Two important events took place this week. One was the President's call for a higher minimum wage, which got a lot of attention. The other was a new report which showed just how much of our nation's wealth continues to be hijacked by the wealthiest among us.
That didn't get much attention.
There's a Great Robbery underway, although most of its perpetrators don't see themselves as robbers. Instead they're sustained by delusions that protect them from facing the consequences of their own actions.
Heads I Win ...
An updated report from economist Emmanuel Saez details the loss of income suffered by 99 percent of Americans, and the parallel gains made by the wealthiest among us. Its most startling finding may be this: The top 1 percent has captured 121 percent of the increases in income since the worst of the financial crisis, while the rest of the country has continued to fall behind.
If you thought the rich recovered from the crisis just fine but everybody else got the short end of the stick, relax: You're not crazy. And since the financial crisis was caused by members of the 1 percent - not all of them, of course, just the ones we spent so much to rescue - it's understandable if the injustice still rankles you.
You rescued them. Now they're drinking your milkshake.
Tails You Lose
But this wealth shift is not a new phenomenon. As Saez notes in his paper, "After decades of stability ... the top decile share has increased dramatically over the last twenty-five years." In fact, the top 10 percent's share of our national income is higher than it's been since 1917 - and maybe longer. (The figures don't go back any farther than that.)
Although it began during the Reagan years, to a certain extent this wealth shift has been a bipartisan phenomenon. During the Clinton boom years (more of a bubble, actually; Dean Baker has the details) the top 1 percent saw their real income grow by 98.7 percent, while the other 99 saw a smaller increase of 20.3 percent. They lost more during the recession that followed - a little over 30 percent, versus 6.5 percent for everyone else - but more than made up the difference again during the Bush years.
The same thing happened after the Great Recession: The top 1 percent lost more during the initial shock, but they're rapidly making up the difference now. (Meanwhile, underwater homeowners still don't have the help they need.)
The disparities are even greater when you include capital gains. And Saez uses pre-tax income for his figures, so the after-tax differences could be even greater, with generous tax breaks for capital gains and the many loopholes used by the wealthy .
There's even economic injustice at the top. Gains for the one percent have far outstripped those of the top five and top ten percent. As the old song says: Them that has, gets.
If you can remember the sixties you weren't there ... or can't afford to remember
The minimum wage has been falling since 1968. As John Schmitt notes in his paper, "The Minimum Wage Is Too Damn Low," "By all of the most commonly used benchmarks - inflation, average wages, and productivity - the minimum wage is now far below its historical level."
It's currently $7.25. Schmitt wondered: What would it have been if it had been tied to a commonly-used benchmark?
Consumer Price Index (CPI-I): $10.52
Current CPI methodology (CPI-U-RS): $9.22
As a percentage of average production worker's earnings: $10.01
Current CPI methodology (CPI-U-RS): $9.22
As a percentage of average production worker's earnings: $10.01
And if it had been tied to productivity gains the minimum wage would be $21.72. But all that added wealth went straight to the top.
Magical Thinking
There's a myth in this country that enormous wealth doesn't come from anywhere or anyone, that it's self-creating and self-sustaining, thriving on pure oxygen like an epiphyte or a garden fairy. In reality, highly concentrated wealth is caused by actions - human actions with human consequences.
Saez: "A number of factors may help explain this increase in inequality, not only underlying technological changes but also the retreat of institutions developed during the New Deal and World War II - such as progressive tax policies, powerful unions, corporate provision of health and retirement benefits, and changing social norms regarding pay inequality."
Wealth inequity is created whenever an employer lowers his employees' wages, replaces a full-time worker with several part-timers, busts a union, cuts corners on workplace safety, or pays a lobbyist to change the rules.
It's created whenever a job is shipped overseas, and when investments are shifted from job-producing industries to the non-productive financial sector. It's created when GE outsources its manufacting operation and gets into the banking (read, "gambling with taxpayers' money") business. Or when AIG stops insuring risk and starts betting on it.
And the process isn't slowing down. In fact, it seems to be accelerating.
As Saez says, "We need to decide as a society whether this increase in income inequality is efficient and acceptable and, if not, what mix of institutional and tax reforms should be developed to counter it."
Up
The President's proposal is modest, and there's no reason not to enact it immediately. For those who believe that businesses "can't afford" to pay higher wages, some key facts:
Most low-wage workers work for large corporations, not Mom-and-Pop businesses.
A Data Brief from the National Employment Law Project finds that 66 percent of low-wage employees work for companies with more than 100 employees. A handful of very large corporations collectively employ nearly 8 million low-wage employees.
There's no evidence minimum wage increases mean fewer jobs.
Opponents say a higher minimum wage means fewer jobs. But the official US unemployment rate in 1968, when the real minimum wage was highest, was 3.6 percent. Today it's 7.8 percent - and the unofficial numbers are even worse. At the state level, the Fiscal Policy Institute recently concluded that "States with Minimum Wages above the Federal Level have had Faster Small Business and Retail Job Growth."
92 percent of the 50 largest low‐wage employers in the country were profitable last year.
As the NELP notes, big corporations more than recovered from the recession: 75 percent are collecting more revenue, 63 percent are earning higher profits, and 73 percent have higher cash holdings than they did before the crisis.
Bringing It All Back Home
The real "job creators" aren't the ultra-wealthy. If they could create jobs with all their added wealth, they would have done it already. The real job creators are working people with jobs.
They don't invest their money in hedge funds or stash it in offshore accounts. They spend it: on food, transportation, their kids' education, maybe a night at the movies ... And then other people get jobs making those things possible.
We have a working model to follow: The USA in the thirty-five years after World War II. As Paul Krugman says, "To the extent that people say the economics is confusing or uncertain, that's overwhelmingly because people want it to be." We know how to do this.
Raising the minimum wage is a start. A maximum wage would help, too, by reducing CEOs' incentives to emphasize quarterly gains over long-term growth and leaving more to be shared with employees.
We also need a national strategy for regaining the more reasonable distribution of income this country had in the 1950s. We need to ensure that the door of opportunity, which is closing every day for millions of young people, is opened again. And we need to ask the wealthiest to really pay their fair share - at something closer to the top tax rates of the 1950's or 1960's. (Elvis Presley's manager "Colonel" Tom Parker once said "I consider it my patriotic duty to keep Elvis in the ninety percent tax bracket.")
Most of all, we need to educate those around us so they understand what's happening. That includes the well-intentioned well-to-do, who might do more to end the problem if they knew it existed. After all, you can't stop a robbery until you know it's happening.
Follow Richard (RJ) Eskow on Twitter: www.twitter.com/rjeskow
The Minimum Wage, Guns, Health Care and the Meaning of a Decent Society
Raising the minimum wage from $7.25 to $9 should be a no-brainer. Republicans say it will cause employers to shed jobs, but that's baloney. Employers won't outsource the jobs abroad or substitute machines for them because jobs at this low level of pay are all in the local personal service sector (retail, restaurant, hotel, and so on), where employers pass on any small wage hikes to customers as pennies more on their bills. States that have a minimum wage closer to $9 than the current federal minimum don't have higher rates of unemployment than do states still at the federal minimum.
A mere $9 an hour translates into about $18,000 a year -- still under the poverty line. When you add in the Earned Income Tax Credit and food stamps it's possible to barely rise above poverty at this wage, but even the poverty line of about $23,000 understates the true cost of living in most areas of the country.
Besides, the proposed increase would put more money into the hands of families that desperately need it, allowing them to buy a bit more and thereby keep others working.
A decent society should do no less.
Some conservatives say "decency" has nothing to do with it. Who has the right to decide what's decent? We should let the "market" decide what people are paid.
This is one of the oldest conservative canards in existence, based on the false claim that there's something called a "market" that exists separate from society. But there's no "market" in a state of nature, just survival of the fittest.
A society necessarily determines how the "market" is to be organized. Standards of morality and decency play a large role in those decisions.
We set minimum standards for worker safety and consumer protection. We decide young children shouldn't be in the labor force.
We do our best to prevent certain things from being bought and sold -- such as slaves, dangerous narcotics, babies, votes, sex with children, machine guns, nuclear material.
We decide citizens shouldn't have to buy certain things that should instead be available to everyone free of charge (paid in effect by all of us through our taxes) -- such as clean drinking water, K-12 schools, safe bridges, protection from violence, public parks.
Opinions may differ about what decency requires, and we hash it out in a democracy. We might decide certain minimum standards are too costly or inefficient, or can't be enforced, or impose unwarranted constraints on our freedoms.
Different societies come up with different answers. Handguns are banned in most other advanced nations, for example. Workers have more protections than they do in the United States. Minimum wages are higher. Taxes on the wealthy are higher. Health care is more universally available.
Every society must necessarily decide for itself what decency requires. That's the very meaning of a "society."
Don't fall for the mindless assertion that "markets" know best. Markets are human creations, requiring human beings to decide how they are structured and maintained.
The questions we face -- whether to raise the minimum wage, restrict the availability of guns, expand health care coverage, and countless other decisions -- inevitably require us to define what we mean by a decent society.
ROBERT B. REICH, Chancellor's Professor of Public Policy at the University of California at Berkeley, was Secretary of Labor in the Clinton administration. Time Magazine named him one of the ten most effective cabinet secretaries of the last century. He has written thirteen books, including the best sellers "Aftershock" and "The Work of Nations." His latest is an e-book, "Beyond Outrage," now available in paperback. He is also a founding editor of the American Prospect magazine and chairman of Common Cause.
Follow Robert Reich on Twitter: www.twitter.com/RBReich
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