The real root of increasing income inequality

I’m not a social-justice-minded kind of guy — maybe I’ll write about that one day, probably not — but I don’t see how a mathematically literate person can be a fan of percent-based raises, let alone all the Social Justice Warriors who claim to care about the poor.

Why not?

Consider a couple of university professors.

Professor A

• applied for three grants, winning only a small, internal grant for the improvement of instruction;
• taught five courses in load, all of them undergaduate: one with 8 students, another with 12 students, and the other three with 30 students or more;
• had teaching evaluations well above the department’s average;
• taught a graduate course with 4 students in it out of load, and directed a couple of undergraduate research projects as well as a graduate student’s research project;
• published one single-authored journal paper and another joint-authored paper (on a different topic) at a conference — both venues peer-reviewed, international, and respected for quality;
• served on two department committees and one college committee;
• refereed six papers carefully, providing detailed explanations of his concerns.

Professor A receives a very high evaluation at the end of the year, qualifying for a 5% raise (the maximum). For various reasons, his salary is $50,000 (he’s new-ish, and didn’t negotiate his initial salary from a strong position), so he receives a $2,500 raise.

Professor A is pretty happy, because he was told he received the maximum raise possible: 5%. He has no reason to doubt this. After all, from the perspective of a percentage, it’s true.

Professor B

• won no grants — didn’t even apply;
• taught four courses in load, all graduate level, none larger than 8 students;
• had… less-than-stellar teaching evaluations;
• directed 3 doctoral students;
• published fifteen journal papers, all joint-authored and peer-reviewed, but with little difference in content — essentially, they apply the exact same mathematical idea to different applied contexts, the originality consisting in a few lines here and there to show how the idea applies — and while two of them appear in respected journals, the rest are more along the lines of “spray-and-pay” venues where a page fee applies and refereeing is perfunctory;
• served on a department committee, if you can call it “serving”: he rarely showed up and, when he did, shrugged and deferred to his colleagues’ opinions;
• refereed sixty papers, submitting very sparse rationales for the recommendations, but basing most of them on a quick skim of the contents and then trusting the author’s reputation.

Professor B receives a mediocre evaluation at the end of the year, qualifying for a 3% raise (the minimum). For various reasons, his salary is $100,000 (he’s near retirement, and the university hired him away from another institution, hoping he would help build a magnificent, revenue-generating graduate program), so he receives a $3,000 raise.

Professor B is annoyed and starts to complain, but his supervisor points out that he received a larger raise than any other faculty member — the next higher raise, he says, was $2,500. Professor B is still annoyed, but he can shrug and walk away, while the supervisor breathes a sigh of relief. After all, he didn’t lie, right?

How is this fair?

There’s no reasonable argument that Professor A provided any less value to the university than Professor B, yet not only does Professor A have no hope of catching up to Professor B’s salary, he is actively falling behind. And why? Because the method used to calculate raises derives most of its value from the employee’s base salary. It implies, wrongly, that an employee’s value to the institution depends not on the year’s contributions but on pre-existing status.

If you think about it, it’s amazing Professor B does any work at all beyond the bare minimum to keep his job. (And yes, in the university context he’ll have tenure, so the university can’t fire him without cause, and were they to try, he’d put up a fight they’d find painful.✝As far as I am aware, universities can and do win most of these fights, but legal counsel is not cheap, which may be why it seems most universities consider it their legal departments’ primary job not to fight lawsuits but to avoid them altogether — even what should be a lot of blatantly winnable ones.)

That’s stupid.

No, really, it’s Stupid. With a capital S.

Unsurprisingly, this idiocy is not restricted to universities, and is so widespread that, all by itself, it explains how the rich get richer while the poor get poorer.

Caveat lector: I don’t actually believe that last sentence, but there’s some truth in it, too.

OK, Mr. Smarty Pants: how would you run things?

1. No rewards for bygone years’ effort. Raises are based on what one did during the period evaluated. Hence, it cannot be determined as a percentage of current salary.
2. Determine merit raises based on dividing the pot according to what the criteria actually mean: everyone who “exceeds expectations” receives one, large amount; everyone who merely “meets expectations” receives a lesser amount designed to keep up with inflation; and everyone who “fails to meet expectations” receives nothing.
3. Given how inflation works, Professor B would object that he loses money. Well, yes, that’s the point. He ought to consider himself lucky they’re not firing him: does he give passing grades to students who don’t meet expectations? (If he does, that’s even worse, but never mind that.) If Professor B thinks he provides that much value, let him go find an institution willing to hire him at the salary he thinks he deserves.

If that last sentence sounds harsh, keep in mind that my former Provost used to say that about the faculty whose spokesman he supposedly was. But he had a point! I took his advice, and it worked out great for me.✞I suspect they are paying a lot more for my replacement, and I doubt either that he brought a corresponding increase in value, or that the Provost learned any lesson from that.

Sour grapes, eh?

Not really. After all, I’m earning more than 50% more than what I earned then.

I mean, sure, Professors A and B are based on people I knew at my former institution, but the one person closest to Professor B was a decent human being, renouncing at least one of his raises because (in his words) he didn’t need more money, while a lot of junior faculty had salaries he considered embarrassingly low. Though I did first discover this phenomenon while reflecting on a 5% raise I received one year at the university.

But wait! there’s more!

Did I mention inflation and taxes? If you wanted sour grapes, here ya go.

To wit. Suppose I earned $100,000 in 2021 — I didn’t, but it’s just convenient for the sake of a percentage — and in 2022 I received a raise that was 10% of my 2021 salary. I’m in line for a raise of $10,000. Sounds good at first! Nominally, I’m earning $110,000, but…

• Inflation in 2021 was 7%, so on average, anything that cost $1 in 2021 now costs $1.07.
• Applied to my salary, that means that in 2022 I’d have to earn $107,000 in order to maintain the same budget. So far I’m $3,000 ahead, but…
• The government still wants its share! Suppose my federal income bracket is 25% and my state bracket is 5%. (Not unreasonable at that salary level, depending on family size.) The government looks only at the nominal income, so it sees that I’m now earning another $10,000, and it taxes 30% of that, or $3,000.
• At least my post-tax nominal income is $107,000, which kept up with inflation, right? Well, no: I didn’t mention Social Security tax (12.4%), Medicare tax (2.9%), disproportionately higher health care costs (wasn’t the ACA supposed to fix that?), and the 401(k) deduction which, being a percentage of salary (8% in my case), also takes more. (At least I’ll get that back one day! — though the government will tax that then, so I won’t get all of it. It’s a little more complicated.)

By the time all is said and done, I’ve received a merit “loss”.

Moral of the story

You ever look up how much the average Social Justice Warrior makes? Compared to the people they ostensibly care about? Guess who’s actively perpetuating inequality every time they accept a raise? 😉

The real moral of the story

Don’t major in mathematics. You’ll spend the rest of your life making a fool of yourself.