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January 14, 2013 9:39 AM Redistribution

By Ed Kilgore

This is an old story by now, but a lot of people haven’t heard it, and Steve Greenhouse of the New York Times lines up the unhappy numbers effectively:

Wages have fallen to a record low as a share of America’s gross domestic product. Until 1975, wages nearly always accounted for more than 50 percent of the nation’s G.D.P., but last year wages fell to a record low of 43.5 percent. Since 2001, when the wage share was 49 percent, there has been a steep slide….
For the great bulk of workers, labor’s shrinking share is even worse than the statistics show, when one considers that a sizable — and growing — chunk of overall wages goes to the top 1 percent: senior corporate executives, Wall Street professionals, Hollywood stars, pop singers and professional athletes. The share of wages going to the top 1 percent climbed to 12.9 percent in 2010, from 7.3 percent in 1979….
From 1973 to 2011, worker productivity grew 80 percent, while median hourly compensation, after inflation, grew by just one-eighth that amount, according to the Economic Policy Institute, a liberal research group. And since 2000, productivity has risen 23 percent while real hourly pay has essentially stagnated.
Meanwhile, it’s been a lost economic decade for many households. According to the Center for Budget and Policy Priorities, median income for working-age households (headed by someone under age 65) slid 12.4 percent from 2000 to 2011, to $55,640. During that time the American economy grew more than 18 percent.
Emmanuel Saez, an economist at the University of California at Berkeley, found that the top 1 percent of households garnered 65 percent of all the nation’s income growth from 2002 to 2007, when the recession hit. Another study found that one-third of the overall increase in income going to the richest 1 percent has resulted from the surge in corporate profits.

Now you can argue back and forth about why this is happening. Perhaps the incomes of most working Americans are stagnating because they in fact are contributing less than before to the growth that benefits all, as compared to overseas labor or technology or the innovative genius of the people who happen to own the economy. But we shouldn’t just assume a system that is is ever-increasingly awarded an ever-higher share of the fruits of all our labor to the most privileged among us is “natural” or “efficient,” much less just or desirable. And most of all, this rampant evidence of an upward redistribution of national wealth should put a stop to the self-righteousness and self-pity of the very wealthy about concerns over income inequality or proposals to do something about it. They are beginning to sound like their class-bound English forebears, endlessly complaining about the impudence and ingratitude of their servants. It’s downright un-American.

Ed Kilgore is a contributing writer to the Washington Monthly. He is managing editor for The Democratic Strategist and a senior fellow at the Progressive Policy Institute. Find him on Twitter: @ed_kilgore.

Comments

  • c u n d gulag on January 14, 2013 10:09 AM:

    "They are beginning to sound like their class-bound English forebears..."

    Really, Ed?
    English?

    They sound more French to me.
    Late 18th Century French, to be more exact.
    "Well then, let them eat Twinkies!"
    Ooops!
    Corporate pirates went an' raided the Twinkie factories, 'n took all the stuffin', and stuffed it in their wallets.
    'N had the employees pension, for dessert.

    And we all know how well things worked out for the rich folks in France at that time.
    Why, things were SOOOO good for the rich folks in France then, that a lot of people went and lost their heads over the situation.
    Literally, not metaphorically or symbolically.

  • Andrew on January 14, 2013 10:13 AM:

    Exactly right. This our biggest problem now. Yes climate is a catastrophe, but nothing is going to happen with that or anything else until we address this. It is undermining our democracy.

  • m on January 14, 2013 10:13 AM:

    "Class-bound English forebears" ???

    The US is currently among the most class-bound of all developed nations-- if not THE most class-bound.

    Additionally, one of the Commandments in the Conservative Theology is that "The rich shall get richer; the poor shall remain forever poor and shall become more numerous; the middle-classes shall transfer their bits of wealth to the rich."

  • Domage on January 14, 2013 10:19 AM:

    rampant evidence of an upward redistribution of national wealth should put a stop to the self-righteousness and self-pity of the very wealthy

    No, it won't. For a significant chunk of the 1%, the very idea that people below them on the economic ladder have any money at all is offensive. They really, truly believe that anyone who is not part of the upper class is such because of serious moral failings. Thus, school teachers, mechanics, painters, and even doctors do not deserve to have any money at all.

    The 1% already control 99% of the wealth. They will not rest until they live in barricaded compounds while seas of starving poor swirl around the gates, begging for crumbs.

  • Ron Byers on January 14, 2013 10:44 AM:

    All of this brings us to what happens in my household. My wife and I are in the upper 1%. We have 4 young adult children. Two with BA degrees, one with an associate's degree and one still in school. The two with BAs are fully employed in solid traditional middle class jobs but they just don't make that much. One son has a hard time finding a job as an auto mechanic. The fourth is a young single mom going to school at 24. None of my adult children is truly self-sufficient. My wife and I are supporting two of them and the other two still need assistance from time to time. Talking to our friends and family, I don't think we are alone. My kids aren't lazy or stupid. They are just victims of an economy that doesn't work for the middle class. When my parent's raised my brothers and me, they could reasonably expect we would have better lives than them. They were right. When the end of their lives approached they knew their kids were all employed in well paying jobs and each had a real future. My wife and I don't feel that way.

    My kids are lucky though. My wife and I are funding accounts to help our grandkids go to college. Most young people don't have that.

  • patrick II on January 14, 2013 10:53 AM:

    I watched a segment on 60 Minutes last night about robots and manufacturing. It featured a robot that could do many light manufacturing tasks and its costs worked out to about $3.25 an hour. The robot is beating cheap Chinese labor and is returning manufacturing work -- but not jobs -- to the U.S.
    And it will just get worse. I read a science fiction short story fifty years ago that asserted most work would someday be done by robots and that would necessitate socialism if we wanted to feed the people who's income comes from labor. It was remarkable foresight fifty years ago, except for the part that those with money and control would actually be interested in allowing the rest of us to eat.

  • Peter C on January 14, 2013 11:06 AM:

    The Bush years were disasterous for all but the rich. They started out with a massive tax give-away to the rich where government surpluses were transferred to the wealthy. Sadly, the rich also made real gains in the propaganda struggle - so much that a Presidential candidate would dare say that 47% of the public feel they are entitled to the basic necessities of life: food, shelter, and healthcare. Most of his base cheered him on (if cringing that he said it out loud).

    But, the underlying idea is sickening, isn't it? Should we be satisfied if only 53% of our society feel secure about their basic needs?

    Do we want a society that is mostly owned by only a handful of people and there is a near majority of the public living at subsitence level concerned about their basic needs?

    At a certain level of wealth, one's passive earnings are greater than what it is possible to spend. These people get richer every year without even trying; they are on an escalator going up. Should their children start out on this escalator through inheritance alone because clever messaging has invented the phrase 'death tax'?

    We don't all benefit uniformly from our government. We have a massive military protecting 'our' oil tankers. But they aren't really 'ours'; they belong to Exxon and Exxon's shareholders. We all pay to maintain our roads, but I drive only one car on them; Sam Walton's heirs drive their cars and a fleet of trucks. The police protect my house, but they also protect Sam Walton's heirs' houses AND all their stores.

    Progressive Taxation is not charity from the rich to the poor; it is a fair way for the rich to pay their fair share given the disproportionate share of the benefits they receive from government and society.

    I can accept a society with disparities of wealth; I don't insist that the benefits of our society go exactly equally to all. But, our society would be more stable and vibrant if all felt secure of their subsistence and all believed that their natural abilities (and not their birth) played the greatest role in determining their success. Such a society would have: a safety net which guaranteed subsistance level food and housing; guaranteed free health care; guaranteed free education; and a progressive system of taxation where the costs of our society were borne by those best able to bear them and who reap the lion's share of the benefits.

  • c u n d gulag on January 14, 2013 11:06 AM:

    patrick,
    There's a classic story, where, in the early 60's, Henry Ford's son takes a labor leader through the new Ford plant.

    He shows the labor leader the first robots to be used in the manufacturing of auto's, and says to the labor leader, "I'd like to see you try to unionize these robots!", and laughs.

    The laugh was short-lived when the labor leader said back to him, "Well, Mr. Ford, I'd like to see you try to sell these robots, your cars."

    Robots are here to stay.
    And that's why I say we need a stiff tax on them, and tax breaks for hiring real people.
    Let the companies decide which would improve their bottom lines best - robots, or humans.

  • jjm on January 14, 2013 11:15 AM:

    Domage on January 14, 2013 10:19 AM: you are sooo right.

    The most galling thing is that the extremely wealthy consider those with less wealth as MORALLY INFERIOR, unworthy.

    The rich are the original "takers" from those who actually made them money. Their own psychological blindness to the real origins of their wealth will eventually cause their demise.

  • patrick II on January 14, 2013 11:40 AM:

    @ c u n d gulag; 11:26

    Whatever method we use, I don't necessarily want to see fewer robots -- or ai systems that do mental work for that matter -- what I do want to see is the wealth they create distributed fairly. I think that calls for a radically different economic system than we now have. Robot tax ain't gonna do it.

  • c u n d gulag on January 14, 2013 11:50 AM:

    A different economic system!

    Why, that's SOCIALIST talk you're talkin' 'bout there, boy!
    SOCIALCOMMUNIFASCISM!!!

  • rrk1 on January 14, 2013 12:17 PM:

    Robots are hardly the issue, and they won't go away even if they are heavily taxed.

    Our class warfare at the moment is really the most recent expression of social Darwinism. A theory of society that conflates wealth with superiority, moral or otherwise. It's a feel-good mechanism for the rich that found justification in the American interpretation of evolution. William Jennings Bryant was a staunch opponent of evolution because it was perverted to have social implications.

    The pronouncements of Herbert Spencer (1820-1903) were welcomed by American capitalists. Spencer was an English social philosopher and applied Darwinian theory to human development, arguing that wealth and power were signs of fitness and that mankind benefited from intense competition and removal of the weak and unfit. Something the Nazis found useful somewhat later.

    William Graham Sumner (1840-1910). Sumner was a Yale-based sociologist and political economist who espoused an extreme laissez faire position, arguing that the government had absolutely no role in the economy's functions. He concluded that all forms of social reform were futile and misguided. Sumner's views contrasted sharply with those of the advocates of the Social Gospel.

    Despite the social gospel espoused by many protestant clergymen in the late 19th and early 20th century, which sought to use the New Testament to lessen the worst depredations of capitalism, now we have the prosperity gospel preached in the mega-churches all over the country. You're rich because god favors you, is that message. So being poor is a sign of god's disfavor. Also a very convenient feel good mechanism. God is no longer on the side of the poor, and therefore the poor are not to be helped, rather they should be condemned.

    Sounds so very Republican, doesn't it.

  • Gretchen on January 14, 2013 1:14 PM:

    I don't think robots are the issure. When I was in medical laboratory training 35 years ago, we thought that automation was going to kill jobs. Instead, what we can test for has expanded exponentially, beyond our wildest imaginings. Back in the day, a lab tech could boil a tube for 20 minutes to get one glucose result. Now we shoot it through an instrument and get 20 chemistry results in the same amount of time. There are fewer medical technologists now, though, even though there's a robust job market for us. That's becuase hospitals used to run training schools for the good of society. Now most of those hospitals are for-profit, so they've closed the schools because they don't add to the bottom line. It woud be good if we could get back to "It's good for society" rather than "how much profit does it make?"

  • Jose on January 14, 2013 1:35 PM:

    I would like to see the data plotted for the following factors:

    1. Wages and income splits as a percentage of the total wage pool, not just GDP

    2. Percentages of GDP developed from other sources rather than just wages. I suspect that a large percentage of the disparity, even in the face of increasing compensation for the upper brackets, is caused by the disparity in access to the ability to create wealth and unearned income from the increase in the value of the equity markets, which also took off in the mid 70's. The lower strata, in addition to losing jobs and income due to changes in the labor markets that disadvantaged hourly employees, has never really had the ability or the resources to get deeply into the investment markets in a way that would allow them to share the increases.

  • PTate in MN on January 14, 2013 2:36 PM:

    I'll second what Peter C says: "Progressive Taxation is not charity from the rich to the poor; it is a fair way for the rich to pay their fair share..."

    I'll go one step farther. The kind of statistics Kilgore has provided--the rich sucking up 65% of income growth since 2002, productivity growing 80% while compensation grew just 10%, incomes declining 12% while the economy grew 18%--suggest that compensation is not fair. These statistics suggest that the rich, the owners of capital, are unfairly compensating themselves by hoarding wealth created by others. So I might restate Peter C's comment as "progressive taxation is not charity from the rich to the poor; it is a civil way to keep the rich from stealing the wealth of the nation."

    We could do like the French during the French revolution, but, surely, progressive taxation is more reasonable. Many things in this country would be helped by a more progressive tax code.