Income inequality has been steadily growing all across the globe. Developed economies, like the United States, suffer from some of the highest levels of income disparity in the Western world. To combat this, Swiss citizens have gone on the offensive against the ever growing gap between the corporate elites and low wage workers. The first action taken against corporate abuse was back in March 2013 when Swiss citizens voted in favor of the so-called “fat-cat initiative.” The fat-cat initiative aimed to reform CEO pay packages, including making golden parachutes illegal in the country. The measure was affirmed by 68 percent of the population.
On November 24th, the Swiss can take another step in curbing corporate superfluous pay grades. The 1:12 initiative seeks to limit the monthly pay of the highest earners in Swiss firms to no greater than the yearly pay of the lowest earners. In other words, CEO’s can’t make more in a month than their lowest laborers makes in a year. For example, if a CEO makes 30,000 Swiss francs a month, the lowest paid worker in their company will make at least that in a year. The goal is to make a relationship between the highest and lowest paid workers. Obviously the corporate elites in Switzerland outright reject the 1:12 initiative. A few CEO’s even threatened to move their businesses out of the country.
However, these threats are most likely the bluster of spoiled children. Switzerland is one of the most business friendly countries in the world. If this initiative passes there are several ways companies can deal with the new radical mode of income redistribution. They can leave the country, which, again, is unlikely. Or they can redistribute the surplus to the workers. Or they can utilize their profit to reinvest in their respective companies. The situation that will most likely transpire will be a combination of the latter two options. David Roth, President of the Young Socialists of Switzerland, one of the architects of the 1:12 initiative said:
“I think it’s quite arrogant of some people to think that big companies will disappear. Big companies are not here because they can pay the managers high salaries. Big companies are in Switzerland because we create really good conditions for those companies. We have really well-educated people, we have a really good level of infrastructure, we have a health care system that is working, we have social security, and public security, of course, because of the social security. You are able to walk the streets — it doesn’t matter how rich you are, you are safe here in Switzerland. Well-educated people, good infrastructure, that is the reason why these companies are here, not because they can pay those high salaries.”
Income inequality has exploded in the past decade
The increasing levels of income disparity in Switzerland have occurred relatively recently. Thirty years ago a CEO in Switzerland made about 6 times more than their average employee. By the end of the 90’s the differential was 13:1. In 2007, CEO’s made 56 times more than their average employees. If the initiative is successful, companies in Switzerland will have to find ways to comply with the law. Huge Swiss firms like Roche, which is a healthcare company, has a pay discrepancy of 239:1. ABB’s, one of the top tech companies in Switzerland, top salaried employee make 227 times more than their lowest laborer. Novartis is a multinational pharmaceutical corporation which pays their top executive 219 times more than their lowest paid worker. These companies possess outrageous income disparity levels like those found in the United States, which last year was 273 to 1.
So what does this mean for America? Absolutely nothing at this current time. The word “redistribution” carries a negative connotation in America as long as it’s going from top to bottom. If you reverse that, however, you get an enthusiastic applause from conservatives. What makes the the radical approach taken in Switzerland so interesting (and scary for American CEOs) is that it should be a blueprint for those who crusade against corporate injustices. The idea is to educate Americans, to let them know that income disparity is even worse than they think! Wage reforms won’t be won through public pressure campaigns. Those movements have proven to be unsuccessful in recent years. The Swiss have the right idea: Ballot initiatives brought directly by the people through petitions in local and state elections, wherever possible should be the target of anti-corporate crusaders.
Making corporations responsible for their employees will help bolster the economy. It will also relieve citizen reliance on the government while subsequently lowering tax rates since more people will be able to pay into the system. Swiss citizens have taken a radical approach to unjust and unnecessary income inequality. They have faced the problem head on, instead of fighting on the periphery. Only time will tell what will happen on November 24th in Switzerland, but I believe the workers of the country will make the right decision.
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