Recent Economic Growth Benefits Solely the Rich
The phrase “income inequality” is the spittle on every pundit’s lip. Left-leaning pundits like to use this issue as a cudgel with which to beat Republicans, but fall far short of proposing policies that would actually help, such as a universal basic income. Right-leaning pundits continue to try to obfuscate the issue; The Wall Street Journal had to issue a retraction after editor Bret Stephens used non-inflation-adjusted figures to try to prove that poor and middle-class Americans have gotten significantly richer over the last 40 years despite rising inequality.
In reality, according to the U.S. Census Bureau, incomes for the bottom 25 percent declined by 2.6 percent in real terms, and income for the middle class (in the 50 percent to 75 percent range) increased by only 5.7 percent in real terms, from 1979 to 2012. The top 25 percent increased their incomes by 42 percent in real terms with staggering increases in the top 1 percent accounting for much of that growth. For the last three decades, most Americans have been treading water while the top 1 percent swim away with an Olympic-worthy freestyle.
Stephens, in another misleading article, recently wrote that “inequality should only matter to Americans if, Russia-like, the rich are getting richer at the expense of the poor.” I agree with him — and I think it’s quite apparent that the rich are getting richer at the expense of the poor.
Before the 1970s, wages rose with productivity. Since 1970, wages have stagnated, while productivity has continued to increase. The result? Corporate profits are at record highs. If industries are producing twice as much as they did in the 1970s but only paying their workers slightly more in real terms, it’s obvious that the result will be massive profits for the owners and shareholders.
It may be an awful economy for employees, but not for employers. Desperate workers are good for business. Why raise wages in an economy when being employed at all is considered a blessing? Why create jobs when you can raise performance standards and squeeze more wealth out of your existing employees instead?
The current state of affairs is a stunning refutation of supply-side economics. The conventional wisdom in American politics is that if businesses thrive, the country thrives. For both political parties, it’s gospel truth that “what’s good for General Motors is good for America.”
But what’s actually happening in the real world is that the workers are getting screwed and the owners are getting off. If you live on a salary, you live in a depressed economy. If you live on dividends or stock options, you’re in the middle of one of the biggest booms in history. These two facts do not exist independently of each other, and the former has largely caused the latter. Labor costs are low, so profits are high.
The U.S.’s GDP is growing at a healthy clip — employment, not so much. One of President Obama’s signature initiatives from the State of the Union is to convene a conference of CEOs at the White House to create more jobs. The President is going to beg business leaders to hire people instead of hoarding money and paying dividends to investors. Spoiler alert: It’s not going to work!
The economic pie is growing, all right, but all of that growth is getting devoured by a gaggle of greedy gluttons. It’s been this way for 30 years, and it’s past time we did something about it.