Nation slips as taxpayers must pay what CEOs avoid
A comparison to other countries shows our greater tolerance for inequality comes with costs for middle- and low-income Americans.
Seattle Times staff columnist
Author in town
Pulitzer Prize-winning reporter David Cay Johnston is in Seattle this week speaking about his latest book: “Divided: The Perils of Our Growing Inequality”:
• 6:30 p.m. Thursday at the University of Washington’s Kane Hall
• Friday as part of “Working Democracy: Labor and Politics in an Era of Inequality,” a conference at the University of Washington (details at )
• 8 p.m. Saturday at Town Hall Seattle, sponsored by Washington Physicians for Social Responsibility
The United States tolerates more inequality than most other wealthy nations, and that is one of the reasons we have lost our standing as the world’s richest nation at every class level except the top.
I’m not so interested in whether we beat out every other nation as I am in whether we are prosperous and fair, and what our declining status tells us is that fewer of us are prospering, because our country is less fair.
The latest measure of how we compare is a report from the Organization for Economic Cooperation and Development (OECD), which provides unbiased economic information to the governments of member nations. The New York Times carried an illuminating analysis of the OECD data Tuesday.
In 1980, most Americans had higher incomes than their counterparts in most countries, but during that decade the numbers began to change. Since then, incomes for middle-class and poor Americans have fallen behind several other nations, but the U.S. has remained the top earner overall because of the tremendous growth at the top.
This has happened for a number of reasons. The U.S. no longer has the same advantage in education; the minimum wage is lower here; and pay at the top is higher than elsewhere. And governments in countries whose middle classes have overtaken ours have policies and practices that are more favorable to poor and middle-income citizens, while ours tend to favor those at the top. (We protect some companies from foreign competition, but not labor.)
Canada’s median wage tied the U.S. median in 2010, according to the Times’ analysis, and most likely it is higher now as the result of faster wage growth.
Efforts to raise the minimum wage in this country recognize the ground we’ve lost, but those efforts have to combat fears that higher wages will kill off businesses and stall the economy.
The imbalance between CEO pay and wages for labor were cited in the OECD report as a reason the middle-income workers in the U.S. aren’t doing as well as in the past.
Since the food industry tends to be outspoken against increasing the minimum wage, I want to mention another study I saw this week. It’s from the Institute for Policy Studies, a progressive think tank. This study, released Tuesday, looks at restaurant-pay practices and taxes for the 20 largest corporate members of the National Restaurant Association.
What it found is that taxpayers lose out twice. Soaring pay for CEOs of those companies is in effect subsidized because much of it is shielded from taxes, while on the other end, workers at the lowest level often earn so little that they qualify for food stamps.
The report singled out Starbucks CEO Howard Schultz, who it said “pocketed $236 million in exercised stock options and other ‘performance pay’ over the 2012-2013 period.” The study calculated that the company, by structuring the pay the way it did, using stocks rather than wages, saved $82 million in taxes.
Tax rules intended to encourage investment help people at the top disproportionately. We should correct that imbalance and do more to encourage savings among low- and middle-income wage earners, because that’s one way to move up the economic ladder — to save for children’s education and for retirement.
Americans are worried about their financial future. A Gallup poll released this week found 59 percent of Americans worried they won’t have enough money for retirement.
Some of them should have worked harder, spent less (but that hurts business) and saved more, but some of the problem is with our economy, which makes it increasingly hard — even for those who try to do everything right — for most people to thrive.
Most people, when they reach retirement age, will depend on the wages of younger workers to keep funding Social Security. How those workers fare going forward ought to be everyone’s concern, but we are falling short on preparing them for the future, another reason we are slipping behind other wealthy nations.
According to that analysis in The New York Times, Americans between the ages of 55 and 65 rank above the rest of the world in literacy, numeracy and technological skills, but Americans between 16 and 24 rank near the bottom.
Our education shortcomings are another prime reason we are being overtaken by other countries. We shouldn’t expect to always be first, but we should want to be our best. We need to stop hurting ourselves, heed the warnings and become less tolerant of inequality.
Jerry Large’s column appears Monday and Thursday. Reach him at 206-464-3346 or email@example.com
About Jerry Large
I try to write about the intersections of everyday life and big issues. I like to invite readers to think a little differently. The topics I choose represent the things in which I take an interest, and I try to deal with them the way most folks would, sometimes seriously, sometimes with a sense of humor. My column runs Mondays and Thursdays.
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