Does income inequality really hurt societies?

[cybercoma]

Here's social epidemiologist Richard Wilkinson's answer

Some of his points:

-Between industrialized societies, there is no correlation between life expectancy and gross national income (GNI); however, within the societies there are "social gradients in health" based on income.

-Scores on the index of health and social problems (IHSP) show a positive correlation between the size of income gaps within any given industrialized society and the amount of "problems" within that society; however, there is no relationship when comparing the IHSP to GNI between nations.

-Using UNICEF numbers, children are doing better in more equal societies than ones with a higher income gap. (This was done to show that they weren't "cherry-picking" facts from the IHSP). Again, there's no relationship to GNI.

-The average well-being of societies has nothing to do with GNI in the developed world, only in poorer countries.

-Trust and involvement in community life is lower in inequal countries.

-In the US, these relationships remain true on a state by state basis.

-Rates of mental illness are also correlated to income inequality

-Homicide, proportion of population imprisoned are also correlated to income inequality. Wilkinson argues that this isn't due to more crime, but harhser sentencing in societies with greater inequality. They're also more likely to still have the death penalty.

-High school dropouts (measure of social mobiility) are correlated.

-Sweden and Japan are two of the most equal developed societies. Sweden equalizes its society through taxation and social welfare programs. Japan, on the other hand, has lower differences in earning before taxes and less taxation and social programs.

-It's not just the poor that are affected. Between England & Wales and Sweden, infant mortality is significantly lower across the entire band of father's occupations (showing social class). This shows even the rich can benefit from a more equal society.

-Ultimately, inequality has damaging effects to social pschology and this is the reason for these negative outcomes.

[na85]

-Ultimately, inequality has damaging effects to social pschology and this is the reason for these negative outcomes.

An interesting yet not entirely unobvious conclusion.

What's the alternative though? Communism?

[Evening Star]

An interesting yet not entirely unobvious conclusion.

What's the alternative though? Communism?

Two examples of more egalitarian, non-Communist societies were given just in the OP.

[Moonbox]

What's the alternative though? Communism?

No offense but this is the type of moronic degredation of political discussion that has the Americans so screwed up down south.

More regulation and equitable social policies =/ communism.

That's like saying mixing a tiny drop of red dye in a great big bowl of blue dye makes the bowl red. It's still going to be blue, or more technically a very blueish shade of purple.

[Moonbox]

Cybercoma, you and I don't really agree on a lot of things, but I'd love to hear your thoughts on this instead of just bullet points from an article. I'm usually a little right-of-centre myself, but I believe income-inequality and the shrinking middle class is probably the biggest problem facing the western world.

The larger the number of poor people we have, the larger the number of kids are raised without opportunity, good examples and postive, supportive parents. There've been hundreds of studies confirming that kids from poor families, regardless of IQ or intelligence, are FAR less likely to succeed academically or financially. The Bill Gates', Sidney Crosbys etc all grew up in middle or wealthy class families.

[August1991]

Cybercoma, I think you are confusing causation and correlation. You happen to believe that if a society is "more equal" then it has better socio-economic statistics.

To illustrate my point, if we could make every quadriplegic walk, then society would be more equal and probably happier. If we made everyone use a wheel chair, then society would also be more equal but I doubt if it would be happier.

Equality as such is not the cause of happiness.

Edited December 9, 2011 by August1991

[MiddleClassCentrist]

No offense but this is the type of moronic degredation of political discussion that has the Americans so screwed up down south.

More regulation and equitable social policies =/ communism.

That's like saying mixing a tiny drop of red dye in a great big bowl of blue dye makes the bowl red. It's still going to be blue, or more technically a very blueish shade of purple.

Yeah.

I think that most people see benefit in encouraging others to work harder to receive more compensation. The difference of opinion is what the that the pay variance should be limited at or what is reasonable. Communism is just a bogeyman pulled out to scare anyone who makes more than the average income.

Someone could argue that a CEO's pay should be capped at 10x the lowest salary in the organization, for example. 10x the compensation could be enough incentive to do the job.

[MiddleClassCentrist]

Cybercoma, I think you are confusing causation and correlation. You happen to believe that if a society is "more equal" then it has better socio-economic statistics.

To illustrate my point, if we could make every quadriplegic walk, then society would be more equal and probably happier. If we made everyone use a wheel chair, then society would also be more equal but I doubt if it would be happier.

Equality as such is not the cause of happiness.

I do understand your example and it was a pretty good attempt to illustrate the issue.

Except in your example you are applying a bad thing that affects a small group to a large group.

We are talking about a good thing that applies to a small group being spread out, just a bit more over the large group.

This is more like the NHL. Revenues of all teams are shared so that more teams can exist and reach more people on a balanced level. There is a salary cap to ensure that one team can't just buy up all of the talent and dominate the league, preventing anyone else from being able to reasonably compete.

The example above is taking a good thing and spreading it out to improve the quality of a social construct and is more in line with our discussion.

[dre]

An interesting yet not entirely unobvious conclusion.

What's the alternative though? Communism?

No no. We already know the answer. Capitalist societies can avoid extreme wealth concentration with progressive taxation, estate taxation, limited social programs etc... and by taking action if we see things getting out of balance. And you limit the political influence that can be bought with money.

We broke up the English aristocracy with property taxes, and by taking the political veto away from the house of lords. We had to do the same thing with the Robber barons and the railroad tycoons. If we hadnt they would own EVERYTHING now and we would all be renters.

Its really not rocket science. Everyone whos ever picked up a history book knows that a society that concentrates will not last. Avoiding extreme concentration of wealth is actually pretty easy to do, and the founders of our society left us pretty detailed instructions.

Edited December 10, 2011 by dre

[Jack Weber]

No no. We already know the answer. Capitalist societies can avoid extreme wealth concentration with progressive taxation, estate taxation, limited social programs etc... and by taking action if we see things getting out of balance. And you limit the political influence that can be bought with money.

We broke up the English aristocracy with property taxes, and by taking the political veto away from the house of lords. We had to do the same thing with the Robber barons and the railroad tycoons. If we hadnt they would own EVERYTHING now and we would all be renters.

Its really not rocket science. Everyone whos ever picked up a history book knows that a society that concentrates will not last. Avoiding extreme concentration of wealth is actually pretty easy to do, and the founders of our society left us pretty detailed instructions.

That,sir,is spot on!!!

I have a real fear,though,that this generation of free marketeers will be like the ones in Europe in the 1800's.And we all know what horrendous ideas came about then as a counterbalance...

Edited December 10, 2011 by Jack Weber

[cybercoma]

You happen to believe that if a society is "more equal" then it has better socio-economic statistics.

Not socio-economic, but health and social problems. And, I don't just believe it, but the video shows you that this is exactly the case. While there are no differences between industrialized nations when you compare their GNI (a rising tide lifts all ships), when you look at the inequality within a nation, those with higher inequality are not doing so well when it comes to the index of health and social problems, as well as the UNICEF child welfare metrics.

You say I'm confusing correlation with causation and this is also addressed towards the end of his lecture. There have been studies done that indicate there's a high likelihood of causation. And it makes sense. I'm not sure how having lower health and higher social problems would lead to greater inequality. It seems much, much more likely that it works exactly as Professor Wilkinson said. Societies with higher income inequality is damaging to the social psyche. It creates an environment where people distrust one another and are more aggressive and violent. It makes the problem even more defined when you see that even those with higher incomes in a society, those with the best infant mortality rate, are still doing worse off than those in more equal societies.

Keep in mind this doesn't work for the developing nations. They need to be brought up to a certain minimum standard. Once you get into the developed nations however, income differences between states is not as important (as in not at all) as the income gaps within the nations.

I'm just rehashing his arguments here, but I find it absolutely fascinating that Sweden and Japan have a similarly high scores on these metrics, although they approach equality a different way. The former has high taxation and social programs with larger differences in income, while the latter has narrower differences in income with less taxes and social programs. The outcome is the same and their well-being is similar in those societies.

Now I know you like that old argument that people need to be motivated to create new things and that inequality is someting that can't be controlled becuase it will stifle innovation. However, it cannot at all be said that Japan and Sweden are not creative economies. They're both inventive and more equal than other industrialized nations.

[cybercoma]

Yeah.

I think that most people see benefit in encouraging others to work harder to receive more compensation. The difference of opinion is what the that the pay variance should be limited at or what is reasonable. Communism is just a bogeyman pulled out to scare anyone who makes more than the average income.

Someone could argue that a CEO's pay should be capped at 10x the lowest salary in the organization, for example. 10x the compensation could be enough incentive to do the job.

He even says in his presentation that absolute equality is not what he's suggesting, nor would it even be preferable.

[dre]

And we all know what horrendous ideas came about then as a counterbalance...

Yup. Thats the real danger. If wealth gets too concentrated, then fully distributive systems like communism or real socialism could become popular. Venezuala is a good example of that.

[cybercoma]

That,sir,is spot on!!!

I have a real fear,though,that this generation of free marketeers will be like the ones in Europe in the 1800's.And we all know what horrendous ideas came about then as a counterbalance...

That's just it. As wealth continues to concentrate, people will continue resorting to making due via "any means necessary." At least the laissez-faire crowd realized it was necessary to throw people a bone, so that those with money could have stability and security with their wealth.

[August1991]

Someone could argue that a CEO's pay should be capped at 10x the lowest salary in the organization, for example. 10x the compensation could be enough incentive to do the job.

Why 10X? Why not 20X? Or 23.6X?

This is very arbitrary.

[dre]

Why 10X? Why not 20X? Or 23.6X?

This is very arbitrary.

I agree and I dont think those type of limits on salary are necessary.

But what you COULD do is allow all the shareholders to vote on executive compensation, so that the CEO and his buddies on the board of directors cant just write down as big a number as they feel like.

[MiddleClassCentrist]

Why 10X? Why not 20X? Or 23.6X?

This is very arbitrary.

As opposed to arbitrarily raising it to infinity as a company fails...

It's up for discussion good sir. An executive's success relies almost entirely on the quality of people below them. Maybe setting it at a ratio of what it was in the 1960's or some other timeline before the divergence began to occur.

All I'm saying is that we have examples of salary caps to improve the quality of a social construct. Putting a salary cap would encourage top earners to raise the lower wages in their company because finally, they'd have personal invested interest in that wage being higher. It would no longer be a number just to be cut at all costs. A war of the highly paid on the rest.

From the other perspective, workers are the ones who actually generate the profit for a company. Why should they be paid 20x less because the company needs more of them to succeed?

I'm just talking about it. I guarantee that this is an eventuality in a few hundred years and our current economy will have shifted toward socialist policies for wage and compensation. We can't have a far right capitalist economy running forever. Especially since the current goal in such an economy is now to roboticize and automate, eliminate jobs and reduce the pay of all jobs that aren't near the top over time through inflation. Just follow those trends, you can see where it's going... unless there is change to stop it.

Edited December 10, 2011 by MiddleClassCentrist

[punked]

I don't even know why we are still having this argument. When the 6 Walmart heirs have more wealth then 100 million Americans and wealth that would make up close to half of the Canadian budget of course it is going to hurt societies.

[PhilosopherKing]

I have a real fear,though,that this generation of free marketeers will be like the ones in Europe in the 1800's.And we all know what horrendous ideas came about then as a counterbalance...

An interesting datum in this morning's news.

The Six heirs to Sam Walton (The Wal-Mart family) together own as much wealth as the lowest 30% of the American population.

[cybercoma]

And that's inherited wealth. It would be silly to be completely against inheritances, however. If someone works hard to build up their wealth, they ought to be able to pass it along to their kids.

Also, I'm not so sure the CEO cap is really an effective means for reducing the gap. It's not just corporate executives that are pulling away from people. It's actually mostly the top 0.1%.

In a recent study they mention that "despite making various extrapolations beyond

what is directly available in publicly‐available data sources, for the year 2004 they are only able to identify the occupations of 17.4 percent of the top 0.1 percent of income earners." Those professions that they can identify include not only corporate executives, but also "financial professionals, law partners, and professional athletes and celebrities." What I'm getting at is that capping just the corporate executives does nothing for the rising income gap when the people that are pulling away from the pack include other occupations as well.

This is an American study, but Canada falls right in the middle when it comes to the income gap, but our income inequality is growing faster than any other nation. We will be on the US end of the spectrum within a generation. We're not there yet, so that's worth bearing in mind as well. However, considering crime reporting is down, this may also be an indication of social trust being eroded, as Wilkinson argues.

I would be curious to know how or why Japan has a narrower income band to begin with. Is it just a cultural thing. It would be interesting to know.

The problem in America is the capitalist spirit of profits as an end in itself. Profits ought to be a means to an end, but we see people accumulating all of this wealth for no other reason than to accumulate all of this wealth.

Their successes, however, do not happen in a vacuum. People are only successful because they live in a society that is conducive to that success. Without public spending on healthcare, education, water treatment, sewage, roads, utilities, fire, police, judiciary, and government, it would be much more difficult, if not impossible for people to have the same level of success.

Why does that matter though? Well, when the middle class falls behind and begins to struggle, there will be increased demand on social services and a decrease in funding to supply those services. It's important to really think about that for a minute. People argue that income redistribution is not fair; however, the income will be redistributed no matter what. When the money is hoarded at the top, those that fall behind will stop being able to pay for the social services. The burden will go to the top to provide them. But what if we just don't provide those social services, you might ask. You create instability and violence, which will make it much more difficult for those at the top to continue being profitable. As Merton argues, if society values particular ends (profit in and of itself is valued in our society), but does not provide people with the means to achieve those ends, they will find "creative" ways of doing so. Those means are what he called deviant because they go against what society finds acceptable (remember, we're talking about a condition where society doesn't provide the means for attaining the ends it values).

In short, the top's wealth will be redistributed one way or another. Either we find a way to keep the income gap narrower from the start (less variance in wages/salaries between occupations), we redistribute wealth through taxation (more variance in wages), or the wealth comes under attack by instability (do nothing approach). As the cliche goes, there's an easy way to do this or there's a hard way to do this. Your choice.

[August1991]

I'm travelling and this is a good but difficult thread. I'll respond in Argus style.

The example above is taking a good thing and spreading it out to improve the quality of a social construct and is more in line with our discussion.

The problem is that if we have any hope to make it possible for paraplegics to walk, we must accept "some inequality" now.

Cybercoma is advocating that we put everyone in a wheelchair. I argue rather that people who can walk should live with paraplegics while we seek a solution to the problem of nerve tissue and paraplegia.

Cybercoma seems to mwould make all of us poor but equal.

This is more like the NHL. Revenues of all teams are shared so that more teams can exist and reach more people on a balanced level. There is a salary cap to ensure that one team can't just buy up all of the talent and dominate the league, preventing anyone else from being able to reasonably compete.

Posters here know that I don't follow sports so I may be wrong. If I understand properly, US football and the NHL restrict how teams pay their players. US baseball does not.

If I managed a professional sports league, I would want exciting/unpredictable games between equally matched teams. IOW, I would want good players evenly distributed among teams. Since these young guys love to play, I would pay them as little as possible.

Frankly, I don't know what you mean by your NHL example, MCC. The NHL is a monopoly, and Sidney Crosby is also a monopoly.

The North American market in supermarket cashiers, for example, is much wider.

Edited December 11, 2011 by August1991

[cybercoma]

Cybercoma is advocating that we put everyone in a wheelchair. I argue rather that people who can walk should live with paraplegics while we seek a solution to the problem of nerve tissue and paraplegia.

Cybercoma seems to mwould make all of us poor but equal.

I have no idea what you're talking about; your metaphor isn't working. Do you think everyone in Sweden and Japan is poor? I've said quite clearly, as Wilkinson mentioned, that absolute equality is not the goal, nor even preferable to what we have. Absolute equality is simply the other side of the coin that is the income gap problem. There's a "sweet spot" between everyone making exactly the same thing and having a large problematic income gap. You can see from the video that in the developed nations you have Sweden and Japan on one end with a more preferable situation, Canada in the middle and the United States on the opposite end. No one's suggesting everyone be poor. I would hardly say everyone is poor in Sweden and Japan.

[August1991]

I have no idea what you're talking about; your metaphor isn't working. Do you think everyone in Sweden and Japan is poor?

People in Japan and Sweden are rich. They are generally happy.

People in Cuba and North Korea are generally poor. They are generally unhappy.

According to State statistics, people in all four countries earn roughly the same income as others in their country.

----

Cybercoma, I have no idea what you're talking about. (IOW, income equality has nothing to do with anything.)

Edited December 11, 2011 by August1991

[Moonlight Graham]

An interesting datum in this morning's news.

The Six heirs to Sam Walton (The Wal-Mart family) together own as much wealth as the lowest 30% of the American population.

And the six heirs help keep them that way by employing many of the lowest 30% with Walmart wages and crap benefits.

But dang do I like those savings!

[Evening Star]

No offense but this is the type of moronic degredation of political discussion that has the Americans so screwed up down south.

When I lived there, I once had a friend (a Democrat at that) tell me that the only two alternatives are American capitalism and Khmer Rouge-style communism.