Not all consumers are confident
Last week’s economic news included the cheerful report that consumer confidence is strong, the highest it has been in two years. But a story in The Wall Street Journal dug one level deeper into the University of Michigan survey and found this nugget: Although consumer confidence has risen sharply since December among families with incomes greater than $50,000, it has dropped among families making less than that amount.
Those are the families who notice it the most when prices increase for milk or gasoline, as they did during the past few months. Those are the families who are losing a lot of the jobs that have disappeared from the U.S. economy, or find themselves in lower-paying jobs with no real prospects of better things to come.
It’s no mystery why the two ends of the income spectrum see the economic landscape differently.
According to statistics assembled by inequality.org, a New York organization founded and directed by author James Lardner, “income inequality is far greater in the United States than in other major countries. Australia, Canada and 10 European countries have much more equal distribution of income.”
The top 20 percent of American households control 83 percent of the nation’s wealth.
The after-tax income of the richest 20 percent of families rose 43 percent between 1977 and 1999, but for the poorest 20 percent of families, it fell 9 percent.
At Fortune 500 companies, the average CEO compensation was $37.5 million in 2001, compared with $38,000 for the average worker, a ratio of almost 1,000 to 1.
Human nature being what it is, the well-to-do aren’t likely to start writing checks to the poverty-stricken, and they shouldn’t. That’s not how a free market is supposed to function. But restoring fair play by changing tax laws and restructuring corporate compensation should be doable. In the long run, it should even be sound business strategy. After all, Henry Ford supposedly paid his workers good wages because he realized that he needed a working class that could afford to buy cars.
As the inordinately rich Warren Buffett wrote last year in a discussion about tax cuts: “Putting $1,000 in the pockets of 310,000 families with urgent needs is going to provide far more stimulus to the economy than putting the same $310 million in my pockets.”
If he can understand that, a lot of other privileged folks should, too.