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. Leonore Palladino has several essays about this idea. In November, 2024, she published the book "Good Company: Economic Policy After Shareholder Primacy". We need a new paradigm for our largest economic agents, 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". Clearly these two author-scholars wish to undermine and reorient our present complacent thinking about the mega corporation. David Korten, William Mitchell, Paul Adler, and Gus Speth also challenge our present corporate system of production.
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 was $15,443. Not much. The year-round full-time minimum wage workers earn $15,080 per year -- not much. 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.
If the average wealth of the U.S. was distributed as in Denmark, then the top U.S top 10% of 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 middle 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. Stock buybacks for 2023 were $795.2 billion, and in 2022 they were $922.7 billion. 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, shows the Fed's Distributional Accounts page. The top 10% also own over half of all pension benefits. Professor Lazonick's study shows that over 90% of corporate profits since 2004 have gone to shareholders. 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.
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.
Raising incomes and decreasing expenses will instill economic security so urgently needed for many Americans. A higher Earned Income Tax Credit, a permanent refundable (meaning universal) Child Tax Credit, providing subsidies for child care and preK instruction, and a government jobs program are ways to increase incomes.
Reducing normal expenses are the other side of the coin. The important proposals are: Medicare for All, obviously, building public housing such as Senator Sanders' plan to build 10 million permanently affordable housing units in 10 years, canceling student debt, and expanding Social Security for low income seniors. 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 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. Again, the 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 orbitted 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:
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.
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."
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 (explore this article). Capitalism was struggling for its existence in the 1930s, fascism and communism had won temporarily.
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 that group of poor humans. Approximately half of Mexico's families fall below this $6.85/day income threshold.
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?
