November 27, 2015 at 9:54 pm #3564
Setting Targets for Wealth Distribution – Minimum Wage, Incomes & Tax
I promised in my opening remarks of World Peace – The Transition, that I would not hover too closely on any one country, and then I qualified that I might be constrained by the availability of statistics from time to time, to prefer to discuss a country based on ease of data collection. In this regard, America posts every statistic online that is needed to explain the process of Wealth Distribution. America is also an unusual example of Extreme in Capitalism – and so I will use them here alongside statistics from The Netherlands, Norway and Canada.
In 2010, the U.S. Federal Reserve reported in the Budget the following stats – and in 2013 a Princeton professor confirmed that nothing is changing if less distributed. This chart was taken directly from Wikipedia in 2015.
To level-set, Wealth Distribution is a Capitalistic Policy that ensures 100% of a country can participate in generating GDP Wealth for their country. Setting wealth and income targets, and then putting in place the Economic Controls of taxation and guaranteed incomes, ensures everyone can participate in commerce – in the generation of GDP (Gross Domestic Product). Countries who do this well include Norway and the Netherlands where there is free education at all levels, government retirements, childcare, affordable housing and high minimum wages protected by off-shoring restrictions. A Trade Surplus was ensured year-over-year and GDP statistics today show very clearly that citizens with the means, are 50% to 200% more productive than citizen in countries without these controls.
If you are wondering, why is this discussion important to me? These are huge productivity gains that would triple Canada’s Exports – adding $60 billion annually and ending it’s 30-year trade deficit easily. In the U.S., Wealth Distribution would add $500 billion dollars to the economy – and these are annual revenues, year over year. Today, 160 million Americans have no means to produce GDP within their economy as 40% have almost no wealth. They also live 13 years shorter than their wealthy citizens, and this produces enormously expensive social problems as well.
Inequity is an incredibly expensive Policy, shortsighted and perhaps morally reprehensible as well.
Plug your own country’s numbers into the formulas below to calculate the Minimum Wage and Per-Quintile Income and Wealth Distribution targets for your country.
Available Assets – per page 199 of the 2010 US Budget containing the following wealth and income statistics for 2008.
- $ 10.2 trillion – in publicly owned assets
- $ 54.2 trillion – in privately owned assets
- $ 57.2 trillion – in education capital
- $ 3.9 trillion – R&D capital
- $ 118.1 trillion in total after assets claimed by foreign interests
- 1995 Assets were about half these numbers at $ 54.1 trillion.
- The Reader’s Country Total Assets __________
- $ 18.15 Trillion – up from 16.1 in 2012 when it was 108% of GDP
- Debt was presented by the Federal Government Debt Clock at usgovernmentdebt.us on October 15, 2015
Debt to Asset Ratio
- $18 trillion/$118 assets = 15%
- Although this makes one wonder why to carry debt at all, the current debt load appears to be within any mortgage lenders serviceable range that is often 34% of assets.
- $12.95 trillion annual (2012 – US Bureau of Economic Analysis)
- The reader’s Country Total Income __________
To adjust all citizens to wealth and income levels suggested in Chapter 5’s “IDEAL” Target Income Distribution Chart (11% wealth for the bottom 20% of wage earners), wealth within the bottom group of 80 million US income earners, would have to rise to approximately $74,387.
That’s 11% of $54.1 trillion of assets (wealth in 2003) divided among 80 million. Also, these 80 million people would then need to take home incomes of $30,000. These incomes appear to be more than double current US household income levels. See Census.gov at the link here (US Census Bureau, 2015) in Bibliography.
To achieve a zero-tax income of $30,000 per year would require 100% employment, or equivalent income, with a minimum wage of approximately $18 per hour plus health coverage benefits (allowing for 4% vacation pay).
By the “Ideal” income distribution chart above, 15% of total wealth is assumed for the second lowest Quintile. 15% of $54.1 trillion divided among 80 million calculates to wealth per individual of $101,438 and family incomes of $60,000 annually or a minimum hourly wage of $34 per hour with benefits after tax.
The Middle 20 Percentile targets wealth of 18%. 18% equates to wealth per individual of $121,725 and family incomes of $90,000 annually or a minimum hourly wage of $49 per hour with benefits after tax.
21% amounts to a wealth of $142,012 and family income of $120,000, or a minimum wage of $65 per hour with benefits after tax.
35% average wealth of $236,687 with an income of $150,000 annually, or a minimum wage of $82 per hour plus benefits after tax.
In this next Federal Reserve chart, household income is the red line beneath GDP (Gross Domestic Product) in blue above it. Leading causes of wage stagnation between 1995 and 2013 include technological change, the decline of labor unions and more specifically, their joint bargaining powers, and globalization.
By taking this opportunity to target national goals of wealth distribution and employment, governments put an end to “Starvation Wages” and reduce the many and varied costs of Social Problems created by Wealth Inequity.
Creating a governing principle within the laws or guidelines of your government’s economic policy, should ensure that these minimums are regularly reviewed and kept current. Over time, this will not guarantee perfect distribution, but it will go a long way to protect the Good Lives of everyone while permitting movement between the Quintiles for High Performers.
Implementing Graduated Tax structures ensures that wealth distribution meets national targets for equity sustainability. In a graduated system, both large businesses and rich individuals pay a larger percentage of the total costs of running the country and keeping all employed and salaried.
Isn’t a scenario where the Rich pay high tax, bad for society? No, not at all. In fact throughout the 1940s through 60s, the rich paid up to 92% in tax and a maximum of $2 million of income per year was permitted as well. Society boomed during these times and it wasn’t until the “Low-Tax” Trickle-down policies of Reagan and George Bush Sr. that created real wealth-inequity problems within America.
Dem Dem Rep Dem Dem Rep Rep Dem Rep Rep
Just for fun, I have thrown in US Presidents to give a view of policies and parties over time as well.
As discussed above, there are often five income quintiles used to represent the population of a country. This model might be too simple for very large countries, but it serves as a starting point that can be used to monitor the success of graduated taxes actively over time.
As wealth creation remains strong – and wealth distributes on-target, Governments can be said to have managed the country’s finances very well.
This article is an excerpt from “World Peace – The Transition”.
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