Do we have criteria to estimate the income one deserves?

In the course of the equality and equity discussion, there are a few questions that make me feel uncomfortable.  One of these questions the role of government in economic and social life it has to govern. The gender and race inequality in income are commonplace and the demand for equality seems to be absolutely justified. 

To understand the income inequality problem, let’s first take a look at real income inequality estimates and start with white (alone) males as published by the US Census Bureau. Figure 1 presents the age dependence of the Gini ratio in 2019. One can see that there is no equality in income distribution for the white males in any age group. The equality implies that the Gini ratio is equal to 0, but it is rather 0.5, i.e. income inequality is extremely high. The highest inequality (Gini=0.539) is observed in the youngest age group from 15 to 24 years of age. This group also has the lowerest mean income, as Figure 2 shows.  Interestingly, the lowermost income inequality (Gini =0.405) is observed in the next to the youngest group – from 25 to 29 years of age. Then the income inequality grows with age to the age of the peak mean income – 57.5 years of age in 2019. The level and the age evolution of income inequality in the white-alone-male population does not ignite any visible discussion. It seems to be a fair one, i.e. the income distribution is considered as proportional to some widely accepted criteria (which I do not know except the one used in our income distribution model). In our previous post, we discussed the secular impoverishment in the youngest age group but it was not connected to the unfairness of income distribution as such. Therefore, the observed income inequality is not considered unfair when we talk about white males. 

For the white females in Figure 3, the overall evolution of the Gini ratio is very similar, except it grows much faster in the mid-ages between 30 and 50. This reflects the fact that the white females have larger income inequality in the age interval when the mean income grows fast. Black males and females demonstrate similar Gini ratios with some small deviations. Therefore, within each of these four groups, we observe similar income inequality levels and evolution with age. It is highly likely that the same economic forces drive the distribution of income and these forces do not raise any questions about their unfairness. At least at the level of the unfairness of income differences observed between the groups – a major topic of discussion in the USA. 

I wonder that the government servants have to be merciless robots to resolve the conflict between different gender/race (and age) groups. On one hand, any mechanical leveling of income will demolish the fair criteria of the current distribution of income in any of the groups. Essentially, the relatively fair income distribution mechanism has to be replaced with something artificial. One needs to defend such a new set of mechanisms to be accepted by all participants. On the other hand, income disparity between genders and races is obvious, has a clear historical background, and definitely needs urgent action. The real fight is ahead. However, the income distribution in and between the groups is a result of similar fights in the past when the capabilities and power distribution were different. 

As a researcher, I would like to see the new criteria of the income distribution, i.e. who deserves what? 

Figure 1. Gini ratio (published by the US Census Bureau. Table pinc01_1_2_3) in 2019. Dependence on age for white alone males.

Figure 2. Mean income of white (alone) males and females in 2019 as a function of age

Figure 3. Gini ratio in 2019. Dependence on age for white males and females, black males and females.