Donald Trump’s Solution to Income Inequality

 

During yesterday’s Republican Primary Debate, Donald Trump and other candidates stated that they would not raise the minimum wage. Trump took this level of thinking even lower, proclaiming “Our wages are too high.” He thinks the only way for America to be competitive is for “people to work really hard” to “enter that upper stratum.”

This kind of language is out of touch. Bill Clinton and Newt Gingrich teamed up to “end welfare as we know it.” Most poor Americans work, but they don’t make enough money to get ahead. It’s easy for a billionaire who was born into a wealthy family to tell others to work hard. It’s also dishonest. Our economy does not produce enough jobs that pay enough for people to enter the middle class, much less Trump’s “upper stratum.” Complex problems need thoughtful solutions, not cliches

A Portrait of American Success in 2015

 

It’s been a great day.  The Cubs beat the Cardinals, and I met some friends for a steak dinner.  So, now while chilling out listening to blues and catching up with The New Yorker, I read these words in Amy Davidson’s October 8 profile of GOP presidential candidate Carly Fiorina:  “When HP fired her, she got a twenty-million-dollar severance package, plus fifteen thousand for career counseling.  Only in this country, perhaps, could a C.E.O. receive compensation worth more than a million hundred million dollars in six years, get fired, and use the money to enter politics.”

I don’t believe in salary restrictions of any kind.  If a company wants to pay any employee any amount, that’s the company’s business.  At the same time, voters should be able to ask about a candidate’s history and what it says about his or her potential leadership.  In Fiorina’s case, she laid off thousands of workers before she took the money and ran.  As far as I can tell, none of her current positions would do anything to help American workers.  “Only in America.”

Productivity and Wages

 

Daily Kos’s Mark E. Anderson examines increased productivity and stagnant wages between 1948 and 2014. His article includes a very informative graph that shows how these two economic measures were almost aligned. Now productivity doubles wages. Where has the money gone? Anderson argues that work has gone overseas where labor is cheaper and profits have gone to executives and investors.   I agree, but would add one other big factor: automation. I was working with a client this weekend who works for a large technology manufacturer. His company will be able to shed hundreds of tech jobs once they move to cloud-based systems. Jobs can come back from China. Once they are automated, they are gone forever.   Anderson makes a great point in concluding his article: What are the super rich and executives going to do when no one can afford to buy their products?

Happy Labor Day?

 

Writing in Huffington Post, Bill Quigley, a law professor, lists several sad facts facing American workers on this picnic day that is supposed to honor labor. I urge to you take a minute, review this list, and ponder its meaning. The one point I would like to underscore is this: While productivity increased 21% between 2000 and 2014, wages only increased 2%. To quote the Talking Heads, “Who took the money away?”

Good News on Jobs and Unhappy Workers

 

USA Today’s Susan Page recently interviewed Secretary of Labor Thomas Perez. She asked Perez about a paradox in the current economic recovery: unemployment is down with little increase in wages. Perez said that there is still “slack” in the market, which would mean that unemployment would have to go even lower to drive increased wages. He also discussed a White House Summit on Workers, which will take place on October 7, 2015. This sounds like good news, but what results will it bring? Perez captured the general mood of American workers this way: “They’re hard and falling behind.” Page cast this as a “disparity between the wealthy and the middle of the workforce.” I would respectfully disagree. From the Occupy protests to the ongoing Fight for 15, low wage working people are voicing their frustration and demanding justice in a way that the middle class is not. That said, most American (I’d guess 70-80%) are feeling anxiety and a lack of security. President Obama put it best when he said, “America needs a raise.”

Income Inequality and Hard Work

 

Daily Kos features an article by Hunter on presidential candidate Rand Paul’s explanation for income inequality. The senator from Kentucky told Chris Wallace of Fox News: “The thing is, income inequality is due to some people working harder and selling more things.” Hunter asks an important question: How much is Senator Paul’s own success a matter of his hard work and how much of it is based on the great base of support built by his father’s decades of hard work? The same question could be asked about the Walton heirs.

From a different angle, how much harder do CEOs work than the average U.S. worker? According to the SEC (as cited in yesterday’s Chicago Tribune), some of Chicago’s CEOs must be working incredibly hard:

1. James McNerney of Boeing earns $28.9 million annually, 611 times the average worker’s annual income.
2. Peter Liguori of Tribune Media has annual compensation of $23 million, 487 times what the average worker makes.

The rest of the top ten Chicago CEO earn between $21 million and $15.6 million, which is also 466-331 what the average American worker earns.

My problem is not simply income inequality. When Senator Paul and other conservatives talk about hard work and “takers,” they disrespect the work done by millions of Americans. They project a divided society where the lucky few deserve wealth and security and most Americans live pay check to pay check in constant fear of losing a job and have little hope for the future. I don’t think the problem of income equality is simple to explain or solve. Dismissing it as a matter of hard work is insulting to all Americans.

$15 throughout New York?

 

Huffington Post reports that New York is making a big stride toward a state-wide minimum wage of $15 per hour for fast food workers. A panel set up by Governor Andrew Cuomo, a politician often criticized for not being liberal or progressive. It’s not clear if this measure would only apply to the fast food industry or if it would cover all industries. In any case, this is another example of politicians admitting that the current minimum wage is too low. America needs a raise, and hopefully leaders in New York will set a good example.

Work More to Make More?

 

Much has been made of a comment by presidential candidate and former Florida Governor Jeb Bush, who said that economic growth depended on people working “longer hours and, through their productivity, gain more income for their families. That’s the only way we’re going to get out of this rut that we’re in.” According to a source cited by Mark E. Anderson of Daily Kos, American work on average 46.7 hours per week.

My problem with Bush’s comments is that Americans are already working too many hours. As Anderson points out, many people go to work even when they’re sick because they are not eligible for paid sick leave. The problem ignored by Bush is that Americans are not getting the kind of raises they have in the past. Working Americans are stressed by too much work, burdened by death, and frightened by insecurity. President Obama put it best: “America needs a raise.”

 

CEO Pay and the Rest of Us

 

Where is the money going? Corporate profits are up. Productivity keeps going higher and higher. Despite this “good news,” most Americans feel insecure in their jobs and income. So, where is the money?

Laura Clawson of Daily Kos shows one area where the money has gone: CEO pay. While I recommend that your read Clawson’s article, the whole story is told in a graph that accompanies the article. Before the mid-1990s, CEOs’ average pay was less than 100:1 the pay of average workers. By the end of the 1990s, the ratio had moved to 300:1. Since that time, the average has gone up and down. Still, it has ranged between 200:1 to 400:1.

This trend is only part of the story. If CEOs pay has moved this way, it’s logical to assume that other senior leaders have received healthy raises. I’m not arguing that these salary increases can’t be justified – because anything can be justified. The reality is that if pay disparity rewards the top of the pyramid, those at the bottom and middle will lose. The fight over the minimum wage is a good thing, but we also need to thing about who is being reward for economic growth and enhanced productivity. Do we want a society where a few have security and most people are running scared?

Further Adventures in Who Is Getting Paid

 

In today’s Daily Kos, the great labor reporter Laura Clawson examines the wealth of an average worker compared to Sam Walton’s offspring. According to research by the AFL-CIO, the six Walton heirs total wealth is the same as that of 52.5 million American families (42.9%). The study points out that some families have negative wealth. Adjusted for that, the number of families needed to equal the Walton wealth drops to 1.7 million. However, that adjustment also indicates that many American families have issues with “negative wealth.” Clawson also notes that a Walmart worker being paid $9 per hour would have to work 1,036 hours to make what the company’s CEO Doug McMillon makes in one hour.

Do the Walton heirs deserve to be very rich? I believe they do. Their father created an innovative business model. The bigger question is how much wealth should anyone – rich heir or CEO — have. What is the cost to society of an economy where a few are very rich and secure and many working class and middle class families are falling behind and less secure?