Want to improve the economy? Narrow the growing wealth gap

Many politicians and business executives like to complain about the slowness and fragility of the economic recovery. Then they push policies to keep it that way — or make it worse.

What they don’t seem to understand is that the best way to improve the economy is to put more money in the pockets of average people who will spend it.

Instead, these politicians and executives oppose raising the minimum wage, which has been $7.25 an hour since 2009 and losing ground to inflation for decades. A low minimum wage keeps wages just above it depressed, too.

Then there are the perversely misnamed “right to work” laws. Their real purpose is to weaken what is left of labor unions so that big business, which already seems to have bought control of government with campaign contributions, has nobody to challenge its power.

Add to that efforts to repeal Kentucky’s “prevailing wage” law, which would cut the pay of working men and women who build public construction projects.

The biggest drag on the economy — and perhaps the biggest threat to America’s long-term prosperity — is the widening wealth gap between the haves and have-nots. Narrowing the gap is in everyone’s best interest, whether they realize it or not.

The prevailing-wage law became a flashpoint last week at a state legislative meeting. The law is designed so that public construction projects pay wages that reflect those in the local community. But as so much of the construction industry has become non-union, critics argue that the law puts too much emphasis on higher union wages.

The Legislative Research Commission compiled a report showing that construction workers on state projects earned $8 an hour more than those on private projects. Workers on 12 school district projects earned $11.37 an hour more.

But critics objected to the analysis, saying it looked only at labor costs, not total project costs. Might more skilled, better-paid workers complete projects faster and better? Besides, higher wages help strengthen local communities.

The irony is that most of the legislators who think construction workers are overpaid have little to say about the sometimes obscene compensation policies at state government’s highest levels.

Kentucky’s public pension systems are among the most under-funded and least transparent in the nation, yet they provide rich benefits for part-time legislators and other high-ranking officials smart enough to game the system.

And then there is the case of the Kentucky Community and Technical College System president, long the nation’s highest-paid community college leader. He recently retired with a $300,000 handshake.

Warren County’s Fiscal Court last week approved Kentucky’s first county “right to work” ordinance, although it is unclear if it is legal under state law.

Republican legislators and chambers of commerce would like to make Kentucky a “right to work” state. That would make Kentucky more “friendly” to companies that want to come here and pay low wages. Studies show right-to-work states often do have faster job growth — as well as lower overall wages and higher poverty rates.

Since Congressional Democrats failed to overcome Republican opposition to raising the federal minimum wage, a statewide minimum-wage increase has been proposed by Democrats in the Kentucky General Assembly. Last Thursday, Louisville’s City Council raised the local minimum wage to $9 by 2017 on a 16-9 party-line vote.

Predictably, business groups and right-wing activists argue that would cause huge job losses — even though it has never happened with previous minimum-wage increases.

Since Ronald Reagan was elected president in 1980, economic policies and trends have largely been based on “trickle-down” economic theory — the notion that if the rich get richer, everyone else will prosper, too. Trouble is, it hasn’t worked that way.

Wealth inequality in the United States is now higher than at any point since the 1920s. The vast majority of all income growth is going to the rich. Corporate profits and the stock market are at record highs. But average workers are losing ground, and the overall economy remains sluggish.

This is a global problem, too, prompting Pope Francis to take up the issue last year in a papal statement worthy of a few amens.

“Some people continue to defend trickle-down theories, which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world,” the Roman Catholic Church’s leader wrote. “This opinion, which has never been confirmed by the facts, expresses a crude and naive trust in the goodness of those wielding economic power.”



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