Speaking of inequality (as I was this morning), my boss Bob Kuttner has some good things to say on the subject:
The system is now essentially rigged so that workers' productivity can rise, but workers' incomes can't. A study prepared last month for Democrats on the House Financial Services Committee and released by Representative Barney Frank of Newton showed that since 2002 annual productivity growth has averaged more than 3 percent, while real wage increases have been under half of 1 percent. Corporate profits, meanwhile, have risen from 8.5 percent to 14.4 percent of national income.
Whenever wages show signs of rising with productivity, the Federal Reserve whacks them back down. It shows no such concern about corporate profits being excessive. Until this month, when the Federal Reserve announced a "pause" in rate hikes, our central bank had hiked interest rates 17 times since June 2004, citing fears of inflation, mainly in rising labor costs. But note the sleight of hand. If workers' wages are lagging well behind workers' increased productivity, then rising wages are not a source of inflation.
As the kids say: Word. The Fed's abject terror of wage growth is a rather unhelpful hangover from the stagflation era. But, in the same way that economists kept trying to deal with the problems of yesteryear then, they're missing the relevant economic issues now. This society is in no danger of paying its workers too much, or seeing their salaries increase too rapidly. Quite the opposite, in fact. We're facing down unheralded inequality, and the Federal Reserve can't pull its head out of 1978 for long enough to realize the middle class is evaporating, profits are amassing in a grotesquely disproportionate fashion, and America's workers -- particularly in a labor market this tight -- need a serious raise that isn't cut apart by rate hikes.
