Richard Wilkinson says a wide income gap is bad news for society — it increases crime, health and education, which affects everyone, even the rich.
What’s more, in his book “The Spirit Level: Why Equality is Better for Everyone” Wilkinson shows that there’s a point beyond which increased income does nothing to improve your happiness or quality of life. So high-end corporate salaries are damaging society without anyone really realising extra benefits.
If he’s right — and the book provides very compelling evidence across a wide variety of measures — then the widening rich/poor gap is a big issue for Australia. We can expect it to drive more spending in crime and healthcare, money which could otherwise be spent on education and welfare. And in most developed nations the gap is widening; I wrote recently on BNET how in 1995 the top 20 percent of the population earned 10.6 times the income of the lowest quintile. By 2007 the gap had risen to 11.8 times.
How do we fix the issue? A more progressive tax might be part of the issue, but a more vocal approach from shareholders on the issue of executive pay could play a big part in the solution too.