November 10, 2014
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The American people have spoken. But what did we really say about inequality?
At
first glance, it seems that extreme inequality mattered little to the
majority of voters who put pro-business candidates into office. After
all, the Republicans, along with far too many Democrats, are certain to
cater to their Wall Street/CEO donors. Do Americans really want an
ever-rising gap between the super-rich and the rest of us?
An important study (
"How Much (More) Should CEOs Make? A Universal Desire for More Equal Pay" )
by Sorapop Kiatpongsan and Michael I. Norton provides insight on why
Americans aren't more upset about rising inequality: It shows we are
clueless about how bad it really is. Their analysis of a 2009
international survey of 55,187 people from 40 countries found that when
it comes to understanding the severity of inequality, we're the most
clueless of all.
Americans are virtually blind to the growing gap
between CEO pay and the pay of the average worker. As the chart below
shows that gap has increased dramatically. In 1965, for every dollar
earned by the average worker, CEOs earned $20. By 2012, that gap
mushroomed to 354 to one.
But,
when asked in the survey, Americans grossly underestimated this gap.
Instead of 354 to 1, the Americans in representative survey think it is
only 30 to 1. When asked what the ideal pay gap should be, Americans say
that a fair gap would be about 7 to 1.
More amazing still, the
survey results, combined for all countries, show that the misperception
of inequality doesn't significantly vary by age, gender, income,
political leanings or education.
To see if these finding also hold
for the U.S., I waded into the database: Does political affiliation and
education impact how the 1,581 Americans in the survey estimated the
wage gap? (The data comes from the International Social Survey
Programme: Social Inequality IV - ISSP 2009
on the website Gesis . )
As the chart above shows, "Strong Democrats" estimated that the
actual
ratio between a CEO of a large corporation and an unskilled factory
worker was about 36 to 1. "Strong Republicans" said it was 40 to 1. A
difference without a distinction.
When it comes to offering opinions about what the wage gap
shouldbe,
the Strong Democrats thought 5 to 1 was about right, while the Strong
Republicans thought it should be about 12 to 1. The two political
extremes obviously are much closer to each other than to the current
reality of 354 to 1.
Does education make a difference?
The
data also allowed us to compare those who didn't finish high school
with those with graduate degrees. Lo and behold both groups again were
closer to each other, and again were wildly off the mark. Those who
didn't finish school thought the
actual gap was 60 to 1 while those with graduate degrees thought it was about 40 to 1.
Those
who didn't complete high school thought the ideal pay gap should be
about 5 to 1, while those with graduate degrees offered 12 to 1, ratios
were identical to those offered by the Strong Democrats and Republicans.
When
it comes to our ignorance of the pay gap, there are no blue states, no
red states—only misinformed states of mind. We're the know-nothings of
inequality.
Why are we so blind to inequality?
Most
of us have no idea that our golden land of opportunity is the runaway
leader among developed nations when it comes to inequality (
see chart below ).
This dubious distinction runs counter to American Dream we've been
indoctrinated with since birth. As a result, we reflexively think that
America is the epitome of democracy -- the fairest, most just and most
upwardly mobile country in history. That makes it hard for us to account
for why we are more unequal than all these other countries. So I
suspect many of us just tune out the data. It's too jarring to the
deep-seated doctrines that comprise our national identity.
Our
misreading of inequality also may be a legacy of the post-WWII economic
boom. During that time, our working class had the highest global
standard of living with ever increasing yearly real wages. (
Please see my last post .)
In the heat of the Cold War, it was American policy to boost jobs and
incomes to make sure our workers and middle class were the envy of the
world. If you add in the late New Deal and WWII into the mix, we're
looking at more than a half century of rising prosperity for working
people. Also during this period income taxes on the wealthy were
extremely high, more than 90% on the highest bracket during WWII. As a
result the top one percent, while living extremely well, saw their share
of total U.S. wealth decline (
see chart below ).
Little
wonder, that the massive baby boomer generation grew up both with the
idea of relatively equality and the reality of it. Of course, there were
wealthy people all over America, but life was getting better and better
for the vast majority of Americans.
We may still be living with
this cultural hangover and operating from a societal self-image from
yesteryear. We are likely to cling to it for quite awhile, in part,
because it's comforting as new economic insecurities take hold. As
workers from other nations pass us by, we look in the mirror and still
hope we are the fairest of them all.
Both political parties refuse to address inequality
Perhaps
the biggest reason we are so misinformed stems from the failure of both
parties, especially the Democrats, to address rising inequality in a
meaningful way. Yes, the Democrats tend to support modest rises in the
minimum wage that indeed make a difference to those stuck in the
lowest-paying jobs. But they won't go near the revolutionary idea of
placing a legal limit on what the CEO/worker pay gap should be -- let's
say at 12 to 1 which the Strong Republicans and the well-educated favor.
The reason is obvious: Politicians live in fear of a different
revolution -- a massive revolt from their corporate donors, who wouldn't
dream of earning so little. In fact, the entire elite establishment --
in finance, in the corporate world, in the higher levels of government,
academia and the media have no intention of limiting their incomes, no
matter what the public believes to be just and fair. Here lies the very
essence of class struggle between the 99 percent and 1 percent, and both
parties want no part of it.
What will it take to wake us up to inequality?
The
good news is that Americans of all genders, shades, incomes, education
and politics think on average that the wage gap should be about 7 to 1,
not 354 to one. That's a heck of a good place to start. Imagine if the
only real economic debate was between the strong Democrats who thought a
fair wage gap should be 5 to 1 versus the strong Republicans who
thought it should be 12 to 1. Progressives should be able to build upon
this shared sense of basic fairness, one that is miles apart from what
elites expect and feel is their due.
For about six months Occupy
Wall Street touched this nerve and put inequality on the agenda. "We are
the 99 percent" became our national anthem. For the first time in a
generation the country was talking about the gap between super-rich
financiers and the rest of us.
Roughly at the same time, the Tea
Party emerged with a different message. They also sensed that something
was profoundly wrong. For them the problem is government. They're not
concerned with inequality. If they see it at all, they follow Ayn Rand
and blame it on those at the bottom for not working hard enough. They,
and their political allies, revel in talk about "takers and makers" to
explain away the growing and glaring economic disparities.
Occupy
disappeared. (Yes, they are still doing good work here and there.) We no
longer have 900 encampments around the world to remind everyone that
inequality is our new way of life. But something still is stirring at
the bottom. Minimum wage campaigns are succeeding even in Red states.
The quest for $15 per hour pay for low-wage workers is growing. And most
importantly, each day millions more face the stark reality of trying to
lead a decent life on low-pay and porous benefits with blatant
inequality all around.
Elites and their academic acolytes will
counter by blaming inequality on advanced technology and the lack of
education. The poor can make it if only more elite colleges admitted
them, if only charter schools replaced tenure-saddled public schools, if
only the teachers unions disappeared. Only then will inequality be
reduced as those at bottom get more degrees and advanced skills.
To
be sure, the "help-thyself" message has resonance, and access to more
education will certainly help. But it leaves in place the powerful
structures of elite economic domination. It will take a different kind
of education to reduce the wage gap. We will need to learn the skills of
building a mass movement, that starts by providing education on the
realities of growing inequality. Only then can we can break through the
faulty self-image of America that is crippling us. Spreading the word
can really make a real difference. It's something we all can do.
We are the most unequal society in the developed world, and it doesn't have to be that way.
