Yes, Making the Rich Poorer Would Make Everyone Else Richer

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Policy Shop / Demos Blog

Yes, Making the Rich Poorer Would Make Everyone Else Richer

Conservatives like to argue that curbing the outsized wealth of the top 1 percent wouldn't do anything to increase economic mobility or reduce inequality. Rich Lowry of the National Review nicely summed up this thinking in a column the other day:

Mark Zuckerberg could be stripped of all his wealth tomorrow, and it wouldn't help anyone further down the income ladder. It wouldn't increase wages, or reduce out-of-wedlock child rearing, or lead to less incarceration or revive the work ethic, all of which would enhance mobility and lift more people into the middle class. It would just make Mark Zuckerberg poor.

Before getting to Lowry's larger point, let's actually look at the math regarding Zuckerberg. His wealth is fluctuating because he's about to dump a bunch of Facebook shares, but as of September 2013 he was worth $19 billion. So to engage Lowry's thought experiment we need to ask whether $19 billion could improve life prospects for those "down the income ladder?" 

Obviously so. For example, $19 billion would be more than enough money to provide universal pre-K education for a year to every four-year old in America who now doesn't have this opportunity. Or that money could provide pre-K to every four-year old in Texas who doesn't have it for the next twenty years, with money left over to cover pre-K for every needy four-year old in New York City for the next decade. 

Maybe Rich Lowry doesn't think that pre-K makes any difference in life chances, but the majority of parents and social scientists would beg to differ. 

Lowry mentioned reducing incarceration as an important goal. Well, there are a variety of programs that are proven to do this, most of which are under-funded. The RAND Corporation just released a study that found that "Prison inmates who receive general education and vocational training are significantly less likely to return to prison after release and are more likely to find employment than peers who do not receive such opportunities." The authors wrote that "prison education programs are cost effective. The direct costs of providing education are estimated to be from $1,400 to $1,744 per inmate, with re-incarceration costs being $8,700 to $9,700 less for each inmate who received correctional education as compared to those who did not."

By my math, Zuckerberg's fortune could provide education for 2 million inmates -- nearly the entire U.S. prison population -- for the next six years. This would help turn around innumerable lives, reduce crime and incarceration, and save taxpayers a fortune.

I could go on with more examples, but won't because nobody's talking seriously about seizing Mark Zuckerberg's entire fortune. Anyway, you get picture: There's some pretty serious money sitting at the top of our society and an even modestly better distribution could, in fact, make a huge difference in the life chances for the poor. Zuckerberg's just one rich guy. A bunch of people have more money than he does. 

But forget the Zuckerberg distraction and take a more realistic example: Last year the CEO of YUM! Brands, David Novak, made $44 million dollars. Two other top executives raked in another $7 million. Meanwhile, many of the 523,000 workers they oversaw at places like Taco Bell and KFC made near-poverty wages (which is why workers at many YUM! Brands establishments have been protesting over the past year.)

So let's say that the company high command had taken home half as much compensation in 2012 and distributed the remaining $25 million or so as bonuses to their 10,000 best performing workers. That would have been $2,500 per worker -- which is serious money when you're earning under $25,000 a year. It's enough to beef up a savings account for eventually buying a home, or even putting a down payment down on a place in some parts of the country. 

All this math is not so complicated. In fact, when corporate earnings are better distributed, it does improve things for workers down the income ladder. When huge fortunes at the top are more heavily taxed, it does pay for public goods like pre-K or prison incarceration that can increase life chances for the poor. 

Why is this math so hard to grasp?

David Callahan

David Callahan is a co-founder of Demos and now edits the Demos blog PolicyShop.net. David is the author of eight books and his many articles have been published in such places as The New York Times, The Washington Post, The Nation, and The American Prospect.

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