Engine of Growth: Strong Middle Class Wages
Over the last three decades, we’ve lost something precious and essential in the American concept of capitalism – the idea that shared prosperity is good business and smart economics because it generates long-term economic growth and competitiveness for the nation as a whole.
High economic inequality is a drag on economic growth, economic studies show. And for all the gossamer forecasts of wage increases to come in some indefinite future, the Trump tax bill will sharply steepen inequality and the lopsided fortunes of the 1% and the 0.1%.
Certainly the splashy announcements of $1,000 bonuses for employees at AT&T and Comcast are welcome news. But those are one-shot gains. Also, more than 30 large US companies have recently announced $83.7 billion in stock buybacks to shell out some of their tax cut windfalls to Wall Street and shareholders.
For the middle class what counts most are steady gains in wages and salaries, like the new $15 an hour minimum wages proclaimed by Wells Fargo and Fifth Third Bancorp. So why doesn’t Trump press Congress to raise the federal minimum wage of $7.25 an hour, set a decade ago?
Trump’s first 11 months in office have hardly burnished the American dream for most wage earners. Wage increases have done little more than keep up with inflation. So the income of the typical American household today is roughly where it was in 1999.
Stingy Business Brings Slow Growth
The stinginess of American businesses ignores the lessons of American history. In the heyday of the U.S. middle class in the 1950s, ’60s and ’70s, the captains of American industry pursued a different strategy and enjoyed economic growth well above our current levels.
CEOs like Charlie Wilson at General Motors, Reginald Jones of General Electric and Frank Abrams at Standard Oil believed that the job of the CEO is to balance the economic interests of the various stakeholders in the corporation. Of course, that meant the owners and managers. But it also meant the workers, the suppliers, the communities where they had their factories and offices.
In short, the U.S. middle class became the envy of the world because American business leaders believed in sharing the wealth. By their economic credo, paying their rank-and-file employees well was good business and smart economics because they understood that a prosperous middle class is the source of massive consumer demand which is the engine of economic growth.
By contrast, today’s winner-take-all economics and middle class wage stagnation is a badly flawed formula for the nation. And if the latest performance on Capitol hill troubles you, take a look at the video to see what the rest of us can do about it. We can fix it, but that means taking action at the grass roots all across America. And believe it or not, it’s already happening.