How can it be that the five-year bull market — the Obama rally, if you will — coincides with a national effort to raise the minimum wage to $10.10 an hour and a robust campaign in Seattle for $15? Many shares on Wall Street are at record highs, yet inequality is at Gilded Age levels. What’s going on?
After all, one of the conceits of the “New Economy” that emerged in the 1980s was the rise of a broad investor middle-class. Stock ownership would no longer be the privilege of the rich but available to most Americans. We would become (and I wrote a blog with this title) Shareholder Nation.
In fact, Shareholder Nation turned out to be a small place. The top 10 percent of U.S. households own 80 percent of stocks. Seen another way, as of 2010 the bottom 90 percent of households owned 19.2 percent of stocks and mutual funds.
During the Obama rally wages for most Americans have continued their stagnation. Thus, the people who make most of their income from investments have done very well. But those who depend on wages have not. Nor have housing prices recovered enough to help the large number whose principal residence is their major investment. The working poor, who are increasingly stuck in minimum- and low-wage jobs, usually lack even flawed 401(k)s.
Even as more workers receive the minimum wage, it has lagged inflation (and productivity). The $1.60 an hour minimum wage I received in 1973 as a low-skilled high-schooler has the same buying power today as $8.43. But the federal minimum is only $7.25.
The way the market is constituted today, the institutional investors that reward or do a beat-down on stocks put a premium on keeping labor costs down. They also like mergers, even though these destroy jobs and tend to deliver only short-term rewards to shareholders. Offshoring high-skilled, high-paying middle-class jobs — or any American jobs? The market loves it.
Unlike the stock market when the American middle class was at its zenith, this one mainly prizes the short-term and the cheap. If more and more Americans can’t buy stuff to keep the companies going, then call in Scarlett O’Hara as a consultant. Think about that tomorrow, from your offshore tax shelter.
So there’s no contradiction between a roaring market and unrest in much of the middle class and working poor. The latter, however, lacks political power. Indeed, many of its members are convinced their difficulties are the result of something other than an economy gamed against them (say, minorities getting things they don’t deserve). For the toffs, it’s mission accomplished.
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Today’s Econ Haiku:
Bitcoin like cocaine
It’s God’s way of telling you
Too much money, dear