At Work

Why is “inequality” a problem?

Slow economic and income growth for the majority is a problem, but it has nothing to do with inequality. The outcry over inequality is a political left ploy that masks the real problems and misleads Americans. 

What we can do to fix the problem: The rise of top incomes relative to the bottom 99 percent represents a sharp reversal of the trend that prevailed in the mid-20th century. Between 1928 and 1979, the share of income held by the top 1 percent declined in every state except Alaska (where the top 1 percent held a relatively low share of income throughout the period). This earlier era was characterized by a rising minimum wage, low levels of unemployment after the 1930s, widespread collective bargaining in private industries (manufacturing, transportation [trucking, airlines, and railroads], telecommunications, and construction), and a cultural and political environment in which it was outrageous for executives to receive outsized bonuses while laying off workers.

We need policies that return the economy to full employment, return bargaining power to U.S. workers, and reinstate the cultural taboo on allowing CEOs and financial-sector executives at the commanding heights of the private economy to appropriate more than their fair share of the nation’s expanding economic pie. Source: Economic Policy Institute (1)

“appropriate more than their fair share of the nation’s expanding economic pie” I love it. Taboo! Exactly how does the growth in value of stock shares count as appropriation of anything? In many cases that value was created in new and innovative ventures that while creating great wealth for a few also created jobs and opportunities for many more. 

We are comparing periods after the depression, during and after WWII and before globalization with intense international competition. 

Nearly all that gain for the top earners is not wages, but capital appreciation. But more important what does it take from anyone else? The issue of low growth for the majority has much more to do with a changing world economy, innovative technology and our educational systems failure to adapt.

We should not be scapegoating a handful of Americans, but instead focusing on the true causes of minimal advancement by the majority. Why stop at the top 1%, why not accuse every family in America with an income greater than the average?

The opposite of inequality is equality. Is that what we seek, everyone average? 

If you want to blame someone, blame successive generations of politicians at both local and federal levels who spend more time creating new scapegoats and excuses than they do solving problems. 

(1) https://www.activistfacts.com/organizations/516-economic-policy-institute/

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3 replies »

  1. Unearned compensation not inequality is in my opinion a problem. An analogy to a huge ship the captain of which changes every few years: the captain did not build the ship, the captain often does not set the direction or speed of the ship or really understand what it is carrying. Yet, regardless of whether the ship makes it into port, gets lost for years wandering in circles, or runs a ground, the captain leaves with a golden life raft. After the bank and corporate failures of ten years ago, how many top executives paid a price for their sophisticated corporate crimes? Inequality as such is not so much a problem as unearned compensation.

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    • And that’s the fault of the BOD and shareholders who care only about the stock price and dividends. I agree there needs to be real pay for performance, but that is a separate question from inequality

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  2. I do not understand why these socialist wants to penalize innovators. I know if I work hard and risk everything that I want to be rewarded. If I work overtime, pay me or promote me. If I invent something I should be rewarded because I did the work.

    Let’s take Bill Gates for example. He is worth about $84 billion dollars today. Microsoft has 114,000 worldwide employees. He stopped working for Microsoft in 2006. That money, mostly in stock, works out to be about $73,684 earned per employee. I think that $73K per employee hired is more than fair reward to Mr Gates. How many other people now have jobs writing software or making computers that do not work for Microsoft but have jobs because of his innovations?

    It must also be remembered that since 2006 he has work fulltime at Bill & Melinda Gates Foundation and they have given away over $35 billion in aid to solve mostly 3rd world problems. But these socialist want to take his earnings away and give it to some lazy American who wants free this and free that.

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