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Equitable distribution of income and wealth (Condition 3)

In recent decades, the discrepancies in the distribution of income and wealth of several countries have significantly increased or are increasingly perceived. This is particularly true for the distribution between the wealthiest households and the rest of the population. In the UK the top decile was owning 44%-45% of  wealth around the years 2005 – 20071. Already in 1998 the richest 1 % of households in the United States owned even about 38 % of US wealth 2.  Since the beginning of the 70th the top 10 % income share in the US rose from 32 % to 45 % in 2008 3. Estimates on an international level show that the top 10 per cent owned 71 per cent of world wealth 4. Given these trends, it has become inevitable to further regulate this distribution taking into account two major concerns : (a) In order to maintain the incentive to private initiative, notable differences in the distribution of income and wealth have to be tolerated. (b) On the other hand, it has become necessary to limit inequality in the distribution of income and wealth to what is compatible with the rational use of resources and social cohesion.
Limits to inequalities
The statistical office publishes annually for the past years
  • the decile distribution of gross income of households 5,
  • the median of gross wealth of households 6.
Based on these statistics, the public authorities announce up to what point they will tolerate on their territory inequalities in the distribution of income and wealth, i.e. they set limits to acceptable inequalities. No household in the country may have
  • a gross income exceeding x times a reference income (e.g. 30 times the average gross income of the households in the first two deciles).
  • a gross wealth exceeding y times a reference wealth (e.g . 30 times the median of gross wealth of households).
Income or wealth exceeding these limits are considered exorbitant and unacceptable.
Correction by concerned
Together with the definition of acceptable limits, the public authorities are fixing a transition period (e.g. three years) during which the households concerned can make arrangements reducing their income and wealth to the limits allowed. Households with an exorbitant income or wealth can then decide themselves how they
  • bring, during the transition period, their income and wealth into the  limits permitted
  • keep, after the transition period, their income and wealth within the limits allowed.
Correction by public authorities
The public authorities intervene only after the transition period insofar as households with an exorbitant income or wealth did not use their opportunities to implement the changes required. Income exceeding the acceptable limits will be confiscated or assigned to bodies serving general interest (research, education, environment, culture). Similarly, the government will decide what parts of an exorbitant wealth will be confiscated, sold for the benefit of bodies serving the general interest or transformed into an autonomous unit.

If households are leaving the scope of these provisions because they have a penchant for excessive income or wealth, they may try to pursue their ambitions elsewhere.

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1 HM Revenue & Customs : Distribution of Personal Wealth
2 Edward Wolff (The Review of Income and Wealth) : The Wealth Divide - The Growing Gap in the United States Between the Rich and the Rest
3 Facundo Alvaredo, Tony Atkinson, Thomas Piketty, Emmanuel Saez : The World Top Incomes Database
4
James B. Davies, Susanna Sandström, Anthony Shorrocks, Edward N. Wolff : The Level and Distribution of Global Household Wealth, Abstract.
5 The households classified by size of gross income are grouped into 10 slices ("deciles") each containing 10% of households. The decile distribution of households by their gross income is showing the 1st, 2nd, 3rd ... 10th decile of households receiving successively higher gross incomes. The first decile contains the 10% of households receiving the lowest gross incomes and the tenth decile the 10% of households receiving the highest gross incomes.
6 The median of gross wealth of households is the gross wealth of that household being exactly in the middle of all households classified by size of their wealth (50% of households have a lower wealth and 50% a higher wealth).


Pour en savoir plus :

OECD : Decile ratios of gross earnings
INSEE : Les très hauts salaires du secteur privé, Graphique 1
INSEE :  Les inégalités de patrimoine s’accroissent entre 2004 et 2010
INSEE : Niveaux de vie moyens par décile en 2009
INSEE : Patrimoine moyen par décile en 2010
Swiss Confederation, Federal Chancellery: Federal popular initiative 'against excessive pay', initiated by Thomas Minder, accepted by the federal referendum no. 568 of 3 March 2013 with the majority of 68% (participation rate: 46%).
C. Landais, Th. Piketty, E. Saez : Pour une révolution fiscale





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