CSRWire: Does greater equality benefit the rich?

Corporate Social Responsibility Wire asks if greater economic equality benefits the rich, as well as the poor:

By Jeffrey Hollender

“We want bigger houses and more cars, not because we need them, but because we use them to express our status. Material goods are how we show the world we’re keeping up, and in a more hierarchical society that’s more important. Status competition becomes more intense, and that increases our need to consume… We came across a website in England called ‘Ferraris for All,’ making the point that if everybody had a Ferrari, there would be no status in owning one.” -Kate Pickett

For years, I have worked to create a more just and equitable society, knowing that it would lead to a more sustainable world but also deeply believing that it was a moral imperative. If you are one of the globe’s vast majority of citizens who live daily with the adverse impacts created by the concentration of wealth in the hands of a very few, chances are you agree with this point of view. However if you are part of the wealthy and powerful 1% of the population that controls 90% of the world’s wealth, you’re likely to think this point of view reeks of a liberal disorder.

But what if increased justice and equity was also the key to greater happiness and fulfillment for the wealthy as well, and would mean less pollution, higher levels of educational achievement, lower health care costs, less crime, more vibrant local communities, and declining rates of cancer and depression? What if the bad stuff we all want less of and all the good stuff we want more of was exponentially achievable if we lived in societies where the spread between the rich and the poor was reduced?

A brilliant and critically important new book, The Spirit Level: Why Greater Equality Makes Societies Stronger, by Richard Wilkinson & Kate Pickett, provides compelling evidence that, in fact, each of eleven different health and social issues-physical health, mental health, drug abuse, education, imprisonment, obesity, social mobility, trust and community life, violence, teenage births, and child well-being-fare substantially better in more equal societies.

Until I read the research assembled in The Spirit Level it was difficult to argue that the problem of income inequality in modern societies is about anything other than fairness. But Wilkinson and Pickett methodically compare the scale of income differences in both different countries and different states within the U.S. to reveal just how much the fabric of society is affected by high levels of inequality. Research carried out since the early 1990s shows that many of our most pressing problems are worse in more unequal societies, and that societies with bigger income differences suffer more from a very wide range of health and social ills.

Statistics comparing countries with very high-income inequality like the U.S., the U.K., and Singapore to countries with very low-income inequality like Sweden, Norway, Finland, Netherlands, Belgium and Denmark tell a stark story:

When being asked to agree or disagree with the statement, “most people can be trusted,” people in Sweden, Norway, Finland and Denmark agree 50% more often than citizens of the U.S. and Singapore.

Comparing levels of foreign aid, Sweden, Norway, Finland, and the Netherlands spend on average 400% to 500% more of their national income than does the U.S.

60% more individuals suffer from mental illness in the U.S. and U.K. than in the Netherlands and Belgium.

If you live in Sweden or Norway you’ll live on average 2 to 3 years longer than if you live in the U.S. or Singapore.

Infant deaths per thousand are 100% higher in the U.S. than in Sweden, Norway, and Finland.

Obesity is 200% higher in the U.S. than in Sweden and Norway.

What can we do to erase these and many other remarkable disparities? Here are 10 ideas that would go a long way toward that critical goal:

Develop a national economic plan that places a priority on investing in health, education and welfare over military spending.
Raise income taxes on the wealthiest individuals and families and close loopholes.

Eliminate estate tax deductions.

Change capital gains tax rates to provide aggressive incentives for long-term investments. Short term rates (investments for under 1 year) may need to increase to as much as 90%, with long term rates declining to zero over a twenty-five year time horizon.

Mortgage deductions must be eliminated on second homes and limited to $200,000 for primary residences.

Charitable giving needs to receive even greater financial incentives.

Limit deductions for executive compensation to $500,000.

Minimum wage requirements must be transitioned to “Livable wages.”

We must ensure that “green jobs” are only funded and incentivized in sustainable businesses and industries.

Small Business Administration loan guarantees and tax credits for job creation must be aligned with the interests of local sustainable economies.


For more information on the issue and impacts of inequality, please visit the Equality Trust, Wealth for the Common Good, and Fair Economy.org.

An Inequality Index from the Institute for Policy Studies

Percentage of U.S. total income in 1976 that went to the top 1% of American households: 8.9. Percentage in 2007: 23.5.
Only other year since 1913 that the top 1 percent’s share was that high: 1928.
Combined net worth of the Forbes 400 wealthiest Americans in 2007: $1.5 trillion.
Combined net worth of the poorest 50% of American households: $1.6 trillion.
U.S. minimum wage per hour: $7.25.?· Average hourly wage in 1972, adjusted for inflation: $20.06.?· In 2008: $18.52.
From 2006 through 2008, the top five executives at the 20 banks that have accepted the most federal bailout dollars since the meltdown averaged $32 million each in personal compensation. One hundred average U.S. workers would have to work over 1,000 years to make as much as these 100 executives made in three years. (Institute for Policy Studies, Executive Excess 2009)
About Jeffrey Hollender

Jeffrey Hollender is co-author of the recently published book, The Responsibility Revolution and Co-Founder and Executive Chair of Seventh Generation, the leader in green household products. He is also the author of Inspired Protagonist , the leading blog on corporate responsibility and a co-founder of the American Sustainable Business Council and the Sustainability Institute.

NYT Bloggingheads: Mental Bandwidth Scarcity and Poverty

The New York Times Bloggingheads video section has a fascinating conversation between two economists on the effects of poverty on psychology. Basically, poor people have scarcer mental resources, as well as physical resources, to devote to raising their children well.

Caltech: Your brain on income inequality

Groundbreaking research at Caltech University has found, using functional MRI scans, that our brains respond to income inequality:

Specifically, the team found that the reward centers in the human brain respond more strongly when a poor person receives a financial reward than when a rich person does. The surprising thing? This activity pattern holds true even if the brain being looked at is in the rich person's head, rather than the poor person's.

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It's long been known that we humans don't like inequality, especially when it comes to money. Tell two people working the same job that their salaries are different, and there's going to be trouble, notes John O'Doherty, professor of psychology at Caltech, Thomas N. Mitchell Professor of Cognitive Neuroscience at the Trinity College Institute of Neuroscience, and the principal investigator on the Nature paper.

But what was unknown was just how hardwired that dislike really is. "In this study, we're starting to get an idea of where this inequality aversion comes from," he says. "It's not just the application of a social rule or convention; there's really something about the basic processing of rewards in the brain that reflects these considerations."

The brain processes "rewards"—things like food, money, and even pleasant music, which create positive responses in the body—in areas such as the ventromedial prefrontal cortex (VMPFC) and ventral striatum.

In a series of experiments, former Caltech postdoctoral scholar Elizabeth Tricomi (now an assistant professor of psychology at Rutgers University)—along with O'Doherty, Camerer, and Antonio Rangel, associate professor of economics at Caltech—watched how the VMPFC and ventral striatum reacted in 40 volunteers who were presented with a series of potential money-transfer scenarios while lying in an fMRI machine.

For instance, a participant might be told that he could be given $50 while another person could be given $20; in a second scenario, the student might have a potential gain of only $5 and the other person, $50. The fMRI images allowed the researchers to see how each volunteer's brain responded to each proposed money allocation.

But there was a twist. Before the imaging began, each participant in a pair was randomly assigned to one of two conditions: One participant was given what the researchers called "a large monetary endowment" ($50) at the beginning of the experiment; the other participant started from scratch, with no money in his or her pocket.

As it turned out, the way the volunteers—or, to be more precise, the reward centers in the volunteers' brains—reacted to the various scenarios depended strongly upon whether they started the experiment with a financial advantage over their peers.

"People who started out poor had a stronger brain reaction to things that gave them money, and essentially no reaction to money going to another person," Camerer says. "By itself, that wasn't too surprising."

What was surprising was the other side of the coin. "In the experiment, people who started out rich had a stronger reaction to other people getting money than to themselves getting money," Camerer explains. "In other words, their brains liked it when others got money more than they liked it when they themselves got money."

"We now know that these areas are not just self-interested," adds O'Doherty. "They don't exclusively respond to the rewards that one gets as an individual, but also respond to the prospect of other individuals obtaining a reward."

What was especially interesting about the finding, he says, is that the brain responds "very differently to rewards obtained by others under conditions of disadvantageous inequality versus advantageous inequality. It shows that the basic reward structures in the human brain are sensitive to even subtle differences in social context."

This, O'Doherty notes, is somewhat contrary to the prevailing views about human nature. "As a psychologist and cognitive neuroscientist who works on reward and motivation, I very much view the brain as a device designed to maximize one's own self interest," says O'Doherty. "The fact that these basic brain structures appear to be so readily modulated in response to rewards obtained by others highlights the idea that even the basic reward structures in the human brain are not purely self-oriented."

Camerer, too, found the results thought provoking. "We economists have a widespread view that most people are basically self-interested, and won't try to help other people," he says. "But if that were true, you wouldn't see these sort of reactions to other people getting money."

The researchers say more information is needed to find out how this drives actual behavior.

Center on Budget and Policy Priorities on 2008 poverty and insurance data

Robert Greenstein has comments on the new Census data:

Today’s grim Census Bureau report shows the nation lost substantial ground in 2008 on poverty, median income, and the number of people who are uninsured. Several aspects of the Census report stand out.

The number of people living in poverty jumped by 2.6 million to 39.8 million — the highest since 1960. The poverty rate — the percentage of people living in poverty — also rose, to 13.2 percent, which is its highest level since 1997. Similarly, real median household income fell by $1,860 to $50,303, its lowest level since 1997.

These figures are particularly grim because they come after the disappointing record of the 2001-2007 expansion. Poverty was actually higher — and median income for working-age households lower — at the end of that expansion than during the 2001 recession. Such a dismal record during an expansion has never occurred before, since the nation began collecting these data.

Health Insurance Data
The health insurance figures are instructive. The percentage of uninsured people remained unchanged at 15.4 percent, while the number of uninsured jumped by 682,000 to 46.3 million. The story was not worse because gains in public (that is, government) health insurance programs, especially for children, helped to offset continued declines in employer health coverage.

Consider two figures. First, the number of children without insurance actually fell by 801,000 in 2008, due to expansions in government health insurance programs for children. But the number of workers without coverage rose by 932,000, evidence of the continued erosion of employer-based coverage.

Figures Will Be Worse in 2009
All of these figures almost certainly will look considerably worse next year, since the economy has weakened further in 2009 and unemployment has risen sharply. The number of people in poverty will likely set a 50-year high, while the number of uninsured will likely climb toward the 50 million mark.

Moreover, the expected increases in 2009 in poverty and in the number and percentage of uninsured people would be substantially greater if not for the economic recovery law that the Administration and Congress enacted earlier this year. Just seven provisions of that law — including tax credits for working families, expansions of unemployment insurance and nutrition assistance, and one-time payments to senior citizens, veterans, and people with disabilities — will prevent an estimated 6.2 million Americans, including 2.4 million children, from falling into poverty, according to an analysis the Center issued yesterday.[1] Moreover, these figures understate the poverty-preventing effects of the recovery act because they do not capture other provisions of the law, such as increases in housing, child care services, or the law’s effects on preserving or creating jobs. In addition, the law’s increases in medical assistance are preventing hundreds of thousands more from becoming uninsured.

Finally, today’s disquieting health insurance figures underscore the need for comprehensive health care reform. The decline in job-based health coverage is leaving millions of Americans uninsured or underinsured. As noted above, the new Census data show that last year’s economic decline did not fuel an even greater drop in overall insurance coverage only because of the expansion in coverage by public insurance programs.

Health reform bills that Congress is considering would help to address this problem by covering tens of millions of Americans who lack insurance. They would strengthen employer coverage and Medicaid, offer new health insurance choices for Americans, and prevent insurance companies from denying coverage or charging exorbitant amounts to people with medical conditions. The bills also seek to slow the growth of health care costs, which is essential to expanding coverage and sustaining progress in reducing the ranks of the uninsured over the long run.

End Notes:
[1] The 6.2 million figure is based on an alternative measure of poverty that counts non-cash benefits as income.
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Coalition on Human Needs' comments on new poverty and uninsurance data in the US

Grim Census Data on Poverty Points to Growing Need Even Before Unemployment Skyrocketed this Year

Uninsured numbers reflect the importance of public health insurance programs
see links to data and analyses below



WASHINGTON, D.C. -- Today's Census Bureau report that the number of Americans living in poverty increased by nearly 2.6 million to 13.2 percent in 2008 is a stark reminder of the toll the recession was already taking on families even before the economic picture worsened this year.



Continuing a long-term trend, the number of people without health insurance grew to 46.3 million, according to the Census data. From 2000 to 2008, the proportion without insurance rose from 13.7 to 15.4 percent. The numbers of uninsured working age adults (18-64 years old) increased from 19.6 percent to 20.3 percent between 2007 and 2008, an increase of more than 1.5 million people. Bucking the trend, the total number of uninsured children dropped from 11 percent to 9.9 percent, because many children are eligible for public insurance programs such as SCHIP and Medicaid that are unavailable to most adults.



"This data shows the enormous importance of public health insurance programs in filling the gaps as more people continue to lose private health insurance," said Deborah Weinstein, executive director of the Coalition on Human Needs, adding that President Obama's call to action on health care reform could not be timelier.



Last year's 39.8 million poor people comprise the highest number of Americans living in poverty since 1960. As bad as that number is, Weinstein pointed out that the overall poverty rate is almost certainly worse today than it was in 2008 when the recession was first getting underway -- the period reflected by the Census data. Unemployment averaged 5.8 percent last year compared with the August rate of 9.7 percent. The Economic Policy Institute estimates that assuming an average unemployment rate of 9.3 percent for 2009, poverty would increase to 14.7 percent. Higher unemployment will hit children disproportionately hard. Their poverty is expected to rise from 19 percent in 2008 to 25 percent this year, which translates into one in four children living in poverty.



In a family of three that means trying to provide children with a roof over their heads, adequate health care and a nutritious diet on an annual income of $17,163. Still worse, the proportion of children living below half the poverty line ($8,600 for a family of three) is rising steeply, from 6.4 percent in 2000 to 8.5 percent in 2008. "If poor children were not hidden from most of us -- if they could look us in the eye -- we would not allow their hardships to continue," said Weinstein.



The huge increase in poverty clearly points out the need for continuing aid to help the unemployed and states struggling to maintain vital services in the face of growing need.

"Without this aid we risk stamping out a fledgling economic recovery before its full impact has been felt by millions of Americans.

"If we invest in health care, education, and rebuilding communities, we will create jobs and renew our economy. Failure to act is a moral wrong, since it causes preventable harm to vulnerable people. Inaction is a practical wrong as well, because consigning tens of millions to poverty, with no protections against sickness and debt, drags our economy down and further delays our recovery."

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For key points about the grim poverty and health insurance trends: http://chn.org/pdf/2009/2008poverty-insurancetalkingpts.pdf

For a first fast look at the national poverty and health insurance data: http://chn.org/pdf/2009/2008-2007-2000-CPScomparisons.pdf

You can find national and state poverty, health insurance, and household income data and analyses on the Coalition on Human Needs website, at http://www.chn.org/issues/statistics/povertyday2009.html

WSJ: Boost in food stamp funding percolates through economy

The Wall Street Journal has an illustration of how supports for the poor, such as food stamps, have follow on effects that boost the economy generally. An excerpt:

AVENPORT, Iowa -- The lush red strawberries caught the attention of Rachel Patrick, a mother of five shopping at a farmers market along the Mississippi River here. She selected two cartons and ignited a little-noticed chain reaction that is an important part of President Barack Obama's economic stimulus plan.

Ms. Patrick handed a plastic card loaded with her monthly food-stamp allocation to farmer Ed Kraklio Jr., who swiped it through his electronic reader. Mr. Kraklio now regularly takes in several hundred dollars a month from food-stamp sales, a vital new revenue stream that has allowed him to hire another assistant to help tend a cornucopia of fruits and vegetables. The new worker, in turn, spends her income in nearby stores, restaurants and gas stations.

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But it also has put more money into the hands of the poorest Americans by boosting monthly food-stamp allocations. Starting in April, a family of four on food stamps received an average of $80 extra.

Money from the program -- officially known as the Supplemental Nutrition Assistance Program -- percolates quickly through the economy. The U.S. Department of Agriculture calculates that for every $5 of food-stamp spending, there is $9.20 of total economic activity, as grocers and farmers pay their employees and suppliers, who in turn shop and pay their bills.

While other stimulus money has been slow to circulate, the food-stamp boost is almost immediate, with 80% of the benefits being redeemed within two weeks of receipt and 97% within a month, the USDA says.

The quick influx of cash into the economy reflects the often desperate situation faced by millions of households struggling to put enough food on the table. For many families, monthly food-stamp allotments rarely last more than a few weeks, leaving them with dwindling grocery supplies -- and sometimes bare cupboards -- by the end of the month.

Angie Minix rushes to her local Save-a-Lot grocery store on Chicago's South Side at the start of every month, when her new food-stamp allocation appears on her card. So do many of her neighbors. "You can't even get in the parking lot," she says.

On a recent shopping trip, she headed straight to the fresh produce section. Before her increase in April to $606 from $525, Ms. Minix said she would rarely even troll the fresh-food aisles. Now, she talks about how she has introduced her two sons to cauliflower, cabbage, lettuce and cucumbers.

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For years, the food-stamp program was plagued by criticism that it was an inefficient way to help the poor. Many who qualified wouldn't apply because of a lack of information, daunting paperwork or the embarrassment of handing over stamps in a grocery checkout line. And it did little to increase access to more nutritional food, since fresh produce remained scarce in poor areas.

In recent years, though, registration has been streamlined; many food pantries offer information and direct sign-up services. The switch from stamps to plastic cards offers a cloak of anonymity. Meanwhile, more farmers markets offering fresh produce in urban areas have adopted the technology to accept the cards.

Nationwide, enrollment in the program surged in March to about 33.2 million people, up by nearly one million since January and by more than five million from March 2008. In a recent research report, Pali Capital Inc. estimated that food-stamp spending will increase between $10 billion and $12 billion this year from $34.6 billion in 2008.

For grocery stores and farmers markets, the added food-stamp revenue has helped offset slower sales to other consumers.

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Farmers markets in Iowa have been particularly aggressive in courting the business of food-stamp recipients. At the Davenport market, food-stamp purchases have boosted business at Sawyer Beef. As farmer Norman Sawyer's sales increase, he says he plans to buy more fencing and water tanks to improve grazing areas for his cattle. "This has been a good deal for us," he says.