It is a good day for working stiff schadenfreude when top executives at Citigroup are told by company shareholders that they don't deserve millions of dollars in compensation. Hurray for the 99 percent.
The "say on pay" vote, albeit advisory, was a surprising yet satisfying show of shareholder disgust with the greed of top executives in the financial sector. Thanks go out to the Dodd-Frank financial reform law that requires this vote for every publicly traded company — the law Mitt Romney says he would repeal as president.
So could this be the first hint that we reached inequality's nadir, and that the pendulum of social equilibrium is now swinging back toward the middle? Is it a harbinger of another great compression similar to the one that occurred after World War II and into the 1970s when income inequality contracted sharply because of a resurgent middle class?
Don't count on it. That won't happen until Americans discard the myth that huge rewards flow to those who earn it through hard work. This is a carefully built illusion based on the assumption that the American economy is fair. And it fuels the corollary that those struggling financially are just not giving it enough elbow grease or haven't strived hard enough for marketable skills. It's not true, and we're gullible to believe it.
Do glorified packaged-debt salesmen really work 10 to 100 times harder than the laborer who replaces a roof or the home health aide? Are their skills that much more valuable? See circa 2008.
America's explosion of Gilded Age inequality is the result of government and workplace policies, not any superhuman industriousness by those at the top. And this misalignment has a cure: fairer taxes and living wages for work, starting with the minimum wage.
Mitt Romney is worth somewhere near a quarter-billion dollars largely from his leveraged buyout firm Bain Capital. In describing his success Romney says, "what I have, I earned, I worked hard, the American way." But Romney's finances would have looked quite different had he made his fortune during the mid 20th century.
Then, marginal tax rates were as high as 90 percent, capital gains taxes were higher than the 15 percent Romney pays, and government protected workers' rights. Bain Capital may not have found it so easy to layoff workers or slash benefits at its buyout-target companies. Government and union power led to shared rewards for everyone's hard work, with taxes to spend on public investments and amenities. Romney would have still been plenty rich, just possibly not "putting a car elevator in the beach house" rich.
Only the government can get the nation back to an optimal equilibrium. Maybe not a 90 percent tax rate but at least asking millionaires to pay a higher rate than Warren Buffett's secretary. And the minimum wage needs to be raised. The federal rate is $7.25 an hour or $15,080 a year, not even the federal poverty line for a family of two. (Florida's rate is $7.67 per hour and is tied to inflation.)
Minimum wage earners are no longer teens looking for pocket money. Eighty-eight percent are 20 or older, and nearly 44 percent have at least some college education. And no, a raise won't reduce employment: See the extensive 16-year study by lead economist Arindrajit Dube which found "no employment effects" from an increase.
Sen. Tom Harkin, a Democrat from Iowa, is pushing a wage raise bill, but the issue is a nonstarter in the Republican-controlled House, where many lawmakers would like to see the minimum wage abolished. What's a little indenture between friends?
When Romney ventured in January that the federal minimum wage should rise with the Consumer Price Index he was set upon by conservatives. Since then Romney has backed off, pointing with pride to his veto of a minimum wage boost while governor of Massachusetts. Wonder what he'll say after the Etch-a-Sketch shake?
After decades of wage stagnation there is a growing awareness that hard work no longer correlates to success. The 99 percent "say on pay" is that enough is enough for Wall Street; now it's everybody's turn. But the government has to help.