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Economics Weekly
Finding the Path to Greater Equality
Economic theory is finally catching up to political theory in showing policymakers how to right the record income inequality—worst in the developed world—that has plagued working Americans since the 1970s.
It is about time when we have just
witnessed one of the consequences of that inequality—the storming of the US
Capital by extreme-right terrorists bent on overthrowing our duly-elected
government that was in the midst of verifying the electoral victory of
President-elect Joe Biden and Vice president-elect Kamala Harris.
Economists are modernizing New
Deal Keynesian economics that brought us out of the Great Depression and World
War II, the economics that says government must be part of the solution to
today’s problems, including the protection of workers’ rights, the environment,
and keeping America strong and prosperous for all Americans, not just the 1
percent.
For instance, a recent MIT research project confirmed that Four decades ago, for most U.S. workers, “…the trajectory of productivity growth diverged from the trajectory of wage growth. This decoupling had baleful economic and social consequences: low-paid, insecure jobs held by non-college workers; low participation rates in the labor force; weak upward mobility across generations; and festering earnings and employment disparities among races that have not substantially improved in decades.”
Much of that divergence was
caused by trickle-down economics, a political theory from the Reagan era that
rationalized making the wealthy wealthier with the teaser that some of that
wealth might trickle down to the 80 percent, which are wage and salary earners that
power most economic activity.
While new technologies have
contributed to these poor results that promote labor-saving AI and robotics, researchers
are now saying these outcomes were not an inevitable consequence of
technological change, nor of globalization, nor of market forces. Similar
pressures from digitalization and globalization affected most industrialized
countries, and yet their labor markets fared better.
It was, “…the decay of unions and collective bargaining, the explicit hardening of business (by the Business Roundtable formed in the 1970s), the popularity of right-to-work laws (mainly in conservative red states), and the fact that the wage lag seems to have begun at about the same time as the Reagan presidency all pointing he same direction: the share of wages in national value added may have fallen because social bargaining power of labor has diminished,” said the MIT study.
And therein lies the solution
that only government policymakers and legislators can enact by expanding
government healthcare, raising the minimum wage, more progressive taxation,
making college education more affordable, and expanding workers’ collective
bargaining rights that red state right-to-worker laws have drastically
curtailed.
This list of economic can-dos
has been obvious to any professional economist that has not been defending the
one percent’s right to most of the wealth created by working Americans. Free market ideologies have held sway for the
past 40 years—not based on empirical research—that advocated unfettered
economic growth by any means, and enshrined maximized profits as the greatest
good, while ignoring business ethics and a morality that promotes caring for
our brothers and sisters.
The economic disparities are growing
due to the pandemic, as I reported earlier. In April, nearly 12 million
low-wage workers were laid off, while some 6 million workers who were earning
between $18 to $29 an hour were laid off. By November, all but 400,000 of those
workers earning $18 to $29 an hour had returned to work, Raj Chetty, a Harvard
economics professor, has said. Meanwhile, some 6 million workers who earned
less than $13 an hour have yet to return to work.
Now the coronavirus pandemic has reinforced the need for an economic science that recognizes we are all in this together. As many have said before now, we are poorer if we ignore the plight of the poorest.
Harlan Green © 2020
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