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And he worked till he died

And he worked till he died

20.3.2013 7:58

Remember Occupy Wall Street? It was the name given to a protest movement that began in September 2011 in Zuccotti Park in New York City's Wall Street financial district. In late December 2012, FBI documents released under a Freedom of Information Act request showed there was a concerted action by the FBI and the DHS (Department of Homeland Security), coordinated with the big banks, to crush Occupy in the shortlived time the movement spent creating headlines in the world press. On 15 November 2011 there was a violent crackdown and that was it. But as the Zuccotti Park has returned to its original serenity, one of the main reasons which led to the rise of the Occupy movement has not disappeared, quite the contrary. It is the inequalities at play in American society.

Bloomberg News reported recently that in 2012 the top US CEOs received a 20% rise in their income and benefits, following a 26% increase in the year before. Most likely they drafted it themselves and had it approved by their friendly Boards, they really didn’t have to ask the shareholders as they mostly don’t control the large corporate and haven’t for ages now. That all happened while one in two Americans, or some 150 million people, have fallen into poverty or can now be classified as low income. Some of you may have read an article on this server last week about the European population facing the worst poverty since World War II. It seems to be worse in the US. Income inequality in America is at levels not seen since the 1920s. The top 1% gets about 20% of current income and holds about 40% of the wealth in the USA.

Joseph Stiglitz, a Columbia University professor and Nobel prize economist, in 2011 named by the Time magazine as one of the 100 most influential people in the world, wrote an article for Vanity Fair, aptly named “Of the 1%, by the 1%, for the 1%” and, more recently, a book “The Price of Inequality: How Today's Divided Society Endangers Our Future". Stiglitz has calculated that the six heirs of Sam Walton’s Walmart empire jointly hold $107.3 bn, which is the same figure as the accumulated wealth of the entire bottom 30% of the US society. The disconnect between private rewards such as the CEO salaries, and social costs, such as the taxpayer money thrown into the system to salvage the US car industry or the banking system, is increasing. Stiglitz also points to the well known fact that the wealthy don’t really pay much in taxes. That holds for the USA as well as Europe, or anywhere else in the world, really. I picture you, when you are reading this article. In my mind, the typical reader of this server is a high or middle-ranking manager, probably male in his 30’s or 40’s, a successful person, with a house, one or two luxury cars, one or two overseas vacations every year. Well, as a salaried person, it is you who has been paying taxes through your nose, the income tax, the VAT, the social and medical, the alcohol and petrol taxes, you name it. The truly wealthy, the top 1% of the US population, and there is little reason to believe it is different elsewhere, pay on average only 15% income tax. The rest of their money is well protected in tax havens and sophisticated tax structures. So every time the governments, in response to the electorate’s call for more equality, raise taxes for the wealthy, like in the case of the 7% surcharge for the people earning over CZK100,000 in the Czech Republic, enacted in November 2012, it is you, a salaried person, who will pay it. The truly rich never do.

Adding injury to insult, new research reported in the Washington Post last week shows a link between wealth inequality and the life-expectancy gap.

St. John’s County in Florida is a rich community, abundant with manicured golf courses, lovely Atlantic Ocean beach hiking trails, tennis courts and youthful-looking retirees. All the jogging and golfing clearly pays off. The average life expectancy of women in St. John’s County is nearly 83 or four years longer than just twenty years ago. Male life expectancy is more than 78 years or six years longer than two decades ago.

Now let’s look in the neighboring Putnam County, which is literally a half hour’s drive away. Incomes and housing values are about half what they are in St. Johns and you won’t find too many golf courses here. Life expectancy in Putnam has barely changed since 1989, rising less than a year for women to just over 78 and rising by a year and a half for men to just over 71. That is seven years less than the men living a few miles away in St. Johns.

It is not that surprising that the wealthier live longer, although it is quite shocking to see how much longer. After all, they have better access to first class health care and probably live healthier life styles, with better food and more exercise. One would probably not have guessed that it can contribute to up to a 10% life expectancy increase for the affluent but at least it may motivate you to go back to the gym and eat more broccoli. Washington University research shows that it is a broad societal phenomenon, not just limited to the Florida pensioners, but that almost all the gains in life expectancy achieved since 1980’s in the USA go to the wealthy. Lastly, it has some other, not quite so intuitive, implications.

The retirement age in most of Western Europe is currently 65 years. It is 67 in the US and 68 in the UK. Top US executives belonging to the Business Roundtable, whose companies generate annual revenues of $7.3 trillion, have recently issued a statement insisting that the retirement age for Social Security and Medicare eligibility be raised to 70. It is the longer life expectancies of the population, especially the post-war baby boomer generation, which is about to retire, which are behind this demand. This initiative is now being translated into a bipartisan law proposal, aimed at bringing pension spending under control.

Take a minute to think about this. If the retirement age is raised from 67 or 70 and an average low income former blue collar in Putnam Country only lives till 71, than it will effectively cut the working poor’s retirement years to single digits. He practically works until he dies. And while he and his wife are still working, their taxes will go into Social Security payments for the wealthier and healthier, who will draw on them for another nearly a decade. A wealthier senior thus wins twice—with longer lifespan and with more years getting a pension, paid by the poor one.
One need not be a radical egalitarian to find this picture morally troubling.


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