One Plus One Equals...

Matthew Yglesias is making a common liberal complaint. "The poor are getting poorer and the rich are getting richer." He makes it in a very reasonable way however and points out that this trend has continued through both Republican and Democratic administrations. So it isn't a knee jerk anti-Bush piece. I did some thinking and to some extent I don't have a problem with trend.

Now if there is one thing any American business man will tell you, it is that American labor is expensive. If are trying to compete internationally this can be a real problem. If your workforce is heavily unionized and you are trying to compete internationally, the costs are almost prohibitive. See the US auto and the US steel industries for specifics on how high labor costs (and poor management) are destroying once powerful businesses.

So American workers are often overpaid, at least in international terms. If those businesses are every going to become profitable in the face of international competition, they must be paid less. Then once the business makes a profit, the rich business owners will admittedly get richer. But this is what has to happen. Otherwise we simply won't have any business and both the rich and the poor will be bankrupt. Everybody is even worse off.

So while I don't like the idea of really poor people starving, I don't really have a problem with American labor making a bit less money than they used to because right now many of them are making far too much.

Now is there a way out of this inequality so that the rich and the poor both come out ahead? Maybe. I think we should work to increase the workers' share of ownership in their employing companies. Use profit sharing or some sort of investment system. Then the loss in wages will be made up, at least partly, by an increase in their investments net worth. Even a switch to 401k retirement savings or better yet, private investment accounts via social security, would be something.