Economics 101 & Public Square

Five Things Christians Should Know about Income Inequality

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Income inequality is still at the forefront of conversation for many people. Thankfully, there are biblical principles that help Christians understand whether income inequality is a problem, and if so, how we are to respond.

We’ve talked a lot on the IFWE blog about various aspects of income inequality and how to think about it. Today, I’d like to summarize this tough topic through these five points dealing with the best approach to bringing about flourishing, especially for the poor.

1. How income inequality is measured

Income inequality measures income differences across groups of people using a statistical tool called the Gini coefficient. It ranges between zero and one. A score of one indicates perfect inequality (one person makes all the income and everyone else makes zero). A score of zero indicates perfect equality (everyone earns the same amount).

The U.S. Gini coefficient is .45 according to the CIA World Fact Book. For the sake of context, Bangladesh has less inequality than the U.S. (Gini of .32) and Hong Kong has slightly more inequality than the U.S. (Gini of .54).  Alone, income inequality data doesn’t tell us that much about whether one country is “better” than another.

2. Cronyism makes income inequality worse, and it’s unfair.

Cronyism occurs when corporations pursue the government for benefits, protections, or subsidies benefiting their business at the expense of competing firms and consumers. It is a growing trend evidenced by the hundreds of lobbying firms popping up on K Street. Politicians have responded quite favorably to these lobbying efforts and have created a culture in which the most well-connected win.

This is inherently unfair. An unjust system is prevailing where ordinary businesses and entrepreneurs are failing because they lack the resources to buy off politicians. The unfortunate result is that they can’t succeed, and the well-connected rich get richer and stifle more opportunities for the poor.

3. Diversity is a biblical premise of creation. We are born with different gifts, resulting in different incomes.

We are created in God’s image (Gen 1:27) and, while we bear many physical similarities, we are all distinct. That means that, by definition, we are unequal. God knew that our uniqueness makes our work and talents inherently dignifying and brings us into community with one another. Our interdependence makes us able to achieve things we never could on our own.

We use our gifts and skills to provide goods and services that others need. We then trade for goods and services that we need but aren’t able to provide ourselves. The market return for our services is our income, and that income is based on the market supply of what we provide and the value people place on it.

This means that our incomes will be different. However, because we do not operate in a vacuum, those who do earn high incomes tend to create lots of value for everyone, including lots of job opportunities. High incomes are not a sign that the rich have stolen from the poor. Quite the contrary, wealthy individuals have often innovated products and services that make us all richer and ease our way of life.

4. Income mobility is a better measure of prosperity.

Income mobility is quite different from income inequality. Income mobility tracks the lifetime income of a person. It’s a way of understanding if people are able to earn more income over their lives as a result of increases in their education, skills, and productivity.

The trouble with the data on income inequality is that it doesn’t track individuals over time. If we look at the poorest income bracket in 1990 and again in 2014, we have no idea if the people who were poor in 1990 are still poor today simply by looking at the data. In fact, mobility data suggests that almost sixty percent of individuals who were in the lower income brackets moved into higher brackets in under a decade.

5. We should focus on what God has called us to do, not on what others are doing.

In a flourishing society, there are going to be lots of people who make high levels of income. Think how different the Congo or Vietnam would look if local entrepreneurs had the opportunity to create and innovate. The world would have a lot more people like Bill Gates and a lot more wealth and opportunity for all—not just the rich.

It’s easy to want for ourselves what others have, but we can’t all be Bill Gates. God has gifted each of us to do something specific and special. We need to focus on our unique callings and do them with excellence rather than focusing on what others have.

Unfortunately, some of the talk around income inequality is about coveting what others have rather than wanting more for the poor. I can tell you from living in a county with the highest per-capita income in the country that it is easy to want what others have: the newest car, the bigger house, the better wardrobe. It is a deceptive trap to believe that if we have these things, we will feel better or live better.

What can you do about income inequality?

Be aware of the cronyism all around us that often shows up in seemingly benign programs like laws mandating certain light bulbs, sugar subsidies, and occupational licensing.

Government is increasingly giving in to the entitlement culture of lobbying. We need businesses to stop asking for favors and political leaders who will stop the handouts.

Furthermore, prayerfully discern the path to which God calls you and pursue it with integrity, hard work, and faith. No matter what income it brings, it gives you a chance to serve others in the here and now and achieve everlasting significance for God’s kingdom.

Editor’s note: Read more from Anne Bradley on income inequality in her chapter in Counting the Cost: Christian Perspectives on Capitalism.

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  • David Bashir Hughes

    I appreciate the reference to the Gini coefficient. I was disappointed at the lack of Scriptural citation, though. It seems the Bible has plenty to say about income inequality. At least two of these are:

    Parable of the Workers in the Vineyard, Matthew 20:1-16

    Parable of the Talents, Matthew 25:14-30

    I would also disagree with the premise that uniqueness creates income disparity in and of itself. There are many kinds of managers and employees and business owners, across various fields of work, and even people in the same station of the same field may receive a substantially different pay, for one reason or another- be it aptitude, attitude, or demand in their location. The Parable of the Talents speaks in some way to this.

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