A Christian Response to Economic Inequality

In a single year, Patrick Mahomes, the quarterback of the Kansas City Chiefs, earns $52 million.[1] The average teacher salary in the US is around $70,000,[2] meaning that Mahomes makes as much as 742 teachers combined.

Last summer, Tesla shareholders voted to pay CEO Elon Musk close to $45 billion over ten years,[3] which would imply annual earnings around $4.5 billion. Musk would therefore make more than 86 hypothetical star quarterbacks like Mahomes, and more than 64,000 teachers combined.

Is this fair? What does it say about our economic system?

There has always been a divide between the rich and the poor. But modern economic growth, beginning around 1870, has created much more wealth to go around and distributed it quite unequally. The top 1% earn 20% of the income generated in the US[4] and 35% of total wealth.[5] Seven million homes in the US are second homes;[6] meanwhile, over 600,000 Americans experience homelessness.[7] Income inequality, wealth inequality, and consumption inequality all have increased over the last few decades,[8] and each one comes with its own set of issues.

The rise of free-market meritocracy has brought a difficult irony: when wealth is earned rather than inherited, wealth and poverty can become signs of virtue and vice. Yet, we all know there’s more to what we earn than simply what we deserve. And this imperfect relationship between merit and economic status creates complications for justice in how we distribute the economic pie and efficiency in the incentives we set up for making the pie in the first place.

In the economic sphere, as any other, the gospel calls us to discern the structure of God’s good design and face the realities of a fallen world while we work and wait for its renewal. We need to distinguish between healthy and unhealthy inequality. Some of us might raise legitimate concerns about inequality, but mostly out of envy. Others might seek to justify the merits of what we’ve earned to avoid our call to generosity. It’s easy to underappreciate or overemphasize the importance of incentives and individual merit. My prayer is that we can move from envy to contentment, from greed to generosity, and from division to harmony. And my hope is that a better understanding of our economy can help us steward our money and our political influence wisely in an unequal world.

Causes of Inequality

Discerning the underlying causes of inequality is crucial for assessing the efficiency and justice of inequality. So how might some people get so much richer than others? Maybe they produce immense value for others in the marketplace. Maybe they give consumers what they want, even when it’s bad for them. Maybe they benefit from the efforts of other people. Maybe they leverage unfair advantages through the political system. Maybe they get lucky.[9] And wealth has inertia: however you get rich, wealth compounds itself. The crucial question is this: which methods of getting rich do we want to encourage in our society?

In an important sense, market competition is meritocratic, aligning self-interest with the interests of others. Consumers reward whoever serves them the best. To the extent riches are merited, it may be unjust to confiscate what was earned, and it may be inefficient to dilute the incentives and opportunities people have to gain wealth by serving others well in the marketplace. But for similar reasons, we may not want to reward all the less virtuous ways people acquire riches.

Is Inequality a Problem?

Efficiency

In economics, efficiency means maximizing the total value created. Politics often focuses on taking from one to give to another, but American poverty has decreased over time much more from economic growth than government redistribution. Inequality can help or hurt economic efficiency. It can be an incentive to climb the ladder or a means for the well-off to knock the ladder down behind them.

Letting market forces determine wages is usually efficient, because wages tell potential workers what skills are in demand. Consumers use their money to tell businesses what they want, and businesses relay the message when they reward the workers who help make it. Paying doctors well convinces talented students to take on the high time costs and financial costs of becoming a doctor. In a competitive labor market, if one firm won’t pay a worker what they’re worth, another will.[10]

But it’s not so simple. Labor markets aren’t always competitive.[11]

Sometimes big employers can keep wages below the value a worker produces. Sometimes a profession can restrict entry into the profession to keep wages high.[12] Sometimes consumers don’t convey their preferences in a competitive market; we don’t really know what parents would be willing to pay third grade teachers because the government pays them. Finally, in a world of sin, consumers don’t always have the right priorities when they tell the market what they want.

So, is it efficient for Mahomes to make 700 times as much as a teacher? On the one hand, millions of people are willing to pay to watch him play football, and it’s hard to imagine a class of 25 students could generate the same willingness to pay, even if teaching is more important than football. On the other hand, education isn’t a competitive market driven by consumer demand. Even if it was, one could reasonably debate whether Americans’ willingness to pay for watching football reflects well-ordered priorities. [13]

Income also comes through returns to capital. While Marx thought value came from and belonged solely to labor, market-driven capital gains are crucial for efficiently allocating capital to investment opportunities. The market incentivizes good investments, and it enables good investments by giving more capital to those who have managed it well in the past. Though the things God rewards in His kingdom don’t always align with what the market rewards, it’s a bit like what Jesus says about stewardship in Luke 16:10: “One who is faithful in a very little is also faithful in much, and one who is dishonest in a very little is also dishonest in much.”

However, concentrated wealth can create unfair advantages. Nobel laureate economist Angus Deaton said, “There is a danger that the rapid growth of top incomes can become self-reinforcing through the political access that money can bring”.[14] Inequality can hurt economic efficiency when the rich spend on lobbying and campaign donations, as it diverts resources from productive purposes and distorts the rules of the game, disincentivizing and inhibiting others from taking on productive activities in the marketplace.

In short, it’s efficient to incentivize and enable people to earn money by contributing to the well-being of others, but we can’t overlook that people can attain riches in less virtuous ways.

Justice

While economists care about how inequality impacts the total economic value created (efficiency), everyone cares about how that value is distributed, which brings us to justice.

One approach is to let markets determine distribution, in the way of philosopher Robert Nozick or economist F.A. Hayek. Nozick said distributions are just if they arise from voluntary exchange and just acquisition, which makes government redistribution a violation of individual rights.[15] Hayek emphasized the efficiency of decentralized market processes and argued that no central planner can determine a “fair” distribution.

Another approach comes from philosopher John Rawls’ "veil of ignorance:” how would you want society to operate if you didn’t know your position in it? The painful prospect of poverty might loom larger than a remote chance of obscene wealth. You might push for equality of opportunity and a strong social safety net, permitting some inequality to incentivize productivity insofar as it benefits the “least advantaged”.[16]

In an important sense, I agree with Nozick that justice is about a fair process rather than a fair outcome. As Christians, we must recognize that while we are equal in inherent worth as image-bearers, God has designed different roles in society. Scripture affirms private property and honors authority structures, but it also condemns violating the rights of the poor.[17] Though we can’t easily distinguish between just and unjust earnings, basing public policy on the assumption that all earnings are justly earned seems misguided.

Perhaps Rawlsian “justice” would be better described “mercy”. Scripture says “the laborer deserves his wages” but calls us to pay taxes and teaches that all we have is entrusted to us by God and ultimately belongs to Him. While Christians may disagree on the degree to which our public policy should exhibit “mercy”, God expects us to show mercy with the resources He’s given us.

What Should We Do About Inequality?

It’s hard not to look at the degree of inequality in the US and imagine things would be better if we could transfer resources from those with extreme excess to those with not enough. But if we redistribute too much from the rich to the poor, it reduces incentives for wealth production and can shift resources away from those with a proven ability to invest well. One strand of research in the optimal taxation literature[18] builds on these two points to find an income redistribution scheme that balances efficiency and equity. Studies based on this approach often recommend making our progressive income tax system more progressive, raising top marginal rates to around 70%.[19]

Another paper following a different approach finds that the current progressivity of the US tax and transfer system may be close to optimal.[20]

Another approach, supported by economists like Zucman, is a wealth tax; but it bears significant challenges. Only a few countries have tried it, and several of those have repealed it since. There are administrative difficulties in measuring and taxing wealth, especially with unrealized capital gains, and potential incentive effects on wealth creation that could reduce economic efficiency. Wealth taxes also can lead to tax avoidance and evasion, as the wealthy move their assets abroad.[21]

Perhaps a better approach would be to focus more directly on what we care about. If the problem is the rich wasting money on luxury consumption, what if we tried a progressive value-added tax?[22] If the problem with wealth accumulation is unfair political advantages, can we curb the influence of money in politics, maybe with campaign finance policy? [23]

Turning to our individual lives, we tend to think “rich” means some amount considerably more than what we have. Comparisons to those with less than we have don’t draw our eyes in the same way. While most of us couldn’t imagine having what Mahomes or Musk have, most of us are rich compared to past generations and compared to the rest of the world. 1 Timothy 6:17-19 says that as rich Christians, we should be generous and not set our hopes on earthly riches. And the richer we are, the more generous we should be, and the more we need to guard against the idol of money, so we can enter the Kingdom of Heaven “through the eye of a needle.”[24]

Lastly, although it’s natural for socioeconomic disparities to lead to social divisions, this isn’t God’s vision for the church. For all the things money can buy, it can’t buy a place in the Kingdom of Heaven, and it shouldn’t buy special standing in the church. James warns against favoritism toward the rich,[25] but it’s always going to be tempting to pay more attention to those who can contribute more financially. Perhaps the most radical picture we could look to is the early church, where believers had “all things in common”,[26] selling possessions and sharing freely to meet each other’s needs. How can we create communities where wealth serves the body of Christ rather than dividing it?

Good Christians may disagree on how Biblical principles—stewardship, affirmation of private property, warnings against oppressing the poor, and calls to generosity—should impact our public policy. We need economic theory, empirical evidence, and wisdom to navigate difficult policy questions. But what seems clearer to me is that we’re called to use our resources for the good of others, give generously to the poor, and find contentment in God’s provision to us.

Footnotes

1. https://www.usatoday.com/story...
2. https://www.nea.org/resource-l...
3. https://www.pbs.org/newshour/e.... This compensation package has been held by ongoing legal disputes and appeals, due to concerns about procedure and corporate governance.
4. https://ourworldindata.org/gra...
5. https://ourworldindata.org/gra...
6. https://eyeonhousing.org/2022/...
7. https://usafacts.org/articles/...
8. Piketty, Saez, and Zucman (2018) estimate that, after accounting for taxes and government transfers, the top 1% income share rose from 8% in 1970 to 16% in 2014. Auten and Splinter (2024) adjusted their technical assumptions on things like underreported income and untaxed retirement and found a much smaller increase—from 7% to 9%. Wealth is harder to measure, but Smith et al. (2023) finds that the top 1% wealth share has increased from 26% in 1989 to 34% in 2016. Hence, wealth inequality is roughly twice as big as income inequality. Bils and Aguiar (2015) estimate that the income gap between those in the 80-95th percentiles and those in the 5-20th percentiles has risen by 36% from 1980 to 2010, while the consumption gap has risen by 30%; the gap for income is about twice as big as the gap in consumption in 2010.
9. Bertrand and Mullainathan (2001) shows the impact of oil price fluctuations on CEO compensation.
10. Economic theory says a worker’s wage in a competitive labor market is the value of the marginal product of that worker: the extra output produced when that worker joins the firm, times the price the firm can sell the output for.
11. Azar and Marinescu (2024)
12. Gottlieb et al. (2025) shows that medical doctors are one example of barriers to entry restricting the labor supply and keeping salaries higher than they would be otherwise.
13. I’d like to think professional sports can glorify God and that He can use my cheering for the Green Bay Packers for His purposes, but it’s still a reasonable question for us to ask ourselves.
14. Deaton (2013)
15. https://plato.stanford.edu/ent...
16. Rawls argued for the difference principle: “Social and economic inequalities are to be arranged so that they are to the greatest benefit of the least advantaged.” https://plato.stanford.edu/ent...
17. For example: Leviticus 19:9-10, Isaiah 10:1-2
18. It starts with Mirrlees (1971)
19. Diamond and Saez (2011) argue for a top marginal rate of 73% based on a mid-range estimate from the empirical literature. With the top marginal rate for income tax currently at 37%, the US is currently around 45% after adding Medicare taxes and the average state income and sales tax rates.
20. Heathcote et al. (2017) builds on the approach of Ramsey (1927) and searches for optimal tax rates that balance the efficiency of providing insurance to households who fall into low earnings and the efficiency of incentives for skill investment and labor supply.
21. Seim (2017)
22. da Costa and Santos 2023 finds considerable welfare gains from moving from progressive income taxes to progressive consumption taxes by avoiding disincentives for saving.
23. Coate (2004)
24. Matthew 19:24
25. James 2:1-9
26. Acts 2:44-45

References:

Aguiar, Mark, and Mark Bils. 2015. "Has Consumption Inequality Mirrored Income Inequality?" American Economic Review 105 (9): 2725–56. https://doi.org/10.1257/aer.20120599.

Attanasio, Orazio P., and Luigi Pistaferri. 2016. "Consumption Inequality." Journal of Economic Perspectives 30 (2): 3–28. https://doi.org/10.1257/jep.30.2.3.

Auten, Gerald, and David Splinter. 2024. "Income Inequality in the United States: Using Tax Data to Measure Long-Term Trends." Journal of Political Economy 132 (7): 000–000. https://doi.org/10.1086/728741.

Azar, José, and Ioana Marinescu. 2024. "Monopsony Power in the Labor Market: From Theory to Policy." Annual Review of Economics 16 (1): 491–518. https://doi.org/10.1146/annurev-economics-072823-030431

Bertrand, Marianne, and Sendhil Mullainathan. 2001. "Are CEOs Rewarded for Luck? The Ones Without Principals Are." Quarterly Journal of Economics 116 (3): 901–32. https://doi.org/10.1162/00335530152466269.

Coate, Stephen. 2004. "Pareto-Improving Campaign Finance Policy." American Economic Review 94 (3): 628–55. DOI: 10.1257/0002828041464443

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Deaton, Angus. 2013. The Great Escape: Health, Wealth, and the Origins of Inequality. Princeton, NJ: Princeton University Press.

Diamond, Peter, and Emmanuel Saez. 2011. "The Case for a Progressive Tax: From Basic Research to Policy Recommendations." Journal of Economic Perspectives 25 (4): 165–90. https://doi.org/10.1257/jep.25.4.165.

Gottlieb, Joshua, Maria Polyakova, Kevin Rinz, Hugh Shiplett, Victoria Udalova. 2025. “The Earnings and Labor Supply of U.S. Physicians.” Quarterly Journal of Economics. https://doi.org/10.1093/qje/qjaf001

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Seim, David. 2017. "Behavioral Responses to Wealth Taxes: Evidence from Sweden." American Economic Journal: Economic Policy 9 (4): 395–421. DOI: 10.1257/pol.20150290

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