Income Inequality and Perhaps a Touch of Humility
Income is a partnership
With Miroslaw Manicki
Rand Paul, a U.S. Senator, gave a speech in the Senate in which he made the case for extremely minimalist government. He indicated that the government had no right to “take” income from individuals to put to use in ways that the individuals didn’t themselves approve of.
This is an opinion, to be sure. It is a stunningly narrow-minded one.
Consider that income, for example — Senator Paul’s career as ophthalmologist in particular — is highly skewed around the world. Income is highly dependent on where you live.
As to physician income, ophthalmologists are on the low end of physicians generally in the United States. According to various sources, they earn between $200,000 and $300,000 on average. This compares to $316,000 on average by all physicians according to a 2021 Medscape study (Global Medical Staffing, 2021; Kane, et al., 2021).
That study is useful in that it provides comparative income levels for physicians in various countries. One economics neophyte might counter with the argument of purchasing power parity. Things cost more in the United States than they do in Mexico, for example. The following example demonstrates the effects of this.
As can be seen, given that the U.S. has a cost-of-living index itself below 1, normalized income for physicians actually go up, as they do for all of the countries on the chart. This improves the relative position of Mexican doctors, the effective earnings number thus moving up from $12,000 to roughly $35,000. The bad news is that even with this in mind, they earn only 8% of what their US colleagues do for similar work. Viewed from another perspective, U.S. physicians earn almost 13 times what Mexican physicians do.
If you are a physician, as it can be seen, it is wildly beneficial to practice in the United States. Broadly speaking, it can be presumed that work effort is equivalent, if not similar, from country to country. How can it occur that Mexican physicians are compensated at 1/13th the level of Mexican doctors?
What contributes to this? This isn’t something that physicians learn, per se, but they ought to be very happy that they exist. It could be said that the individual doctors are in partnership with governments, societies, educational organizations, and other interests to prolong the good times.
Of course, there are stark differences between countries. Some have better equipment. Some have better levels of education. Some have better laboratory and evaluative systems. There surely is a cumulative effect of collaboration with other professionals that have similarly benefitted from the joys and resources of scientific, educational, and professional abundance.
If conventional physicians fail to understand the underpinnings of such things, perhaps they would prefer to work in systems that are less complex, less nuanced, and less multipolar than in perhaps the U.S. or Europe. Rather than insisting on micromanaging governmental policymaking, they may rather stand in awe at what the system and the country does for them. Embedded in their success is hundreds of years of tradition, commitment, investment, sacrifice, invention, discovery, competition, military effort, planning, and concerns for the betterment of the people.
People who find themselves in this bubble cannot be expected to recognize the bubble, if even to understand it. Senator/Dr. Paul doesn’t seem to be losing any sleep to try to understand. He seems to take full credit for the advantages he enjoys while presuming to fully understand things he does not know. This resonates with the famous Dunning–Kruger Effect, where people fall prey to ignorance of their ignorance (Dunning, 2011).
Mexico is an instructive example here. Perhaps a net of X% of a U.S.-based physician’s income in the form of taxes paid is at least as good as 100% of the $12,000 annual pay level in Mexico. Would they rather have the Mexican income level tax-free? Not to say that there are not protections in Mexico, they are pale in comparison to those in the United States. That is the point.
It isn’t simply a matter of professional compensation; low income is a critical factor in the world in general in all fields and in all work sectors. Adjusted for price levels, on a per capita basis, U.S. citizens on average enjoy $76,399 income per year (World Population Review, 2023b). That isn’t the highest. Luxembourg citizens receive $142,214 income per year. The U.S. is tenth on that list, led by Luxembourg, Singapore, Ireland, Norway, Qatar, Bermuda, United Arab Emirates, Switzerland, and the Cayman Islands. All these benefit from fortress aspects of modern life and the benefits of very large infrastructure, finance, and legal environments. Wealth-generation is an expensive proposition.
On the low end — in countries without protections and infrastructures and traditions of successful development, we can see the lowest ten countries on record with respect to income adjusted for comparative price levels (World Population Review, 2023a). Working our way up from the bottom, Burundi is at $836 per person, Central African Republic is at $967, DR Congo at $1,337, Somalia at $1,364, Mozambique at $1,468, Niger at $1,505, Liberia at $1,725, Chad at $1,668, Afghanistan at $1,674, and Malawi at $1,732. See this below, with calculations of per capita income per day.
This is a chilling factor, to be sure. How can people survive on such low levels of income? The Afghanistan condition is both very sad and dangerous. Given the theory that conditions of want in Afghanistan have contributed to terrorism and violence, there is much to be done to resolve the problem there and elsewhere.
This also raises the question of whether people ‘in a bubble’ are aware of the bubble’s existence at all. Can Dr. Paul be expected to understand why his professional compatriots can earn $316,000 to do the same thing that their Mexican colleagues earn $12,000 to do?
Perhaps workers and professionals in places like Mexico would love to have the income multiples that we enjoy in our country. Perhaps they would enjoy having the educational benefits and research grandeur as experienced by professionals here? Perhaps they would react positively to public investments that could be made with skill and confidence, if not from personal taxes, but from some other source.
The U.S. National Security Advisor, Jake Sullivan, just now published commentary on an important related subject in his Foreign Affairs submission, “The Sources of American Power.” It is not wholly congruous with the income question, but there is a relationship, indeed. A wealthy country can afford to be powerful; many of the sources of power coincide with conditions favoring wealth generation. Of course, wealth generation is most legitimate where it represents value creation and that is best carried out under conditions of peace and openness.
Mr. Sullivan addresses features that contribute to the American ‘bubble’ of which we speak.
The United States’ underlying strengths are vast, both in absolute terms and relative to other countries. The United States has a growing population, abundant resources, and an open society that attracts talent and investment and that spurs innovation and reinvention (Sullivan, 2023, 8.)
Such benefits exist. Certain detractors indicate the price is too big, that we need to scale back. They may concur with the broadly-accepted assumption of American exceptionalism, but in kind of magical, quasi-spiritual, presumption of inevitability — if not superiority. Basically, the point of many who share this thought is that America — the United States — is superior because God wants it to be. This comes down further to the famous Yule Brenner as Pharoah quotation from the movie The Ten Commandments, where he said of his Hebrew counterpart, Charlton Heston as Moses, “His God is God.”
I don’t think that this is what is going on. I would like to share a story that I think is instructive.
Early in my career I was hired to take over management of a company that was growing wildly, beyond expectation and to the point of possibly blowing apart from an inability to meet demand. The owners of the company were of a notable ethnic background.
They were ecstatic when I was able to turn the problems around very quickly. I hired and organized professional teams. We were in a major American metropolis and I hired people from virtually every prevalent ethnic background found in the United States.
The people I brought in dealt with problems in their various areas of expertise — accounting, legal, customer support, inventory management, sales, shipping, and other important activities. Manufacturing took place elsewhere, but I worked closely with management there to streamline processes and bring in appropriate people to carry out needed tasks.
In celebration, we had a high level meeting in the owner’s boardroom, next to mine. We brought in all of the section leaders that had turned the company around and ushered the company out of trouble.
One particular section leader ended up sitting next to the owner in the plush chair in the beautiful room. It was obvious that he was enjoying himself — he was simply beaming.
Sitting on the opposite side, I could see that the owner was appalled. He was seething with the implication that he had to deal with those people. He was clearly uncomfortable with the person sitting next to him, who was professional, respectful, and who represented himself with decorum in all respects. It was probably part of the problem, though, that he was acutely aware of the importance of what he had done and felt pride along with the others in what he had accomplished.
After the meeting ended — shorter than had been planned and shorter than it should have been — the owner called me in and demanded that I fire them all immediately. This didn’t happen, as I reminded him that his company now benefitted from their efforts. We negotiated something of a stalemate in that we wouldn’t have any more staff meetings with him present and he wouldn’t have to interact with them any more.
This was representative of what many American exceptionalists are all about. They realize that there is a bubble. They realize that there is an amazing set of advantages to living and working in the United States.
They simply do not want others to enjoy those benefits. They were like the man at the head of the table who was appalled at having to sit next to someone from another ethnic background and culture, appalled at the prospect that in any way they would be considered as colleagues or friends, or even co-operatives in the achievement of his business goals.
This is not to say that there are not some numbskulls who think they are rich and privileged and protected because “their God is God” are likely to put us all at risk. Among other things, they ought to carry out a more fulsome study of the underpinnings of their stated religion — particularly if that happens to be Abrahamic. Get to know the man. That isn’t how it works.
References
Dunning, D. 2011. Chapter five — The Dunning–Kruger Effect: On being ignorant of one’s own ignorance. Advances in Experimental Social Psychology, 44, 247–296. https://doi.org/10.1016/B978-0-12-385522-0.00005-6
Global Medical Staffing. 2021, August 20. How much locum tenens physicians get paid in other countries. Gmedical.com Blog. https://gmedical.com/blog/physician-pay-other-countries/
Kane, L., Schubsky, B., Locke, T. Duqueroy, V., Gottschling, C., Lopez-Mejia, M., Schwartz, L., Ovadia, O., Javier Cotelo, J. 2021. International Physician Compensation Report 2021: Do US Doctors Have It Better? https://www.medscape.com/slideshow/2021-international-compensation-report-6014239#2
World Population Review. 2023a, November 1. Poorest countries in the world. https://worldpopulationreview.com/country-rankings/poorest-countries-in-the-world
World Population Review. 2023b, November 1. Richest countries in the world. https://worldpopulationreview.com/country-rankings/poorest-countries-in-the-world