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WINNERS AND LOSERS IN THE WEALTH AND WAGE INEQUALITY GAME

April 30, 2015

WINNERS AND LOSERS IN THE WEALTH AND WAGE INEQUALITY GAME

Republican politicians and their rich and investment class patrons and campaign contributors have explained their refusal to raise wages and share the economy’s increased wealth with the working poor on grounds that such workers are, among other things, under-educated and do not by their efforts contribute enough to economic growth to be rewarded with wage increases and increased sharing of the new wealth which comes from such economic growth.

Such propaganda (in addition to being demonstrably and blatantly false) fails to tell the whole story. It is not only the working poor who are being victimized by the greed and grasping of this class of one-per centers which has resulted in its skimming off 95 percent of our economic growth for many years for its own coffers from an economy to which all of us contribute in our capacities as producers, investors and consumers – far from it. This greedy class skims off contributions of the educated or anyone else who stands between it and maximization of profit, including Republicans who are currently covering for its greed. Profits first and foremost!

The truth is that the toxic effect of the failure of the rich and investment class to share in our economy’s fruits has crept beyond impoverishment of the working poor and into the middle class (or what’s left of it), which explains the accelerated rate of those formerly in the middle class who have dropped into the working poor class. Thus those of the middle class and even upper middle class whose businesses are feeling the brunt of the one percent’s takeover of our economy and political control of our Congress are finally beginning to recognize that wage and wealth inequality is not just limited to an underclass of the poverty-stricken. It is affecting their pocket books as well and some are finally beginning to go public with this current and indefensible travesty of distributing 95 percent of our economic wealth produced by all of us to only 1 percent of us, a policy approved by bought congressional toadies fortified by incessant propaganda of Wall Street and an issue which is beginning to adversely affect those other than the working poor (whose ranks are rapidly being increased by middle class dropouts).

This comes as no surprise to me since (as my followers know) I have been harping on such an inequity in sharing new wealth produced by our economy and its effect of suppression of aggregate demand in the marketplace for years, an effect that is finally beginning to be felt by all of us and not just the working poor (though they are still the most adversely affected and in need of relief). It is an elementary proposition: People without money don’t and can’t buy goods and services in the marketplace and, ultimately and obviously, those providing goods and services in the marketplace start to experience negative results from such tepid demand. Such small and medium-sized businesses run by middle and upper middle classes either go under or seek reorganization under Chapter 11 in bankruptcy or limp along hoping for a Christmas or other season to keep their heads above water while keeping low inventory, laying off help etc.

Such a clearly unfair distribution of the fruits of the economy presents a vivid portrayal of an economy that is underperforming and in malaise for the vast majority of us, and for no good reason. Rich people can only buy so many yachts and have only so much room in the front yards of their estates for Rolls Royces, Bentleys and other trinkets only the rich can afford, but if the working poor were paid a minimum wage of at least $15 an hour with corresponding increases in the wages and business profits on up through the middle and upper middle classes, just imagine what that would do for aggregate demand (and a decent standard of living for all and even increased profits for the rich and investment class itself in the final analysis)!

As evidence of what is happening and in support of my thesis, take, for example, the homeownership rate. Bloomberg News reports that our homeownership rate has fallen to 63.7 percent, the lowest since 1993, and correctly if tardily points “to a multi-year decline as rising prices and stagnant wages keep young families out of the property-buying market.” This business page (uncharacteristically) goes on to point out that: “Entry-level buyers are struggling to save enough money to purchase homes as gains in U.S. real estate prices outstrip increases in wages, while mortgage lending remains tight.” Finally the truth is out, even on the nation’s pro-Wall Street business pages, i.e., that the housing business is bad because of poor wages.

I then read in the Bloomberg News piece something I should have read years ago (but better late than never). Jay Morelock, an economist with FTN Financial in New York, said: “The No. 1 issue in the housing market right now is wages. For the housing recovery to be sustainable in the long run, we have to see wages increase at a faster pace.” Amen, Mr. Morelock, and it’s not just the housing market. It is applicable not only to housing but to every market.

Such long-awaited admissions by representatives of the rich and investment class were inevitable what with the finding of a former Census Bureau director of wage statistics (Gordon Green) that, among other things, the median family income today as adjusted for inflation was 5.3 percent lower than January 2008 when Bush’s Great Recession was beginning. Aside from the big words used to describe it, the situation is easily explained and it is this: There is not enough money in the hands of consumers to stimulate demand in the housing market (or as suggested earlier, in any market). This is a recipe for continuing economic malaise.

Here’s the bottom line per Harold Meyerson in an article in the winter edition of the American Prospect: “What has devastated the white working class, held back minorities’ prospects, and imperiled middle-class security isn’t the programs creating a more level playing field for blacks and Latinos. It’s the massive transfer of income from more than 90 percent of Americans to the wealthy, from labor to capital, or in American English, from workers to big-time investors.” Meyerson is right. Wage and wealth inequality is making everyone poorer, as even the rich are finally admitting, so let’s end such inequality by fairly sharing our economy’s income and growth while stimulating our economy and paying decent wages to our workers.   GERALD    E

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