Monday, March 05, 2012

An Economic Aside: What About The Workers?

Remember the conservative meme that people don't have enough "skin in the game" because so many earn too little to pay federal income taxes? The prescription to that is always to lower the taxes for the wealthy and for the corporations and to make the rest of us pay more.

Given that backstory, it is worth noting that the big societal income cake is now divided more unequally between capital and labor, to the detriment of labor, than it has since 1947:
The share of the gains going to everyone else in the form of wages and salaries has been shrinking. It’s now the smallest since the government began keeping track in 1947.
If the trend continues, inequality will become ever more extreme.
We’ll also face chronically insufficient demand for all the goods and services the productivity revolution can generate. That’s because the rich save more of their earnings than everyone else, while middle and lower-income families – with fewer jobs or lower wages – no longer have the purchasing power to keep the economy going at full tilt. (Before 2008 they kept up their buying by sinking deep into debt. This proved to be an unsustainable strategy.)
Robert Reich also points out something that should get much more attention, both here and in Europe, and that is the giant role insufficient demand has in this recession. People are not buying. If people are not buying, firms will not expand and hire more people.

It's a vicious cycle which is ignored because the economic arguments have become one-sided and biased.

I never thought I'd live to hear Serious People tell us that firms should face less uncertainty in general, before they do the business of risk-bearing! They are paid for that role, after all, while workers are not.