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FULL EMPLOYMENT AND INCOME INEQUALITY

November 14, 2018

FULL EMPLOYMENT AND INCOME INEQUALITY

Today we are told by breathless business columnists, the WSJ and sundry politicians that the economy is booming beyond anything we have seen since the era following WW II. Business interests claim it is due to lower taxes and less regulation, and politicians such as Trump say it is due to their brilliant leadership. Things could hardly be better, right? Wrong.

Things could and should be much better. The era after WW II was one where wages rose in tandem with the Dow, and that was due to New Deal policies of FDR that lasted up until the era of Reagan and following the advice of Lewis Powell, who in 1971 advised a friend of his who was vice president of the U.S. Chamber of Commerce in detail just how business and financial interests could capture the politics of Washington. With the advent of Reagan in the Oval Office, business interests followed the Powell guidelines very successfully. Result? The Dow has since gone into the stratosphere while median wages have stagnated and even fallen, adjusted for inflation, so that even now, adjusted for inflation, workers are making less than they were forty years ago. (Powell, the Richmond, Virginia attorney for Big Tobacco when he wrote his infamous memo to his friend, was later appointed to the U.S. Supreme Court by Nixon, which sealed the deal with an enrobed big business zealot on the bench.)

What the Wall Street drum beaters are telling us today omits salient facts. Like, during the New Deal era only one household member’s wages were necessary to make house payments, car payments, and meet other household expenses. The other member (usually the wife) stayed home and kept the kids out of juvenile court. Now we have both members of the household working more hours (frequently with two or more jobs) to keep their economic noses above water (and with only pittance tax help for childcare). Median wages as adjusted for inflation have not moved for some forty years and even the slight uptick in today’s wages has already been offset by inflation, increasing interest rates and removal of certain tax deductions in the Trump/Ryan tax bill passed in December, 2017, a bill that gave 1.9 trillion dollars to the rich and repayment (national debt increase plus interest) to the rest of us as we await our first predicted trillion dollar current budget shortfall (also to be added to our national debt we and our grandchildren must pay – with interest) though we were told in effect that we can borrow our way into prosperity. We can’t, but even if so, prosperity for whom?

Also of note is the fact some of these extra jobs today are undertaken by over-qualified people in order to avoid a Chapter 7 experience in bankruptcy. I personally had a (now deceased) classmate with a PhD who was a Walmart greeter who as a retiree needed the income, meager as it was, so the issue is not just having to do extra jobs to make ends meet; it’s also what kind of jobs one feels forced to do. There is nothing wrong with working as a greeter at Walmart and I do not by what I am writing want to demean those who are greeters, but I submit that the job description shouldn’t require a PhD.

Steven Pressman, an up and coming professor of economics at Colorado State University, notes in the November edition of The Washington Spectator that the share of total income going to the top one percent (those with incomes of 1.5 million per annum) has risen from 8.9 percent in the late 1970s to 22 percent in 2015. He writes that “Almost all income gains in the entire U.S. economy over several decades have gone to the very wealthy.” He is right, and it’s getting worse since 2015, at the continuing expense of other stakeholders in the economy, and especially the workforce.

The near full employment that Wall Street and Trump crow about along with even raising the minimum wage and providing a broader social safety net will not solve these and other structural problems in our economy. The culprit is wage inequality, our most pressing domestic problem, a real drag on aggregate demand and the primary cause of our underperforming economy.

So a boom, you say? For whom, what with by far the worst poverty rate in the Western World and struggling poor and middle classes working day and night? It will be a boom when it is a boom for all, when wage rates mirror the Dow, when one job per household is sufficient, when labor is valued fairly and shares equitably with the economy’s financiers for its contribution to the wealth and income produced by our economy and when, finally, the cancer of wage inequality and its debilitating effects on our economy’s performance is in our wake.      GERALD        E

 

 

 

 

 

 

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