The following excerpt is from an online source we are really enthusiastic about, the New Economics Foundation. The proposals below will be very hard for most Americans to even understand as we are so thoroughly propagandized and most of us worship the rich almost like our personal gods. However, the NEF is really onto something by quantifying the benefits (or costs) that different professions bring (or impose) to society. If efficient markets prevailed, investment bankers would have to pay roughly seven times their salary to perform their professions, and professions like hospital cleaners would go up by a factor of 20.
Because social and environmental costs are not properly accounted for, the market tends to oversupply products that may have a significantly negative environmental or social impact – such as cheap consumer goods and complex financial products. In the same way we underpay work that has a high social value, creating high vacancy rates in our most important public services such as nursing and social work. By making social value creation an important societal goal we could set the right incentives to maximise net social benefits, ensure a greater return to labour rather than capital, and a more equal distribution of economic resources between workers.
High-earning investment bankers in the City of London are among the best remunerated people in the economy. But the earnings they command and the profits they make come at a huge cost because of the damaging social effects of the City of London’s financial activities. We found that rather than being ‘wealth creators’, these City bankers are being handsomely rewarded for bringing the global financial system to the brink of collapse. While collecting salaries of between £500,000 and £10 million, leading City bankers to destroy £7 of social value for every pound in value they generate.
Both for families and for society as a whole, looking after children could not be more important. As well as providing a valuable service for families, childcare workers release earnings potential by allowing parents to continue working. They also unlock social benefits in the shape of the learning opportunities that children gain outside the home. For every £1 they are paid, childcare workers generate between £7 and £9.50 worth of benefits to society.
Until goods and services reflect the real costs and benefits of their production, incentives will be misaligned with the kinds of positive behaviours society wishes to promote. Getting the prices right would affect relative profitability and so would align what wages could be paid with the value that is created. Consumption and corporation tax are two vehicles for doing this, but they need to be applied in a progressive way.
One of the reasons why a minimum wage has become the norm is because it has been accepted that perfect competition does not exist and that employers have ‘monopsony’ power – the power to set wages. It is increasingly evident however, that workers at the top end have the power to command salaries over and above what the market will bear.
The disconnection between executive remuneration and corporate performance means that high pay differentials cannot be rationalised by performance delivery. An honest analysis ought to concede that the executive elite has the power to demand and receive excessive pay without being bound to contribute greater returns. Remuneration committees are both self-regulated and self-fulfilling, comprised as they are of members of the executive elite. Shareholders have little power to contain management pay.
It has been claimed that workers at the top end of the income scale work long hours and therefore ‘deserve’ higher earnings. There are several factors, however, that are not usually taken into consideration when calculating hours worked.
One of these factors is the fact that the poorest in our society are just as likely to work long hours in a main job and/or to take on multiple paid jobs. Many need to do so to make ends meet.
The private sector is more efficient than the public sector, hence the higher salaries
Work that is cheap is not necessarily work that is effective. This myth about the supposed efficiency of the private sector has contributed to an increase in competitive tendering of public services to private contractors. It has also been used to justify spending less on a service. But lower prices often come at a cost.
In the case of hospital cleaning UNISON has shown how cost savings have been generated by paying staff less and allowing working conditions to deteriorate. Cost cutting can reduce the time spent on cleaning and affect the quality of the cleaning service as a whole. Competitive tendering can thus lead to all sorts of negative consequences.
Similar trends emerge when we broaden the question to include goods and services that traditionally fall outside of public services. Our current system – in which efficiency means doing more for less – can actually crowd out many of the things that we value as a society. It means it is ‘efficient’ for City bankers to devise more and more creative financial products rather than provide sustainable access to finance. It means it is ‘efficient’ for advertisers to motivate consumers to eat more and more cake, regardless of the costs in obesity-related health problems for the state. It also means it is ‘efficient’ for the cake that the advertising agencies promote to be extravagantly packaged and exported half way across the world – regardless of the environmental impact. We need a new definition of efficiency, one that takes account of outcomes.77 Efficiency savings will be misleading unless we include the true social and environmental outcomes of the goods or services being produced. The concept of ‘efficiency wages’ is useful here. This term describes the situation where it is more effective to pay staff above the minimum wage. It can build loyalty, increase incentives for staff to do their job effectively, and enable people to enjoy a decent standard of living.
Orthodox economic theory suggests that people will choose to live and work where they stand to gain most in terms of personal finances.82 Given the opportunity, the theory says, they will move from a high tax jurisdiction to a low tax one to keep a higher share of their pay.
Intuitively, however, we understand that decisions on whether to emigrate are far more complex than that. They depend on a multitude of factors beyond just the financial, including cultural familiarity, environment, proximity to friends and family, and quality of public services.83
If it were the case that higher taxes caused wealth to flee we would expect to see an exodus of the wealthier citizens of Sweden, Denmark, Norway and France – the countries with the highest tax rates. A glance at the latest Forbes billionaires list84 reveals that of four Norwegians on the list all live in Norway, the two Danes live in Denmark, five of the nine Swedes live in Sweden, and eight of the ten French live in France.
Some of the super-rich like to hide behind the myth that they contribute more to our society than the rest of us. Think of all the tax they pay, the argument goes, and their very visible charity donations.
In the United States the economist Simon Head has calculated that the average weekly wages of the bottom 80 per cent of the working population fell by 18 per cent from 1973 to 1995, while the pay of the corporate elite rose 19 per cent before taxes. This increase reached 66 per cent after the tax accountants had ‘worked their magic’.86 In the UK executive pay increases in the past decade have vastly outstripped those for employees, on top of which the rich pay proportionately much less of their income in tax than the poorest.
Not only do the rich pay less tax, but they often form a powerful lobby to erode the tax base of the economy. They have supported the propagation of the misguided view that tax cuts are good for stimulating growth and even increasing government tax revenues. The Nobel Prize- winning economist Paul Krugman claims that this is not true in the context of the United States. The tax cuts of the Bush administration that disproportionally benefited the most affluent had disastrous consequences for the economy. They contributed to converting the $230 billion surplus inherited by President Bush into a $300 billion deficit.
Rich people who avoid paying tax often justify this by referring to the inefficiency of public services. Some hide behind a smokescreen of high-profile charity donations. However, the rich actually donate less in relative terms to charity than the poor. The top fifth of households give less than 1 per cent of their income, while the poorest tenth give 3 per cent. In fact, inequality in income terms is echoed by unequal philanthropic giving.89 It is as if the small-change contributions of the super-rich are merely a salve to a guilty conscience for some. Polly Toynbee has stated that “true philanthropy in the modern world is tax-friendliness: public acknowledgement that a reputable mechanism exists to extract money from those who have too much and give to those who have nothing”. – NEF
Citibank is an extremely low grade institution that both takes advantage of its customers and engaged in mortgage fraud during the housing bubble. Amazingly authors think nothing of holding them up as a paragon of efficiency with their Six Sigma quality programs. 
