Last week I wrote about how developed countries where people are more equal (a smaller spread between the richest and poorest) have less mental illness, longer lifespans, less drug abuse, lower murder rates, less obesity, lower rates of incarceration, lower infant mortality, fewer teenage births, higher literacy, more trust and, oddly, more social mobility.
In short, “in rich countries, a smaller gap between rich and poor means a happier, healthier and more successful population,” said British researchers Richard Wilkinson and Kate Pickett.
They have been researching this subject for decades, most recently for their book Spirit Level: Why Equality is Better for Everyone (www.equalitytrust.org.uk). The findings hold true across developed countries and 50 U.S. states.
We’re social animals who get stressed when we’re at the bottom of hierarchies. Extreme stress leads to dysfunctional behaviour and illness.
Since hearing Wilkinson talk here in Vancouver in December, I’ve been watching the statements of provincial political leadership candidates and federal politicians in light of Wilkinson’s observation, backed up by mountains of data, that “more economic growth will not lead to a happier, healthier or more successful population. In fact, there is no relation between income per head and social well-being in rich countries.”
So all the talk about expanding the economy to solve our social problems (“to generate the money to pay for better education and health care”) is basically wrong. Wow. That’s quite a shift from the prevailing political mantras. What we really should be doing is reducing the gap between rich and poor.
Yet what we’re actually doing is just the opposite. In Canada, almost a third of the economic growth between 1997 and 2007 went to the top 1% of income earners, a spread unprecedented in Canadian history. Meanwhile, the median inflation-adjusted pre-tax salary of a full-time Canadian worker has been frozen for more than two decades.
Why aren’t we obsessed with closing this gap?
I suspect it’s because people at the top fear personal losses, even though Wilkinson’s research shows that while the poor would gain most, people all the way up the income scale would benefit from more equality.
Many of us prefer to open up more opportunity at the bottom – providing equality of opportunity rather than taking away from people at the top. Yet there’s more social mobility in countries where there’s less inequality.
“If you want to pursue the American dream, go to Norway,” said Wilkinson.
It’s very hard to achieve equality of opportunity without reducing income inequality.
There are really only two ways of reducing income inequality: reduce differences in pay before tax (as in Japan) and/or redistribute income through taxes and benefits (as in Sweden).
Businesses have a big role to play in reducing pay differences, especially when you consider that two-thirds of the income of the richest 1% comes from wages.
They could start by reducing inequality in the workplace. Bust the myth that Ivanhoe Mines would collapse if its top three executives didn’t average $9.1 million in annual income (2010 figures from Business in Vancouver’s Book of Lists), or Goldcorp couldn’t prosper if its top three executives weren’t making an average of $7.3 million a year.
Follow Goldcorp’s lead and give back big bucks for the public good, as it did with a $10 million donation to Woodward’s. Raise the levels of pay for people at the bottom by shaving a small percentage off the pay at the top. Sweeten up the pension plan. Tolerate unions. Put the interests of everyone in the company on a par with those at the top.
And always remember that everyone wins when there’s less inequality – even those in higher income brackets.