January 11, 2011

Tackling inequality from the top and the bottom

Several recent posts on this blog have talked about the problem of inquality -- Persistent Povery and the Rise of the Richest 1% and Cutting Health Costs by Cutting Poverty, for instance.

Readers have sent me links to interesting approaches to tackling inequality from the top and the bottom.

Ben Janzen commented on the Persistent Poverty blog and directed me to some information from Meritas Mutual Funds on the "Say-on-Pay" movement among sharelholders aiming to rein in Executive Compensation. Gluttons at the Gate, an article from Macleans, looks at the efforts of Gary Hawton, Meritas' own CEO, to champion "say-on-pay" shareholder motions.

For background on the rise of Executive pay in Canada, see Hugh Mackenzie's recent report from the Canadian Centre for Policy Alternatives, Recession Proof: Canada's 100 Best Paid CEO's. It not only describes how the pay of Canada's top 100 CEOs has grown phenomenaly, both in relation to average pay for all workers and inflation, it explores what led to that rise and possible solutions. Mackenzie is not convinced that the 'say-on-pay' movement alone will bring executive compensation back to earth. Evidence from the U.K., where shareholder 'say-on-pay' has been around longer, supports that view. He recommends tax changes: changing the way stock options are taxed and increasing the tax rate on high incomes, as well.

The important thing is that as shareholders and citizens we challenge the notion that some people should get paid excessively, esecially when other people have obscenely low incomes.

Ken Ogasawara sent me a link to a story in the New York Times that examines how basic income programs in Mexico and Brazil have helped reduce inequality by giving money to poor families. The Bolsa Familia in Brazil and the Opportunidades program in Mexico give conditional cash grants to poor families. The conditions include things like children staying in school and getting regular health check-ups. These programs have had a demonstrable impact on reducing poverty and inequality.

Canada actually has its own such programs -- the Canada Child Tax Benefit (CCTB) and provincial counterparts like the Ontario Child Benefit. These programs do not include conditions that families need to meet. They are simply based on the level of family income: the lower the income, the higher the benefit. Campaign 2000 reports that Government Transfers like the CCTB lifted nearly 725,000 Canadian children and their families out of poverty in 2008. Campaign 2000 recommends raising the CCTB from its current annual maximum of $3,436 to $5,400 per child.

Old Age Security (OAS) and the Guaranteed Income Supplement (GIS) have done for seniors what child benefits are doing for children. The OAS and GIS have helped reduce poverty among Canadian seniors dramatically over the past thirty years.

What we are missing in Canada is a basic income for people 18 - 64 years of age. The expectation is that able bodied people of those ages will earn income through work. But as the Ontario social audit found, work does not work for everyone. Many jobs are precarious -- providing low wages, little or no employment security and few or no benefits. The majority of unemployed workers do not qualify for E.I. and welfare rates guarantee that you will live in poverty. Basic income security for adults 18 - 64 years of age is one gap preventing Canada from making real headway in reducing poverty and inequality.

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