On February 15, 2015, David Akadjian of the Daily Koz writes on AlterNet:
In 2013, the gross domestic product of the United States was 16.77 trillion dollars. That’s roughly $140,000 per each employed person in our country.
That is, if you break this down per person, each of us produced $140,000 in goods.
Yet most people only see a small percentage of this in their wages. The median wage in the United States was $27,851 in 2013 (median wage is a better measure of how the average American is doing because a few extremely wealthy people at the top skew the average). This means 50% of working adults make $27,851 or less each year.
If each of us made half of what we produced the median salary would be $70,000. Now clearly there’s other costs involved, still why aren’t people paid more?
Why do so many jobs pay so little?
16.77 trillion USD.Photo Credit:World BankClick to enlarge.Christopher Jencks, professor of social policy at Harvard, says it’s really quite simple.
In an article called “Why do so many jobs pay so badly?” for David Cay Johnston’s book Divided: The Perils of our Growing Economy, Jencks writes:
A market economy is not designed to ensure that workers get paid what other people think they deserve. The logic of the market is that we should all be paid the smallest amount that makes sure our work gets done, and that is what low-wage workers generally receive.The logic of the market is not to pay people what they deserve. It’s not to pay people what would make a better life for them. It’s to pay the absolute minimum that you can get away with.
American economists and business leaders have long argued that the way to improve low-income workers’ standard of living is to grow the economy. This worked for a while after World War II. However, since the early to mid-70s, productivity and national income have increased, but wages haven’t.
Growth of real hourly compensation.Photo Credit:Bureau of Labor Statistics, Bureau of Economic AnalysisClick to enlarge.Between 1940 and the mid-1970s, growth and wages matched each other. Since the mid-1970s, however, the economy has grown and wages haven’t.
What’s the difference between these two time periods?
Why are the benefits of growth sometimes widely shared and sometimes not?
Some of the causes commonly cited include globalization, computerization, and educational skill deficits.A helpful way to look at the issue of inequality is to look at other wealthy, industrialized nations and compare what’s similar and what’s different. TheLuxembourg Income Study (LIS) has data going back to the 1970s on the United States, Great Britain, Canada, France, Germany and Sweden and data going back to the 1980s on many other countries.
Today, the United States is by far the most unequal rich democracy in the world. Globalization has impacted all of these countries, some even more than the United States, yet many have stable income distributions while the U.S. has grown much more unequal.
There are some studies, such as the International Adult Literacy Survey that suggest educational inequality in America is greater than in the European countries and Canada. However, the differences as slight compared to inequality difference between the U.S. and these other countries.
The difference in the level of computer skills between poor and wealthy is suggested as another alternative. However, if this were the case we should see the same levels of inequality in other countries with similar distributions of skills. We don’t.
So what is it?
Jencks writes that basically it comes down to politics:
Economic inequality is less pronounced in countries where the constitutional system has few veto points, allowing the government of the day to make fundamental changes. Rules that favor a multi-party system rather than a two-party system also produce more equal economic outcomes. So does proportional representation. Such arrangements apparently make it more likely that a ruling coalition will seek to protect labor unions, raise the minimum wage, and centralize wage negotiations, all of which tend to reduce income inequality.It’s too easy to buy our politicians. Politicians know they need money to win elections and the quickest way to get this money is to appeal to corporate special interest groups.
In exchange, corporate special interest groups receive tax breaks, less oversight, laws designed to break unions, and policies that favor their industry.
In almost every line of business, there are a number of choices that executives can make when it comes to remaining competitive.
Companies can take the low road and choose to squeeze workers by cutting benefits and aggressively fighting to drive down wages. WalMart takes this approach.
Or companies can choose to pay workers more and innovate in other ways. CostCo, WalMart’s competitor, pays workers an average 70% more than WalMart and still manages to stay competitive. 82% of workers at CostCo have benefits compared with less than half at WalMart. As a result, CostCo’s workforce is much more loyal and less likely to leave. CostCo sees 17% overall turnover compared to 44% for WalMart. Continually having to hire and train new employees is its own form of overhead.
The point Jencks makes in his article is that companies are more likely to choose the high road if there are unionized workers who can make abusing workers most costly.
According to Jencks, a populist political party and an active media would also help:
The pro-market consensus also reflects the influence of journalists and political pundits, most of whom seem to be even more skeptical of government than about private enterprise or the current influence of the business elite. This consensus owes something to the absence of a political party that questions it. The absence of such a party derives from rules that make third parties extremely difficult to organize and from a system of campaign finance that makes every party dependent on rich contributors.Corporate media largely supports corporate special interest group policies: lower wages, less benefits, paying less in taxes, and a culture that puts more pressure on people to work longer and harder for less money.
What would change this?
If America wants better pay, there needs to be a better balance between workers and owners. Right now, our political system and our media work for owners, and not typically owners of small businesses or even medium-sized business, but owners of the largest companies in America and their special interest groups like the U.S. Chamber of Commerce.
Things that would even the negotiation positions and put upwards pressure on wages:
- Unions
- Breaking up monopolies (like the banking system and cable companies, for example)
- Government investment in infrastructure and research to stimulate the economy
- Taxing income from capital at the same rate as wage income (reinvest this money in infrastructure and research)
- Laws and enforceable penalties to protect consumers and workers (not just owners)
- Increases to the minimum wage
This would ensure we have an economy that works for everyone (not just a few). To do this, we need populists in government.
Here’s the question then, how do we elect populists when candidates from our two parties are competing for campaign cash?
We all know what’s needed: campaign finance reform and getting the money out of politics. One way or another.
How do you convince people?
One of the issues is that campaign finance reform is boring and people have a hard time seeing how this would affect their day-to-day lives.
Bring up campaign finance reform and watch your friends eyes dart around the room looking for an escape. No one but the wonkiest of the wonky (like most of us here … heheh) cares about something called campaign finance reform. It sounds like going to the dentist.
Instead try asking a question like: Why are people paid so poorly in America?
This will turn a few heads. Poorly? Who is paid poorly?
Here’s where some of the above statistics and story help. Talk about how we’re the richest country in the world with the greatest inequality.
Why does the richest country in the world have so many poor people? Talk about what the average person produces compared to what they make. Should only a few people benefit from America? Why are other countries so different?
People may feel attacked. They may feel as if you arguing to take from some and give to others. This is how the opposition has framed the debate.
If the United States were a pirate ship and you managed to win 1,000 gold coins. Imagine there were 40 crew members. How should the money be divvied up? What should the investor who funded the the voyage receive? What would be fair?
In 2010, the top 1% had 35.4% of the wealth in the United States. The next 19% had 52.5%. The bottom 80% had 11.1%. In pirate terms this means the bottom 80% or 32 lowest ranking crew members would split 111 gold coins. This is roughly 4 coins apiece. Or more likely more coins for those at the top and a coin or less apiece for the lowest ranks. The investor who funded the ship would receive 354 gold coins. And the top 8 ranking officers would split 535 gold coins, or roughly 70 gold coins each.
Remember, consumers make up roughly 70% of spending in the United States. If people were paid better, this would create more demand which in turn would help the economy.
I like to ask: Weren’t we all better off when more people made more money?
http://www.alternet.org/economy/america-land-low-pay-numbers-will-surprise-you
This article is typical of a lack of logic among conventional economists whose proposals will never be able to solve the growing income and wealth ownership inequality without destroying the principles of private property on which America was founded and transforming our nation to socialists governance whereby the earnings of those who are most productive are redistributed those who are less productive.
The premise that somehow human labor PRODUCES the annualized gross product output (GNP) of the United States––meaning that EACH person employed “produced $140,000” in 2013 dollar value is simply not the reality, This ill-logical thinking is based on the labor theory of value, whereby labor produces ALL products and services.
This logic completely ignores the economics of reality in which since the dawn of mankind, people invented tools to reduce toil, enable otherwise impossible production, create new highly automated industries, and significantly change the way in which products and services are produced from labor intensive to physical capital intensive––the core function of technological invention. Most changes in the productive capacity of the world since the beginning of the Industrial Revolution can be attributed to technological improvements in our capital assets, and a relatively diminishing proportion to human labor. Productive capital does not “enhance” labor productivity (labor’s ability to produce economic goods). In fact, the opposite is true. It makes many forms of labor unnecessary. Because of this undeniable fact, free-market forces no longer establish the “value” of labor. Instead, the price of labor, as argued by the author of this article, should be determined by what people “need,” which means that government should artificially elevate wages through minimum wage legislation, overtime laws, and collective bargaining legislation or by government employment and government subsidization of private employment, or outright guarantee an annual income solely to increase consumer income.
Such people who believe the labor theory of value, such as this author, are single factor focused––labor––and deny that productive capital is increasingly the source of the world’s economic growth or that the owners of land, structures, tools, machines, robotic super-automation, computerization, etc. should not earn as much as those who ONLY labor. They also fail to understand that technological change makes tools, machines, structures, and processes ever more productive while leaving human productiveness largely unchanged (our human abilities are limited by physical strength and brain power––and relatively constant). The technology industry is always changing, evolving and innovating. The result is that primary distribution through the free market economy, whose distributive principle is “to each according to his production,” delivers progressively more market-sourced income to capital owners and progressively less to workers who make their contribution through labor.
But in the face of this economic reality, they want to coercively redistribute the earnings of productive capital to wage earners rather than recognize that productive capital ownership should become the source of added property incomes for all. The logic is that if both labor and capital are independent factors of production, and if capital’s proportionate contributions are increasing relative to that of labor, then equality of opportunity and economic justice demands that the right to property (and access to the means of acquiring and possessing property) must in justice be extended to all. Yet, sadly, the American people and its leaders, propelled by academia, still pretend to believe that labor is becoming more productive, and ignore the necessity to broaden personal ownership of wealth-creating, income-producing capital assets simultaneously with the growth of the American economy.
It is the exponential disassociation of production and consumption that is the problem in the United States economy, and the reason that ordinary citizens must gain access to productive capital ownership to improve their economic well-being.
The father of binary economics––the recognition that there are human and non-human factors of production––Louis Kelso said, “Conventional wisdom says there is only one way to earn a living, and that’s to work. Conventional wisdom effectively treats capital as though it were a kind of holy water that, sprinkled on or about labor, makes it more productive. Thus, if you have a thousand people working in a factory and you increase the design and power of the machinery so that one hundred men can now do what a thousand did before, conventional wisdom says, ‘Voila! The productivity of the labor has gone up 900 percent!’ I say ‘hogwash.’ All you’ve done is wipe out 90 percent of the jobs, and even the remaining ten percent are probably sitting around pushing buttons. What the economy needs is a way of legitimately getting capital ownership into the hands of the people who now don’t have it.”
Kelso postulated: “When consumer earning power is systematically acquired in the course of the normal operations of the economy by people who need and want more consumer goods and services, the production of goods and services should rise to unprecedented levels; the quality and craftsmanship of goods and services, freed of the corner-cutting imposed by the chronic shortage of consumer purchasing power, should return to their former high levels; competition should be brisk; and the purchasing power of money should remain stable year after year.”
Without this necessary balance hopeless poverty, social alienation, and economic breakdown will persist, even though the American economy is ripe with the physical, technical, managerial, and engineering prerequisites for improving the lives of the 99 percent majority. Why? Because there is a crippling organizational malfunction that prevents making full use of the technological prowess that we have developed. The system does not fully facilitate connecting the majority of citizens, who have unsatisfied needs and wants, to the productive capital assets enabling productive efficiency and economic growth.
Kelso said, “We are a nation of industrial sharecroppers who work for somebody else and have no other source of income. If a man owns something that will produce a second income, he’ll be a better customer for the things that American industry produces. But the problem is how to get the working man [and woman] that second income.”
In Kelso’s words, “a democratic capitalist economy is a private-property, free-market economy in which goods and services are produced through the voluntary and universal cooperation of concurrent labor workers and capital workers under a politically democratic government.” At present the United States economy, nor for that matter any other economy does not operate as a private-property democratic-capitalist, free-market economy. What needs to transpire is an understanding of binary economics along with instituting credit mechanisms that will implement the goal of broadening productive capital ownership in ways wholly compatible with the U.S. Constitution and the protection of private property.
Without a policy shift to broaden productive capital ownership simultaneously with economic growth, further development of technology and globalization will undermine the American middle class and make it impossible for more than a minority of citizens to achieve middle-class status.
President Obama stated: “What’s at stake is whether this will be a country where working people can earn enough to raise a family, build a modest savings, own a home, and secure their retirement.” As long as working people are limited by earning income solely through their labor worker wages, they will be left behind by the continued gravitation of economic bounty toward the top 1 percent of the people that the system is rigged to benefit. Working people and the middle class will continue to stagnate, resulting in a stagnated consumer economy. More troubling is that this continued stagnation will further dim the economic hopes of America’s youth, no matter what their education level. The result will have profound long-term consequences for the nation’s economic health and further limit equal earning opportunity and spread income inequality. As the need for labor decreases and the power and leverage of productive capital increases, the gap between labor workers and capital owners will increase, which will result in turmoil and upheaval, if not revolution.
We are absent a national discussion of where consumers earn the money to buy products and services and the nature of capital ownership, and instead argue about policies to redistribute income or not to redistribute income. If Americans do not demand that the contenders for the office of the presidency of the United States, the Senate, and the Congress address these issues, we will have wasted the opportunity to steer the American economy in a direction that will broaden affluence. We have adequate resources, adequate knowhow, and adequate manpower to produce general affluence, but we need as a society to properly and efficiently manage these resources while protecting and enhancing the environment so that our productive capital capability is sustainable and renewable. Such issues are the proper concern of government because of the human damage inflicted on our social fabric as well as to economic growth in which every citizen is fairly included in the American dream.
The majority of Americans, dependent on labor worker wages, no longer think that jobs and labor wages will return suddenly—if at all—and at a livable earnings level, that the value of their homes will rebound, or that their limited retirement funds will soon be fully restored. Americans are scared but attribute their worsening finances to job losses, reduced hours, wage givebacks, and overall reduced earnings. They do not understand the role of productive capital driven by technological innovation and science and the requirement for them to become capital workers, as well as labor workers, to earn a viable economic future. And until we, as a society, understand how wealth is produced, how consumers earn the money to buy products and services and the nature of capital ownership, we will not be able to set a course to obtain an affluent quality of life for middle and working class citizens, where everyone “can earn enough to raise a family, build a modest savings, own a home, and secure their retirement.” In Kelso’s words, “build an economy of universally productive individuals and households.”
Kelsonian binary economics and the various credit mechanisms derived from its understanding are not “socialist” or “communist” solutions but are based on the principles and dynamics of a free market economy. When understood, the current system is exposed as a system rigged to continually concentrate the ownership of capital in the 1 to 5 percent of the population. Also exposed are the moral implications of the current system, which is presently propelled by greed in our society. Economic personalism does not require people to be any better than they presently are, but it does enable our society to leverage both greed and generosity in a way that honestly recognizes and harnesses productive capital as the factor that exponentially produces the wealth in a technologically advanced society.
The resulting impact of our current approaches has been plutocratic government and concentration of capital ownership, which denies every citizen his or her pursuit of economic happiness (property). Market-sourced income (through concentrated capital ownership) has concentrated in individuals and families who will not recycle it back through the market as payment for consumer products and services. They already have most of what they want and need so they invest their excess in new productive power, making them richer and richer through greater capital ownership. This is the source of the distributional bottleneck that makes the private property, market economy ever more dysfunctional. The symptoms of dysfunction are capital ownership concentration and inadequate consumer demand, the effects of which translate into poverty and economic insecurity for the 99 percent majority of people who depend entirely on wages from their labor or welfare and cannot survive more than a week or two without a paycheck. The production side of the economy is under-nourished and hobbled as a result.
While Americans believe in political democracy, political democracy will not work without a property-based free market system of economic democracy. The system is the problem, but it can and must be overhauled. The two prerequisites are political power, which is the power to make, interpret, administer, and enforce laws, and economic power, the power to produce products and services, whether through labor power or productive capital.
Kelso wrote: “In the distribution of social power, whether it be political power or economic power, all things are relative. The essence of economic democracy lies in the elimination of differences of earning power resulting from denial of equality of economic opportunity, particularly equal access to capital credit. Differences of economic status resulting from differences in advantages taken and uses made of differences based on inequality of economic opportunity, particularly those that give access to capital credit to the already capitalized and deny it to the non- or -undercapitalized, are flagrant violations of the constitutional rights of citizens in a democracy.”
The stark reality is that we are in a depression reflected in rising unemployment and underemployment and instability that we will never escape from until we change our economic policy. Increasingly, more Americans will not be able to ever purchase a home, due to the packed inflationary wage and welfare base factored into the cost of building homes, which inflate prices, and will be forced to rent their entire life or depend on government living assistance––not able to accumulate equity that can help to sustain them in their retirement years. And this is the new reality now facing people in the middle class. The uncertainty of holding onto a good job is frightening to an increasingly wider base of middle-class working citizens. When you factor in the average non-salaried worker, even with a government-mandated minimum labor wage rate of $10.00+ per hour in some states, the outcome is grim. Never mind that consumer demand continues to dwindle because of insufficient income, solely tied to labor worker wages. The impact of the decline in consumer demand due to declining labor worker wages is that production will decline or desist without sustainable consumer demand.
This is all coming about because we have severely mismatched the power to produce with the possession of unsatisfied needs and wants. Those capital owners who have unsatisfied needs and wants have ready access through conventional finance to get as much or more capital as they want. Our tax laws are designed to further benefit the 1 percent by providing enormous write offs and credits to producers (corporations) who are owned by the few, who already produce more than they can consume. Those who have only their labor power and its precarious value held up by coercive rigging and who desperately need capital ownership to enable them to be capital workers as well as labor workers to have a way to earn more income, cannot satisfy their unsatisfied needs and wants. With only access to labor wages, the 99 percenters will continue, in desperation, to demand more and more pay for the same or less work, as their input is exponentially replaced by productive capital.
But if we change direction and systematically build earning power into consumers, we have the opportunity to reverse the depression perpetrated by systematically limiting the 99 percent to labor wages alone and through technology eliminating their jobs. We need solutions to grow the economy in ways that create productive jobs and widespread equity sharing. We need to systematically make capital credit to purchase capital accessible to economically underpowered people (the 99 percenters) in which the income from the capital investment is isolated until it pays for itself, and then begins to produce a stream of dividend income to the new capitalists. This can only be accomplished by enabling every person to have access to capital ownership and purchase the capital, and pay for it out of what the capital produces. It’s time good and well-intentioned people woke up and adopted the Just Third Way beyond the greed model of monopoly capitalism and the envy model of the traditional welfare state. This will promote peace, prosperity, and freedom through harmonious justice.
We need leadership to awaken all American citizens to force the politicians to follow the people and lift all legal barriers to universal capital ownership access by every man, woman, and child as a fundamental right of citizenship and the basis of personal liberty and empowerment. The goal should be to enable every man, woman, and child to become an owner of ever-advancing labor-displacing technologies, new and sustainable energy systems, new rentable space, new enterprises, new infrastructure assets, and productive land and natural resources as a growing and independent source of their future incomes.
On the basic issue of economic empowerment of each individual, the essential goal needs to be economic democracy, which will finally make political democracy a meaningful reality.
The emphasis on the systemic injustices of monopoly capitalism can only be addressed by comprehensive reforms to the tax, monetary and inheritance policies favoring the top 1 percent at the expense of the 99 percent. The current system perpetuates budget deficits and unsustainable government debt, underutilized workers, a lack of financing for financing advanced energy and green technologies, and outsourcing of U.S. industrial jobs to low-wage countries, trade deficits, shrinking consumption incomes among the poor and middle class, and conventional methods for financing productive growth that increase the ownership and power gaps between the top 1 percent and the 90 percent whose combined ownership accumulations are already less than the elite whose money power is widely known as the source of political corruption and the breakdown of political democracy.
The unworkability of the traditional market economy is evidenced by the diverse and growing deficits––federal budget deficit, trade deficit, city, county and state budget deficits––which are making it increasingly impossible for governments at every level to function. The increasing deficit burden is the result of the growing numbers of people who cannot earn, from legitimate participation in production, enough income to support themselves and their families. Thus government is obliged to “redistribute” to starve off economic collapse. The key means of redistribution is taxation––taking from the legitimate producers and giving to the non- or under-producers––to make up the economy’s ever wider income and purchasing power shortfalls.
The fact is that political democracy is impossible without economic democracy. Those who control money control the laws that foster wage slavery, welfare slavery, debt slavery and charity slavery. These laws can and should be changed by the 99 percent and those among the 1 percent who are committed to a just and economically classless market economy, true equality of opportunity, and a level playing field in the future for 100 percent of Americans. By adopting economic policies and programs that acknowledge every citizen’s right to become a capital worker as well as a labor worker, the result will be an end to perpetual labor servitude and the liberation of people from progressive increments of subsistence toil and compulsive poverty as the 99 percent benefits from the rewards of productive capital-sourced income.
The question that requires an answer is now timely before us. It was first posed by Kelso in the 1950s but has never been thoroughly discussed on the national stage. Nor has there been the proper education of our citizenry that addresses what economic justice is and what ownership is. Therefore, by ignoring such issues of economic justice and ownership, our leaders are ignoring the concentration of power through ownership of productive capital, with the result of denying the 99 percenters equal opportunity to become capital owners. The question, as posed by Kelso is: “how are all individuals to be adequately productive when a tiny minority (capital owners) produce a major share and the vast majority (labor workers), a minor share of total goods and services,” and thus, “how do we get from a world in which the most productive factor—physical capital—is owned by a handful of people, to a world where the same factor is owned by a majority—and ultimately 100 percent—of the consumers, while respecting all the constitutional rights of present capital owners?”
