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 August 04, 2015 17:10 GMT

FACTORY ORDERS

WASHINGTON (AP) -- Orders to U.S. factories increased in June, driven by a big gain in commercial airplanes. A key category that reflects business investment plans posted a modest rise.

The Commerce Department says factory orders advanced 1.8 percent in the month. The jump reflected a surge in demand for commercial aircraft, an often volatile sector.

A key category that serves as a proxy for business investment plans edged up 0.7 percent after declines in April and June. In the first half of the year, demand in the investment category is down 3.5 percent from the same period a year ago.

Manufacturing has been held back this year by a rising dollar, which dampens demand for exports, and falling oil prices, which have cut into energy industry investment spending.

EARNS-FREDDIC MAC

WASHINGTON (AP) -- Mortgage giant Freddie Mac reports net income of $4.2 billion for the second quarter, up sharply from the same period of 2014, as it increased its purchases of home loans and sold off greater volumes of riskier mortgages.

The April-through-June results posted today marks the government-controlled company's 15th straight profitable quarter. Freddie also benefited from rising interest rates.

The McLean, Virginia, company will pay a dividend of $3.9 billion to the U.S. Treasury next month. Freddie will have paid $96.5 billion in dividends, exceeding its government bailout of $71 billion.

The government rescued Freddie and larger sibling Fannie Mae at the height of the financial crisis in September 2008, after they suffered huge losses from risky mortgages in the housing market bust.

DELTA AIR LINES-TRAFFIC

ATLANTA (AP) -- Delta says traffic is up from last year but a key revenue measure is down, indicating that fares are likely declining from last summer.

The airline says revenue is being hurt by the strong dollar, lower fuel surcharges on international routes, and lower prices in some U.S. markets.

Delta Air Lines Inc. says passenger revenue for every seat flown one mile fell 3 percent last month compared with July 2014. Delta filled a higher percentage of seats than last summer, so it's likely that the drop in the closely watched revenue figure means average fares were lower.

The decline is not a surprise. Analysts have worried that after several years of holding down supply, airlines are adding flights and seats too quickly, causing prices to fall.

TOY RECALL

NEW YORK (AP) -- The Manhattan Group is recalling about 2,800 My Snuggly Ellie activity toys because a wooden ring can break into small pieces, posing a choking hazard.

The company has received one report of the wooden ring breaking. No injuries have been reported. But consumers are advised to immediately take the toy away from young children.

Approximately 2,700 of the toys were sold in the U.S. and 100 were sold in Canada.

The plush brown elephant toy has white crinkle ears. There is a green hanging loop on top of the elephant toy's head so that it can be attached to a stroller or crib. There is a mini mirror on the elephant toy's stomach, while a teether and a wooden ring hangs below its body.

The item number is 212520, which can be found on the small white tag sewn into the bottom of the toy.

ATM FEES-LAWSUIT

WASHINGTON (AP) -- A federal appeals court has revived a lawsuit accusing MasterCard, Visa and three major banks of illegally fixing ATM prices at the expense of consumers.

The federal appeals court in Washington ruled today that a group of consumers and independent ATM operators could pursue antitrust claims against the companies.

A federal district judge had thrown out the lawsuit in 2013 after finding the plaintiffs failed to show any conspiracy to overcharge consumers.

But the appeals court said challengers could argue that the payment processors coordinated with Bank of America Corp., JPMorgan Chase & Co. and Wells Fargo & Co. to adopt anticompetitive fees.

The lawsuit claims the companies impose contract terms preventing independent ATM operators from charging less when consumers use debit cards that can tap cheaper processing networks.

EARNS-KELLOGG

BATTLE CREEK, Mich. (AP) -- Kellogg says its U.S. cereal division saw another decline in quarterly sales but that trends in the category were improving.

The maker of Frosted Flakes, Froot Loops and Kashi is trying to revamp the marketing for its cereals as Americans reach for other breakfast options, like Greek yogurt and fast food. One strategy has been trying to reposition Special K to be more in line with changing health trends.

For the quarter, Kellogg Co. said sales in its flagship U.S. Morning Foods segment fell 2.3 percent when stripping out the impact of currency exchange rates and other one-time factors. Its international division was hit by unfavorable exchange rates.

Profit fell to $223 million, or 63 cents per share.

EARNS-AETNA

UNDATED (AP) -- Aetna's second-quarter earnings jumped 33 percent and the health insurer raised its 2015 forecast again after receiving a boost from a government business it plans to feed with a $35 billion acquisition.

Shares of the Hartford, Connecticut-based company started climbing today before markets opened and after it released results.

Aetna said Thursday that higher underwriting margins or improved profitability helped balance a jump in operating costs. The nation's third-largest health insurer easily topped Wall Street expectations.

For the second quarter, Aetna brought in $731.8 million. That compares with $548.8 million last year. Adjusted results in this year's quarter totaled $2.05 per share.

Health insurance is Aetna's main product, but the company also sells dental, group life and disability coverage. The company announced last month that it would buy rival insurer Humana Inc., the nation's second-largest provider of federally funded Medicare Advantage plans.

EARNS-CVS HEALTH

UNDATED (AP) -- Pricey specialty drugs helped CVS Health cope with tobacco withdrawal to top analyst expectations in the second quarter.

The nation's second-largest drugstore chain says revenue from its biggest business, the pharmacy benefits management segment, jumped 12 percent to more than $24 billion, spurred in part by specialty drugs.

Specialty drugs are complex medications that treat certain forms of cancer, multiple sclerosis and hepatitis C, among other conditions.

Overall, CVS Health earnings climbed 2 percent to $1.27 billion in the second quarter while revenue rose more than 7 percent to $37.17 billion. Adjusted earnings came to $1.22 per share.

SHIRE-ACQUISITION

NEW YORK (AP) -- Irish drugmaker Shire PLC Is offering to buy Baxalta Inc. for about $30 billion in stock in a move to solidify its position in rare disease treatments.

Deerfield, Illinois-based Baxalta was spun off of Baxter International Inc. in July and focuses on bleeding disorders. Dublin-based Shire makes treatments for a range of conditions including attention deficit hyperactivity disorder, epilepsy and hunter syndrome.

In a statement, Shire urged Baxalta to engage in negotiations. It made the offer to the company on July 10 and said the offer implies a value of $45.23 per share, a 36 percent premium for Baxalta.

Shares of Baxalta rose more than 20 percent to $40.10 in premarketing trading. Shire's stock fell nearly 3 percent to $260.92.

GENERAL MOTORS-PLANT INVESTMENT

FLINT, Michigan (AP) -- General Motors says it's investing $877 million to upgrade an assembly plant in Flint.

The company plans to build a new, 883,000-square-foot body shop for Flint Assembly, which makes full-size pickups for the Chevrolet and GMC brands.

The new body shop will be closer to the Flint Metal Center, which supplies sheet metal to the plant. Construction is expected to begin in early 2016 and finish in 2018.

Flint Assembly, which opened in 1947, is GM's oldest plant in North America. GM says the upgrade will reduce the time and cost to ship parts between the two plants.

PAYPAL-UNITED CONTINENTAL-CFO

NEW YORK (AP) -- PayPal says it has hired United Airlines chief financial officer John Rainey for the same position at the payments company.

Rainey has been United's CFO for the past three years.

Last month, PayPal split from eBay Inc. into a separate publicly traded company. Rainey will join the San Jose, California, company on Aug. 24. He will replace Patrick Dupuis, who will stay at the company as a senior vice president.

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