Is income inequality the tide that will sink all boats?

Copyright JC Politi Photography
A woman begging outside a church in Barcelona, Spain

There is an article in the New York Times about whether increased income inequality in the United States will lead to slower economic growth. The article quotes prominent economists and includes some shocking statistics.

According to the article:

Income inequality has soared to the highest levels since the Great Depression, and the recession has done little to reverse the trend, with the top 1 percent of earners taking 93 percent of the income gains in the first full year of the recovery.

The 1 percent earns about one-sixth of all income and the top 10 percent about half.

The I.M.F. (International Monetary Fund) has cautioned the United States, too. “Some dismiss inequality and focus instead on overall growth — arguing, in effect, that a rising tide lifts all boats,” a commentary by fund economists said. “When a handful of yachts become ocean liners while the rest remain lowly canoes, something is seriously amiss.”

I am struck by these statistics, despite the fact that I have heard them before. It makes me wonder what impact these levels of income inequality have on people on both sides of the economic divide.

Our country is sharply divided on many levels and on many issues. An earlier post on this blog discussed the lack of opportunities for interaction between people of different classes, due to what Michael Sandel has labeled the “Skyboxification of America.”

Copyright JC Politi Photography
A porche taxi-cab in Frankfurt, Germany

It is much easier for people to act in their own self-interest if they can insulate themselves from people with different backgrounds and experiences. The Skyboxification of America enables people to insulate themselves from people who cannot afford their lifestyle.

But how much money is enough? Some  corporate salaries are far beyond what people need to live a comfortable existence. And yet, people continue to strive to make more money and to acquire more things – while people they work with struggle to make ends meet.

Maybe we should all focus more on acquiring more understanding for other people and their needs and struggles instead of on acquiring more wealth.

Copyright JC Politi Photography
Occupy Frankfurt Demonstration, Frankfurt, Germany

What do you think? Do you think income inequality in the United States has reached a point where people in leadership positions will have to start taking it seriously? What would that look like? Do you know of any examples of CEOs who have worked on leveling incomes in their companies? What will it take for policymakers and corporations to stand together to make some changes to the policies that lead to income inequality? What opportunities do you see for bringing people together to promote better understanding and cooperation? What role do you think the need to save for retirement plays in this equation?

I would love to hear your thoughts. Thank you for reading.

30 Comments

Filed under Business, Culture, Economy, equality, Ethics, Income inequality, Photography, Photos, Policy, Politcs, Poverty, Role of Government

30 responses to “Is income inequality the tide that will sink all boats?

  1. Sadly I think it will always be a difference in people’s earnings – but as it’s today is totally crazy that some CEO’s can get yearly bonuses for running companies that can feed 50 families for a year. They are only doing their jobs, just you and me. How will we change it ???
    We have to start from the top with this one. In Ireland when they economy crises sat in last year the whole government toke a salary cut 20% – that’s the right way to act.

    • Absolutely. Although here, at least on the state level, government workers are not making much, and their salaries have already been slashed. To me, the income inequality comes from the CEO issue you raise. Thanks so much for the comment!

  2. Barneysday

    I do believe income inequality will ultimately be the downfall of this country. The government runs by the consent of the people, as do corporations. Once there is a perception, a tipping point really, when people realize they have no hope of crossing over, then they have nothing to lose. They’ve already lost their house, their medical care, their life savings and their jobs. So why not rise up and say, enough is enough?

    You are correct; there is no reasonable justification for the CEO salaries being paid today, for the rich to be paying less than 15%, and you and I 25%.

    We continue to sold the bill of goods, that with hard work and dedication, we can all achieve the American dream. Thats just plain hogwash! Without an education, without an adequate breakfast even, the masses have no chance.

    Great post

    • Thanks for the insightful comment, Barney. So true. I don’t know when people will stand up and say this is unacceptable. It takes so much to get people in this country to stand up against the status quo. I don’t understand why. Thanks so much for the comment!

  3. Agree with Barneysday…and your comments, as well.

  4. From what I have read the very rich don’t even regard themselves as American citizens: they see themselves as citizens of the world with homes all over. It seems logical that they really wouldn’t care about the poor and the middle classes in this country. If things get really bad here they will simply move elsewhere. I don’t see it getting any better and time soon.

  5. Once one begins the seductive journey of acquiring, I see them become less and less aware of the people and disparate realities around them. In a general sense, the more we can get, the less we have in the most important areas that define success.

    • Hi Mimi! The acquiring issue is an interesting one, isn’t it? I wonder if that is part of the problem. Maybe the hyper-capitalism of our society is part of the issue? It is just baffling…and disturbing for me. Thanks so much for the comment, Mimi!!

  6. When people are good at what they do they should be paid well, even if it means they are paid better than their supervisor! If you haven’t already, you should read this book: http://www.amazon.com/First-Break-All-Rules-Differently/dp/0684852861

    • Hi Diana! I don’t know that book. I’ll have to check it out. I agree that people should be paid well for good work, but the CEO salaries have really become obscene here in the past 20 years. Thanks so much for the comment! I hope you’re doing well.

      • CEO salaries are obscene here too!

        • Has the gap between CEO and employees grown exponentially in Canada too? CEO’s now make 100s of times what the average employee makes, according to CNN. It is out of control. Is it that bad in Canada too? And how has that played out politically?

          • if an employee makes 30K the CEO make 3MM?? yikes! I’m not sure if it’s the same here, but non-profit CEOs can make quite a penny here now. Our hockey players make too much money! We have one that makes 35k a week!

            • Yup. It is disgusting. And athletes are also way out there. I just googled and Kobe Brown makes 23 million per year!!!! It is just so sad when there are so many people losing their homes and unable to afford to feed their families. There are people working several jobs for more than 40 hours a week and still living under the poverty level. It is just wrong in my mind. And don’t forget that we don’t have federally provided health care or higher education. It is really complicated, and just seems really wrong to me. Thanks for the education about our neighbors to the north! 🙂

  7. Jenni, you know how I feel without saying it. The American Dream does not exist for too many Americans. People cannot walk in the shoes of those in need because of the skybox or gated community effect. The demise in the middle class began in 1980 when Reagan changed the tax rates and the income disparity became too divergent. Next came the outsourcing to improve profits further and so on. What frustrates me about our GOP friends’ claims, Obama did not create this poverty. It has happened over time and it will have to be corrected over time in a concerted way. The President should do more, but he is not getting enough credit for the job retraining and push for community colleges he has done. We need to improve the minimum wage level to a living wage. Right now, the minimum wage jobs perpetuate poverty and as close to slave labor as we can get. Thanks for posting. BTG

  8. The way I see it is that equality or wealth distributed evenly is simply not realistic, the system wouldn’t work, it wouldn’t be a sustainable economy, you need a certain inequality to keep the economy moving, otherwise what you create is abundant speculation. We just need to look back a few year ago with the real state problem, people was acquiring property well beyond their possibilities because they were led believe they could sustain that “life style” and we all know what happened once reality hit.The main problem is how taxation works, they keep screwing (I couldn’t find a smarter word) the middle class, take this as an example: I’m currently living in Spain, you all know economy is at it worse, government had the brilliant idea to increase sales taxes from 18 to 21% and from 8 to 21% in basic need products (school goods, food,etc.) as a way to increase the revenue for an already failed system, they also increased income taxes by 5% if you are in a lower bracket, mine was 12% (I had a 25% salary increase and I’m literally taking 7% more) but because the government now more than ever is an ocean of brilliant ideas they decided that to boost the economy and create jobs they would reduce the taxes to big corporations. Now, guess what’s happening, yeah, you got it right, not only the unemployment rate increased but the magnificent government suffered a reduction on its revenue because: “drum rolls” middle class is not spending a single Euro, I mean who would?.
    The whole problem here is that the government makes it easy for the rich to get richer, the wealthy rarely do illegal things, they only slip through the cracks the government leaves for them, is that bad? I don’t think so, we use whatever is best for us, we use the system in our favor.
    Don’t take me wrong, I’m not on the rich side, far from it, the government defend their own kind, they don’t represent the majority of us, clearly they will do little to change it and when they do something they seem to forget that is their job and that we, the taxpayers, are paying for it, they feel like they are giving handouts.

    • I agree that the system does seem to favor the wealthy and that with rulings like Citizens United making it harder and harder for any person who is not wealthy to run for office, it does not seem likely to change anytime soon. I do think there could be some limits on corporate pay or some way for the government to prohibit CEOS from making more than 100 times what their average employees make or something like that. There must be a middle ground. Thanks so much for sharing your insights and perspective. It sounds like what is happening in Spain is devastating. I hope we all learn some lessons as we dig out of this mess. Thanks again for reading and for your comment. Sorry for the delayed response.

  9. Jenni, greetings. Your timing on this could not have been better (or for me, at least). I was about to do a post on “The Rich and the Rest of Us.” Please check it out as I would love your opinion. As for our friend living in Spain, I had a few comments in response. One of the keys for our government is to keep things fair. I believe in capitalism, but the unfettered pursuit of gains can cause undue leveraging, corner cutting, and at its worst unethical and illegal behavior. The haves take advantage of the have nots. They always have and always will. Nonetheless, we need to keep it as fair as possible and make them play by the rules. Bernie Madoff is an extreme, but the folks symbolized by Gordon Gekko in the movies are not atypical. They made their money by leveraged buyouts, putting heavy debt on the company they bought and paying for it through RIFS and selling off the pieces. Yet, what is more commonplace are leaders who do not know how to make their numbers, so they cut people to beat their budget goals. At the end of the day, the average Joe and Joanne’s interest are the least important and they get screwed. Sorry for the soapbox. BTG

    • I couldn’t agree more and am always happy when you get on your soapbox as it helps inform me more and hopefully others as well. Thanks so much for your comment. Looking forward to checking out your post. I am in between phones, so my reading time has been cut down lately until get that all squared away, but I will be over shortly. 🙂 Thanks again for your thoughtful comment!

  10. I think rising income inequality is our biggest economic problem. The last 30 years have been fueled by household borrowing compensating for declining incomes.

    http://econopolitics.com/2012/10/19/its-the-middle-class-stupid/

  11. Over the past 30 years, differences in salaries have jumped dramatically between the classes. The cost of living has jumped so much that it is turning salaries that, 30 years ago, would have been considered upper middle class. Now, they are bordering on lower middle class and poverty levels. It’s harder for families to manage on only one salary. Forcing moms to go to work when they wish they could be home with their kids is wrong, in my opinion. Those company execs who are making obscenely high salaries should be forced to take a cut in pay or figure out a way for them to donate half their salary to organizations such as homeless shelters. Perhaps the government can tax them more and earmark those taxes to help those who are struggling. Something definitely has to be done, both in Canada & the U.S.

  12. Dear Jenni,
    This is something my friend and I talk about on a daily basis. We have no solutions, but both agree…the more we hold on to “what’s MINE!”….like a selfish toddler, not wanting to share, I think the more of this vast space will exist between the haves and have NOTS. I believe we change each other’s minds…one person at a time. YOUR blog, and others that encourage that we open our minds and hearts to giving more, worrying less about “fairness”…and “what’s OURS”….make a difference. Keep doing it friend. Keep asking questions.
    Much love to you♥♥♥
    Love, Lis
    xoox

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