Looking at Income Inequality

Updated: Friday, May 16, 2014
Looking at Income Inequality story image
KALAMAZOO, Mich. (NEWSCHANNEL 3) - A surprise best-selling French author has stoked the fires of class warfare in the United States with the recent publication of his book "Capital in the 21st Century."

Tonight, in Tom's Corner, our Tom Van Howe says whether the book is right or wrong is irrelevant right now; its publication has people talking.

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The author's name is Thomas Piketty. And his premise is this: unless governments start using heavy taxes to break up large concentrations of wealth, our economy and the world's economy will become increasingly unbalanced, with only a few people inheriting massive fortunes.

And he says the only way to penetrate that socio-economic class would be to marry into it--because good old-fashioned hard work won't get you there.

The book has been pretty much kicked to the dirt by conservatives and hailed by liberals. I'm stuck in the middle because I struggled with economics in college.

But I'm not sure you need  a dollars-and-sense degree to get a sense that things aren't going well--that somehow the game is rigged; that the fix is in.

Take a look. The pay of the typical American worker peaked in 1978 and has been dropping ever since.

Since 2000, the wages of the median male worker across all age brackets has dropped 10 percent after inflation.

Compare that to what has happened to CEO's over that same period of time. According to former Labor Secretary Robert Reich, until about 1980, CEO's were paid, on average, 30 times what their typical worker was earning.

Since then, CEO pay has skyrocketed to roughly 300 times the pay of a typical worker.

Its good to be on top--not so good for those who are not.

And I can hear you say, 'Well, let's not pick on the job creators.'

But I can't find a single economist to say they're creating that many jobs.

What those CEO's are doing instead is taking their millions and investing it. Maybe hoarding it is a better word.

Maybe--just maybe--if they increased the pay of their workers, those same  workers would have more money in their pockets to buy more of the product they're making.

Kind of like Henry Ford, who doubled the pay of his workers to five dollars a day, so they'd be able to afford their own cars.

That would seem to be a good thing for the economy.

If a company can sell more of what is has to sell, it has reason to expand and hire more people. So customers are really the job creators.

Absent that, however, what do we do to level the paying field?

The french economist Piketty says we ought to start by taxing the hell out of the wealthy and then redistribute all that money to balance the scales.

But--to be real--that doesn't seem likely.

After all, our lawmakers, who rely on the monied classes for their political survival, aren't going to start gnawing on the hands that feed them. Can't see that happening next week.

How about the return of labor unions? To sit down and negotiate wages and benefits.

Well, unions are out of vogue right now, and while we do have the right to collectively bargain in this country, why don't you try organizing a union chapter where you work and see where that gets you.

The best idea I've heard so far is in a bill coming up for consideration in California.

It called Senate Bill 1372, and would set corporate tax rates according to the ratio of CEO pay to that of a typical worker.

The higher the ratio, the higher the tax. The lower the ratio the lower the tax.

All of a sudden, board members at 'Corporation A,' who set CEO pay, would have to start answering to stock holders who'd suddenly have a different set of questions.

I don't know if the Frenchman's book about capitalism is on target or not, but it has, indeed, set people to talking.

The elephant has left the building and we're talking about class warfare in this country as if it were a real thing.

And that's good--because it is.

In this corner...I'm Tom Van Howe.

Business News

Last Update on March 27, 2015 17:24 GMT

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WASHINGTON (AP) -- U.S. economic growth slowed in the fourth quarter and economists are looking for an even weaker showing in the first quarter as severe winter weather takes a toll on the economy.

But the slowdown is expected to be short-lived. Stronger growth is expected for the rest of the year as a recovering job market supports healthy gains in consumer spending.

The Commerce Department says the overall economy, as measured by the gross domestic product, grew at an annual rate of 2.2 percent in the October-December period, an estimate that was unchanged from a month ago. The economy had surged at a 5 percent rate in the third quarter.

The final look at fourth quarter GDP found consumer spending was stronger than previously estimated but business restocking was weaker.

CONSUMER SENTIMENT

WASHINGTON (AP) -- Bad weather and rising gasoline prices pushed U.S. consumer sentiment a bit lower in March.

The University of Michigan's consumer sentiment index slipped to 93 this month from 95.4 in February. Richard Curtin, chief economist for the survey, notes that despite the monthly drop, consumer optimism was the highest in a decade for the first three months of 2015.

Sentiment dropped most this month among low-income households, which are especially sensitive to high utility bills in the winter. Confidence rose for mid- and high-income households. Curtin predicted that an improving job market would boost consumer spending the rest of the year.

AIRLINES-COCKPIT RULES

COPENHAGEN, Denmark (AP) -- Europe's aviation safety agency is recommending that airlines across the continent always have two people in the cockpit of a flying aircraft.

European airlines, including the Lufthansa Group that includes Germanwings, have been making commitments to implement the measure after it emerged that the co-pilot of Germanwings Flight 9525 had apparently locked himself in the cockpit to crash the plane.

U.S. airlines revamped their policies regarding staffing in the cockpit following the Sept. 11, 2001 terrorist attacks. But the procedure is not standard in Europe or Canada.

The European Aviation Safety Agency's executive director, Patrick Ky, says "while we are still mourning the victims, all our efforts focus on improving the safety and security of passengers and crews."

The president of the German pilots union Cockpit tells The Associated Press that his organization would support measures requiring two people in the cockpit at all times during flights, but he cautions that such a move wouldn't solve all security problems.

UNITED STATES-ASIAN BANK BLUES

WASHINGTON (AP) -- U.S. resistance to a Chinese-led Asian regional bank is leaving it isolated among its Asian and European allies.

That's giving some heft to China's frequent complaints that Washington wants to contain its rise as a world power.

One of America's closest friends in Asia, South Korea, announced Thursday it will join the Asian Infrastructure Investment Bank. The institution is intended to help finance construction of roads and other infrastructure.

The U.S. has expressed concern that the new bank will allow looser lending standards, undercutting the World Bank and Asian Development Bank, where the U.S. and Japan have the most clout.

But since Britain broke with Washington two weeks ago, other major European economies have signed up for the Chinese-led bank. Australia also appears poised to join.

GREECE-BAILOUT

ATHENS, Greece (AP) -- Greece's alternate minister for international economic relations says his government is prepared for a "rupture" with the country's creditors if its current bailout negotiations don't go well.

Euclid Tsakalotos said Friday the government would not be negotiating properly if it didn't envisage a rupture with its partners, although he would not say what exactly a rupture might entail.

Greece's government is in talks with its creditors -- eurozone nations, the European Central Bank and the International Monetary Fund -- to unlock urgently needed funds from the country's bailout. It must present a list of reforms by early next week, which it hopes will lead to the disbursement.

Tsakalotos, speaking on private Star TV, said the government was intentionally creating ambiguity with its partners regarding its intentions as a negotiating tactic.

SILICON VALLEY-SEXUAL DISCRIMINATION

SAN FRANCISCO (AP) -- Jurors deciding the outcome of a much-watched gender discrimination lawsuit against a prestigious Silicon Valley venture capital firm are set to enter their third day of deliberations.

The jury of six men and six women are due back in San Francisco Superior Court on Friday in Ellen Pao's lawsuit against Kleiner Perkins Caufield & Byers.

Pao says the firm discriminated against her because she was a woman and then retaliated by denying her a promotion and firing her when she complained about gender bias.

Kleiner Perkins denies the allegations and says Pao had a history of conflicts with colleagues that contributed to the decision to let her go.

The case has put a spotlight on gender imbalance and working conditions for women in Silicon Valley.

ARCTIC OIL DRILLING

WASHINGTON (AP) -- U.S. oil storage facilities are filling up and the price of oil has collapsed, but an Energy Department advisory council says the U.S. should push now to exploit the trove of oil in the Arctic waters off of Alaska or risk a renewed reliance on imported oil.

The U.S. has drastically cut imports in recent years and transformed itself into the world's biggest producer of oil and natural gas by tapping huge reserves in shale rock formations. But the National Petroleum Council's study predicts that the shale boom won't last much beyond the next decade.

Exxon Mobil CEO Rex Tillerson chaired the committee that drafted the study. He says oil companies need to start probing the Artic because it takes decades of preparation and drilling to bring oil to market.

Geologists estimate the Arctic holds about a quarter of the world's undiscovered conventional oil and gas deposits. But environmental advocates say the Arctic ecosystem is too fragile to risk a spill.

OBAMA-CHEMICAL BOARD

WASHINGTON (AP) -- The U.S. Chemical Safety Board is operating without a permanent leader. Its chairman has been forced to resign, following accusations of mismanagement.

A White House official says Rafael Moure-Eraso (rah-fah-YEL' moh-RAY' eh-RAH'-soh) stepped down Thursday at the administration's request. The official spoke on condition of anonymity to discuss personnel matters.

The National Safety Council says the independent federal agency under Moure-Eraso repeatedly fell under scrutiny for board departures, delayed investigations and other issues. Members of the Senate Environment and Public Works Committee had accused Moure-Eraso of violating his oath of office and the law. Committee members had requested his resignation.

The board is responsible for investigating chemical accidents. Its members are appointed by the president and confirmed by the Senate.

President Barack Obama has nominated Vanessa Sutherland to succeed Moure-Eraso.

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