Another Half (or is that Quarter) Truth

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Let’s start out this discussion clearly stating that the American economy is still chugging along.  Which is a great thing.  We haven’t had this many years in a row without a recession or depression!

The problem is that the economy is not helping the bulk of American citizenry.  If you are in the top echelons, you are doing better.  (If you are in the top 1%, you are doing stupendously.   You went from owning 35% of the wealth in the US to owning 40% [or more].  Oh- let’s not forgot if you are not in the top 1%, but the other 9 (as in the rest of the top 10%)- you’ve been screwed, too.  Your share of the American pie fell from about 41% to 36% over the past decade.  [The 1-5% rung actually held its own, so it’s the next 5% that took it on the chin.  And, the bottom 90%- they dropped from 25% to barely 20%.)

American Dream is now gone

That’s a real problem, since consumer spending currently provides about 70% of the GDP (gross domestic product).   And, when workers are worried about their jobs (a condition that is remnant from the Great Recession of the late 2000’s), coupled with the anti-union behavior of the federal and many state governments, wage pressures are attenuated.

Yet, the Wall Street Journal, which used to be a most respectable business journal, persists in playing fast and loose with the news.  To protect a certain reprehensible individual.

Here’s the most important article from the Saturday (28 December 2019) Wall Street Journal. [You do recall that newspapers place the most important article of the day in the top right hand corner of the front page, right?] Wages Rise as Labor Market Tightens.

What does this piece claim? That wages rose at the quickest pace in more than a decade.  And, the mendicants want you to believe that means the labor market has tightened up and better wages are just around the corner.

After all, the other lies we’ve been fed over the past few years was that the tax cut was going to make us all richer.  And, the big piece of the pie that was donated to corporations was going to lead to higher wages and significant capital investment in America.  Oh, and the economy  was going to soar at 4% growth.

Yeah.   Right.

How about the fact that the tax cut has done very important thing.  Increased the US deficit by more than $ 1 trillion in its first year of existence.  And, the economic growth has continued at the 2 to almost 3% that we’ve been experiencing for the entire decade- even before the tax cut.

The only folks who have made more money are the CEO’s and the top 1 or 2%.  It’s true unemployment is way down- but that’s because everyone in the bottom 90%  is desperate to stop their economic slide.  [Keep in mind that those without a high school degree have a 5.3% unemployment rate (compared to 7.8% the last year of Obama’s presidency) and college grads are at a 2% unemployment rate (down from 2.4%).]

And, what exactly were those wage gains the Wall Street Journal was heralding?  The article posted that  pay for the bottom 25% of wage earners rose by 4.5% in the last year.  Compared to wage gains for the top 25% that only rose at 2.9%.

It took reading down to the 5th paragraph from the end of the article to get even a modicum of truth.  “Another factor supporting the lowest-paid workers is a wave of minimum-wage increases. Twenty-nine states have increased minimum wages above the federal level, and 21 of those will lift the level again in 2020.”

What didn’t they tell you?  The key fact that outside of Florida (2%), Montana (4%), and very few others, the minimum wage in those 29 states rose by an average of more than 10%.

Bottom 25% wage gain

In other words, that increase in the bottom 25% of wage earners?  It’s basically due to the efforts of the folks in state governments that actually caused the minimum wage increase.  Not due to any difficulty in finding workers (which is admittedly an issue).  Not due to business decisions (other than to comply with the laws).

The best way to improve economic conditions in the USA is to do what I’ve been advocating forever.  America needs to charge all these companies NOT paying a living wage to their employees a fine. Equal to 105% (at least) of what we- that’s you, me, and everyone else- are shelling out to their bereft employees in the form of SNAP (aka food stamps), AFDC (aid for dependent children), Medicaid, and other government benefits to stave off poverty for our working poor.   Because that subsidy still accounts for almost the entire profits that WalMart (among many other firms, especially the fast food chains)  claims to earn each year, by not paying their employees a living wage, forcing the rest of the US to make their employees whole.

Then, we will see some real wage increases.Roy A. Ackerman, Ph.D., E.A.

 

I will have a follow-up to this post, that will be delayed for a few days because of the New Year's holiday and resolution traditions.

 

8th Day of Chanuka

The Festival of Lights- the Chag of Chanuka- is ending today.  The 8th day of the holiday.   Chag Urim Sameach!

 

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