Wednesday, August 19, 2015

Three Short And Scrumptious Economic Posts: On Income Inequality and Lack of Information. A Re-Posting.

 (Originally posted here.  Everything in it still applies, income inequality is still growing and so on, and it's still worth your while to read the post if you haven't.)

1.  This is a neat bar graph about how the big economic cake is sliced and divided between various groups in the American economy.  It shows what has happened to the extra cake (income increases) in various economic expansions.  The latest expansion is passing most of that extra cake to the top ten percent of earners:

That's about how income inequality grows, right?   But what do people believe about income inequality in this country?

2.  A recent survey asking questions about what people believe CEOs here earn tells us this:

...Americans told researchers they thought CEO pay at major corporations was approximately 30 times more than their own. Actually, CEO pay averages 354 times what a worker earns at the same company.
Americans also said they thought the pay gap between CEOs and workers should be approximately 7 to 1. To achieve that ratio, workers would have to make $1.8 million each year, a separate study concluded.

Boggles your mind, doesn't it?  These results support earlier ones which suggest that Americans think general income inequality is a lot less than it actually is and would prefer even lower levels of inequality.  The Scandinavian ones.

To return to those CEOs, in other countries the multipliers are smaller.  From 2013 but still much bigger than the idea that CEOs would earn roughly thirty times as much as the average worker in the same company:

The ratio of CEO pay to average worker pay in neighboring Canada is 204, in Germany it's 147, in the U.K. it's 84, and in Japan it's just 67.

The Huffington Post piece notes that perhaps income inequality doesn't energize US voters because of this lack of information about its true size.  That may well be the case.  But it's also true that many not-rich in this country see themselves as just temporarily hampered potential billionaires whose interests lie with the top one percent and that class-based segregation in most everything further helps to disguise the magnitude of the differences.

3.  Speaking of lack of information:  The practice of maintaining secrecy about earnings in general is one reason why it's difficult for someone who suspects they are being paid less for discriminatory reasons to verify or falsify that.  If you don't know what others doing the same job are earning, how do you know if your pay is fair?

To take an example from gender differences in earnings, a Washington Post primer notes this:
 The one employer with relatively fair pay between men and women, Maatz said, is the federal government. Why? Because salary scales are published and widely known — so women, who historically have not negotiated for higher salaries, or are punished when they do — have more information about where to start.
That kind of transparency, among other provisions, is exactly what the Paycheck Fairness Act calls for.