When I graduated from high school in 1974, the average hourly wage paid to American workers was less than $5 an hour.
That sounds absurdly low today, but here’s a hard fact: Forty-four years later, the average hourly wage is still less than $5 an hour, at least if you account for inflation. Put another way, for almost two generations now in this country, the paycheck for the average worker has not grown in the least.
The deeper that you dig into those numbers, the more grim the situation becomes. Real wages for the top 25 percent of U.S. workers have grown significantly over these decades, particularly among the top 10 percent, which is great for them. However, as a function of mathematics, it also means that real income for everybody else in the American workforce -- the vast majority of workers -- has fallen.
When you factor in workplace benefits, that economic divide grows higher still. Roughly half of American workers are covered by employer-provided health insurance, which means that half are not, and most of those without coverage already work in lower-earning jobs. Given soaring medical costs, that means roughly half of our workforce faces a daunting challenge in trying to access basic health care for themselves and their families.
Company-provided pensions are also disappearing, and have supposedly been replaced by 401(k) programs. But again almost half the workforce -- mainly the lower-earning half -- has no access to such programs, and overall just 38 percent of workers have such a fund. Overall, for the vast majority of the American workforce and even in prosperous times such as these, wages remain flat or declining and benefits are disappearing
Yet look around you: By many measures, we are a much more affluent and prosperous country today than 44 years ago. Real gross domestic product per American -- meaning adjusted for inflation -- has more than doubled, yet as we’ve seen, workers have gotten almost none of that gain.
So where has all the money gone?
Well, since 1974, and after adjusting for inflation, corporate after-tax profits have tripled. (The data do not yet include the impact of the recent huge corporate tax cut, which will send it soaring further.) Adjusted for inflation, the Dow Jones Industrial Average has multiplied eight-fold since ‘74. According to Fortune magazine, CEO compensation rose by 930 percent from 1978 to 2016, and has climbed even more since then.
(UPDATE: According to a new report released Aug. 16, “in 2017 the average CEO of the 350 largest firms in the U.S. received $18.9 million in compensation, a 17.6 percent increase over 2016. The typical worker’s compensation remained flat, rising a mere 0.3 percent. The 2017 CEO-to-worker compensation ratio of 312-to-1 was far greater than the 20-to-1 ratio in 1965 and more than five times greater than the 58-to-1 ratio in 1989 (although it was lower than the peak ratio of 344-to-1, reached in 2000).)
I’m a strong supporter of capitalism -- no economic system can even challenge its capacity at producing a broad-based prosperity. That said, it also has its blind spots and excesses. It is built on the assumption that the value of everything can be expressed in dollars and cents, and human life is a bit more complex than that.
For example, capitalism puts no value on the lives and dignity of those whose productivity has declined as a result of age, and as a result we have had to implement programs such as Social Security and Medicare. Left to its own devices, capitalism treats workers as units of production to be maximized, discarded when worn out and then replaced, which is why we have 40-hour work weeks, child-labor laws, unemployment insurance and workers’ comp programs. And capitalism has yet to produce a model to provide universal access to health care, which is increasingly and properly viewed as a human right.
All of those programs have been attacked by opponents as socialism, when in fact they are crucial to maintaining public support for capitalism. Many have their origins in the New Deal under Franklin Roosevelt, as part of his effort during the Great Depression to save capitalism from its own worst instincts. As FDR put it at the time, “One of my principal tasks is to prevent bankers and businessmen from committing suicide”by opposing such programs.
Today, public support for capitalism is again waning in some quarters, while support for socialism is rising, particularly among younger Americans. It’s hard to know whether that reflects support for actual, real-life socialism or merely for mainstream programs such as ObamaCare that opponents falsely deride as socialism.
Historically, however, we know that the popularity of socialism rises in direct proportion to the perceived excesses of capitalism, such as income inequality, and thus serves as a check on those excesses. In this case, those sentiments stem from a growing sense among liberals as well as many conservatives that capitalism in its current form, as it is currently practiced, produces outcomes that benefit an elite but are increasingly inequitable.
It’s easy to forget, but that was basically the economic theme of Trump’s 2016 campaign, in which he pledged to protect Medicaid, Medicare and Social Security, promised to replace Obamacare with a program that provided even better coverage to even more Americans, and talked of taking the little guy’s side against the global elites. In practice, that has translated into huge tax cuts for the wealthy and corporations, the ongoing sabotage of public health care and increasing pressure for major cutbacks in Social Security, Medicare and other programs that provide economic security to millions.
If you’re truly concerned about the future of capitalism, I would argue that’s exactly the wrong way to go about saving it.