Sunday, December 9, 2012

Are Wage Ratios an Answer?

Regardless of the outcome of this month's Washington political response to the economic situation, you can rest assured that the gap between the rich and the poor will continue. Catching a few crumbs off the tables of the rich if not given right back to them through other tax loopholes or deregulation will hardly change the shape of the graphs of inequality. Yet as Nobel economist Jospeh Stiglitz writes in his op ed piece today,

A comprehensive program to increase economic opportunity and reduce inequality is also needed – its goal being to remove, within the next decade, America’s distinction as the advanced country with the highest inequality and the least social mobility. This implies, among other things, a fair tax system that is more progressive and eliminates the distortions and loopholes that allow speculators to pay taxes at a lower effective rate than those who work for a living, and that enable the rich to use the Cayman Islands to avoid paying their fair share.

Even the more 'progressive' pundits seem straitjacketed in some voodoo like pragmatism when talking about inequality. With this mentality our forebears a century ago would not have asked for a 40 hour work week, they might have been satisfied with 'no more additional hours' tacked on 60+ work week. I'd like to see a serious discussion of options to deal with the obscene inequality that has concentrated power in fewer and fewer hands within our democracy. So let's start here to broaden the boundaries of  the discussion.

If we were starting from scratch wouldn't we want everyone to have the basics in life so that they might pursue the development of their capabilities and build a better world for themselves, their children and their grandchildren? I suspect that there might be a vocal minority who would suggest such a thought is socialistic, but I'd bet most people would support such a principle. That no one should be, for example, hungry or without shelter.

I believe we can do this, but not by playing a game that is designed to reward winners without care for the well-being of the losers. Even war has rules that recognize such an impoverishment of losers is wrong. We recognize, again most all humans do, that we live on a single finite planet and that there are more of us now then when we were born (regardless of when that was). So given those finite limitations we must determine how to share the resources, both between current generations, and between present and future generations. One way to do this is prescribe limits. We can allow for the bottom limit that anyone needs to survive and make sure everyone has that much. But we could also limit how much one is allowed to hoard for themselves.

Oh my god, big government is going to tell us what to do!!! No, we could decide this democratically, both the lower limit and any upper limit. And I'm open to what those limits might look like. The U.S. median family income (that amount that 50% of families earn more than and 50% earn less than) is and has hovered at about $50,000 (low of $48K, high of $54K) for almost two decades.

So to be clear I'm not suggesting that every family gets $50,000 a year. The poverty rate for a family of our is about $23,000. So for easy math purposes let's call a minimum income $20,000 for a family. Might we  consider a top rate? One way to think about this is by using a ratio - 10 times, 20 times, 100 times the minimum. An advantage of this approach is that as the minimum goes up the maximum can go up proportionately.

So if we think a family should be able to live at poverty threshold for $20,000/year and we also believe that a single adult should be able to provide income for a family, the minimum wage for a 40 hour work week would be almost exactly $10/hr a third higher than current minim wage. If we were to tie top wages via a ratio then they could make $200,000 (10 times), $400,000( 20 times), or $2,000,000 (100 times) etc.
We could use the ratios within workplaces (Ben and Jerry;s had an 8 times rule, Judy Wick's White Dog Cafe had a 6 times rules between the owner and the dishwasher). One argument against using the ratio for annual incomes is that when you compound the advantage year after year the gulf in wealth grows dramatically.

So maybe, as Robley George proposes in his book "Socioeconomic Democracy" we need to have a Maximum Allowable Wealth (MAW) that is determined regularly by a vote of the majority just as they determine the Universal Basic Income (UBI). This approach allows the public to determine, based upon current conditions and forecasts what seems the best limits.

Maybe these ideas are not exactly the ones we need to repair the great inequality between us. But if we don't discuss different approaches, we can be sure that we will continue to compound the gap between the rich and poor not only in our society, but globally. If there is anyone out there that thinks growing that gulf is a good idea, I suspect you stopped reading before now.

Is there some moral limit as to "Too Much" or "Too Little" especially in an increasingly crowded and finite world? Do we who have so much have some responsibility to address this and to offer credible solutions so that others may prosper and that we may all avoid the threat of dispossessed citizens of our planet to rally up from anger and frustration against those they perceive have unjustly benefited at their expense, be they governments, individuals, or corporations?

Just as the threats of climate change seem to grow with each passing study completed, so too must we recognize the dual peril of the growth in inequality. Truly sustainable solutions must solve for both...at the same time. And to do this, we'll need every one's ideas and good faith at the table. 'Cuz whether we like it or not, we're all in this together.