As part of my Economics of Poverty class we often are given the opportunity to do a free write. No prompt, just honest and heartfelt response to our readings. Here is what I wrote along with with the source articles:
- Wessell, David (2005), “As Rich-Poor Gap Widens in the U.S., Class Mobility Stalls,” Wall Street Journal, 15 May 2005.
- Bernstein, Aaron (2003), “Waking Up from the American Dream,” Business Week, 1 December 2003.
American business has, for a long time, been on a race to the bottom. Lower costs, and thus lower prices, have been the ultimate goal of every corporation. This seems as if it would be a good idea. Lower prices mean that consumers can buy more for less and therefore spend other money elsewhere allowing the overall economy to grow. Unfortunately, when a company begins to cut costs it starts at the bottom. It slows the growth of low and midlevel employee wages, out sources manufacturing, and spends less on research and development in order to save money. At the same time profits are rising along with stock prices. The reward is not distributed evenly throughout the corporate ladder but strictly at the top, recognizing the idea generators and not the laborers. This system will only work for a short period of time, like it has, until it all comes crashing down. As the wealth of the laid off and underpaid begin to shrink and inflation rises they can no longer afford as many luxuries as before. The rock bottom priced items their companies sell are now the only things they can afford, if that. While all of this is going on more and more people are attending college, seeking high paid, high skilled jobs. Now there is no longer a supply. What are needed are low skill laborers. The graduates are then left with college debt and fall to financial lows, beginning to suffer as well, continually driving the economy downward.
This entire process begins to create a divide. The rich progressively get richer and the poor get poorer. This is the society in which we live: one that no longer rewards innovation, education, and hard work. Immigrants to this country used to be able to start with nothing and rise to the top, and while there are still some shining examples of that, it is almost virtually impossible today. The only thing that motivates them to move to America is that even the low wages they are paid here are more than what they get in their home countries. Once they begin working they realize that even though they make more, the cost of living is higher and they still remain at the bottom.
What needs to happen (and seems to be the view of the new administration) is for a shift in cultural values to take place. The race to the bottom needs to be declared over, and lost. Minimum wages need to rise and executive pay needs to fall. Steady pay increases need to be awarded to tireless employees in order to, at minimum, sustain their quality of living. We need to invest in and support the efforts of science and mathematics across all levels of income, including the poor. More children need to have the opportunity to attend college and know that they will be able to find a well-paid job upon graduation. Government regulation needs to be more strict when it comes to business in order make sure they are not taking advantage of consumer’s money and that they are supporting the country. All of this is in an effort to restore the middle class. Earning, spending, and savings all need to increase in a balance that makes the lives of Americans and the country as a whole a more well-off place.
If steps are not taken to enact this change the income and wealth gaps will continue and more of us will begin to stuffer. A society like this can only survive for so long and even the people at the top should realize that a failed economy doesn’t benefit anyone.
