So, what’s a fair wage ratio between the highest paid employee and the lowest?
A disturbing but fleeting fact graced the news of the day on January second this year. As of 1:11 PM on January 2nd, top CEO compensation had exceeded what the average Canadian worker would earn all year. That average Canadian earned just under $47,000 in 2012. It took the top 100 CEOs of Canada just over a day and a half to earn the same amount.
This gross inequality merits a brief mention, but tends to be forgotten as quickly as a New Year’s resolution. It’s hard to imagine anyone thinking this situation is fair, that the work of a CEO is over 200 times more important than that of other Canadians. Indeed, a 2012 poll showing over 70% of Canadians believing that income inequality, now growing faster in Canada than the United States, presents a serious problem that undermines Canadian values.
One thing growing inequality certainly undermines is our health.
Greater levels of income inequality lead to worse health outcomes. This is most true for those who, as Pope Francis said in his recent letter, “must be content with the crumbs.” People living in poverty suffer from far higher levels of illness, often having life expectancies 20 or more years less than the wealthiest members of society.
The ill health effects of inequality don’t rest entirely with the poor, however. As Richard Wilkinson and Kate Pickett pointed out so well in their 2009 book, The Spirit Level, there’s something about living in a country that is less equal that harms the physical and mental health of everyone in society, even those at or near the top of the socioeconomic scale.
Whether it’s higher levels of crime, a greater burden on social structures, or simply the toxic stress of constant competition, there’s something about high levels of inequality that damages us all.
U.S. President Obama has called inequality, now reaching levels in his country not seen since just before the Great Depression, the “defining challenge of our time.” Even Canada’s Federal Finance Committee has released a report raising concerns about this issue and calling for some (albeit minor) changes to our income tax and benefit system to help offset inequality.
However much attention this issue merits, there is an inconvenient truth that few in the realm of politics are willing to discuss. To deal with income inequality, and thus prevent the economic and social harms it causes, some people have to be paid less than they’re currently earning and some people more. The incomes of those at the top of the scale and those at the bottom aren’t going to magically gravitate toward one another.
There needs to be a conscious decision, before or after taxes, to increase equality.
Perhaps this uncomfortable fact explains the fleeting attention paid to the whopping salaries of the top earners relative to the rest of us. Despite the growing chorus of concern, governments have been loath to legislate increased wages or even to effectively tax executive compensation (much of the pay of the highest earning CEOs is in stock options which are taxed at a lower rate than cash income). The flattening of tax rates and a laissez-faire approach to the economy are simply too sacrosanct to address, even in the face of mounting evidence of their harm.
Recognizing this intransigence on the part of the elected, one new organization, WageMark, is taking the case to the companies, and the consumers, themselves. Along the lines of Certified Fair Trade or Certified Organic, they offer a means to see, right on the packaging, the equality ethic of a company. Certified WageMark businesses have a maximum of 8:1 ratio between the highest paid employee and the lowest. To contrast that with the current situation, the second-highest paid CEO in the country in 2012 earned 500 times the national average wage, and over 1000 times that of someone earning minimum wage. They’re a long way off the mark.
It’s a novel idea, and only time will tell if it catches on, but there’s one thing working in its favour. While ballooning CEO salaries have never been shown to boost company performance, reputation certainly has. If the growing attention to income inequality translates into consumer demand, then company policies will follow. And consumers are voters, so if the message resonates at the till, it may resonate at the ballot box as well.
A version of this commentary appeared in the Vancouver Province, iPolitics.ca and the Saskatchewan Star Phoenix