Why Have The Rich Been Getting Richer?
(Photo by Robin Holland)
This week on the JOURNAL, Bill Moyers spoke with former Secretary of Labor Robert Reich about the power of Washington lobbyists and his vision for reforms to make America more prosperous and equitable.
Reich lamented that the middle class has not shared the benefits of our nation’s economic expansion over the past few decades:
“The fact of the matter is that, as late as 1980, the top 1 percent by income in the United States had about nine percent of total national income. But since then, you’ve had increasing concentration of income and wealth to the point that by 2007 the top 1 percent was taking home 21 percent of total national income. Now, when they’re taking home that much, the middle class doesn’t have enough purchasing power to keep the economy growing. That was hidden by the fact that they were borrowing so much on their homes, they kept on consuming because of their borrowing. But once that housing bubble exploded, it exposed the fact that the middle class in this country has really not participated in the growth of the economy, and over the long term we’re not gonna have a recovery until the middle class has the purchasing power it needs to buy again.”
Economist Dieter Braeuninger of Deutsche Bank Research notes that, during the period Reich describes, many developed countries experienced similar increases in income inequality. Braeuninger suggests that technological advances and a surplus of unskilled labor are responsible for this trend:
“Income inequality has risen in the industrialized world with skilled workers’ incomes rising faster than compensation for low-skilled labor... [Economists] identify the strong pace in technological progress and, in particular, the revolution in [information technology] as the engine of change. The triumphant advance of the microchip, the PC, and the internet kick-started a wave of automation, as well as a transition to flexible and accelerated production processes. This not only boosted productivity, but also resulted in a shift from labor-intensive to capital-intensive production methods. The winners are hence both owners of capital goods as well as the highly qualified labor force... The new technologies allow the replacement of less qualified labor through physical capital, such as machines and computers... The global labor force has risen fourfold since the early 1980s. The supply of basic labor has increased enormously... As long as less-skilled workers cannot shift to more productive tasks, increasing income inequality remains a threat.”
What do you think?