Is inequality really a problem?

Some people feel that inequality in itself isn’t a problem as long as everyone is able to lead a decent standard of living. One problem with valuing inequality for its own right is known as the leveling down objection.¹ One way to make everything more equal would be to just destroy the wealth of the very richest people and make everyone poor. However, would this really be a better society than one with inequality?

Others will see inequality as real but fair — it simply comes from people making different amounts of effort in their lives, with different results. And if we created a society within which those who didn’t make as much effort got as much as those who made more, we would be distorting people’s incentives to work hard. A core feature of capitalist economies is the so-called free market, within which some will inevitably win and others will lose out — and that spurs people to work harder.² And if everyone’s working harder, we’re producing more, and everyone does better.

But it’s not that simple. Studies show that although inequality might spur on competition, there’s also a strong link between inequality and violence, incarceration, drug abuse, obesity, teenage pregnancy, and mental health issues.³ It might be true that a society with huge inequality but no poverty is preferable to a society with less inequality but high levels of poverty, but studies show that our well-being is grounded largely in how we are doing relative to those around us. What might be seen as ‘poor’ in one country would count as rich somewhere else, but if your living standards are far below those around you, you might consider yourself poor in your local context. It is also not necessarily true that earning more is directly related to working harder — a nurse working in a busy emergency department, for instance, earns far less proportionately than a highly-paid investment banker but it would be hard to argue that he or she is working less hard on a day to day basis or worked less hard in their training.

Even for those whose values don’t align with those in the arguments above, inequality at the level we see it at today has been shown by some of the biggest economic institutions to be damaging to everybody, including the wealthy.⁴ When wealth inequality is so high that the rich end up sitting on more money than they can spend, all that money is doing is hanging around in a bank account. If that money were more widely distributed among people who needed it, they’d be buying things, making investments, traveling … spurring on economic activity that has positive effects for society as a whole. So inequality isn’t just bad for those who need the money; it’s bad for those at the top, too.