The Love Chronicles; Inequality in the United States

Posted: March 12, 2014 in News and politics
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Inequality in the United States

 

Inequality overall is usually expressed as wealth or income gap. Regions (southern states is one example) also make a difference as does race and religion. Religion is a war generator, just as much as ethnic bias is. It indirectly has an effect on world economies and poverty. Education is no longer a guarantee of higher wages or even of employment, at least here in the United States of America!

Americans are living in an unequal society, more so than practically anytime in the last century.  The income and wealth differences are greater in the good ole U.S.A. than in any democratic or developed country in the world.  As Joe Friday used to say, “the facts, nothing but the facts.” 

It is not as if we are condemned to watching all of this from the sidelines. All of these economic and demographic changes are embedded in a larger institutional and political story. In order to understand U.S. inequality and its growth over time, and in order to think about what we need to do to fix it, we need to focus on differences that matter. The simplest way to do this is to go back to our midcentury public policies that sustained both a floor for the bottom of the labor market and a ceiling for the top of it. This was done primarily with the power of unions, believe it or not, as they limited how much management could syphon off in pay and bonuses and other areas like buying back their own stock to manipulate profits for gain, but this puts money in the pockets of few, while money for increased wages and benefits is not even in the plan of a major corporation anymore. The work force was motivated because they were being treated fairly and able to transition to the middle class.  The tax base on the top tier of income and profit was also at a much higher rate in the years after WWII, so that the government was able to more easily have funds to operate without creating a huge deficit. Now top tier taxes have dropped dramatically and our politicians are asking you and I to take up all the slack.  This includes education, which in my opinion is a criminal act in itself. Some of the so-called 2% are crying that we should be glad we even have a job, and they feel like we are treating them like the Nazis treated the Jews. Actually said, I did not make that up. 

Some people blame globalization and entities like the World Bank and International Monetary Fund for this inequality. Yes, they are partly to blame, however the real result in globalization has been to bring about more equality to nations, but more inequality within them. We were the only major power after the war that did not have to rebuild an infrastructure destroyed by war. That and the fact that at the time fuel and power sources for industry were cheap and plentiful.  However our spending started to increase dramatically starting with the Vietnam War while cheap plentiful fuel was getting harder to come by and also more expensive. Money in the world economy started flowing to countries with younger more energetic economies or who were rich in natural resources. This started narrowing the advantage we had in both trade and influence. What resulted was an economy that used the vast cheap labor pool and manufacturing available at lower costs on foreign soil to blackmail the American worker into working longer for less money, giving up things like unions, healthcare and retirement, in exchange for the company not to outsource their jobs, or moving the company itself overseas or to countries to the south.                                                                                                                 

We need Unions with their power restored to act for the worker as they once did until they were finally made ineffective by a systematic attack by a small percentage of the population whose avarice has no bounds, basically large corporations.  Without unions, workers have no bargaining power at all. Over the years labor’s bargaining power collapsed as I explained previously. This all began with the passage of the Taft-Hartley Act in 1947, which outlawed secondary labor actions (such as boycotts, or the picketing by workers not involved in the dispute) and undermined union security in so-called “right to work” states—especially in the South, the rural Midwest, and the mountain west.  The Landrum-Griffith Act (1959) further constrained secondary labor actions and permitted non-members to vote in certification (or decertification) elections—essentially inviting employers to hire scabs, and then count scab votes against the fate of the unions. This is a direct result of big business buying the votes it needed to enact such legislation. An assault on unions was systematic, and the middle class and all workers, even those outside of the unions began to suffer. The net result is telling. Early in the century, the share of the American workforce which belonged to a union was meager, barely 10 percent of the labor force. At the same time, inequality was stark–the share of national income going to the richest 10 percent of Americans stood at nearly 40 percent. This gap widened in the 1920s. But in 1935 the New Deal granted workers basic collective bargaining rights; over the next decade union membership grew dramatically, followed by an equally dramatic decline in income inequality. This yielded an era of broadly shared prosperity, running from the 1940s into the 1970s. After that, however, unions came under attack—in the workplace, in the courts, and in public policy. As a result, union membership has fallen and income inequality has worsened—reaching levels not seen since the 1920s. Today’s unions are merely figureheads, they have no real power, they have been systematically stripped over the years by influence peddlers (lobbyists) that work for the elite who can afford to make policy with their wealth, to make even more wealth.  Some suggest it is less than two percent of the population that control how the rest of us are going to live. It definitely is not a government for the people and by the people any longer. Well for 98% of us anyway! So look, if you knew that you were going to have to work almost twice as hard for about half the money, would you have agreed? If you knew that a huge portion of health insurance and retirement security was available to employees of corporations but was going to disappear without the protection of a union and that this would result in our elderly being more dependent on social security, medicare, and medicaid, would you still have a bad taste in your mouth about unions? And, of course, union decline contributes to inequality beyond the bargaining table or the paystub. But because public and private sector unions have been such a potent political force across the last century; their decline also undermines support for a wide range of public policies that might sustain working families or check corporate power. 

The net effect is clear. For a generation after World War II, the economy and the wages of working Americans grew together—a clear and direct reflection of the bargaining power wielded by workers and their unions. From the early 1970s on, however, union strength fell—and with it the shared prosperity that it had helped to sustain. Labor productivity has almost doubled, but the median wage has grown only 4 percent.   Let me repeat that, labor productivity has almost doubled; yet wages have only grown by 4 percent! The share of national income going to wages and salaries has slipped, while the share going to corporate profits has risen. Inequality has widened most dramatically for those who at an earlier point in our history or in any other democratic and industrialized setting would benefit the most from collective bargaining. You can boo hoo and nay say all you want but there is no denying that our country was growing as was our middle class and industry all with higher taxes on corporations and the wealthiest Americans with strong unions representing workers. Now you think that the average American should work two jobs to get out of poverty and thank the wealthiest for the fact they have jobs. Education suffers because most can’t afford to access it. The specter of poverty, jobs with no future, no advancement with a decent wage, drives people to do some pretty despicable things. This is human nature and we can fix it, we just have to wake up and pay attention to Joe Friday and not the swill being fed us by those who think of us as nothing more than a means to more profit. When we cannot service them anymore we are discarded and replaced.  Is that the legacy you keep talking about? I sure hope not.

The solutions here are straightforward. We need to disentangle health care and pensions from job-based eligibility or participation. This would involve moving towards a sort of “Medicare for All” health care system and a system of universal and portable retirement accounts.  I know how much negativity there is about the Affordable Care Act, but if you follow the money, it is the same money that does not want unions to thrive, or social programs to be funded, or a minimum wage increase. We of course need to reinvent our compensatory social programs (unemployment insurance, food stamps) so that they are a better match in terms of eligibility, coverage, and duration for the challenges faced by the current generation of working families. Remember that Social Security, among others, is a paid deduction that comes out of every paycheck you receive.  You will probably not live long enough to get back what you put in most cases. Also that the federal government borrowed amounts that are described with words like trillion! Now that the bonds have come due, these same top tier lobbyist-funding czars have renamed them entitlements. That is money and a lobbyist talking out his ass, not the true state of affairs. Is there a problem with some people who do not deserve social programs, of course there are. But those are the problems we should be solving and not getting rid of a program that does not affect the deficit. 

The concentration of wealth and incomes at the upper end of the scale is bad for our economy and bad for our democracy. Making headway on this front depends upon the redistribution of both economic and political resources, indeed any real progress on the economic side of the equation is likely to be slight or fragile unless we can sever the close relationship (made worse, but hardly invented by the Citizens United decision) between economic affluence and political influence.

Much higher taxes on the rich are the starting point here—both to sustain and to raise the revenues that make other inequality-fighting policies possible. The form of such taxes is as important as their rates: Taxes that penalize or restrain things like a financial transactions tax for instance, which could both raise money and encourage investment in more productive forms of economic activity. Changes in the tax code could be accompanied by checks on executive pay—either through more transparent and active forms of corporate governance or through public leverage. And efforts to chip away at concentration of wealth at the very top should be accompanied by efforts to build the wealth and assets of ordinary Americans. 

Now Corporate America has also trained you to respond to the above paragraph by calling it socialism. It is a way to divert your attention from the truth. Were we a socialist republic after WWII? No we were not but corporate taxes were high, unions strong, and corporations and the working men and women were both doing well and getting better off each year. This is not the case today and the United States has the worst record of inequality on the entire planet! Japan and Germany, who surpass us, and most of the rest of the world economically, also have vastly lower inequality thresholds and support more and better social programs than we do. So I can’t say it enough, we rate right at the top of the list or bottom depending on how you want to look at it in rampant inequality on the world stage. I have heard the old proverb started by the gods of industry that if they do better it trickles down to you. Well what trickles down has been shipped overseas along with your job, or is in an offshore account. Dumbest saying I have ever heard. You have heard of lemmings? You say you want to leave a legacy for your children? Well unless you can figure out how to marry them off to about five or six families of royalty in the U.S., you’re just flat out of luck if the current trend continues. 

 

 

Comments
  1. James Mahon says:

    As an economist, I look to the changes in the labor supply over time, and the law of unintended consequences for many of the inequalities. Newton was right, there is an equal and opposite reaction to every action, and most of them bite us in the butt. Tax reform, and less governmental interference in the market place are the solutions from my perspective. The resources go where the 10,000 pound gorilla spends, not the millions of insects. And yes, I am oversimplifying a very complicated problem. If the Feds knew best, they could predict every play, how every player would react at any given second, and the end result in a football game before it started. Since perfect information is a pipe dream, let the masses find the answers.

  2. John Love says:

    Your commentary, while non-illuminating, did present to me a culmination of conundrums to assimilate while cogitating the auspices of your indictment. —-Or—– Uh huh.

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