minimum wage, maximum wage: new paths to a more equal america
TRANSCRIPT
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.
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.
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.
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
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.
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.
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
Actual income distribution: a quick tour
NorwayThe essential Scandinavian story
FranceThe basic Euro continental take
USALeading 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.
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
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.
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.
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
Our challenge: Reversing the grand slide
We need to reject our worst inequality, nurture our least.
How do we make that reversal?
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.
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.
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.’
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
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.
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 . . .
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 scientistsSociologistsDemographers
Psychologists
The best exposition yet of this research
British epidemiologists Richard Wilkinson and Kate Pickett
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.
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.
The data show: Greater equality, longer lives
Wilkinson and Pickett,
The Spirit Level
‘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
The gap between the richest and poorest 20%
Mental illness more prevalent in unequal nations
Teenage birth rates higher . . .
More adults obese . . .
Drug abuse more common . . .
Children at higher risk . . .
Homicide rates higher . . .
Rates of imprisonment higher . . .
Rates of social mobility lower . . .
The big picture: Indexing everything
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.
In short: Inequality matters!
Especially for our Earth
An unequal society can never be
a sustainable society
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
Inequality enhances the pressure to consume.
In a more equal society, where mostpeople 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.
Sustainability demands a public spiritedness . . .
. . . that inequality undercuts
More equal nations rank as better recyclers
Source: Richard Wilkinson and Kate Pickett. The Spirit Level, 2009
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.’
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
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.
So what can we do to become more equal?
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
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
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
U.S. unions no longer lifting up the bottom
27%
13%
0%
5%
10%
15%
20%
25%
30%
Union coverage rate, %
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.
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.
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.
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.
The maximum wage today: out from the shadows
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
Talking Swiss maximum
November 2013:
Over a third of
Swiss electorate
votes to cap CEO
pay at 12 times
worker pay.
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.’
Thinking maximum in Canada
A new Toronto-based campaign
seeks to create a new global
standard for fair pay.
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.
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.
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
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.’
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.
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.
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.
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.
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 RumseyWins
Senate
majority
May 2014
Passes
Senate
June 2014
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
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.
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.
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?
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
That distribution tomorrow?
We can shape that choice.
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