Inequality and incentives

Motivation for our debate

Data show inequality getting higher over time in most countries. In the U.S., over the last 30 years, the growth in the incomes of the bottom 50% has been zero, whereas incomes of the top 1% have grown 300%. The younger generation in Sydney loses out on housing affordability as older generations become some of the richest in the world. When we travel overseas we see poverty. High CEO salaries (around 373x average salary) often for poor performance. Why do Whites and Asians dominate venture funded founders in Silicon Valley?

Questions to debate:

    1. Is the problem poverty or inequality? If we took away the income of the rich, everyone would be equally poor. But it would not solve the problem.
    2. Can we fix inequality without messing up incentives for effort, investment and risk taking? Without undermining private property rights?
    3. What is the main cause of high and increasing inequality? Some options are: Unfair power differences in society and rent-seeking behaviour such as lobbying and monopolisation. Low taxes and government expenditure. "Winner-take-all" markets for technology. IP protection laws and regulation. Neo-liberalism (shareholder value dominates other stakeholders in company decisions). Race, gender, age and class discrimination. Investing in risky activities and skills. Luck. Past laziness of poor and effort of rich. Cultural differences favouring education and need for achievement. Intelligence differences causing better life choices (of parenting style, partner, career, location)? Skills and education system.
    4. What should be the solution? Should we try to be more innovative like Israel so more people can join the high returns to entrepreneurial technology? Should we pay employees more and reduce profits? Should we encourage trade unions? Should we have stronger regulation of monopoly power? Should the Reserve Bank and APRA have a role of ensuring fairness in the financial system? Should we make taxes more progressive and increase government spending on welfare? Should we improve our education systems to make access to "supermanager" jobs available to all?
    5. If we use taxes and government expenditure to redistribute wealth, which type of tax or expenditure is best? Most people agree inheritance wealth is less meritorious than labour income. So should we adopt inheritance taxes, currently zero in Australia? Union leader Ayres recently proposed 35% inheritance tax for estates over $10M (top 1% only) giving $3.5B/year redistributed as a grant to all people turning 25 they could spend on starting a business, education, or house deposit. Should we remove superannuation, negative gearing and capital gains tax concessions? Land taxes are harder to avoid than company taxes, especially for multinationals.

Articles to read to prepare your opinions:

Rousseau on Inequality https://www.washingtonpost.com/news/monkey-cage/wp/2014/03/28/should-we-care-about-inequality-lets-ask-a-philosopher

Thomas Piketty’s Capital in the Twenty-First Century argues "super-managers" of technology make up most of the high income, and recommends inheritance taxes. Others say education to access those skills is the solution.

https://www.technologyreview.com/s/531726/technology-and-inequality/

Stiglitz argues to curb rent-seeking behaviour such as lobbying. Have fairer taxes. Curb corporate power in the financial sector. https://www.theatlantic.com/business/archive/2015/11/stiglitz-heres-how-to-fix-inequality/413761/