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 24, 2014 17:58 GMT

NEW HOME SALES

WASHINGTON (AP) -- U.S. sales of new homes were essentially flat in September, after the government sharply revised downward what was initially an August surge in buying.

The Commerce Department says new-home sales edged up 0.2 percent last month to a seasonally adjusted annual rate of 467,000. The report also revised down the August sales rate to 466,000 from 504,000.

The pace of sales for newly built homes has improved a mere 1.7 percent so far this year compared to 2013. Only the South has experienced gains in buying year-to-date.

Housing has struggled to fully rebound since the recession ended more than five years ago. Many potential buyers lack the savings and strong credit history needed to afford a home, causing them to rent or remain in their existing houses instead of upgrading.

EARNS-FORD

DEARBORN, Mich. (AP) -- Ford's net income dropped 34 percent to $835 million in the third quarter, dragged down by the cost of launching its new F-150 pickup.

The company closed its Dearborn truck plant for five weeks during the quarter and cut back on truck sales in order to preserve inventories while it readies the new aluminum-sided truck. That hurt pretax profits in North America, which fell 39 percent to $1.4 billion.

Ford earned 21 cents per share, down from 31 cents in the July-September period a year ago. Without one-time items, including separation costs in Europe, Ford earned 24 cents. That beat Wall Street's expectation of 19 cents, according to analysts polled by FactSet.

Revenue fell 2.5 percent to $34.9 billion, better than the forecast of $33.7 billion.

UPS-HOLIDAYS

ATLANTA (AP) -- UPS is expecting an 11 percent jump in December shipments as the holiday shopping season heats up.

UPS recently announced that it would hire up to 95,000 people to handle the tremendous volume. That's up from last year when the Atlanta company initially planned to hire 55,000 seasonal workers. Major U.S. shipping companies were overwhelmed by a shift in American shopping habits, namely the success of Amazon.com. with its free shipping, and UPS was forced to hire an additional 30,000 people.

United Parcel Service Inc. also maintained its guidance Friday for 2014 adjusted earnings between $4.90 and $5 per share. Analysts polled by FactSet predict $4.95 per share.

PROCTER & GAMBLE-DURACELL

Procter & Gamble removes the batteries

CINCINNATI (AP) -- Procter & Gamble is removing the batteries and making Duracell a stand-alone company.

P&G, which acquired Duracell in 2005, announced earlier this year that it would shed more than half its brands around the globe over the next year or two.

If a split off occurs, P&G said that its shareholders would have the option of exchanging some, none or all of their P&G shares for shares of the newly formed Duracell company.

The Procter & Gamble Co., based in Cincinnati, said Friday that it is also considering a spinoff, sale or other options for Duracell.

CHIQUITA-FYFFES

CHARLOTTE, N.C. (AP) -- Chiquita shareholders have rejected plans to merge with Irish fruit importer Fyffes that would have made the world's largest banana supplier.

Chiquita Brands International Inc. said Friday that the shareholders didn't approve a revised transaction agreement between the two companies during a special shareholders meeting.

Chiquita said it now expects to enter talks with investment firm Safra Group and juice company Cutrale Group on their competing offer of $14.50 per share. Chiquita previously rejected buyout bids from the two Brazilian companies.

CHILD SEAT RECALL

DETROIT (AP) -- Evenflo is recalling more than 202,000 rear-facing infant seats because the buckles can become difficult to unlatch.

The recall affects Embrace 35/9999 models with an AmSafe QT1 buckle. Documents posted by U.S. safety regulators say that if the buckles don't release easily, it may be difficult to get a child out of the seat in an emergency.

The affected seats were made at various times from December 2011 through May of 2013.

Not all Embrace 35 models are covered by the recall. For others, the company will provide replacement buckles if requested by customers.

The recall comes after an investigation by the National Highway Traffic Safety Administration.

Owners with questions can call Evenflo at (800) 490-7591.

HALAL FOODS-INVESTIGATION

IOWA CITY, Iowa (AP) -- The founder of a popular brand of food for observant Muslims has been indicted on charges that he shipped beef to Malaysia and Indonesia that didn't meet those countries' import requirements.

A federal grand jury returned the indictment Thursday against Bill Aossey Jr., who founded the Midamar Corp. in 1974. The Cedar Rapids company grew into the leading U.S. halal brand, selling more than 200 products in the U.S. and abroad.

A 19-count indictment charges Aossey with directing employees to change labels and fabricate documents to make beef products appear that they originated from a slaughterhouse that met Malaysia and Indonesia's strict requirements. Halal meat is supposed to be killed in ritual slaughter.

Aossey's attorney called the indictment unfair Friday, saying the allegations were "a minor regulatory violation" at most.

NBC INTERNS-SETTLEMENT

NEW YORK (AP) -- NBCUniversal will pay $6.4 million to settle a class action lawsuit brought by unpaid interns who worked on "Saturday Night Live" and other shows who claim they are owed wages, according to court documents.

The interns claim NBCUniversal wrongly classified them as non-employees in an effort to avoid labor laws. NBCUniversal said in court documents that even though it is settling the suit, it denies the allegations and doesn't admit any wrongdoing.

The average amount that class-action members of the suit will receive is $505, although the main plaintiffs will receive more. The number of class members is capped at 8,975.

The interns had been seeking recovery of unpaid wages, attorneys' fees, interest and liquidated damages. The settlement still has to be approved by a judge. The lawsuit was filed in federal court in New York.

NBCUniversal is owned by Philadelphia-based cable provider Comcast Corp.

CYPRUS-ECONOMY

S&P upgrades Cyprus on commitment to bailout deal

NICOSIA, Cyprus (AP) -- Rating agency Standard & Poor's has given Cyprus a one-notch upgrade to its credit grade, raising it to B+.

The agency cited the country's commitment to the terms of its bailout program and better-than-expected economic growth. It also said the outlook for Cyprus is stable, with good economic progress offset by lingering challenges to its banking system, which is still burdened with a huge amount of bad loans.

BRITAIN-ECONOMY

LONDON (AP) -- Official figures show Britain's economic recovery is continuing, despite a gloomy global environment.

The Office for National Statistics said gross domestic product grew 0.7 percent in the three months through September compared with the previous three months. That is down slightly from a 0.9 percent quarterly rate in the April-June period but remains among the strongest growth rates among developed economies.

Compared with a year earlier, the economy was 3.0 percent larger.

Treasury Chief George Osborne says the figures show Britain "continues to lead the pack in an increasingly uncertain global economy."

Samuel Tombs, the senior U.K. economist for Capital Economics, says growth in Europe's third largest economy has become broader-based, though recent falls in stock markets, manufacturing surveys and eurozone growth have intensified concerns over the recovery.

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