for others, but one could also argue that his ipads and iphones have contributed greatly to raising the standard of living all over the globe.

An easy way to narrow the income ratio between the 1% and the 99% would be to deport people like Steve Jobs from Connecticut. Actually, it is already happening in an informal way throughout the country. Has anyone noticed how many wealthy athletes are taking up residence in Florida?  Basketball star Le Bron James has been worth far more to Cleveland and Ohio than his huge salary. What will happen if he leaves?

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