Sky-high salariesIf you had a choice between a yearly stipend of 50 million won and 100 million won, which would you choose? Don’t jump the gun before you hear all the details. If you opt for 50 million won, other people will receive 25 million won. However, if you receive 100 million won, others will be given 200 million won.
Now which package would you choose?
In a Harvard University survey, most Americans chose the 50 million won option. What matters is not how much you earn, but how much more than others you earn.
The economist Charles Kindleberger was spot on in observing, “There is nothing so disturbing to one’s well-being and judgment than seeing a friend get rich.”
The small gap in incomes in Switzerland, Denmark and Finland leads to a relatively higher level of contentment in people living there. By contrast, Americans score poorly on happiness surveys. In 2006 data among members of the Organization for Economic Cooperation and Development, the United States had the fourth highest Gini coefficient, a measure of inequality of wealth distribution. The higher the Gini coefficient, the more unequal the distribution of income or wealth.
Wall Street, the heart of the financial turmoil that has sent the U.S. economy into its deepest downturn since the Great Depression, has been blamed as the prime culprit for such wealth inequality. Since the 1980s, financial institutions have been outdoing each other in the amounts they pay their executives. As result, the Wall Street CEO who earned around 20 times the average worker in the 1970s was recently recorded earning as much as 400 times in the same comparison.
JP Morgan CEO Jamie Dimon in 2007 boasted a salary of $30 million, far dwarfing the $400,000 the U.S. president earns per year. The top 25 hedge fund operators pocketed $570 million on average in 2006. And AIG’s latest $165 million payout for retention bonuses is just the tip of the iceberg.
It is no wonder the nation’s smartest brains lined up to join the Wall Street parade. The rate of Harvard graduates joining those financial companies soared from 5 percent in the 1970s to 22 percent by 2007.
But even the best and brightest brains were blinded and deluded by so much cash on the loose which generated the toxic spiral of derivatives that brought down the U.S. financial system. Americans who have lost jobs and pensions have reason to be outraged by the latest AIG shenanigans. The U.S. Congress has started legislation to slap punitive taxes on extravagant bonus payments.
It would be wonderful if the latest financial fiasco could lure young talent to other fields such as the public sector and education. A group of jobless financiers started offering voluntary tax advice for the underprivileged and claimed they’d never been happier.
Money indeed does not buy happiness.
The writer is an editorial writer of the JoongAng Ilbo.
By Shin Ye-ri [firstname.lastname@example.org]
with the Korea JoongAng Daily
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