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 October 20, 2014 07:27 GMT

BUSINESS SURVEY

WASHINGTON (AP) -- A new business survey finds hiring is healthy but pay raises, not so much.

The quarterly survey by the National Association for Business Economics finds that only 24 percent of companies increased wages and salaries in the July-September quarter. That's down from 43 percent in the April-June quarter and the first drop after three straight increases.

Yet the firms still added jobs at a healthy pace, which usually pushes wages higher as employers compete for workers. The figures suggest that the number of people out of work remains high enough that companies aren't under any pressure to raise pay.

And just one-third of respondents said they expect their companies will boost wages in the October-December quarter.

The NABE surveyed 76 of its member economists in late September

ECONOMY-THE DAY AHEAD

UNDATED (AP) -- Investors will have many more corporate earnings reports to look at this week.

Apple will report third quarter financial results today after the market closes.

Tomorrow, Coca-Cola, Reynolds American, Verizon Communications and McDonald's will report earnings before the market opens. Discover Financial Services and Yahoo will report results after the closing bell.

Also on Tuesday, the National Association of Realtors will release existing home sales for September.

SPRINT LAYOFFS

OVERLAND PARK, Kan. (AP) -- Sprint Corp. has cut 452 jobs from its Overland Park, Kansas, headquarters as part of a previously announced cost-cutting effort.

The nation's third-biggest cellphone carrier disclosed the layoffs in a filing with the Kansas Department of Commerce.

The report, which was filed Friday, covers the first installment of layoffs planned throughout October. The Kansas City Star reports that it doesn't cover any job losses outside the headquarters campus, although they are believed to be happening too.

The company said earlier this month in a filing with the Securities and Exchange Commission that it was cutting an unspecified number of jobs to better compete with AT&T and Verizon. Sprint said it would book a $160 million charge in its fiscal second quarter to cover the layoffs, which include managers as well as other employees. It may take more charges for future job cuts.

Another 477 Sprint employees in Overland Park were laid off earlier this year, bringing this year's job cut total to 929

Before the newly disclosed layoffs, about 7,500 worked for Sprint in the Kansas City area.

BOX OFFICE

LOS ANGELES (AP) -- The bloody World War II drama "Fury" blew past "Gone Girl" at theaters this weekend.

"Gone Girl" was tops at the box office for two weeks before Brad Pitt and his rag-tag group of tank mates in "Fury" blasted the film to second place.

According to studio estimates Sunday, Sony's "Fury" captured $23.5 million in ticket sales during its opening weekend. Fox's "Gone Girl" followed with $17.8 million.

Two other new movies landed in the top five: The animated Fox feature "The Book of Life" opened in third place with $17 million; and Relativity's Nicholas Sparks romance "The Best of Me" debuted in fifth place with $10.2 million.

Disney's "Alexander and the Terrible, Horrible, No Good, Very Bad Day" placed fourth, dropping one spot since opening last weekend.

JAPAN-TRADE MINISTER RESIGNS

TOKYO (AP) -- Japan's trade minister has announced her resignation after allegations that she violated election laws.

Yuko Obuchi's resignation on Monday is the first for the current administration of Prime Minister Shinzo Abe and could dent his efforts to raise the profile of women both in politics and business.

The questions over Obuchi's use of election funds are the latest in a series of uproars over activities by some members of Abe's Cabinet. Obuchi is one of five women Abe appointed to Cabinet-level posts in a reshuffle last month that highlighted his commitment to promoting women to leadership positions.

GERMANY-ECONOMY

BERLIN (AP) -- Germany's finance minister says he's confident he can keep promises to balance the budget next year and is rejecting anew suggestions that the country should borrow to finance greater public investment.

Chancellor Angela Merkel is determined to stick to plans to get by without new borrowing next year for the first time since 1969, though Germany's growth outlook has weakened and Berlin faces calls from abroad to pump money into the economy.

Finance Minister Wolfgang Schaeuble acknowledged in Sunday's Welt am Sonntag newspaper that Germany "must invest more and improve our competitiveness." But he added: "We just don't want growth on credit."

Schaeuble said it's important to keep to promises and says he's confident a balanced budget can be achieved because "tax income doesn't react so quickly to economic changes."

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