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Steve Hansen: Income equality is an unreachable dream

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Posted: Tuesday, July 22, 2014 12:00 am

No matter how hard some might try, the concept of income equality has been an unachievable goal throughout history. There are reasons for this. The following story illustrates my point:

One afternoon, a friend asked me to watch his business booth at the Sacramento Boat Show. While I was not thrilled at giving up a large portion of my Saturday, I was more than willing to help a buddy. It turned out to be an important lesson in life.

To the left of me, two attractive ladies in their late 20s had a “revolutionary” product to sell. They were well-dressed and obviously enthusiastic about the prospects of their business venture. The item in question was some sort of aerosol fire extinguisher that put out oil and grease fires instantly. The compact size made it a perfect companion for boats and other vehicles.

I asked them how much the product cost, and what was their cut? One replied $3, and the other revealed a profit of $1 per can.

To the right of my booth was a middle-aged man. His feet were resting on a table while he read the Wall Street Journal. He was selling boatlifts for lakefront homes. I asked this “sales consultant” the same two questions. The lifts were $36,000 and his commission was also one-third of the retail price.

As the day wore on, the ladies barked in several customers. They demonstrated their product by squirting lighter fluid in a metal tray and setting it ablaze. A spray of “Insta-Out” quickly extinguished the small fires — thus proving the veracity of their sales pitch.

But soon, things began to change. Fumes from the lighter fluid and several combustions began to take their toll. Expensive hairdos went from fluffy and full to droopy and dull.

The ladies’ voices changed from radio-announcing quality to scratchy and hoarse utterances — resembling extreme examples of singer Kim Carnes.

Clothes now smelled like lighter fluid, and initial enthusiasm was gone. The women were dragging to the finish line in hopes that their personal misery would soon end.

At the close of my shift, I asked the exhausted ladies how many cans of extinguisher had been sold. They told me it was a good day with a sales total of 85 units.

I quickly did the math. That was a profit of $85 — minus the cost of the booth, which was $35, as well as transportation costs amounting to another $10. These figures do not include the 10 cans used for demonstrations. That left a net profit of $20, which, split equally, left them $10 apiece.

Meanwhile, the boatlift guy had spent most of the day reading newspapers and staring at the crowds. He did not look any worse for wear. I asked how many lifts were sold.

He replied “one,” which provided a nice commission of $12,000. His boss had paid for the booth, as well as transportation costs.

This experience made me realize that there was no way these folks in their chosen occupations could ever achieve income equality. A $3 can cannot match the commission of a large boatlift. Only volume could do so, and it would have taken 12,000 cans sold that day in order to equal the sale of one lift.

However, there were two theoretical possibilities for “equality”: One was to raise the price of the extinguisher, and the other was to heavily tax the boatlift guy and forcibly take much of his commission for the ladies.

In the first possibility, each can would have to sell for $360. Despite the probability of no takers at that price, the women would still have to close on 100 cans in order to make an equal commission of $12,000.

What about the other option? How about forcing Mr. Lift-A-Boat to give $6,000 of his commission to the ladies? Now things would be “equal.”

No doubt the hard-working women would have liked that. But I’m sure Boatlift Guy, after “sharing” his wealth and giving up another 50 percent or more in taxes from the remainder of his commission, would eventually throw in the towel. After all, why should he spend years developing specialized networking and other business skills — only to have the fruits of his labor confiscated for the benefit of someone else? He might as well get on the gravy train too, until there is no “someone else” left to pay the bills.

The dream for income equality may remain in our country for years to come. However, there are universal truths as to why this quest will never succeed. Summarily, the two primary reasons are basic economics and human nature.

Steve Hansen is a Lodi writer.

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1 comment:

  • Eric Barrow posted at 10:21 am on Thu, Jul 24, 2014.

    Eric Barrow Posts: 1591

    I don't think Steve understands income equality and how when we have had more of it in this country the economy has done quite well as did the wealthy.

    How is it that the same people who claim the US economy is not a finite thing and that more wealth is generated by those willing to work hard for it than turn around and claim that if the underprivileged are given more there will be less for others. How does that square is the economy a finite pie or not?

     

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