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How to overcome the impact of income inequality

A few years ago I read “Spirit Level:  Why Equality is Better for Everyone” by two British authors, Kate Pickett and Richard Wilkinson. Using World Health Organization data, the authors construct a careful case showing the relationship between income inequality and 10 social indicators, many of them surprising to me.

Social issues affected by income inequality include infant mortality, teen pregnancy, obesity, math and literacy skills, and homicides. Of the 14 countries analyzed, the U.S. at that time was one of the two least income-equal countries. The same analysis of U.S. states showed New York as one of the most unequal states. These studies suggest that our community is highly likely to suffer from a host of social ills, as indeed the data from ACT Rochester (www.actrochester.org) confirms.

In a June 16 opinion piece in the RBJ, Professor Amitrajeet Batabyal from RIT referenced the escalating disparity in salaries in top American corporations. Ratios of highest-to-lowest pay in large American companies have grown from an average of 50 to 1 in the 1970s to 2015, when most S&P CEOs made 335 times the pay of an average employee.

In other words, the CEO makes as much in one day as the average worker makes all year. “Superstar” CEOs that Professor Batabyal mentions make three times that.

As someone engaged in trying to make the city of my birth a better place, this information about income inequality and related effects offers some insight why the efforts of many groups and committed individuals seem unable to gain traction in reducing poverty and the cascade of surrounding issues.

Given the research articulated in this book, addressing this issue deserves consideration. Let’s talk about it.  What is a ratio that compensates for hard work, risk, responsibility, dedication and other assets that leaders bring? If local organizations chose to amend this scale, could we gain leverage over some seemingly fixed issues?

This is not easy and it’s also not impossible. Putting these ideas into practice at the Gandhi Institute, we are committing once again in our new budget commencing July 1 to a compensation ratio of 2.5:1— meaning that the highest paid person (me) receives no more than 2.5 times compensation as entry level positions.

In the last two years we have allocated our scarce resources to cover the full cost of health care (medical and dental) as well as four weeks paid vacation for genuine rest and downtime for our hardworking staff. In this way we are attempting to live up to one of Gandhi’s more famous quotes:  Let your life be your message.

Kit Miller has served as the director of the M.K. Gandhi Institute for Nonviolence since 2009.

(c) 2017 Rochester Business Journal. To obtain permission to reprint this article, call 585-363-7269 or email madams@bridgetowermedia.com.

One comment

  1. I hope my competitors adopt the 2.5:1 pay philosophy. Doing so will make it easier for my company to hire scarce, highly skilled workers. Due to the scarcity of these workers, they earn several times more than the 2.5:1 ratio. They do not seem interested in working for less. Conversely we cannot significantly increase unskilled worker compensation. The high cost of doing business in New York prevents this. There are only so many dollars available for employee compensation.

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