Minimum Wage, Maximum Wage: New Paths to a More Equal America
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The document discusses income and wealth inequality in the United States compared to other developed nations, emphasizing the need for policies to create a more equal society. It proposes ideas like minimum and maximum wages, referencing historical figures and studies to support the idea that greater equality leads to better societal outcomes. The presentation concludes with a call to action for implementing strategies to address wealth concentration and promote equitable distribution.
Minimum Wage, Maximum Wage: New Paths to a More Equal America
- 1. Minimum Wage, Maximum Wage New Paths to a More Equal America A presentation to Democracy for Monroe County Bloomington, Indiana, May 1, 2015 Sam Pizzigati, Institute for Policy Studies, Washington, D.C.
- 2. Let’s start with an inequality Rorschach test. What do you see? Psychologists use the classic Rorschach inkblots to probe what people are thinking really deep down.
- 3. How about an income distribution Rorshach? We actually already have one. Every ten years, the International Social Survey Program uses ‘inkblots’ to probe how people perceive their own society’s distribution of income.
- 4. Each inkblot defines a seven-tier distribution Top tier: income over 250% of median income Income from 200% to 250% of median Income from 150% to 200% of median Income from 110% to 150% of median Income from 80% to 110% of median Income from 60% to 80% of median Bottom tier: income under 60% of median 15% 5% | 5% 15% SHARE OF POPULATION
- 5. Researchers work from five basic distributions A small elite at the top, few people in the middle, a great mass at the bottom. A small elite at the top, more people in the middle, and most people at the bottom. A pyramid, but with relatively few people at the bottom. A society with most people in the middle. Many people near the top and only a few near the bottom.
- 6. Which distribution makes for a good society? People who feel their society looks like this, the research tells us . . . . . . support policies that would make their societies look more like this. People prefer to live in more equal societies.
- 7. How do actual societies measure up? Some modern developed nations have achieved much more equal income distributions than others, details a new study from Judith Niehues at Germany’s Cologne Institute for Economic Research Judith Niehues, Subjective Perceptions of Inequality and Redistributive Preferences: An International Comparison, Lindau Meeting on Economic Sciences, August 2014
- 8. Actual income distribution: a quick tour Norway The essential Scandinavian story France The basic Euro continental take USA Leading the English-speaking world Sources: European Union Statistics on Income and Living Conditions, 2010 figures. For the USA, Panel Study of Income Dynamics, for 2009. Compiled by Judith Niehues, 2014.
- 9. U.S. wealth even more concentrated than income Credit Suisse Research Institute, October 2014 5.9% 33.5% 31.9% 28.6% 5.1% 51.0% 22.4% 21.5% 0% 10% 20% 30% 40% 50% 60% Over $1 million $100,000 - $1 million $10,000 - $100,000 Under $10,000 A USA-France comparison: share of population by wealth holdings USA France
- 10. Maldistribution’s impact: getting personal $347,845 $317,292 $53,352 $140,638 $0 $50,000 $100,000 $150,000 $200,000 $250,000 $300,000 $350,000 $400,000 USA France Median Mean Credit Suisse Research Institute, October 2014 If the USA had as equal a distribution of wealth as France, typical American adults would have nearly triple their current net worth.
- 11. Does the USA rate as an outlier or the future? The answer from French economist Thomas Piketty, the hottest economist on the planet. In modern market economies, income and wealth are tilting ever more toward the top. The USA stands as our global future.
- 12. Who agrees with Thomas Piketty? Analysts at the OECD, the official economic research agency for the nations of the developed world. Their latest prediction: If current trends ‘prevail,’ all developed nations will show by 2060 ‘the same level of inequality as currently experienced by the United States.’ Henrik Braconier, Giuseppe Nicoletti, and Ben Westmore, Policy Challenges for the Next 50 Years, OECD, July 2014
- 13. Our challenge: Reversing the grand slide We need to reject our worst inequality, nurture our least.
- 14. How do we make that reversal?
- 15. A century ago, Americans faced the same question In the early 1900s, Americans lived in a society even more staggeringly unequal than we do today.
- 16. The conclusion reformers back then reached To create a decent society, we had to take two steps. We had to address the absence of wealth at society’s base. We had to address the concentration of wealth at society’s summit. We had to level up and level down.
- 17. A great newspaper publisher sounds the call In 1907, Joseph Pulitzer of the St. Louis Post-Dispatch urges Americans to ‘always oppose privileged classes’ and ‘never be afraid to attack wrong, whether by predatory plutocracy or predatory poverty.’
- 18. The nation’s top reformer sizes up the stakes ‘We can either have democracy in this country or we can have great wealth concentrated in the hands of few. But we can't have both.’ Louis Brandeis, U.S. Supreme Court justice
- 19. But Brandeis didn’t know the half of it Inequality — what we get when income and wealth concentrate — doesn’t just endanger democracy. Inequality endangers everything basic to social decency.
- 20. The less democratic The less honest The less trustful The less caring The less healthy The less vibrant economically The less sustainable environmentally The more unequal a society, we now know . . .
- 21. How do we know all this? We’ve had an explosion of research on what happens when societies grow more equal — and what happens when they don’t. Economists Political scientists Environmental scientistsSociologists Demographers Psychologists
- 22. The best exposition yet of this research British epidemiologists Richard Wilkinson and Kate Pickett
- 23. What can epidemiologists teach us? About 25 years ago, epidemiological research began showing an amazing set of findings. The greater the gap between a society’s top and bottom, the worse the society’s health. Inequality has more of an impact on health than health care or individual health behaviors. Epidemiologists study the health of populations.
- 24. In equal societies, people live longer Not just poor people, but all people! If you have an average income in a relatively equal society, you’re going to live longer than a average-income person living in an unequal society.
- 25. The data show: Greater equality, longer lives Wilkinson and Pickett, The Spirit Level
- 26. ‘If you want to know why one country does better or worse than another, the first thing to look at is the extent of inequality.’ This same inequality dynamic repeats all over Richard Wilkinson and Kate Pickett, 2009, The Spirit Level
- 27. The gap between the richest and poorest 20%
- 28. Mental illness more prevalent in unequal nations
- 29. Teenage birth rates higher . . .
- 30. More adults obese . . .
- 31. Drug abuse more common . . .
- 32. Children at higher risk . . .
- 33. Homicide rates higher . . .
- 34. Rates of imprisonment higher . . .
- 35. Rates of social mobility lower . . .
- 36. The big picture: Indexing everything
- 37. The bottom line: In developed societies . . . . . . how much wealth a developed society generates matters little for our well-being. What matters much more: How a developed society distributes that wealth.
- 38. In short: Inequality matters! Especially for our Earth An unequal society can never be a sustainable society
- 39. The super rich stomp a huge carbon footprint 1,000 10,000 1970 2006 Private jets in service 1,546 8,892 Commercial jet Private jet Lbs. CO2 per passenger
- 40. Inequality enhances the pressure to consume. In a more equal society, where most people can afford the same things, things don’t matter so much. But where most people can’t afford the same things, things become a powerful marker of social status. In a society growing more unequal, you either accumulate more and bigger things or find yourself labeled a failure.
- 41. Sustainability demands a public spiritedness . . . . . . that inequality undercuts
- 42. More equal nations rank as better recyclers Source: Richard Wilkinson and Kate Pickett. The Spirit Level, 2009
- 43. Has inequality cooked our ecological goose? NASA-funded research has examined the impact of inequality ‘on the fate of societies.’ That study’s key finding: In deeply unequal societies, elites don’t feel the strain and pain from environmental degradation — until that degradation has gone too far to reverse. This ‘buffer of wealth . . . allows elites to continue business as usual.’
- 44. The good news ‘It is fortunate that just when the human species discovers that the environment cannot absorb further increases in emissions, we also learn that further economic growth in the developed world no longer improves health, happiness, or measures of well-being.’ Richard Wilkinson and Kate Pickett
- 45. Our 21st century strategic imperative We don’t need to make more to improve our standard of living. We need to share more. We need to become more equal.
- 46. So what can we do to become more equal?
- 47. Step 1: Recognize we can become more equal 0 200 400 600 800 1000 1200 1925 1930 1935 1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 Income of America’s top 0.1% as multiple of bottom 90% income, 1925-2012 Thomas Piketty/Emmanuel Saez, World Top Income Database, 2013 892 times 993 times
- 48. Step 2: Understand how we became more equal Unions level up the bottom 7.5% 28.3% 0 5 10 15 20 25 30 1930 1936 1942 1948 1954 Union members as % of employed High taxes level down the top 25% 91% 0 10 20 30 40 50 60 70 80 90 100 1925 1929 1933 1937 1941 1945 1949 1953 Top federal income tax rate
- 49. America no longer levels down the top 94% 70% 35% 39.6% 0 10 20 30 40 50 60 70 80 90 100 1925 1933 1941 1949 1957 1965 1973 1981 1989 1997 2005 2013 Tax rate on income in top tax bracket
- 50. U.S. unions no longer lifting up the bottom 27% 13% 0% 5% 10% 15% 20% 25% 30% Union coverage rate, %
- 51. How can we get back on the road to equality? We need to recreate the institutional base for greater equality. • A tax system progressive enough to level down the rich. • A labor movement strong enough to level up the poor. But this double-faceted mid 20th century equality agenda could not sustain itself. We need to go beyond it.
- 52. How can we best go beyond? We already have minimum wages. How about a maximum wage? An off-the-wall notion? Not to Franklin Roosevelt.
- 53. A President speaks In April 1942 Franklin D. Roosevelt asked the U.S. Congress to place a 100 percent tax on all income over $25,000, about $350,000 today. The end result: a 94 percent tax on income over $200,000.
- 54. Maximum wage idea predates Franklin Roosevelt Felix Adler, founder of Ethical Culture Society, first proposes a 100 percent top tax rate in 1880. In 1917, publisher E. W. Scripps calls for a 100 percent tax on all income over $50,000. During World War I, New York attorney Amos Pinchot, brother of Pennsylvania Governor Gifford Pinchot, calls for a 100 percent top tax rate on income over $100,000.
- 55. The maximum wage today: out from the shadows
- 56. Talking UK maximum March 2013: The British Trades Union Congress announces that leading UK unions will vote the shares their pension funds hold against any executive pay plans that compensate top corporate officers at over 20 times average worker pay. ‘We are going to use the power of our pension funds to make a difference.’ TUC general secretary Frances O’Grady
- 57. Talking Swiss maximum November 2013: Over a third of Swiss electorate votes to cap CEO pay at 12 times worker pay.
- 58. Talking Egyptian maximum The militant labor protests that paved the way for Tahrir Square highlighted a maximum wage as a central demand. One slogan: ‘A minimum wage for those who live in cemeteries, a maximum wage for those who live in palaces.’
- 59. Thinking maximum in Canada A new Toronto-based campaign seeks to create a new global standard for fair pay.
- 60. Thinking maximum in France In 2013, a public opinion poll finds the French public supporting a ‘maximum wage’ for corporate chief executives by a 83 to 16 percent margin.
- 61. Thinking maximum in the United States February 2014: Faculty senate at St. Mary’s College narrowly votes down plan to limit the pay for St. Mary’s president to 10 times the lowest worker pay.
- 62. In the past year . . . Oxford University economist Simon Wren-Lewis ‘There are situations where marginal tax rates of 100% or nearly 100% may be justified.’ Scottish Nobel laureate economist Sir James MirrleesMatthew Yglesias, prominent U.S. policy analyst
- 63. An emerging maximum wage activist consensus We don’t need a fixed figure cap at the top. We need a cap on the gap. We need to wage a ‘ratio politics.’
- 64. A ‘ratio politics’ can encourage a solidarity economy If we tie pay at the top to pay at the bottom, income at the top can only advance if income at the bottom advances first. If we cap the gap, our richest and most powerful would have a vested personal interest in helping our poorest and weakest.
- 65. A crucial step toward a ‘ratio America’ Under Dodd-Frank, all corporations will have to annually reveal the ratio between their CEO pay and the pay of their median workers. The Dodd-Frank Wall Street Reform and Consumer Protection Act enacted in 2010 mandates corporate pay ratio disclosure.
- 66. What makes disclosure so crucial? With publicly disclosed executive- worker pay ratio figures in place, we could begin leveraging the power of the public purse against inequality.
- 67. Our new battlefields for egalitarian struggle With ratios public info, activists could campaign to . . . deny tax-free nonprofit status to institutions that compensate top execs over 10 or 25 times workers. limit top pay in public sector employment to a modest multiple of worker pay. direct government subsidies only to businesses that pay top execs at a modest multiple of worker pay. deny government contracts to corporations with top pay that exceeds a set multiple of worker pay. refuse bailouts to troubled enterprises unless they narrow their executive-worker pay divide to a set level.
- 68. These struggles are starting . . . California Senate Bill 1372 raises corporate income tax from 8.84 to 13 percent for firms that pay their top execs over 400 times what their median workers are making and lowers the tax rate to 7 percent on companies with a top executive-worker pay divide less than 25-to-1. Loni Hancock Rhode Island Senate Bill 2796 gives preferential treatment in state government contract procurement to companies that pay their highest-paid executive no more than 32 times what their lowest-paid employees take home. Cathie Cool Rumsey Wins Senate majority May 2014 Passes Senate June 2014
- 69. Labor leveraging away in Massachusetts ‘Every hospital, whether it's non profit or for profit, gets a substantial amount of money from public funds.’ Julie Pinkham, Massachusetts Nurses Association
- 70. The public purse makes for a powerful lever This June 2014 Demos think tank report: puts the total the U.S. federal government spends buying goods and services from private businesses at $1.3 trillion annually. calls on President Obama to issue an executive order that requires these companies to cap executive pay at 50 times the median salary of the company’s staff.
- 71. A gameplan for leveraging escalation Disclose Require all private businesses that seek government support to reveal the pay ratio between their workers and highest-paid executive. Support Give preferential treatment in the procurement process to enterprises with modest executive- worker pay divides. Deny Ban enterprises with excessive executive- workers ratios from any shot of obtaining government contracts.
- 72. The question that needs to ‘occupy’ us How do we want to see the wealth of our world distributed in the years we have ahead?
- 73. That distribution today 69.8% 21.5% 7.8% 0.7%2.9% 11.8% 41.3% 44.0% 0% 10% 20% 30% 40% 50% 60% 70% 80% Under $10,000 $10,000-$100,000 $100,000-$1 million Over $1 million Share of global population and wealth, by net worth class % global population % global wealth Credit Suisse Research Institute, October 2014
- 74. That distribution tomorrow? We can shape that choice.
- 75. The Institute for Policy Studies email newsletter Sign up at www.toomuchonline.org For updates that can help keep you informed and engaged An online portal into Web resources on our great divides
- 76. For inspiration