Thursday, November 05, 2015

High inequality of income is bad

Mr. Tan
You advocate greater equality of income and wealth. If someone wants to work hard and become rich, what is wrong with it? Don't you want to encourage people to work hard? Do you prefer them to be lazy?

If someone wants to work hard and earn a higher income, it is all right. How much harder can they work,compared to others? Two or three times? It is all right for someone to earn 2 or 3 times of the ordinary wage.

However, if the income is 10, or 100 or 1,000 times of the ordinary income, it is too large a gap. In some cases, the high income could be earned through immoral means, e.g. to over charge a client in providing professional services. This happens when the high fees are not disclosed in advance, and are charged to the client who is not given a free choice. Examples are the high fees charged by doctors and lawyers.

There are other immoral ways to earn a high income, e.g. to sell misleading products to buyers, especially if the laws are inadequate in addressing the abuse. Examples are questionable financial products that are being sold to ignorant investors. Some of these products are outright scams.

When some people become super rich, and have assets worth billions, they will usually buy real estates and inflate their values. They sell these real estate to ordinary buyers at high prices and lock them in a heavy mortgage that will take a lifetime to pay. Or they rent the real estate to tenants at high rentals that take up a large part of their income, e.g. 50% or more. This is like a form of exploitation.

Extreme inequality of income of this nature is bad for society.

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