The Rise of the Working Poor and the Non-Working Rich
Many believe that poor people deserve to be poor because they’re lazy. As Speaker John Boehner has said, the poor have a notion that “I really don’t have to work. I don’t really want to do this. I think I’d rather just sit around.”
In reality, a large and growing share of the nation’s poor work full time – sometimes sixty or more hours a week – yet still don’t earn enough to lift themselves and their families out of poverty.
It’s also commonly believed, especially among Republicans, that the rich deserve their wealth because they work harder than others.
In reality, a large and growing portion of the super-rich have never broken a sweat. Their wealth has been handed to them.
The rise of these two groups – the working poor and non-working rich – is relatively new. Both are challenging the core American assumptions that people are paid what they’re worth, and work is justly rewarded.
Why are these two groups growing?
The ranks of the working poor are growing because wages at the bottom have dropped, adjusted for inflation. With increasing numbers of Americans taking low-paying jobs in retail sales, restaurants, hotels, hospitals, childcare, elder care, and other personal services, the pay of the bottom fifth is falling closer to the minimum wage.
At the same time, the real value of the federal minimum wage is lower today than it was a quarter century ago.
In addition, most recipients of public assistance must now work in order to qualify.
Bill Clinton’s welfare reform of 1996 pushed the poor off welfare and into work. Meanwhile, the Earned Income Tax Credit, a wage subsidy, has emerged as the nation’s largest anti-poverty program. Here, too, having a job is a prerequisite.
The new work requirements haven’t reduced the number or percentage of Americans in poverty. They’ve just moved poor people from being unemployed and impoverished to being employed and impoverished.
While poverty declined in the early years of welfare reform when the economy boomed and jobs were plentiful, it began growing in 2000. By 2012 it exceeded its level in 1996, when welfare ended.
At the same time, the ranks of the non-working rich have been swelling. America’s legendary “self-made” men and women are fast being replaced by wealthy heirs.
Six of today’s ten wealthiest Americans are heirs to prominent fortunes. The Walmart heirs alone have more wealth than the bottom 40 percent of Americans combined.
Americans who became enormously wealthy over the last three decades are now busily transferring that wealth to their children and grand children.
The nation is on the cusp of the largest inter-generational transfer of wealth in history. A study from the Boston College Center on Wealth and Philanthropy projects a total of $59 trillion passed down to heirs between 2007 and 2061.
As the French economist Thomas Piketty reminds us, this is the kind of dynastic wealth that’s kept Europe’s aristocracy going for centuries. It’s about to become the major source of income for a new American aristocracy.
The tax code encourages all this by favoring unearned income over earned income.
The top tax rate paid by America’s wealthy on their capital gains – the major source of income for the non-working rich – has dropped from 33 percent in the late 1980s to 20 percent today, putting it substantially below the top tax rate on ordinary income (36.9 percent).
If the owners of capital assets whose worth increases over their lifetime hold them until death, their heirs pay zero capital gains taxes on them. Such “unrealized” gains now account for more than half the value of assets held by estates worth more than $100 million.
At the same time, the estate tax has been slashed. Before George W. Bush was president, it applied to assets in excess of $2 million per couple at a rate of 55 percent. Now it kicks in at $10,680,000 per couple, at a 40 percent rate.
Republicans now in control of Congress want to go even further. Last Friday the Senate voted 54-46 in favor of a non-binding resolution to repeal the estate tax altogether. Earlier in the week, the House Ways and Means Committee also voted for a repeal. The House is expected to vote in coming weeks.
Yet the specter of an entire generation doing nothing for their money other than speed-dialing their wealth management advisers is not particularly attractive.
It puts more and more responsibility for investing a substantial portion of the nation’s assets into the hands of people who have never worked.
It also endangers our democracy, as dynastic wealth inevitably and invariably accumulates political influence and power.
Consider the rise of both the working poor and the non-working rich, and the meritocratic ideal on which America’s growing inequality is often justified doesn’t hold up.
That widening inequality – combined with the increasing numbers of people who work full time but are still impoverished and of others who have never worked and are fabulously wealthy – is undermining the moral foundations of American capitalism.
This inequality shows the unjustifiable difference between CEO pay and their workers’ pay. This is why we need #wageratio legislation. This will limit CEO pay based on how well they pay their workers. Sign the petition and reblog to spread awareness!
New York state recently announced an increase in the minimum wage for fast food workers, to $15 an hour. It’s the fruit of a three-year labor campaign.
But there’s another group of workers out there that hasn’t had a real wage increase in decades. Right now, at preschool programs around the country, teachers are tapping infinite reserves of patience to keep the peace among children at various stages of development and need. They’re also providing meals, wiping noses and delivering a curriculum in math and reading that will get the kids ready for school.
The President blames himself for the Democrat’s big losses Election Day. “We have not been successful in going out there and letting people know what it is that we’re trying to do and why this is the right direction,” he said Sunday.
In other words, he didn’t sufficiently tout the Administration’s accomplishments.
I respectfully disagree.
If you want a single reason for why Democrats lost big on Election Day 2014 it’s this: Median household income continues to drop. This is the first “recovery” in memory when this has happened.
Jobs are coming back but wages aren’t. Every month the job numbers grow but the wage numbers go nowhere.
Most new jobs are in part-time or low-paying positions. They pay less than the jobs lost in the Great Recession.
This wageless recovery has been made all the worse because pay is less predictable than ever. Most Americans don’t know what they’ll be earning next year or even next month. Two-thirds are now living paycheck to paycheck.
So why is this called a “recovery” at all? Because, technically, the economy is growing. But almost all the gains from that growth are going to a small minority at the top.
In fact, 100 percent of the gains have gone to the best-off 10 percent. Ninety-five percent have gone to the top 1 percent.
The stock market has boomed. Corporate profits are through the roof. CEO pay, in the stratosphere. Yet most Americans feel like they’re still in a recession.
And they’re convinced the game is rigged against them.
Fifty years ago, just 29 percent of voters believed government is “run by a few big interests looking out for themselves.” Now, 79 percent think so.
According to Pew, the percentage of Americans who believe most people who want to get ahead can do so through hard work has plummeted 14 points since 2000.
What the President and other Democrats failed to communicate wasn’t their accomplishments. It was their understanding that the economy is failing most Americans and big money is overrunning our democracy.
And they failed to convey their commitment to an economy and a democracy that serve the vast majority rather than a minority at the top.
Some Democrats even ran on not being Barack Obama. That’s no way to win. Americans want someone fighting for them, not running away from the President.
The midterm elections should have been about jobs and wages, and how to reform a system where nearly all the gains go to the top. It was an opportunity for Democrats to shine. Instead, they hid.
Consider that in four “red” states – South Dakota, Arkansas, Alaska, and Nebraska – the same voters who sent Republicans to the Senate voted by wide margins to raise their state’s minimum wage. Democratic candidates in these states barely mentioned the minimum wage.
So what now?
Republicans, soon to be in charge of Congress, will push their same old supply-side, trickle-down, austerity economics.
They’ll want policies that further enrich those who are already rich. That lower taxes on big corporations and deliver trade agreements written in secret by big corporations. That further water down Wall Street regulations so the big banks can become even bigger – too big to fail, or jail, or curtail.
They’ll exploit the public’s prevailing cynicism by delivering just what the cynics expect.
And the Democrats? They have a choice.
They can refill their campaign coffers for 2016 by trying to raise even more money from big corporations, Wall Street, and wealthy individuals. And hold their tongues about the economic slide of the majority, and the drowning of our democracy.
Or they can come out swinging. Not just for a higher minimum wage but also for better schools, paid family and medical leave, and child care for working families.
For resurrecting the Glass-Steagall Act and limiting the size of Wall Street banks.
For saving Social Security by lifting the cap on income subject to payroll taxes.
For rebuilding the nation’s roads, bridges, and ports.
For increasing taxes on corporations with high ratios of CEO pay to the pay of average workers.
And for getting big money out of politics, and thereby saving our democracy.
After a high-profile international protest — the biggest fast food strike in history — disgruntled McDonald’s employees decided to continue their campaign outside the company headquarters in Oak Brook, Ill., leading to more than 100 arrests and a tussle with the police.