John Rawl's theory of Social Justice

1. Each Person is to have an equal right to the most extensive total system of equal basic liberties compatible with a similar system of liberty for all.
2. Social and economic inequalities are to be arranged so that they are both:

• To the greatest benefit of the least advantaged, and
• Attached to offices and positions open to all under conditions of fair equality of opportunity.

1. (The Priority of Liberty) The principles of justices are to be ranked in lexical order and therefore liberty can be restricted only for the sake of liberty. There are two cases:

• a less extensive liberty must strengthen the total system of liberty shared by all;
• a less than equal liberty must be acceptable to those with the lesser liberty

1. (The Priority of Justice over Efficiency and Welfare) The second principle of justice is lexically prior to the principle of efficiency and to that of maximizing the sam of advantages, and fair opportunity is prior to the difference principle".

Distributive Justice

The question is "Is the distribution of social benefits fair?"

Possible criteria of distribution:

1. equal
2. according to needs
3. according to ability or merit or achievements
4. according to efforts and sacrifices
5. according to actual productive contribution
6. according to the requirements of the common good, or the public interest, or the welfare of mankind, or the greater good of a greater number
7. according to a valuation of their socially useful services in terms of their scarcity in the essentially economic terms of supply and demand (i.e. according to market forces)

Measure of income inequality

The most common measure of income inequality is the Gini Coefficient. The Gini Coefficient (GC) 「堅尼系數」,which takes a value between zero and one, is calculated by taking the area between the Lorenz Curve (LC) and the 45° line.

The diagonal line (45°line) represents a perfectly equal income distribution, say 10% of the households hold 10% of the total income, and 20% of the households hold 20% of the total income, and so forth.

The shape of the Lorenz Curve represents most income distributions. For example, 10% of the lowest income households would less than 10% of the total income.

A value ‘zero’ indicates equality in the income distribution (i.e. the Lorenz Curve coincides with the 45° line, every household has an equal share of the total household income). A value of ‘one’ means complete disparity when one household earns the total household income and the remaining households earn nothing. In real life situation, these two extreme values do not arise.

Income distribution within each country

Income distribution across countries/territories

Source of income

The wealthy mainly property income

The middle class - mainly wage income, some property income

The poor - some wage income, some welfare

• Pros:

• Income disparity in a society encourages people to work harder in order to earn more
• Income disparity increases the efficiency of a society
• Income disparity increases the resources for investment activities
• Income disparity attracts more achievement-oriented people and entrepreneurs to come to the society.

• Cons

• Income disparity increases instability (e.g. increases crime rates, intensifies inter-group conflicts in a society)
• Income disparity reduces the equality of opportunity
• Income disparity increases the percentage of people relying on public welfare

• increase progressiveness in income tax (i.e. higher income higher tax rates)
• increase welfare spending
• increase tax relief or tax exemption for charity donations
• set up minimum wage rates

(Note: not all taxes reduce income disparity. General sale tax is regressive. Say the sale tax is 5%. A poor person spends 100% of their income. Thus, he is paying 5% of his income to sale tax. A rich guy spends 50% of their income, and thus is only paying 2.5% of his income to sale tax).

Income Redistribution and Transfer payments

Public welfare payments such as public assistance and various types of allowance (disability and old age) are transfer payments, which redistribute resources from the rich (by tax), to the poor. Doing so, such transfers reduce income inequality.

• Only about 40% of those who have an income pay any income tax.
• Only 10,000 persons pay the standard tax rate of 15%.
• The median hourly income of worker at McDonald is $11/hour, a fresh university graduates working in the government is $87.5/hour, a university full professor is $600/hour, the Chief Secretary of the HKSAR Government is $1,137/hour.

Income inequality and economic welfare inequality

Income inequality and economic welfare inequality are not always the same.

1. Different cost of living in places with different income level: There is a tendency for places with higher income to have a higher cost of living. For instance, the cost of livign in Hong Kong is much higher than that in China.
2. Some low pay jobs are attached with non-monetary reward. For instance, the salary of a Legislative Council member was less than 1/3 of that paid to a Policy Secretary of a Government Bureau.
3. Lower income for some is due to voluntary choice. Some people choose to do less work in order to enjoy life better or more time with their family.

Unequal Opportunity

The causes of unequal opportunity are numerous: different family background, various types of discrimination, structural barriers,

Unequal Opportunity and efficiency

Most phenomena of unequal opportunity reduces efficiency. Here are some of the examples:

1. The gifted child of a poor family was unable to fully developed due to lack of resource support and environment, while the child of the billionaire with only limited intelligence occupies one of the key positions in his father's company.
2. Discrimination against the disabled reduces the probability of their potential being fully utilized.
3. A poor guy with a very good business proposal is highly unlikely to be able to secure a financial loan, while even a stupid business idea of the wealthy get financed.

• The conservative - such policies caused inefficiency and reinforce laziness.
• Liberal (left to the central position) - social policies are useful.
• Radical - ordinary social policies are not that useful, structural changes are necessary.

• provides a safety net to those failed even if equal opportunity prevails.
• reduces hardship caused by casualties in a competitive environment
• reduces the motives to utilize illegitimate means to obtain higher income
• reduces the possibilities of social unrest.