Friday, July 20, 2012

the myth

Inequality, the logic goes, is a natural result of different degrees of work and creativity. Some people strive harder and have better ideas, as well as take more risks, and giving them outsized rewards is a good thing, since it encourages others to emulate this behavior and makes us all wealthier in the end.  Nor are low-wage jobs anything to worry about either, since people who put in the effort can climb upward to better jobs and, also, low wages allow business owners to hire more people and generate more growth so that, again, we all win.

The only problem with this, of course, is that it's persistently contradicted by the actual facts. In truth, inequality reflects the Marxist analysis whereby the owners of capital exploit a surplus of labor to keep wages low and generate high profits  for themselves. Sure, there are smart entreprenuers taking big risks, but the more dominant face of the economy is well-established corporations run by professional managers who keep finding new ways to drive labor costs down and profits up.

A recent study by the National Employment Law Project (NELP), which shows that most low-wage workers aren't employed at struggling start-ups or local businesses trying to expand. Instead, says NELP, the majority of such workers are employed by large corporations. And the reason these workers make chump change is not because such corporations are battling to maintain their razor thin profit margins in tough times. Rather, these companies are making plenty of money -- more in many cases then before the recession. According to NELP, of the top 50 low-wage employers in America: 92 percent were profitable last year; 63 percent are earning higher profits now than before the recession; and 73 percent have higher cash holdings now than before the recession.

By and large, these are great times for the nation's top low-wage employers -- which include Wal-Mart, McDonalds, Target, and Wendy's. And great times, too, for the CEOs of these companies, who earn an average of $9.4 million a year. The big losers are the people who are actually creating most of the value of these companies -- i.e., the workers who make the sales, prepare the food, stock the shelves, and so on. Many of these people are paid under $10 an hour, which is not enough to live on -- and certainly not enough to save for retirement on or buy health insurance, which is not offered to most low-wage workers. Walmart pays its 1.4 million workers just $8.81 an hour on average. The six heirs to the Walmart fortune are worth as much as over 40% of all American households. In this economy, a quarter of full-time working-age American adults are not earning enough money to meet their families’ economic needs.  Even as the shareholders and executives of the top low-wage employers get richer than ever, many of their employees are living in poverty or just above poverty. Unfortunately work is not much of an antidote to poverty nowadays. Even when our economy is booming, plenty of people can work and still be poor -- millions, in fact -- given the low pay of many jobs. And in a bad economy, of course, the picture gets even bleaker.

It may be cliché but the truth is that only the rich are getting richer. The upper class is monopolizing a greater proportion of income and wealth than in past generations.

Adapted from here

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