Income Inequality

Jun 30, 2013 Editorial

The furore raised over the introduction of the minimum wage, scheduled to kick in tomorrow, raises the issue of income inequality. This issue has become a burning question not only in the US and Europe but in every country in which the neo-liberal economic medicine has been administered.
Last month we raised the issue of “Democracy and Inequality” in this space, but the income disparity has some different angles which must also be examined.
In Guyana we can compare the minimum wage of $35,000 per month against the reported $2 million the CEO of GPL is said to earn. The latter is 57 times the former and does not include a wide range of “fringes” that might very well run into millions of dollars.
Asked about the astronomical compensation levels at the Corporation, the CEO gave one of the standard justificatory responses: certain jobs need such high and specialised level of skills, the almost unique individuals must receive commensurate salaries to retain them.
In all of the developed countries this increasing income gap between the top and bottom wage earners has grown. In the US, where the already high share of the top one per cent has grown by 275 per cent since 1980, the comparable rise for the entire bottom fifth grew by just 18 per cent.
Total executive compensation packages average 228 times the minimum wage of about $15,000 annually. The question for us in Guyana is whether we will use the US as a model for income levels or instead, use the Scandinavian countries, where the wage disparity is considerably smaller but the standard of living is consistently ranked higher than that of the US.
The executive salaries are just an extreme example of the justification for other high paying jobs in the economy: that these jobs need a higher level of training in the new technologies. But if we examine the types of jobs that generated the greatest increases in income, both relatively and absolutely, they are primarily in “finance”, where from all the available evidence, the greatest skill needed is a willingness to take the risks involved in gambling. In the meantime, “finance” has generated almost 40 per cent of the profits in the US with the spoils going directly to the top one per cent, who have used their wealth to game the system.
The justification for the mega salaries offered to the CEO of GPL along the lines of their US counterparts is therefore somewhat self-serving since the corporations in Scandinavia are in no way less complex to manage. Critics however, point out that the crucial difference between the two models is the level of taxation.
In the US, tax rates for the highest earners have actually fallen during the period since the 1970’s when their incomes were rising the fastest. The effective tax rate for the top hundredth of a percentile has fallen by more than half, from 71.4 percent in 1960 to 34.7 percent in 2004.
Interestingly, studies have shown that the declining tax rates actually spurred the top earners to demand even higher salaries. Critics of the new status quo consequently argue that increasing the tax rates on the highest earners may help in more than just the redistribution: it may also discourage the top earners from demanding higher salaries.
But ultimately it comes down to the dominant ethos of the day: how much is “enough” and do we have an interest in building a less divided society? But even more fundamentally are we homo sapiens economicus in that all our decisions arise out of the drive for material wealth.
Looking around us today, it would appear that Marx might have lost the battle (between capitalism and communism) but won the war as to what motivates man.
We may have been somewhat fortunate up to now that our economy has not been “financialised” as much as the ones up north and adopted their guiding philosophy tout court. But just last week there was a conference intended to correct that “defect”, just as the $35,000 minimum wage kicked in. Let us keep equity in mind.

Latest News

Income Inequality

Related

Similar Articles

The Glenn Lall Show | February, 3rd, 2025

Follow on Tik Tok @Glennlall

THE BLUNT OF THE DAY

Sports

Corbin century, fast-bowlers give CCC lead as champs face stern Day 3...

Powerlifting to kick off year with...

North Essequibo cart off ECB Busta-sponsored T20...

Construction progress of five New Stadiums,...

Inclement weather forces BCB to halt cricket...

EBDCA/D&R Construction 40-Over Cricket...

Features/Columnists

What Guyanese leaders can learn from Donald Trump

OAS Secretary General Election and renewed OAS Consensus

VP Jagdeo on PPP comrades benefitting

Publisher’s Note

Weekend Cartoon

Bridge Watch

Demerara Harbour Bridge

> Berbice Bridge […]

Income Inequality

Share this:

Related

Similar Articles

The Glenn Lall Show | February, 3rd, 2025

Follow on Tik Tok @Glennlall

THE BLUNT OF THE DAY

Sports

Features/Columnists

Publisher’s Note

Weekend Cartoon

Bridge Watch

Demerara Harbour Bridge

> Berbice Bridge […]