Posts Tagged middle class salaries stagnated
Posted by Darshana V. Nadkarni, Ph.D. in Uncategorized on February 28, 2014
The film “Inequality for All” premiered at the 2013 Sundance Film Festival and won a U.S. Documentary Special Jury Award for Achievement in Filmmaking. Huffington Post calls it a “must-see movie” and according to Variety, this film “does for income disparity what “An Inconvenient Truth” did for Climate Change”; a deeper understanding of the issues and meaningful conversations around some action. How cool that our local community college hosted the screening and fabulous panel discussion, following the film! DeAnza College at Cupertino is a model in providing top notch all-rounded education experience, with opportunity for civic and community engagement. Economic disparity is a very real problem in our society and here is a link to my previous blog on this issue and the huge fragmenting impact of economic disparity on the fabric of our families and communities – http://bit.ly/AwLq7G .
In “Inequality for All”, economist, author, professor and former labor secretary, Robert Reich examines the widening income disparity in the US, and discusses its impact on our society, and on our democracy. So how wide is the gap? In 2011 broadcast of “The Daily Show”, Jon Stewart cited a CIA Gini Index in which the United States ranked 64th in income inequality (worse than Cameron, but just above Uraguay). Later CIA revised the figures, but as Robert Reich explains in the film, 400 people in the US have more wealth than half the population of the US. Reich examines the years leading up to the crash in 1928, and in 2007, and finds striking parallels.
President Reagan’s economic policy was based on reducing growth of government spending, reducing federal income tax, reducing capital gains tax, reducing government regulation, and tightening the money supply to reduce inflation. The very wealthy often made their money in capital gains, and at 15% rate, frequently pay less in taxes than the average Americans. When wealthy do not pay higher taxes, the middle class gets stagnated. When middle class is squeezed, it stops spending, stops buying, and there is less revenue for states, for public institutions. This results in cost of higher education going up, higher school dropout rate, less skilled workforce, more jobs going abroad, higher unemployment and so on.
It is a misnomer to believe that when the very wealthy have more money, they would spend more and hire more. They may buy 3 more cars or 5 more pairs of jeans. But in the end, there is only so much they can buy, compared to a mass of middle class people. The more wealth they accumulate, the very wealthy invest in speculative assets, in gold, housing, and/or invest it abroad. That is exactly what happened in the years preceding the crash in 2007. The financial sector ballooned and greater deregulations helped the speculative assets to grow.
Meanwhile, the average American worker was struggling to keep up. Not wanting to get locked out of the American dream, middle class families too were buying homes. While middle class salaries had stagnated, two income families grew, and many people were working two and three jobs, in addition to borrowing heavily (often against the equity in their homes), just to make ends meet. With greater deregulations, union bashing, and union squashing, increasingly their voices were not heard. In 1992, President Bill Clinton promised to cut taxes for the middle classes, and make the very wealthy pay their fair share. He also promised to contain outrageous executive pay. Many executives then began to get paid in stock options which further fueled the growth of speculative assets. Government sets the rules by which the markets function, says Reich.
Big corporations are simply not designed to generate jobs. They operate with focused objectives of making profit and delivering value to the shareholders. Technology and globalization enable big corporations to take the jobs away from average American workers and go to the regions of the world, where labor supply is cheaper. Who looks out for the average American worker? The answer is “nobody”, says Reich. President Clinton’s policies did nothing to stop the downward spiral of the middle class. The eventual economic crash further harmed the middle class families. Many of them cannot afford to stay in their homes and resulting pressure often fragmented or broke up families. Please do check out my previous blog on its devastating impact on our families – http://bit.ly/AwLq7G . The very wealthy do not benefit when things get so dire for the majority. Reich makes the points emphatically, citing data and sources to bolster his perspectives and with appropriate amount of humor.
This much is clear from the film that this growing income disparity is lethal for a society and for the democracy. People are polarized and on edge. No one benefits from it. In the end, it also hurts the very wealthy. What communities would they live in when the teachers, the grocery store clerks and others cannot afford to live in the same communities? But how can average Americans take back their voice and get heard? What can they do? The panel discussion that followed the film was enlightening and heart warming. The panelists included Professor Ben Pacho, Professor Jim Nguyen, President of De Anza College, Dr. Brian Murphy, Dr. Crystallee Crain, and Dr. Cynthia Kaufman.
Dr. Murphy advised that we not just focus on marginal shifts but focus on the big picture and reclaim public institutions. He suggested we learn about power and leverage the capacity to build coalitions by forging connections across diversity of race, gender, and cultures, to focus on the true cause. It might be a long struggle but with unity, we can counterbalance the power of money. Dr. Kaufman (author of “Ideas for Action” and “Getting Past Capitalism”, added that we need to focus on building deep, authentic relationships with each other and with “stuff” so that we end up requiring less stuff. According to Dr. Crain, we need to overcome apathy and Professors Pacho and Nguyen emphasized the need to get involved in the community. All panelists emphasized they would not want to see the students getting burnt out. In fact, Dr. Murphy talked about the power of “random episodic silent thinking” or rest! He said, no one can do any kind of community or activist work, if they do not deeply love. This love may be for someone or something but deep affection anchors the values and purposefulness and provides the drive to be involved in things one cares about. It may not be everything that we all can take on. But apathy just won’t do. Each of us can take on and contribute to something we deeply care about so we can leave the world a better place.