Income inequality

Purpose - The purpose of this paper is to explain why (based on an extensive body of research findings) efforts to reduce income inequality may have negative effects on motivation and the desire to excel. Design/methodology/approach - This paper presents the author’s personal perspective on income inequality and efforts to reduce it. However, these views are grounded in extensive literature concerning the nature of “fairness,” and the harmful effects of weakening the link between performance or effort on the one hand, and rewards on the other. Breaking this connection may be especially harmful for entrepreneurs, who have strong beliefs that the hard they work in building their new ventures, the more likely are these companies to be successful. Findings - The paper presents what, it is hoped, provides a broadened framework within which to examine the causes and income inequality, definitions of “fairness,” and the potential effects of efforts to reduce such inequality. Practical implications - By weakening the relationship between performance and rewards, efforts to reduce income inequality involving large tax increases may weaken the relationship between performance (accomplishment) and rewards, thus reducing motivation to work hard and achieve excellence. Social implications - Understanding the negative implications of government-funded programs designed to reduce income inequality helps to clarify the potentially detrimental effects of such programs – effects that are neither intended not expected by proponents of such efforts. Originality/value - The effects of efforts to reduce income inequality have not previously been examined in the context of their negative implications for human motivation to work hard and attain excellence in any endeavor – implications suggested by a large body of relevant research.