End Paper BY SAM GUTTERMAN
INEQUALITY, A HOT TOPIC since the industrial revolution, is the
result of both outsize income and wealth in too few and limited income and nonexistent wealth in too many. While most believe that society should provide equal opportunity for its citizens rather than equal
outcomes, we still measure inequality in terms of the latter. What we
should be looking at instead is what hampers income and the accumulation of wealth.
Many public policy programs have
attempted to address this issue, from
President Lyndon Johnson’s war on
poverty that began 50 years ago to more
recent attempts at higher taxes and caps
on bonuses for the wealthy.
But trying to fix inequality can lead to
adverse consequences. Putting too much
emphasis on reducing longevity risks, for
example, could end up shrinking benefits
for those at risk of early illness and death.
Although increasing the minimum wage
can help some, it may address poverty
only peripherally and could end up reducing the number of job opportunities.
I believe that, where possible, the best
approach to reducing inequality is to help
people help themselves. Although a safety net is certainly needed, care should be
taken to develop and maintain incentives
to succeed, while reducing any temptation to game the system.
It goes without saying that views on
how to remove impediments to equal opportunity vary widely, depending where
on the political spectrum you sit. In
today’s world of transparent communication, with conspicuous consumption in
plain sight, no one wants to be stuck in a
low income level.
With all the emphasis placed on in-
equality, it is natural to over-focus on
the extremes of the population, to the
detriment of the broad middle. In edu-
cation, for instance, extra resources
flow to the gifted and those with special
needs. Although this is good, what about
the rest—the large majority who also
would benefit from the best teachers?
We should do our best to enrich every-
one’s experiences and facilitate their
But it will not be easy to enhance
social and economic mobility for
the many, especially those with heavy
school debt and lack of upward social/
business connections, and to reduce the
advantage of the wealthy. Many look to
government to address these problems—
but government isn’t the only force that
can tackle these issues.
We also need to avoid personal back-
sliding. Adequate insurance and savings
for retirement, funded through past or
future consumption sacrifices, address
real needs that can protect against the
adverse financial effect of events that
exacerbate both personal problems and
For a long time, these benefits were
provided or sponsored by or through
employers. As the result of unintended
consequences of often well-meaning
public policy changes and increased
competition among employers, this
source of societal risk management has
declined—and along with it protection
against the adverse effects of death,
disability, accident, property damage,
and longevity. Expansion of the reach
of these programs, particularly those
provided by the private sector, is in ev-
eryone’s future interest.
Ultimately, it’s the responsibility
of each individual (with support from
families and communities) to take ad-
vantage of existing opportunities rather
than being a victim of inequality. Both
private programs and public policy can
serve as facilitators, through more ef-
fective education and training (and
re-skilling), as well as a healthy envi-
ronment that enhances incentives and
eliminates constraints. While technology
has eliminated many entry-level jobs, it
should be harnessed to create expanded
opportunities elsewhere. People’s po-
tential contribution needs to be tapped,
to benefit both society and themselves.
If such efforts also reduce inequality of
outcomes, so much the better!
SAM GUTTERMAN, a member of the
Academy and a fellow of the Society
of Actuaries and the Casualty Actuarial
Society, is a director and consulting
actuary with PricewaterhouseCoopers
LLP in Chicago.