This originally appeared on Robert Reich's blog.
One
of the worst epithets that can be leveled at a politician these days is
to call him a “redistributionist.” Yet 2013 marked one of the biggest
redistributions in recent American history. It was a redistribution
upward, from average working people to the owners of America.
The
stock market ended 2013 at an all-time high — giving stockholders their
biggest annual gain in almost two decades. Most Americans didn’t share
in those gains, however, because most people haven’t been able to save
enough to invest in the stock market. More than two-thirds of
Americans live from paycheck to paycheck. Even if you include the value
of IRA’s, most shares of stock are owned by the very wealthy. The
richest 1 percent of Americans owns 35 percent of the value of American-owned shares. The richest 10 percent owns over 80 percent. So
in the bull market of 2013, America’s rich hit the jackpot.What does
this have to do with redistribution? Some might argue the stock market
is just a giant casino. Since it’s owned mostly by the wealthy, a rise
in stock prices simply reflects a transfer of wealth from some of the
rich (who cashed in their shares too early) to others of the rich (who
bought shares early enough and held on to them long enough to reap the
big gains).But this neglects the fact that stock prices track corporate
profits. The relationship isn’t exact, and price-earnings ratios move up
and down in the short term. Yet over the slightly longer term, share
prices do correlate with profits. And 2013 was a banner year for profits.
Where
did those profits come from? Here’s where redistribution comes in.
American corporations didn’t make most of their money from increased
sales (although their foreign sales did increase). They made their big
bucks mostly by reducing their costs — especially their biggest single
cost: wages.
They
push wages down because most workers no longer have any bargaining
power when it comes to determining pay. The continuing high rate of
unemployment — including a record number of long-term jobless, and a
large number who have given up looking for work altogether — has allowed
employers to set the terms.
For
years, the bargaining power of American workers has also been eroding
due to ever-more efficient means of outsourcing abroad, new computer
software that can replace almost any routine job, and an ongoing shift
of full-time to part-time and contract work. And unions have been
decimated. In the 1950s, over a third of private-sector workers were
members of labor unions. Now, fewer than 7 percent are unionized.
Robert Reich, one of the nation’s leading experts on work
and the economy, is Chancellor’s Professor of Public Policy at the
Goldman School of Public Policy at the University of California at
Berkeley. He has served in three national administrations, most recently
as secretary of labor under President Bill Clinton. Time Magazine has
named him one of the ten most effective cabinet secretaries of the last
century. He has written 13 books, including his latest best-seller,
“Aftershock: The Next Economy and America’s Future;” “The Work of
Nations,” which has been translated into 22 languages; and his newest,
an e-book, “Beyond Outrage.” His syndicated columns, television
appearances, and public radio commentaries reach millions of people each
week. He is also a founding editor of the American Prospect magazine,
and Chairman of the citizen’s group Common Cause. His new movie
"Inequality for All" is in Theaters. His widely-read blog can be found
at www.robertreich.org.
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