Jan
29
Blog Post #1: Luck’s Effect on Income Inequality in the Micro-Level
January 29, 2015 | Leave a Comment
“Rich fathers have rich sons and poor fathers have poor sons.” -Richard Wilkinson
My first reaction to this statement: “My chances of financial security in the future laid in the hands of some mysterious, omnipotent being somewhere in the sky and his/her mood when he/she decided that I would be born into rich family A, normal family B, or poor family C. Wonderful.” This line of thinking led me to, aside from feeling slightly pessimistic about my financial future, recall a story touching on the same idea that luck, before and after birth, plays a HUGE role in every moment of our lives. As this is a piece on income inequality, I’d like to explore the possible relationship between luck and the growing income inequality.
I once read this short story at my aunt’s Buddhist temple.
Boy A (let’s call him Al) and Boy B (let’s call him Bernie) were close friends who grew up together. Al lived in a huge mansion and had a rich politician for a father. Bernie, however, lived in the servants’ quarter of the huge mansion and had the politician’s servant for a father. He was tasked, from an early age, to care for Al’s wellbeing and, thus, the two boys were always together. Bernie would watch Al take a variety of lessons during the day and would stay up late to review what he had heard from those lessons. He wanted to become a politician as well.
One night, just as Bernie was about to fall asleep, he heard whispers above him. Two deities were discussing fates.
Pointing in the direction of Al’s room, the first deity said, “He sleeps through his lessons and his personality will be just as horrid as his father’s. ”
The second deity replied, “But he’s going to be rich when he grows up, just like his father.”
After a pause, the second deity turned his attentions to Bernie and commented, “This child here, though, will never earn more than his father’s wage.”
The first deity replied, “Yet he is diligent and kind, just like his father.”
Of course, there’s more to the story about karma and other Buddhist teachings, but the dialogue between the two deities immediately reminded me of Richard Wilkinson’s statement in his TED talk. Bernie embodies the characteristics and goals of those hoping to achieve the American dream. He comes from nothing but hopes to climb the social ladder through diligence and sweat. As Milanovic said, income inequality “provides incentives for harder work, study, investment and… general desire to better one’s condition.”
Al, however, is more symbolic of the truth – you need money to make money. And the difference between these two characters? Nothing but the mere fact that Al was born into rich family A and Bernie was born into poor family C. The mysterious, omnipotent being somewhere in the sky was in a better mood when deciding where Al would go than when deciding where Bernie would go. Another way of putting it, Al was luckier than Bernie even before they were both born.
Moving aside from the story, I want to go back to Wilkinson’s statement again. Although Wilkinson touched upon the social mobility in income unequal versus income equal countries, he did not delve into the micro view of the situation. He talked about how income unequal countries have more homicides, health problems, trust issues, life expectancy, etc., but he didn’t go into the reasons as to why the statement he made (that I quoted in the first line) can cause income inequality to rise. In fact, none of the articles we read aside from Ydstie and Silver’s article touched on this “why.” And that, I believe, is something very crucial.
Let’s concentrate on the saying that I’ve heard so many times before from people of all income brackets: “Money makes money.” Two of the most important things, in my opinion, that money can offer are time and resources.
When I was researching the impact of early development on children’s performance on NYC and NYS exams, I came across many research papers that have proven that children, under the age of 5, who are talked to more by their parents develop higher levels of cognitive skills than those who do not. Additionally, children, under the age of 5, in the higher income brackets tend to develop higher levels of vocabulary and communication skills at an early age than their counterparts because they are surrounded by well-read parents who speak with denser vocabulary. The “under the age of 5” part is crucial as there is a window of time when every child absorbs anything and everything they hear and see. After the age of 5, a child’s absorption of knowledge slows considerably.
The main connection here is the fact that children with parents in the higher income brackets ultimately develop higher cognitive and communication skills because their parents have more time to spend with them. Children with parents in the lower income brackets do not gain the same benefits because the majority of these parents work more than one job to keep the family afloat. They do not have the extra time to spend. Already, children in the higher income bracket families are ahead in the game.
Resources constitute many things, but I define it here as what money can offer for one’s education. This encompasses pricey private tutors, even pricier college tuition, an abundance of books, etc. Being in the upper income bracket means having the ability to afford many, if not all, of these resources. Being in the lower income bracket, however, means the opposite. Having these resources go a long way to becoming financially stable.
I’ve rattled on long enough about the benefits of money, which we all know well enough about. The main question here: What determines that Al is the recipient of these benefits and that Bernie is not? Again, my only explanation is luck.
This reminds me of Outliers by Malcolm Gladwell and the story about Microsoft’s Bill Gates. We all know that Bill Gates is smart and ambitious. Gladwell thoroughly discussed the importance of the “10000 hour” rule in his book. To achieve mastery in a specific field, one needs to work for a minimum of 10000 hours. Bill Gates, apparently, fulfilled that requirement with all the computer programming he did at Lakeside, a school in Seattle. He loved computers, worked tirelessly at it, and created a company which eventually led to his fame and wealth. This sounds like the perfect embodiment of the American dream.
If we continue reading (I totally recommend this book if you haven’t read it already), we find that there were many things aside from hard work contributing to Gates’ success:
- Gates was born into an upper middle-class family. His father was a prominent lawyer and his mother served on the board of directors for the First Interstate BancSystem and the United Way. His maternal grandfather was a national bank president.
- Gates attended Lakeside, Seattle’s most elite private school catering to the rich.
- Lakeside had the ability to fund a sophisticated computer in its computer club when computers were scarce and expensive.
- Gates was born in 1955, which made him the perfect age to take advantage of all the opportunities that opened up in 1975 when Altair 8800, the first do-it-yourself computer kit, launched (The book covers why he was the perfect age but that’s not something I will get into now).
Diligence and hard work was in Gates’ control. All four of these points listed were not. By sheer luck, Gates was born at the right time, in the right place, with the right mindset. Again, I stress sheer luck.
Luck is connected to so many factors out of our control, yet it decides how our cognitive abilities develop, how financially secure we will be in the future, what we can do in the future, the opportunities opened and closed to us, and so much more. Yes, income inequality is growing but can we blame it for doing so when so many factors out of our control are the root causes of the problem?
I understand that the TED talk and the articles concentrate on the effects of and solutions to growing income inequality. However, Wilkinson’s one statement triggered such a long thought process about income inequality being out of our control that I found it more interesting to discuss how luck can be held accountable for so much of the problem.
Esme Deprez, Richard Wilkinson, John Ydstie, and Marisa Silver all talk about effects, possible solutions, and the background behind income inequality. But looking at the problem from luck’s perspective, how can we possible change something so uncontrollable on the micro level? Another interesting question I thought of as I was typing this is whether there will be a point before a country has 100% income inequality where the difference between the poor and the rich naturally ceases to increase? But that’s for another time.
-Amy (SiJia) You
