Why Does Income Inequality Exist? – Part Two
PART TWO: Income Inequality from an Biblical Perspective
Income inequality, as described above, is a fact of economic life. Different people are born with different gifts and choose to pursue them differently. Those gifts carry unequal earthly rewards, one of which is in the form of income. The market is an earthly construct which can dole out only earthly rewards. In other words, the market will not reward you in the eternal realm for curing cancer. It will reward you monetarily for curing cancer, and the lure of that monetary reward is an important motivator to innovate.
The market rewards contributions to consumer demand through profit. The market punishes those who do not successfully satisfy consumer demand through losses. Profits and losses serve as signaling devices that are critical feedback mechanisms. They alter behavior. They serve as incentives for creativity and innovation.
The looming question is whether this economic reality is necessarily unbiblical. In the scope of this paper, we will examine the Biblical indicators that suggest that an existence of income inequality is not necessarily unjust or unnatural. To best understand this, we need to go to Scripture on two fundamental points: the distribution of gifts and abilities, and examples of God’s earthly rewards for stewardship within the context of market exchange. Outside of market activity, God can and does reward the stewardship of our gifts and abilities in alternative ways. It is important to remember that income is derived from market activity; it is one way Christians are rewarded for use of their gifts, not the only way. Dr. Kaiser highlights the Proverbs which tell us that possessions or property can be gained by industriousness (Proverbs 13:4, 14:23), wisdom (Proverbs 3:16; 24:3), or by development of insight (Proverbs 14:15).27
There are two possible scenarios:
- We are all equally loved by God and also created with the same gifts and thus He will reward us equally on earth.
- We are all equally loved by God and created with different gifts, and thus we should all be rewarded differently on earth.
Scripture is clear on the first part: we are all equally loved by God, we are all created in His image, and He wants fellowship with all of us, even though He knows some will not chose this. John 3:16 tells us that “God so loved the world” that he sent his Son as a sacrifice. The term world is all-inclusive; He loves everyone equally and universally.
Diversity of Gifts
Understanding why income inequality exists requires an understanding of how we are created. Scripture tells us that we are created in God’s image (Genesis 1:26-27) and that implies uniqueness. God is unique—there is only one God. Man too is unique both physically and spiritually. Each person on this earth has a unique genetic code, or DNA, that distinguishes us. From that code we each have a unique voice, fingerprint, personality, etc., all of which makes us matchless. In addition to our specific genetic proclivities we are all created with unique sets of spiritual gifts. Tim Tebow was created uniquely as a quarterback just as Billy Graham was created uniquely as a public evangelist. They both can and arguably have furthered the Kingdom of God through their very different gifts and their different application of those gifts. It’s not the gifts that matter as much as how we apply them to this life.
Economists refer to this uniqueness as the law of comparative advantage. If one individual or company can produce a good or service at a lower marginal and opportunity cost than they are better off specializing in the production of that good/service and trading with others. This is a relative comparison of skills across individuals or companies.
There may be good reason why you choose to take your suit to the dry-cleaners rather than pressing it at home. It takes a specific skill and specialized machines to press a suit or shirt. You might be able to get something clean by doing it at home, but it would take time. That time may be better dedicated to making dinner or being with family or washing the floors. A similar calculation is made by the dry-cleaning business. They don’t make their own hangers, even though they are a critical part of a successful dry-cleaning business.
Why? It takes specific skill and specialized machines to make wire hangers. The dry-cleaners could try but they would spend all day and the hanger would not be nearly as good as the hangers they purchase from businesses who specialize in hangers.
Specialization frees up our time to focus in on using our gifts productively and that freed time is an opportunity to further the Kingdom of God. The wife who sends out her dry-cleaning rather than attempting to spend fruitless hours on it herself frees herself for Kingdom-building work. That Kingdom-building work could be more time spent with the children, her husband, volunteer work, personal devotion and countless other things.
All of this comes down to the fact that each individual is born with unique skills and abilities. Our work on earth, pursued with a true understanding of how God has called us to use those gifts—our purpose—can further His Kingdom. And that can occur through owning a dry-cleaning business, playing professional football, being a professional evangelist and countless other vocations, even though those gifts can and do bring different earthly rewards. Tim Tebow has a net worth of $3 million and Billy Graham’s is recorded at $25 million.28 Those dollars reflect the market return to their comparative advantage. The market rewards and punishes in dollars.
Heavenly rewards will be manifested much differently than in the market. One of the reasons for this is scarcity. Markets are an earthly construct, given to us by God, which allocate scarce resources most productively. Scarcity is a result of the fall; all of our choices now represent tradeoffs. Those scarce resources have multiple and competing ends. Markets help resolve to which ends we allocate our scarce resources by bringing together the most willing demanders with the most willing suppliers. Through this, everyone is better off than they would be without this resource allocation mechanism.
Heaven will not be characterized by the scarcity we know today, the scarcity of a fallen world.
Returning to our two possible scenarios, Scripture supports the second:
We are all equally loved by God and created with different gifts, and thus we should all be rewarded differently on earth.
If this is true then income inequality is an economic reality manifested from the Biblical principle of uniqueness. We are created differently, and some of us will earn higher incomes than others. Income is not the only earthly reward either. It’s just the only reward bestowed by the market. Scripture is clear that some will earn more earthly rewards for efficient stewardship over the resources with which we are endowed.
Diversity of Gifts Allows Specialization
It’s not just what we are endowed with, it’s how we use what we have been given. What we are given refers to abilities, gifts and talents. As we are all created in God’s image, we are all given different degrees, types and combinations of talents. It is this specific combination that allows Tim Tebow to pursue professional football rather than some other vocation.
I Corinthians 12:4-11, in reference to spiritual gifts, says:
4 There are different kinds of gifts, but the same Spirit distributes them. 5 There are different kinds of service, but the same Lord. 6 There are different kinds of working, but in all of them and in everyone it is the same God at work.
7 Now to each one the manifestation of the Spirit is given for the common good. 8 To one there is given through the Spirit a message of wisdom, to another a message of knowledge by means of the same Spirit, 9 to another faith by the same Spirit, to another gifts of healing by that one Spirit, 10 to another miraculous powers, to another prophecy, to another distinguishing between spirits, to another speaking in different kinds of tongues, and to still another the interpretation of tongues. 11 All these are the work of one and the same Spirit, and he distributes them to each one, just as he determines.
Verses 4-6 in the context of income inequality are of particular importance. Paul writes that the gifts are different, the service of those gifts is different and there are different types of working (the gifts manifest themselves in entirely different ways) but in all of them God is at work for the common good. God bestows upon each of his unique children different gifts and we have different propensities to apply those gifts (i.e., different levels of perseverance) but it is all for the common good. So we are unequal, and that inborn inequality serves to make us all better off. How so? Because it releases us from trying to become perfect in all things, thus we can focus on our gifts and make positive contributions to the world.
If I had to possess all of the gifts in a fallen world, I could never accomplish anything. The market is a God-given construct, a methodology for exercising our gifts, and through our unique contributions whether they are through the church (Billy Graham), the business world or motherhood, we can make a contribution to the common good.
Diversity in Abilities
There is empirical evidence that reveals that a diversity in abilities and effort leads to a diversity in income. Markets and private property have lifted millions out of abject poverty. Private enterprise is an effective way to contribute to the common good of mankind. There is more scriptural evidence for income disparity based on diverse abilities found in the Parable of the Talents from Matthew 25:14-30.
The Parable of the Bags of Gold
14 Again, it will be like a man going on a journey, who called his servants and entrusted his wealth to them. 15 To one he gave five bags of gold, to another two bags, and to another one bag, each according to his ability. Then he went on his journey. 16 The man who had received five bags of gold went at once and put his money to work and gained five bags more. 17 So also, the one with two bags of gold gained two more. 18 But the man who had received one bag went off, dug a hole in the ground and hid his master’s money.
19 “After a long time the master of those servants returned and settled accounts with them. 20 The man who had received five bags of gold brought the other five.
‘Master,’ he said, ‘you entrusted me with five bags of gold. See, I have gained five more.’
21 “His master replied, ‘Well done, good and faithful servant! You have been faithful with a few things; I will put you in charge of many things. Come and share your master’s happiness!’
22 “The man with two bags of gold also came. ‘Master,’ he said, ‘you entrusted me with two bags of gold; see, I have gained two more.’
23 “His master replied, ‘Well done, good and faithful servant! You have been faithful with a few things; I will put you in charge of many things. Come and share your master’s happiness!’
24 “Then the man who had received one bag of gold came. ‘Master,’ he said, ‘I knew that you are a hard man, harvesting where you have not sown and gathering where you have not scattered seed. 25 So I was afraid and went out and hid your gold in the ground. See, here is what belongs to you.’
26 “His master replied, ‘You wicked, lazy servant! So you knew that I harvest where I have not sown and gather where I have not scattered seed? 27 Well then, you should have put my money on deposit with the bankers, so that when I returned I would have received it back with interest.
28 “‘So take the bag of gold from him and give it to the one who has ten bags. 29 For whoever has will be given more, and they will have an abundance. Whoever does not have, even what they have will be taken from them. 30 And throw that worthless servant outside, into the darkness, where there will be weeping and gnashing of teeth.’
It is important to note that, although it’s a parable, it is neither arbitrary nor capricious. The story and its components are intentional and convey a specific message that can further a Biblical perspective on income inequality.
There are several key aspects of the parable that require further exploration. Verse 15 says that each servant was given different amounts, each according to his ability. The master, as an “employer” (it’s not clear whether they are slave or free but we can assume that he knew them well enough to understand their different abilities and talents) divided the bags of gold unequally because he knew that each man had a different level of ability to use that gold productively.
This is consistent with both how we are created by God (not all of us have the ability to become neurosurgeons, professional football players or heads of Fortune 500 companies) and how we are hired and rewarded in the workplace.
The scarcity we endure as a repercussion of the Fall results in our inability to be perfect in all things and sets in place a life bound by tradeoffs. Tradeoffs represent constraints; I am not unbound. If I invest my time going to school to be a neurosurgeon, I am by definition, not doing something else. This means we can’t have absolute advantage in all things, but we can have comparative advantage across some things. The master understood this and awarded the talents according to his understanding of their comparative advantage.
The two servants who attempted to use their gold productively, i.e., tried to invest it to gain a return on behalf of their master, both earned 100 percent. Verses 16-17 give us the details. The servant who received five bags “went at once and put his money to work” and he earned five more. The servant who received two bags earned two more. Interestingly, we are given no details on what type of work they did to invest the master’s money. There is no reason to assume it was the same work, especially in light of our understanding of comparative advantage. If they each had the same skills, they may have been given the same amount and perhaps invested the money the same way. But the scripture is clear that they did not have the same skills; so there is no reason to assume they engaged in the same work to invest the money. They each invested the money diligently according to their abilities and earned 100 percent. The dollar amounts they earned were different, but they both doubled what they were given.
This is the message of the parable: diligently apply the gifts God has given you, and you will be rewarded fully. Those earthly rewards will have different dollar amounts attached to them but that is not what matters. Obediently applying the gifts you have been given is the call of Christ. In fact, obediently applying the gifts you have been given may carry no earthly financial reward. Motherhood is the best example of this. There is no pecuniary gain, but there are many non-pecuniary rewards that make it worth doing.
The servant who buried his bag of gold had a zero rate of return and was punished by the master. He was asked to give that bag to the one who had ten bags. The master started with eight talents. Had each servant put their allocation of gold to the best possible use given their abilities, the master would have doubled his gold and ended up with sixteen bags. Instead, he ended up with fifteen bags. We can surmise from this that the master was wise to have only given one bag to the last servant. Had he given the last servant five bags, he would have a net loss of five; instead he had a net loss of one. The master by giving each servant an unequal amount was being obedient and faithful with the resources he owned. Had he given each man an equal amount, putting equality over ability, he would have squandered his resources. By putting servants in charge of his resources according to their skills and diligence, he created more than he would have had otherwise.
We might ask why the master didn’t give all the bags of gold to the most productive servant. Why not give him all eight talents? Wouldn’t he be guaranteed to earn sixteen bags of gold and double his money? Not necessarily. Diminishing returns to labor apply to everyone and occur at different rates, so we don’t know when that might have happened had the first servant been given all the bags of gold. But perhaps this was done because by giving to each person in the manner that the master did, he was able to provide them all with the opportunity to earn more and still double his investment. This message applies to how we are created. Not one person has all the talents, or bags of gold. God spreads out talent among the universe, uniquely.
Opportunity is an important lesson here. God gives us unequal talents and we need the opportunity to put them to productive use. The rest is up to us. We can choose how we will steward the gifts and resources with which we are gifted. There will be both earthly and eternal consequences for how we steward our gifts. The talents referred to in this parable are a metaphor for the skills and abilities which God has given us in addition to any earthly income we earn through our work. The rewards can be and often are financial, but they are more than that. These gifts, if pursued with excellence and purpose, allow us to further the Kingdom of God by creating other opportunities for others through our work.
Markets force sellers to serve buyers. Not all the demands of buyers are free from sin, i.e. markets produce pornography. As Christians, we would argue that pornography is sinful and should be avoided. But the question to be asked is what resource allocation mechanism can unleash the creativity and relish the human dignity with which we were created? Markets are not perfect, but they embrace God’s creation and provide better opportunities for human flourishing than any other resource allocation mechanism ever tested.
Implications for Work
If income inequality is a fact of economic life that derives from the uniqueness in which we are created by God, how then should we work? Do we pursue opportunities that have the highest salary attached? There is no scriptural support for pursuing the job that carries the highest salary. Rather it calls us to seek our true comparative advantage and pursue it with excellence. Some are called to be innovators who are top income earners and some are called to pursue manufacturing or farming vocations that pay less. All of these professions allow us to further God’s Kingdom by putting our unique gifts toward productive work. Our gifts allow us to create something that did not previously exist.
Market economies reward value-creation. Markets are made up of millions of people who, through exchange, make each other better off. God has given us the market mechanism as an efficient allocator of resources precisely because we cannot be perfected in all things.
The farmer who grows soybeans and sells to others, frees those of us who do not have the capabilities to grow soybeans to purchase them and devote our newly freed time to activities in which we have a greater propensity to create value. That is part of how the framer serves his customers. The only people who are rewarded in markets are those that effectively and, at the lowest relative cost, serve the needs of others.
It is important to make the distinction between free-market exchange and rent-seeking (cronyism). The farmer, who grows soybeans, innovates and keeps costs down will be rewarded through profit by the market. The farmer who grows soybeans and lobbies the federal government for subsidies which protect him from other more productive soybean farmers is not serving his customers. Rather, he is lobbying the government for money which he did not earn, and the “profit” he secures in this fashion is appropriated from taxpayers. The market result is that the farmer who benefits from a subsidy does not face the same incentive to innovate and serve his customers by competing to offer lower prices. Ultimately these strategies disproportionately hurt those in the lowest income quintiles by raising the price of food, in this example.
This research suggests that there is some amount of income inequality which results from the uniqueness with which we are created; however, it is economically unwise to exacerbate any natural level of income inequality by: not letting business fail when they deserve to fail (bailouts); protecting some businesses from competition (subsidies and tariffs); or letting some businesses succeed over others through protective legislations (licensing and other regulatory requirements). All of these policies choose certain groups of people to earn a higher income than they normally might through market competition. The only way to do this is through coercive taxation that favors certain industries over others, and there is no moral foundation for tax policies that support one industry at the expense of another through political favor.
We are fallen people who are created uniquely. Our gifts are different in nature, combination and degree. We are called to use our gifts toward the common good and that implies our work. In the research we assert that you can use your God-given gifts for the common good by embracing your talents, focusing in on your comparative advantage and creating value. This does not only occur in the church, in fact, most of our professions are outside the church. Markets are a space where we can unleash our creativity and serve the world through innovation. Markets bring us goods and services that make everyone better off, including the poorest among us. By bringing our creativity to the market through goods and services we serve each other. We use our creativity to make others better off than they were before.
The market is only capable of rewarding through profit and it punishes with losses. These are in terms of dollars. Because the goods and services we bring to the market are valued subjectively by the purchaser, income inequality is a fact of economic life and economics pervades all of our life choices.
The following are the primary findings of this research:
- Diversity is a Biblical premise of Creation. We are born with different gifts.
- By focusing on our gifts we can unleash our comparative advantage and bring value to the marketplace by serving others.
- In a free society, absent cronyism, disparity of wages is not a sign of injustice.
- If we care about a society that reduces poverty and assists the poor, we should be concerned not about income inequality but the relative prosperity of those at the bottom and their income mobility.
- An opportunity society is the best way to unleash the creativity and dignity with which we are created and serve others with our gifts.
We assert that income inequality is a natural part of the human condition. We are created uniquely and that means that there is no universal Biblical standard for income equality. The question that must be addressed Biblically and through public policy is the relative prosperity of the poorest among us and their ability to gain income through the pursuit of their gifts. To that end, we need an opportunity society which embraces our uniqueness, unleashes our creativity and potential and serves the common good. Markets have empirically demonstrated that they are better than any other system at lifting the poor out of destitution.
- Kaiser, “Ownership and Property.”
- CelebrityNetWorth, “Billy Graham Net Worth,” http://www.celebritynetworth.com/richest-celebrities/billy-graham-net-worth/