Shrinking the Global Income Gap
John Steinbeck allegedly once said: “Socialism never took root in America because the poor see themselves not as an exploited proletariat but as temporarily embarrassed millionaires.”
That’s part of what activists like the Occupy movement see as the problem in this country today. Americans have been jailed and abused, as we saw in the case of Cecily McMillan, in their efforts to bring the issue of income inequality into the spotlight. Ever since the Occupy movement amplified the battle cry of the 99 percent, the country has been appraised of the fact that a small group of people, to whom we refer as the 1 percent, controls almost 40 percent of the wealth in the U.S. The Fight for $15 movement is still going strong among employees of fast-food restaurants and other low-paid workers, and the debate doesn’t seem likely to go away anytime soon.
The presumed logic in this argument is that progressives and liberals typically want to see this gap closed, while conservatives believe that the more money the 1 percent makes, the more money it can invest in the economy to help everyone else — a carryover from the “trickle-down economics” popularized during the Reagan era. Although some aspects of this idea may be true, a new study from Harvard Business School shows that people all across the world, from very divergent backgrounds and ideologies, want the income gap to become smaller. The research analyzes data from the International Social Survey Programme of 2012, in which participants from 40 countries were asked what they believed the income gap was between CEOs and unskilled workers and what it should be; it then presents figures about the actual income gaps in question.
“Everywhere we looked in the world and among every political affiliation, Republicans and Democrats, and among rich people and poor people, every single group everywhere in the world wanted the pay gaps to be smaller than they currently thought they were,” Michael Norton, one of the authors of the study, told Truthdig. He noticed that many people are aware that there is a large disparity between CEOs’ salaries and unskilled workers’ pay scales and that they believe the problem should be remedied.
Though participants were aware of a disparity in wages and wished it could be diminished, the Harvard study shows that many respondents had little idea how huge the difference really is. In the United States, for example, the average CEO makes 354 times more money than what the average unskilled worker makes. That’s the highest of any of the countries mentioned in the study. How did Americans fare when guessing the rate? On average, participants from the United States thought the ratio between CEO and unskilled worker pay was 30 to 1. The Americans involved stated they wished it was about 6.7 to 1 on average, which would raise the average worker’s salary to almost $2 million. “We don’t see how much money people make, so we tend to underestimate the extent of inequality, because I really only see the people in my own community,” Norton said.
Countries such as Poland and Austria, on the other hand, registered a much smaller difference between reality and the ideal. Poland stood at 28 to 1 as the actual statistic and 5 to 1 as the ideal, and Austria showed 36 to 1 as the actual statistic and 5 to 1 as the ideal. In fact, none of the other nations in the study even came close to the United States regarding income inequality. At second “best,” Switzerland doesn’t even make it halfway to the U.S.’ ratio, coming in at 148 to 1. “We have some of the largest corporations in the world in the U.S., so larger corporations tend to have higher salaries for CEOs,” Norton explained.
As for solutions to the problem, Norton was not able to provide any foolproof ideas. He pointed out how some say raising the minimum wage means more unemployment, even though studies seem to suggest otherwise. And he noted that some believe decreasing CEOs’ pay gives them less incentive to push business forward. “I deserve to make as much money as I can fit in a landfill,” many would say. It’s a debate that could go on forever. “Even if everyone agrees that the gaps in pay should be smaller, people do disagree on what should be done to change that gap,” Norton said.
One solution that many economists bring up — the idea of companies making all of their salary information public — doesn’t strike Norton as ideal. “Some of the data suggests that if salaries are made public in an institution, people that make a lot of money don’t tend to change behavior very much. … It’s actually finding out that you make less than other people that demotivates your performance,” he said. So there’s that. At this point, Norton’s mainly just trying to figure out the problems instead of pretending he knows exactly how to fix them.
Norton doesn’t have data from his own study about why each country maintains certain levels of income inequality, but he plans to look into it as the focus of another study. In the meantime, we can mark this one down as another dubious title the U.S. is “winning.” Meanwhile, America can also currently claim to be No. 1 in imprisoned people, first in the number of firearm homicides among affluent countries, and the nation with a defense budget that is larger than those of the next eight countries combined.
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