Today, on December 5, 2024, I am expanding on a set of proposals that would restore broadly shared prosperity.
I see the path forward involving
1) a national charter for the 2,000 largest corporations. Each of these 2,000 mega corporations employ at least 5,000 employees, and the average for all is 20,859 employees. These firms account for "40.0 percent of payrolls, and 45.2 percent of
revenues." They create a majority of the corporate profits of the nation. (These data come from an essay by William Lazonick, page 6.) They should confront three or four necessary impediments:
2) The PRO Act would grant unions considerable power to negotiate for higher wages. The NLRAct of 1935 has been nullified by judicial interpretation, so states Ellen Dannin in her book "Taking Back the Workers' Law". Labor also needs a system of "sectoral bargaining" to streamline the formation of labor power in firms in the same economic sector. David Madland wrote the book, "Re-Union, How Bold Labor Reform Can Repair, Revitalize and Reunite the U.S.". These are the first instruments for restoring wage income levels. In France, for instance, only 9% of workers are actual members of a union, but 98% are covered in a collective bargaining contract (page 78). In Denmark 67% are union members but 82% are covered in a collective bargaining contract. If I'm not mistaken, a MacDonald's worker in Denmark earns over $22 per hour, while in the U.S. that worker earns $13.27 per hour. This article describes the additional benefits the Danish worker enjoys, like 6 weeks of paid vacation.
3) The Reward Work Act would require these mammoth corporations to seat 33% of their corporate board with members chosen from workers' selection. Leonor Palladino has several essays about creating a new economic order by reforming the corporation. Either reform or face a devastating 400 million car pile-up, to stretch the imagination about devastation to come. Palladino in November, 2024, published the book "Good Company: Economic Policy After Shareholder Primacy". We need a new paradigm for our largest economic agents, the corporations. William Lazonick titled his last book "Predatory Value Extraction: How the Looting of the Business Corporation Became the US Norm and How Sustainable Prosperity Can Be Restored". The U.S. "norm" is to "loot" says a man who has spent his life investigating at incredible depth our economics. Clearly these two author-scholars wish to undermine and reorient our present complacent thinking about the mega corporation. David Korten, William Tabb, William Mitchell, Paul Adler, and Gus Speth also challenge our present corporate system of production. --- I add this next sentence on February 10, 2025 -- A sweeping revamp of U.S. capitalism is sketched by Robert Kuttner in his Feb. 6 article "Corrupted Capitalism and Dithering Democrats". The economy has many arms or legs or tentacles, and we need to reform those arms to serve a greater purpose that serves all, not just a few at the top.
4) A minimum wage of $25/hour for all large corporation employees. A full-time employee would make at least $50,000 per year. The most recent Social Security Administration report on wage income, for 2023, shows that 41.29773% of workers, or over 71 million out of 173 million, earned less than $35,000. The average yearly income for the 71 million workers (41%) was $15,443. Not much. The year-round full-time minimum wage workers earn $15,080 per year -- not much. The collective wage income of these 71 million workers amounted to under 5% of the total national income for 2023 -- 40% of workers received just 5% of all income -- not much. The other 60% of workers received 95% of all pre-tax income. (I calculated the total income of the 41% from the SSA report, and divided it by the national income, $22.7 trillion, as reported in the Flow of Funds report, page 10.) I hope readers will consider whether this economy properly rewards low-income workers. Of course most of this lower-earning 41% are part-timers, or partial year-rounders, but they overall receive very low wages -- and 41% of workers, 71 million, is a sizeable portion of all workers. We as a society should strive to improve their lives with a healthy, liveable wage rate.
5) An expanded Earned Income Tax Credit
Incomes of the working poor need raising. A proven effective method is the Earned Income Tax Credit. It does very little for single adults without children. And for those with children it needs to be more generous. The EITC should have a higher income ceiling for those receiving benefits, and the benefits should be greater. There were 42 million Americans living below the unrealistically low poverty line in 2023, just over 1 in 8 (12.9% using the Supplemental Poverty Measure, see page 35). There were 137 million (41.3%) living in hardship or poverty. The average income per capita is $64,441 (BEA.gov, Table 2.1 line 38). Imagine, an average family of four should have an income of 4 times that, around $257,000. As a society we can afford higher incomes for working people, the expanded EITC. The best reference is the Center for Budget and Policy Priorities, or the Economic Policy Institute.
The 40% number appears often when I calculate poverty or hardship. Some 41.3% of households have incomes less than twice the poverty threshold is the finding of the Supplemental Poverty Measure for 2023 (page 47, Table B.5) An income of $61,800 for a family of four was 200% of the OPL in 2023. The Economic Policy Institute places the survival budget in the U.S. for a 4 person family at $89,260; this is 288% of the OPL. The Official Poverty Level is unrealistic and very low.
The United Way charity's report ALICE (Asset Limited, Income Constrained, Employed) states for 2022 that
- 13% earned below the Federal Poverty Level (FPL)
- 29% were ALICE, in households that earned above the FPL but not enough to afford the basics in the communities where they live
- Together, 42% of households in the U.S. were below the ALICE Threshold (poverty + ALICE divided by total households).
The report "Executive Excess" shows the annual pay of the median worker at the 100 very large companies who pay the least to their workers, and all are listed on the S&P 500. For instance,
"Walmart: The country’s largest employer last year spent $9.9 billion repurchasing company stock, enough for a $6,166 bonus for each of Walmart’s 1.6 million U.S. employees. Half of the giant retailer’s employees made less than $27,136 in 2022. CEO Doug McMillon, meanwhile, has amassed nearly $285 million in Walmart stock, up an estimated 35 percent in value since the beginning of 2020.
It looks like McMillan, the CEO, had $211 million in Walmart stock in year 2020, and in year 2023 had $285 million, a 35% increase. His stock value increased by $24.6 million per year for three years, or by a total of $74 million. He "earned", or his stock grew, at a rate of $11,827 per hour for three full years (2080 hours X $11,287). In 2.5 hours of watching his stock grow (without lifting a finger) he earned more than half his employees (800,000 workers) earn in a year. What was his salary, or does that matter? I'm trying to rub something in, aren't I?
Denmark to U.S. Income and Wealth Comparisons
Since I brought up the comparison with Denmark, I'll add some additional comparisons. The World Inequality Database shows the percentage of national income going to different groups: the upper 10%, the middle 50th to 90th percentile (by implication), and the lower 50% of earners. It's a tedious arithmetic problem, but I'll show how incomes would change if the U.S. had the same income distribution as Denmark. I use the data at RealTime Inequality to help make the calculations.
The average income of the Upper 10% in the U.S. adults, working ages 20 to 64 years-old, is $448,100. This would drop to $305,240 with the Danish distribution.
The middle 50th to 90th percentiles have an average of $102,100. This would rise to $115,882.
The lower 50% of worker have an average of $25,400. This would rise to $42,135.
This shift may look unrealistic, but it is not as severe as the shift I argue in the most previous essay below. My previous essay argues that if the U.S. had the income distribution ratios of 1976 then, and it sounds outrageous, all households earning less than $200,000, or 90% of all households, or 117 milllion households would have $30,393 more income than today, on average. (See the second paragraph of the essay below.) I'm trying to underline the fact that the U.S. is very much worse-off than it was about 50 years ago. The RAND Corporation study argues that had wage income grown at the same rate as the national income between 1976 and 2018 then the adult worker at the middle, the median, would earn $21,000 more income than in 2018, not $36,000 but $57,000. Therefore a middle or median household would earn at least about $42,000 more income than today, 'at least' because the RAND figures are for 2018. (See page 10) The RealTime Inequality figures I use originate from economists at the University of California, Berkeley.
If the average wealth of the U.S. was distributed as in Denmark, then the top 10% of U.S. households would own -- not $8.97 million average but $6.40 million.
The middle 50th to 90th percentiles would own not $564,774 but $1.44 million.
The lower 50 percent of households would own not $38,075 but $101,533.
Here is a comparison of the Income and Wealth Ratios for both U.S. and Denmark, separating the average income and wealth levels of the lower 50%, then the average for 50th to 90th percentiles, and lastly the top 10% average. For instance, the U.S. lower 50% has an average income of $25,400, the 50th to 90th group has an average of $102,100, lastly the top 10% has an average of $448,100. The ratio is 1 to 4 to 17.
Income, U.S. -- 1 --- 4 --- 17 Wealth, U.S. 1 -- 15 --- 235
Denmark -- 1 --- 2.7 --- 7 Denmark 1 -- 14 --- 63
I reluctantly summarize anything, but I should here speculate that if we really wanted to
Make America Great Again -- we'd have to look to Denmark.
Income Comparisons -- Denmark today, U.S. in 1976 and U.S. in 2023
I'll now show the income percentages going to each of the three groups (lower 50%, middle 40%, top 10%), that of Denmark today, the U.S. in 1976 and the U.S. in 2023 (from RealTime Inequality.org).
Denmark - 2023 U.S. 1976 U.S. 2023
lower 50% 22% 12% 7.9%
middle 40% 47.4% 50.4% 39.1%
top 10% 30.7% 37.7% 53.1%
Which country has a strong middle class? Which country has lost its middle class?
This is the cause of our sorrows in my humble opinion.
Incomes of Higher and Lower Paid Full-time Workers
Today, or in November, 2024, the average yearly income of the lower-paid 55% of full-time workers (just under 60 million full-time workers) is $37,046/year states the Job Quality Index (page 9). The average for the upper-paid 45% is $73,494/year. The high wage group earns about double the lower wage group. And the average for 100% of the 110 million full-time workers is $53,052/year. The lower 55% yearly income comes to $17.68 per hour and a 40 hour work week. Most part-time workers who work year-round earn less, about $25,000 is my guess. Therefore, about 87 million (or 55% of all 160 million workers, full- and part-time) currently employed are earning very little. That's a big, important concept: 55% of all workers are underpaid.
I can underline this -- the Social Security Administration publishes a report on wage earners' incomes each year. For 2023 some 41% of all workers, over 71 million out of 173 million, earned an average income of $15,414, and all earned less than $35,000. A minimum wage worker, full-time and year-round, earns $15,080. Conclusion, about 40% of workers, who mostly depend on wages, are earning very little. This low income group earns a total of $1.1 trillion. On the other hand -- Stock buybacks for 2023 were $795.2 billion, and in 2022 they were $922.7 billion. I have spent about 40 minutes looking at the Flow of Funds report for Q4 2023 (page 10), and it appears that for all nonfinancial corporations, not just the S&P 500, the combined total for stock buybacks and dividends is $1.758 trillion. My quick calculation is that total wage income for the lower 50% of workers equals about -- about -- the same amount that went for stock buybacks and dividends -- around $1.7 trillion for shareholders and same amount for HALF of all workers.
Think about that! Total wage income to 50% of workers equals all remittances to corporate shareholders. --- And after about 15 more minutes I calculate that for every $1 "owned" by 'a person' in the lower 90%, the top 10% 'person' owns $24 dollars. Showing my calculations would be tedious. I calculated from the data at the Fed's Distributionlal Accounts web page.
This is wealth inequality.
As you can see, the main idea I am presenting is that we -- you and I and the others -- are way out of balance. It could be different.
Domestic nonfinancial corporate post-tax profits in 2023 were $2.1 trillion shows the Fed's Flow of Funds, Table F.3, page 10. The top 10% of wealth holders own 87.2% of all corporate equities (87% of $46.59 trillion is $40.5 trillion), shows the Fed's Distributional Accounts page. The top 10% also own about half of all pension benefits (defined benefit and defined contribution) (for a total of $15.9 trillion or 49.4% of pension wealth). Professor Lazonick's study shows that over 90% of corporate profits since 2004 have gone to shareholders.
Lazonick in his earlier book says that the people who contribute least to the corporations of America are the ones who benefit most. The shareholder has a commitment of a split second to the company whose shares he owns. As I mentioned, 87% of stock are owned by 10% of households, and they own about half of all pension wealth. Why should this 10% group be rewarded with 90% of the yearly profits? Is this absurd? Of course there is a counter argument, but I won't bother. The point is that we, this society, incentivizes financial accumulation to the point of hoarding and mass poverty; that's our path. Mexico is our destination, a country with horrific inequality.
Therefore, there's no question about the benefits of wealth accumulation and the often life-long insecurity, deprevation, and hopelessness due to low-paying wages. We can wave the stars and stripes from every household, and we are still on the way to ruin.
One should remember the national income ($24.277 trillion) divided by the number of households (131 million) equals over $185,000 per household, the average income for all households. On December 12, 2024, the Fed's Flow of Funds report shows that total household net worth is $168.800 trillion, and that equals around $1,288,000 of assets net of debt per household. (Figures are updated to most recent Flow of Funds report, page 2 and 10) Two median employees at these largest companies would be earning perhaps $74,000 together. And $74,000 is less than the survival budget for a family of four. (You might search here, here and here to verify that statement.) It is no wonder that the United Way report, ALICE, states that 42% of U.S. adults face hardship or poverty. If we want "wonder" we might wonder how such a fabulously wealthy nation can have 42% living in hardship or poverty.
5) I also suggest a "workers' dividend" or a mandatory annual bonus to workers earning less than $70,000 per year. This concept is explored in the book "The Citizens' Share: Putting Ownership Back into Democracy" by Freeman, Di Blassi, and Kruse. My September, 2023, essay explains.
6) And I'll also squeeze in a job guarantee program. If disaster hits we'll all be looking for a remedy. As I mentioned somewhere, Marshall Auerbach's article "The Real Lesson of the Great Depression: Fiscal Policy Works" is a primer in the effectiveness of government jobs. The book "The Case for a Job Guarantee" by Pavlina Tcherneva spells out the plan. And Phillip Harvey's 2011 proposal "Back to Work" shows how it could/should have been done after the Great Recession, an excellent detailed accounting.
Raising Incomes and Reducing Expenses
Raising incomes combined with decreasing expenses will solidify economic security so urgently needed for many Americans. A higher Earned Income Tax Credit, a permanent refundable (meaning universal) Child Tax Credit, subsidies for child care and preK instruction and elder care (social infrastructure), an expanded Social Security benefit for the poorest elderly citizens, and a government jobs program to make a tight labor force with little unemployment, hence bargaining power for workers --- all are methods to pursue higher incomes for low- and middle-wage families.
Reducing normal expenses are the other side of the coin. The important proposals are: Medicare for All does reduce household costs and creates healthier workers, obviously, and also building public housing such as Senator Sanders' plan to build 10 million permanently affordable housing units in 10 years, and canceling student debt. Combine these with a Green New Deal to counteract the climate change menace. My ambitious goal is to restore the income distribution ratio of 1976, and then each household in the lower-earning 90%, all with incomes below $200,000, would receive about $30,000 more income. In 1976 the lower 90% earned 63% of income not today's 48%, according to RealTime Inequality. The difference is about $30,000 for 90% of U.S. households, as I've already stated.
The Federal Reserve's survey called Economic Well Being of U.S. Households for 2023 shows that 48% of U.S. adults say that the "maximum emergency expense they could pay from savings" is $2,000. (See page 33) The Consumer Financial Protection Bureau reports in December, 2023, that 40.0% of U.S. adults report having less than $1,000 in savings and checking accounts (page 33). And 20.3% have less than $100. And "37.8 percent of households had difficulty paying at least one bill or expense in the previous year." And only 47% had enough liquid assets to cover expenses for a period of 3 months or more. The U.S. Census Pulse Survey for October, 2024, (Spending Tables, #1) shows that 17% found it very difficult "paying for normal expenses in the last week." Another 20% found it "somewhat difficult", and 29% found it "a little difficult" for a total of 66%. Only 34% reported "Not at all difficult". Again, 17% and 20%, or a total of 37% had real trouble paying for life expenses, that's close to the 40% amount I've mentioned. Again, the "mean average" household income is over $180,000 per year. The average household net worth, i.e. savings, is over $1.2 million. It is time to imagine an American society where most households hold assets near the average, and their incomes orbit near the average. Imagine.
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I should end the essay at this point. I should learn the lesson of "cognitive overload". That is, the mind can absorb only so much info at a time. More is less; and less is better.
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But it occurs to me I've left a few items out. Here they are: -- But the reader should not enter. Honestly, the above is enough. Stop now.
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Inequality is ruining our society. Sharing the rewards of work was normal during the late '40s, '50s, and 1960s. During those years wage income grew at the same rate as the national income, as I've shown in the most previous essay. The RAND Corporation also shows this fact. The "average weekly earnings of production and nonsupervisory workers", states the BLS web page, was higher in 1971 than in 2023. Eighty percent of all workers fall into the "nonsupervisory" category. The "Real [inflation adjusted] GDP per capita", states the Federal Reserve, grew by 161% during these 52 years, more than doubling and almost tripling. This discrepancy is the cause of our sorrows. The output grew enormously, but the weekly wage income did not grow, as I've shown often times.
I don't want to overdo it, as I show the second graph here with every essay I write.
The top graph is the "disposable income per capita in "chained (2017) dollars", meaning inflation adjusted. Note that from 1973 to 2024 income increased by 145%, or about 3% per year. And the "average weekly earnings" for nonsupervisory workers (80% of all workers) decreased by 4% in the same 51 years (as shown in the second graph).
From BEA.gov, Table 2.1, line 39. Income increased from $21,020 per capita to $51,786, an increase of 146% (or a multiple of 2.46). But weekly wages collapsed and nearly recovered their 1973 level:
And here's the growth of the lower-earning 50% of adults compared to the top 1%, with the average growth in white, over 47 years (1976 to 2023) from RealTime Inequality:
The growth in the lower 50 percent happened mostly between 1993 and 2000. From 1976 to 2023 the adults in the lower 50 percent saw incomes grow by 18.8% (from $15.7K to $18.8 K, or just $3,100 total growth), the top 1% saw growth of 288% (from $485K to $1.8 million, a gain of $1,315,000).
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Along with the PRO Act, I'd like to see the emergence of organized BOYCOTTS. This is a populist response to the tyranny of large corporations that manipulate low wages and high prices at will.
Profit Inflation Is Real
As I have shown, between 2019 and 2024 the share of national income going to nonfinancial corporations has increased from 6.0% to 11.7% (page 10, Flow of Funds). Pre-tax profits were $1.105 trillion in Q3 2019, and were $2.891 in Q3 2024 -- a five year period, a gain of 113% inflation adjusted. (Flow of Funds Q3 for both years) "Profit Inflation Is Real" states Servaas Storm. This profit increase defies the core belief of capitalism that competing enterprises would compete on low prices to obtain high market share and profits. Page 10 of the Flow of Funds report shows the national income and the profits of nonfinancial corporations; as a percentage of national income they have never been higher. I've covered this in my last few essays.
Three additional articles to read
Now I'll suggest three articles to augment the readers' appreciation of the field of economics. The three are
1) A Tale of Two Countries [France and the U.S.] -- from the Washington Center for Equitable Growth. A comparison between low-income French and U.S. workers shows that French workers enjoy higher pre-tax income even though the per capita income in the U.S. is 35% higher. And then add on social benefits from the government, the French post-tax incomes are signifcantly higher. This article also examines the trajectory of inequality in the U.S. and explains the difficulties of measuring inequality. The authors are Thomas Piketty and Emmanuel Saez and Gabriel Zucman.
2) The WCEG has another revealing study about worker bargaining power and income distribution among rich countries. It provides a "five-country sample, with particular attention to the incidence of poverty-pay and decent-pay jobs for young (18-34) male and female workers without a college degree."
3) "Reading Adam Smith in Denmark" by Robert Kuttner, 2008. It's a 40 minute read, probably, but worth it. Denmark is unique, we are not Denmark, but one can see the play of attitudes, political friction, social cohesion and practical survival ingenuity in the Danish model. The Danes also have a streak of libertarianism in their model, and a willingness to experiment. It's an absorbing read. Kuttner is a favorite writer of mine, I've read three of his books.
Kuttner concludes that if American politicians mustered "the political nerve to propose an active labor-market policy on a serious
scale, it could not only narrow income gaps and increase overall productivity; it might also reclaim some of the lost support for a more
managed brand of capitalism, revive the idea of a role for government
in promoting equality as well as efficiency, reclaim trade unions as social
partners, and build more compassion among Americans for those of
different social strata." --- It would also promote better health, enable substantial leisure and vacation time, and restore a sense of success among most citizens. Stress levels and worrying would nose-dive.
International Comparisons of Wealth and Income
There are many books explaining the "future without capitalism", to summarize the central theme. Capitalism has its drawbacks, as we can clearly see. Corporations that pay the lowest wages can offer the lowest priced product, but that destroys the purchasing base needed for a thriving economy. As the U.S. tests its willingness to create brutal inequality, we have to understand the high risk of social damage. The Great Depression, 1929 to 1937 is such an example. Capitalism was struggling for its existence in the 1930s, fascism and communism had won temporarily. Fortunately FDR's policies reduced the unemployment rate from 25% to 9.6% from 1933 to 1936 (see this article by Marshall Auerbach. One paragraph states: "In fact, once the Great Depression hit bottom in early 1933, the US economy embarked on four years of expansion that constituted the biggest cyclical boom in U.S. economic history. For four years, real GDP grew at a 12% rate and nominal GDP grew at a 14% rate. There was another shorter and shallower depression in 1937 largely caused by renewed fiscal tightening (and higher Federal Reserve margin requirements).")
An indicator of danger is the comparitive "intentional homicide" rates among nations.
Japan has a homicide rate of 2 in a million.
Europe has a rate of 10 in a million.
The U.S. has a rate of 57 in a million.
Mexico has a rate of 249 in a million. Mexico has by far the highest inequality measure.
I can't swear this is causative, but it looks that way. The United Nations' Inequality Adjusted Human Development Index also tends to suggest the correlation.
We must begin to envisage a more cooperative, less competitive, less cut-throat society.
The world population has not benefitted much from our advanced technology and modern economy. Just today I looked up the World Bank report stating that 44% of the world's population lives below a poverty level of $6.85 per day per human. This comes to $2,500 per year per person. A family of four with incomes below $10,000 will fall into the 44% in poverty group. Approximately half of Mexico's families fall below this $6.85/day income threshold. By comparison, in the U.S. some 5% live in "deep poverty", but "deep" U.S. poverty is an income about $4,000 to $6,000 per year per person, much above $2,500 per person per year. Using the U.S. Census Hinc-01 tables I see about 1% of the U.S. population live in households whose incomes fall below $5,000 per person per year.
The average wealth per adult in the world is around $87,489 states the Global Wealth report from Credit Suisse Bank, 2023 (page 126 of Databook). But half of all adults own less than $8,654.
In 2022 half of the adults in Africa owned less than $1,242; in India half owned less than $3,755; in Asia-Pacific half owned less than $5,176; in Latin America half owned less than $6,341. Among all adults in the world, half own less than $8,654. But in China half own less than $27,273. The mean average in the U.S. is $551,347, while half own less than $107,739. In fact the lower 40% in the U.S. own just 0.7%, which comes to about $1,400 per adult. (See page 144). You might be asking, reasonably, "Is that true?"
The World Inequality Database shows total world wealth at just under 580 trillion Euros, equivalent to $609 trillion dollars. A staggeringly huge amount of money. Using Credit Suisse data, I estimate that the average wealth per adult worldwide is near $106,000. Why is there enormous wealth coupled with massive poverty (44% of humanity)? Is it a faulty economy run by people with a mind-set that blinds them?
