Iniquities are our common enemy

What were you doing on January 2 at 11:47 a.m.? At this exact minute, the 100 richest Canadians have made the equivalent of the annual salary of an average Canadian. An OXFAM report tells us that the 26 richest people in the world have as much collective wealth as the poorest half of all humanity.

Jacques Forest
Professor in the Department of Organization and Human Resources, School of Management Sciences, UQAM*

Also, did you know that the difference in life expectancy of people in certain neighborhoods in the east of Montreal, less fortunate, compared to those in the west of the city, more affluent, is nine years? These examples are intended to show that income and wealth inequities exist, even in Canada and Quebec, and that they have consequences.

On this subject, the very instructive works of the British Wilkinson and Pickett^⁠1 tell us that income and wealth inequities are associated with more social unrest, psychological distress, use of legal and illegal substances, obesity, unwanted teenage pregnancies, bullying in school school, imprisonment rate, CO emissions₂, excessive consumption and police interventions, in addition to being linked to less literacy, innovation and social mobility, poorer child health and shorter life expectancy.

Our societies deserve to benefit from the realization of the full potential of all its citizens and inequities are against us collectively, this is a common enemy.

In general, people recognize that not everyone deserves the same salary or the same wealth. That too would be unfair. But the question is what difference there should be between the person who earns the most and the one who earns the least, in a functioning social system.

Research involving more than 55,238 people in 40 countries provides some answers in this regard. The results support the idea that people drastically underestimate current inequity. Furthermore, what seems common to all these people is that the ideal multiplicative ratio between the lowest and the highest salary (for example, between that of a CEO and that of an entry worker), is five to one. In other words, on average, the highest salary should be the lowest, multiplied by five. What is particularly important to point out is that this comparison holds regardless of age, education, socio-economic status and political affiliation (right or left). So we all have a universal desire for a fair wage, regardless of our origins and inclinations.

Financial satiety

Equity is justified inequality, and it seems that human beings can easily tolerate a difference of five times the salary. Once this fact has been established, we can ask ourselves the question, even more delicate but oh so important, of knowing from how much money a salary is “sufficient” or optimal. In other words, would there be a notion of financial satiety?

An article published in the very prestigious journal Nature (Human Behavior), in 2018, used data from 1.7 million respondents across 164 countries. This article aimed to establish how effectively money can predict subjective well-being, typically measured by more positive emotions and life satisfaction, and fewer negative emotions. For North America (regardless of country, region, or city), the peak effect of money on happiness sits at $65,000 for the most positive emotions, $95,000 for the least of negative emotions and $105,000 for an optimal level of life satisfaction. These data are in US dollars of purchasing power parity, which is not perfect, but which nevertheless gives a first approximation. What is striking about this survey is that the positive effect of money decreases once this threshold is exceeded.

There would therefore exist an optimal level of wealth which makes it possible to stimulate as much as possible optimal functioning among the vast majority of members of a society. We must therefore strive towards this ideal, but how?

For several millennia, the preferred means of tending towards equity (since this is a universal desire) has been the use of taxes and levies, which are collective responsibilities. If we go back to the premise demonstrated above that everyone (right or left) has a universal desire for equitable (and not egalitarian) wealth distribution, what would be the ideal ratio to respect? We have seen that there is a level of salary which makes it possible to achieve financial satiety (the amount would still have to be specified for precise geographical regions, but the main guidelines are known) and that the differences are tolerable within from a ratio of 5 to 1 (approximately), it follows that taxes on income and wealth should substantially follow these same parameters.

On this subject, the famous French author Thomas Piketty offers a disconcertingly simple solution that would show good efficiency. This takes up the notion of a factor multiplying income according to the average of each social system. While the tax rate would be 50% when the salary is 5 times the average income (which would correspond to approximately $280,000 for Quebec), it would reach 90% when the salary is 10,000 times the income ( which would be $560 million in Quebec). If these thresholds were accepted globally, without the existence of rogue states robbing us collectively with a race to the lowest tax rate, governments could effectively deliver services to communities and citizens, period.

One wonders why the wealthiest would be against it. Certainly, their relative prestige would diminish. The financial security of their descendants and certain privileges would be affected, and it would also be necessary to readjust their expectations in relation to the capacities to act that money provides, because they would have less of it. At the same time, what research tells us is that reductions in inequity are linked to less instability and economic crises, lower debt levels, more contained inflation and a social climate less dangerous. Moreover, less inequity seems to be positively related to economic growth in addition to being associated with higher productivity. These are all arguments in favor of less inequity, even for the most affluent or capitalist among us.

We must change our glasses to stop seeing money only from an economic point of view and to collectively admit that money has psychological meanings and effects.

Science shows that we can want to make money to contribute to important causes, to have a variety of experiences, to feel free or proud or even by social comparison, by impulsiveness or to overcome personal doubts. According to these meanings, money can have positive or negative effects, and the same goes for taxes and levies. A survey from Harvard tells us that people who see tax as a responsibility, even wealthy people, are more likely to pay their taxes and not cheat. This is an attitude that can be encouraged.

The logical sequence observed by the research is that progressive taxation decreases inequities, which in turn increases fairness and trust, which then has an upward impact on collective subjective well-being. What is important to remember here is that if we succeed effectively in overcoming our common enemy of iniquity, the benefits will be experienced by the fortunate as well as the less fortunate; everyone comes out a winner.

In conclusion, human beings have a universal desire for more equity (and not equality), the notion of financial satiety exists and equity can be maintained if the gap does not go beyond a multiplying factor of five. For the years to come, I would like us to adopt a plan that will stimulate optimal functioning in the vast majority of our fellow citizens, while being informed by science. Let us dare to adopt policies that put these scientific facts into action, in a universal and effective way.

* The author is also a psychologist and a member of the Order of Certified Human Resources Advisors

1. The Inner Level: How More Equal Societies Reduce Stress, Restore Sanity, and Improve Everyone’s Well-Being, Richard Wilkinson and Kate Pikett, Penguin Books, 2019