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POSSIBLE SOLUTIONS TO THE WAGE AND WEALTH INEQUALITY CONUNDRUM

April 30, 2015

POSSIBLE SOLUTIONS TO THE WAGE AND WEALTH INEQUALITY CONUNDRUM

Many of the solutions proposed to end wage and wealth inequality deal with increases in minimum wages designed to help the working poor, and that is certainly appropriate. However, it is not only the working poor who are being left out of their fair share of what our economy produces, and raising the minimum wage does nothing to help the mass of non-poverty wage earners whose own incomes are also stagnating. We should be advocating not only for poverty workers but also for middle class workers whose incomes are going south (along with their purchasing power in the marketplace).

Both such classes are victims of the one percent rich and investment class, which has hogged 95% of both the income and new wealth created by our economy for decades. The result, aside from relative impoverishment of all other classes, is that our economy is beginning to show the effects of such lack of wage and wealth equality as aggregate demand is tanking for lack of money in consumers’ pockets. Just today the AP reports that “The overall economy grew at a barely discernible annual rate of 0.2 percent in the January-March quarter. That is the poorest showing in a year and down from 2.2 percent growth in the fourth quarter.”

Immediately the PR guns for Wall Street took to TV and business editorial sheets and said that our economy was battered by a triple whammy of bad weather, plunging exports and sharp cutbacks in oil and gas drilling during the quarter and that better days are ahead. The export problem is due to the strong dollar, of course, and is offset in consumer terms by cheaper prices for imports as denominated in dollars. Bad weather we have had before, and lower investment in gas and oil drilling was, according to these same people while cheerleading at an earlier time, the result of a glut on the market which would give people cheaper gas and leave such consumers with more money to buy other things in the marketplace. They didn’t.

I take such business page apologies for Wall Street with a grain of salt and note that their “explanations” did not include reduced consumer spending in their “triple whammy,” and for good reason. It would trash their prediction that cheaper gas would stimulate consumer demand. It didn’t. So exactly what was consumer spending (which accounts for 70 percent of total economic activity) for the first quarter? It went down to a rate of just 1.9 percent, its weakest gain in a year, and the business page writers don’t want to write about that because it raises the issue of wage and wealth inequality, an area verboten by the one percenters, who always want to change the subject when reduced aggregate demand is mentioned. Such writers predict that better days are ahead, but I have this question: Really? For whom and who says?

The foregoing is prologue. Like it or not (and I don’t), the present system is what it is and if we are to bring equity and fairness in sharing the fruits of our economy we must devise new and innovative ways and means of doing what we can within the system. Harold Meyerson in a piece in the winter edition of The American Prospect suggests several, some of which I endorse.

The National Labor Relations Act established the right of workers to form unions without fear of being fired. Restoring and reinforcing that right would be a start, but it would take years to do given Republican opposition in the Congress and so-called “right to work” statutes in place in many states. We may be unable to wait that long before the economy finally tanks due to maldistribution of the economy’s income and wealth in a Piketty-predicted crash, so what can we do that will yield the desired results quickly and perhaps avert capitalism’s own implosion?

We could take a page out of the rich and investment class’s book and use the internal revenue code to achieve our goals with some carrot and stick proposals. We could, for instance, advocate lowering taxes on corporations that increase their employees’ wages at the same rate the nation’s annual productivity increases, and raising taxes on those who don’t. (This might be a proposal that could be sold since during New Deal days when unions were strong workers’ wage raises frequently were IN EXCESS of such productivity increases.)

Alternatively, we could advocate lowering taxes on corporations that divide their boards (as in Germany where it works well) between shareholder and worker representatives, and raising taxes on those that don’t. The investment/management side of corporate control is, after all, only the money side. Workers have enormous investments of human capital and risk involved as well in the well-being of the corporation, and should have a place in corporate governance.

Other ideas to end wage and wealth inequality include advocating for higher taxes for corporations that offshore their work, requiring studies of all pending trade agreements that assess the effect of such agreements on domestic median incomes of American workers and support only those that raise them, and in general advocate for tax reform that shifts the tax burden from labor income to investment income.

We need to reframe the economic debate while restoring wage and wealth equality we once enjoyed before circa 1974 after which the rich and investment class decided to hog 95% of both the income and new wealth created by our economy. We need to advocate for all working Americans, including but not limited to just the working poor. We need to bring back the Glass-Steagall Act to end Wall Street traders’ shenanigans with derivatives and other such securities on our bailout dime. We need a federal minimum wage adjusted annually to the inflation rate.

We need a lot of things, but perhaps mostly we need the political will to fearlessly fight for what is right for all of our people in shifting power and income away from activist shareholders, overpaid CEOs, and financial elites who (with the help of their political toadies) so ruthlessly gather all the fruits of our economy for deposit in their bulging coffers. We must win this fight as the stakes (including survival of capitalism itself per Piketty) could not be higher.   GERALD   E

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