A free-market economy creates wealth. For one person to make a dollar does not mean that another needs to lose one. There is not just one dwindling pie to be divided up among the population, but rather a proven recipe to grow the pie to serve everyone. All the talk about the rich “grabbing” too large a share of the national income therefore rests on a flawed understanding of this basic truth of free-market economics.
While on the surface this may seem reasonable and even reassuring, reality says otherwise. So let’s look at the data:
According to the Economic Policy Institute: the bottom tenth of the wage distribution earned less in 2011 than the lowest earners did in 1979, accounting for inflation. Meanwhile, the real wages of the median worker rose only 6 percent between 1979 and 2011.
On average, hourly pay has not grown at all since 2002 for workers with a college degree or with only a high school degree. Wages have not grown for college graduates in nearly every occupation, and college graduates in the 70th income percentile or lower have had stagnant or falling wages since 2000.
Worker productivity grew 11 times more quickly than worker pay between 1979 and 2011. While worker productivity rose 69 percent, median hourly compensation rose just 6.5 percent.
CEO pay today is more than 200 times that of a typical worker, up from 30 times that of a typical worker in the late 1970s.
The top one percent captured 60 percent of total income growth between 1979 and 2007, while the bottom 90 percent was left with just 9 percent of the total. Moreover, the top one percent’s incomes rose 241 percent, in contrast to 11 percent growth for the bottom fifth and 19 percent growth for the middle fifth.
What is evident from the data is that while the pie used to serve everyone in the 1970s, this isn’t the case anymore. The growing pie doesn’t necessarily serve everyone – let alone everyone equitably. It allows a few to enjoy fantastic prosperity, while many struggle to make ends meet (according to a survey by Wider Opportunities for Women around 45 percent of Americans say they don’t have enough money to cover basic expenses like housing, food, or healthcare). Unfortunately, if the situation looks grim now, it will get much worse over the next few decades as the workplace becomes increasingly automated.
But in the meanwhile, we can enjoy the wise words of the late George Carlin:
The End of Capitalism Series:
- The End of Capitalism, Part I : Disruptive Technologies
- The End of Capitalism, Part II : What Is Capitalism?
- The End of Capitalism, Part III : 12 Capitalist Myths
- The End of Capitalism, Part IV : Toward a Flow Economy
For more about Capitalist Myths see:
- Capitalist Myth #1 : The Fallacy of Laissez-Faire Capitalism
- Capitalist Myth #2 : Consumers Are Not The Bosses
- Capitalist Myth #3 : Dividing The Pie
- Capitalist Myth #4 : Capitalism Isn’t Moral, It Is Nihilistic
- Capitalist Myth #5 : Capitalism Is Inherently Exploitative
- Capitalist Myth #6 : Corporate Bonuses Don’t Improve Performance
- Capitalist Myth #7 : For Motivation, Money Isn’t Everything
- Capitalist Myth #8 : Market Value Distorts Intrinsic Value
- Capitalist Myth #9 : Highest Ideal Under Capitalism: Cynicism
- Capitalist Myth #10 : No Dignity In Work
- Capitalist Myth #11 : No Such Thing As A Self-Made Man
- Capitalist Myth #12 : Greed Is Not Good