Unfairness Is Growing In U.S. Economy

The thirty year period after World War II was a period of economic prosperity for nearly all American citizens. Unions were strong, insuring that gains in productivity were shared by workers, executives, and owners. And higher education was fairly cheap -- due to state subsidization of colleges, VA benefits, and low cost loans for students (like the National Defense Student Loan Program). Together, these caused an unprecedented growth in the middle class (which spurred a growth in business since this large middle class had money to spend, which increased demand for goods/services).

But then the Republicans took control of the economy, and they re-instituted an economic policy from the 1920's and before. It was the economic policy called "trickle-down", which said if more money was given to the richest in our society some of that money would trickle down and benefit everyone. This policy de-regulated business and finance, lowered taxes for the rich and corporations, and altered the business/union relationship (tilting the balance of power to favor businesses). The results have been disastrous.

A perfect example of this can be seen in the CEO to worker pay ratio (illustrated in the chart above). Back in 1950, a corporate CEO earned about twenty times the average salary of a worker. Even as late as 1982, that ratio was still only about 48 to 1 -- still reasonable. But that is the point at which the "trickle-down" policies were instituted, and caused to ratio to balloon out of control. By 2012, the average CEO salary was $9.7 million a year -- about 354 times what the average worker earned.

This failed economic policy was the primary cause of the recession that hit in 2007, when millions of jobs were lost. Business has recovered from that recession (especially the largest corporations and Wall Street banks, who are now making profits even larger than before the recession), but workers have not recovered. Nearly 14 million workers are still unemployed and the median wage for workers is still dropping. From 2009 to 2011, productivity did rise in this country. But it was not shared. In fact the richest 1% got 121% of the gains in income in that period (which means they not only hogged all of the gains, but actually stole some of the share of income that workers had).

I would like to be able to say that things are getting better for workers now, but that is just not true. In the first quarter of 2013, workers suffered the biggest drop in income since the Bureau of Labor Statistics began keeping this quarterly stat in 1947 (more than 60 years). Worker pay dropped an annualized 3.8%. There are two reasons for this. First, the rich are still hogging all gains in productivity. Second, the middle wage jobs lost in the recession (and through outsourcing) are being replaced by low wage jobs (at or near minimum wage, which continues to lose buying power).

It is an unpleasant fact of our economy that while the unemployment rate is dropping, so is the median wage for workers -- because the number of minimum wage jobs is growing, both in raw numbers and as a percentage of all workers. It is now expected that by the next decade (the 2020's), fully a quarter of all American workers will be working for (or very near) the minimum wage. If the minimum wage was a livable wage this might not be so bad, but it is not. That wage is only about $7.25 an hour -- far below the buying power it had in the late 1960's (more than $10 an hour in today's dollars).

The truth is that while the rich get much richer, most other Americans are getting poorer. The median wage is dropping, the middle class is disappearing, millions remain unemployed, most new jobs are low wage jobs, and the wealth/income gap between the rich and the rest of America is growing. This is because we are still operating under the failed "trickle down" economic policy -- thanks to Republicans obstructing any effort to move to a saner economic policy (through their control of the House and use of the filibuster in the Senate).

How much longer are we going to put up with this insane policy? If we don't act soon, we will have a nation of only the rich and the poor (with no middle class). That might be good for the rich (who are the only people the GOP cares about), but it would be a disaster for the rest of America (about 99% of us). Isn't it time to return to a policy of economic fairness?