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phil186-income_distribution-essay - A Morally Just Income...

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A Morally Just Income Distribution We can observe that a capitalist country such as the United States has an unequal distri- bution of income: the lowest and highest 20 percent earn 5 percent and 45 percent, respectively. That being said, we can make the case that the rich are getting richer and the poor are getting poorer. However, is there an income limit to what is considered just? Should CEOs of organiza- tions make 300 times as much as their employees? Professor of economy John Isbister, agrees with Plato’s original argument that in a just society the rich should not have more than four times of those at the bottom, but he adds that amount should be raised to eight times as much to adjust for today’s capitalist world. In a utopian society, an equal income distribution would allow equal opportunities for children, however it wouldn’t benefit society as a whole as there will be an in- efficient employment of labor. The problem that Isbister raises is that complete equality of in- come distribution brings inefficiency in society. He then proposes that we must compromise between equality and efficiency if society is to have an income distribution that is just. In addi- tion, Isbister does present justifications for unequal wages and salaries and provides the pitfalls for limiting incomes. However, I believe that it’s unrealistic to set income limits in a capitalistic society . If we want to gravitate towards equality, society should ultimately decide how much is need to live on and any excess should be redistributed to others who have no means otherwise. Isbister gives several reasons why adequate differences of incomes are necessary to maintain efficiency. First, Unequal wages in society forces people to get an education and learn new valuable skills. In illustrating the need for unequal wages, Isbister provides an example of a person who chooses a career as a doctor as oppose to being a clerk. Soci- ety has to determine how much more to pay a doctor who sacrifices a clerk job and fore- gone salary in hopes for higher pay after completing the necessary training. The oppor-
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tunity cost is too great; therefore a doctor is entitled to higher pay. Second, Isbister states that a difference in earnings allows a person to be motivated by the prospect of higher earnings to work hard and effectively (Shaw 135). He provides evidence for this by men- tioning the agricultural communes in China and the former Soviet Union where people are paid the same that are calculated as a portion of the earnings of the commune. Appar- ently if an individual was to work harder than the next, his effort will not gain more pay. Third, Isbister connects wage inequality and efficiency to organizational hierarchies. He argues that organizations with layers of management provide a purpose in that each layer provides a different pay rate from the one below it. He also states “...most people find it hard to supervise people with higher salaries or to be supervised by people with lower” (Shaw 136). Given these reasons for pay differences, Isbister concludes that an 8:1 ratio
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