The Free Press, Mankato, MN

January 5, 2014

The threat from U.S. income gap taints dream

WHY IT MATTERS: American business and workers have to rethink the priorities and opportunities in a new economy

The Mankato Free Press

---- — As if the frigid weather wasn’t enough to chill our hopes for the new year, we were greeted with the cheery news that the richest people in the world got a lot richer in 2013 and the same is on tap for 2014. Well, good for them.

The Bloomberg Billionaires Index which ranks the world’s 300 wealthiest individuals reported that $524 billion was added to their collective net worth. The aggregate is now at $3.7 trillion.

Last week, Bloomberg also published a report that found income inequality is hitting more American households as they exhaust ways in which to stretch their dollars. While net worth and income are two different measurements, it does emphasize there are fewer winners and a lot more losers.

For the past three decades, Bloomberg said, families on the bottom wage level had housewives joining the labor force, husbands taking second jobs and working longer hours and many tapped their home equity to borrow money to spend. Now with the bursting of the housing bubble and women in the workforce peaking, options are running out and so is optimism for a better future.

The most recent Bloomberg National Poll suggests that about 64 percent of Americans believe our system no longer gives everyone an equal chance to get ahead. Out of desperation, workers are holding onto their existing jobs as higher-paying jobs fade away. They are saving more and charging less. Young adults are living with their parents longer.

Economists explain this disparity on losses in manufacturing jobs and unionized workers, robotics, rising compensation packages of CEOs and Wall Street moguls.

All this while stock prices are hitting record highs making rich Americans wealthier and fueling even more polarization between the haves and the have nots.

It’s become a political mantra now. President Obama in December said closing this gap is the “defining challenge of our time” and Democrats are staking out a higher minimum wage as the best answer.

Obama also is targeting simplifying the tax code, increasing exports, enhancing worker training and boosting pre-kindergarten education.

Just on the issue of fairness, there are good arguments to pegging the minimum wage to inflation and examining our tax laws to ensure they are indeed progressive. But while government plays a role, long-lasting answers should come from the private sector’s investors, workers and management.

We are not producing enough skilled workers in today’s new economy, whether that’s computer technology or welding. Paying off college loans by seeking a job armed with an arts education degree has little chance of reaching equilibrium.

The debate on economic systems can be clouded by societal pressure and political agendas. But frankly we need to look inward toward our own misguided ambitions. Gordon Gecko’s “greed is good” supplanted Adam Smith’s vision of an economic system with a moral compass.

But that path does not lead to overall greatness for a society; it only serves a winner-take-all mentality. Malcom Forbes quote “He who dies with the most toys wins” is reflective of an earlier time.

Since then we have seen what happens to ordinary people when an overheated market collapses, when banks misuse their trust, when workers go deeper into debt for more “toys” and when investors are only worried about returns and not how they get it.

We need to rethink the purpose of American economics to restore faith and promise in America as a land of opportunity for all not just the few.