The income gap is no accident

By Charles M. Kelly

Special to The Arizona Republic

     The only surprising thing about the headline in Wednesday’s front page story, “Arizona’s income gap widens,” is that anyone is still surprised. The fact that “…income inequality has increased during the past two decades” has been well publicized.

     “Why” has not been well publicized. One of today’s best kept open secrets is that our federal government deliberately pursues policies that favor corporations, investors and the established wealthy at the direct expense of working-class Americans. Basically, it does it two ways: first, by having the Fed manipulate the prime interest rate, and second, by passing laws that lead to an increase in the labor supply.

     To begin with, whenever anyone says “you shouldn’t be envious of the incomes of the rich,” just remember that the rich watch the incomes of workers like predatory hawks. Just a hint of wage increases causes conservative economists and politicians to call for the Fed to raise the prime interest rate. If it does so, the economy cools, unemployment goes up, and wages go down or continue to stagnate.

     Increasing the labor supply is more complicated, but there are many ways to get it done. Increasing immigration quotas is an obvious one. Most people think that fuzzy headed liberals are the champions of immigration (to bring families together). But anyone who reads the Wall Street Journal, Forbes, Fortune, Barron’s or Business Week knows that conservative economists see immigration as a very effective way to keep wages from going up, especially for farm workers, construction workers, manufacturing workers, and low-skilled workers of every kind.

     Globalization has been another favorite of conservative economists and politicians (including Bill Clinton), and it has exploded during the past 20 years. When a corporation abandons its community and its workers and moves to China, it’s not just the 2,000 workers who lose their jobs who are affected. All workers are affected, because those 2,000 workers enter the job market and depress the wages for everyone else. They become truck drivers, repairmen, salesmen, and so on, going into the job market at the entry level.

     And who benefits the most from these policies? The corporate executives who reward themselves with huge bonuses for cutting their labor costs. The investors who see corporate profits skyrocket as a result of slashed labor costs. Investment bankers, stock brokers and all those who service the needs of the very wealthy.

     Of course, everyone, even workers, supposedly benefit from the cheaper prices for products and services that result from controlling “wage inflation.” However, because of the huge amounts of money skimmed from the top of the corporate income barrel, they don’t benefit nearly as much as they should, especially when they are the ones making all the sacrifices. And when it comes to getting their share of increasingly costly resources, such as land, homes, medical care and education, working-class Americans find they are priced out of the market—in many cases—almost entirely.

Charles M. Kelly is a retired management consultant living in Prescott, AZ, and is author of THE DESTRUCTIVE ACHIEVER, Power and Ethics in the American Corporation.


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