Harry Peterson
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Ways to help the middle class without soaking the rich

History shows a prosperous middle class makes the economy stronger

Economic inequality in America has been increasing for decades as the balance of power in the workplace has swung further and further away from the workers themselves. Restoring equitable growth will require that workers regain some of the control they’ve lost over their wages and working conditions.

There are a lot of ways to quantify the erosion of the American middle class, but this chart probably is as good as any. It shows the share of private-sector output that goes to labor as compensation.


Workers' share of the pie has fallen from about 63% of output to 56%.

As you can see, labor’s share was between 62% and 66% of output for most of the so-called golden years of the middle class, from the end of World War II in 1945 to the oil shock of 1973-74. Now, labor gets just 56% of output. The flip side of that decline in labor’s share is record-high corporate profits. Our economy is producing more with less effort, but the rewards of that productivity haven’t been shared with workers.

If labor were still getting the 63% share that was common in the past, workers would be receiving about $800 billion more in income each year, equivalent to a 12% bump in wages and salaries. And no one would be talking about the crisis of the middle class, or redistributing income, or class warfare. No one would care about the 1%, or the 47%.

Progressives, such as Elizabeth Warren, Bernie Sanders,Chris Van Hollen and the Center for American Progress, have been developing ideas that go beyond “soak the rich.” Most of the policies wouldn’t require any additional government taxes or spending, but they would strengthen the middle class and the economy.

Here are seven things we can do to empower workers while making our economy even more productive. Our history shows that a prosperous middle class makes the economy stronger, not weaker.

Full employment. The easiest way to bring up wages is to make sure everyone who wants a job has one. Reducing the supply of idle could-be workers would raise wages for all.

The Federal Reserve is obligated to ensure “maximum employment,” but the Fed has rarely taken this legal mandate seriously. Under Janet Yellen, the Fed seems more committed to full employment, at least for now. The Fed shouldn’t abandon full employment at the first whiff of inflation. That doesn’t mean policy makers can never raise interest rates, but they should consider the impact on employment and wages.

Congress can help too. Spending money on our forgotten infrastructure would create lots of middle-class jobs, not only in the building of roads, bridges and sewers, but also later on from having a more efficient economy.