It seems such an obvious thing that people need to be paid more. Not necessarily everyone. There are many doing well as things stand. Some, like many top executives, get paid far more than evidence and reason can support.
Most everyone knows the abundance of overly compensated individuals, for supposedly incalculable value that apparently literally cannot be calculated because they make no significant differences in company performance. It is a rigged game, with CEOs influencing corporate boards. Boards using the figures of compensation consultants who say, like in Garrison Keillor’s Lake Woebegone, everyone is above average, which drive up all executive compensation in a mathematically obvious and predictable way, because that curries favor with executives who have a hand in renewing contracts.
Yes, it’s unfair far beyond the differences that capitalism encourages (with good reason or not, depending on one’s political orientation). Unfair up to and beyond corrupt practices. Money gluttons wallowing in pools of cash to cover the welts and boils and open ulcers of attitude and behavior, because otherwise they can’t stand each other or themselves. But forget that for a moment.
Regular people are again treading water fouled not by their hand but by circumstances and societal direction. The Consumer Financial Protection Bureau (CFPB) recently released a report called Making Ends Meet in 2022.
The summary, in full irony, is that even at the start of 2022, after the pandemic, the average consumer was doing better than usual. The combination of high employment, pandemic relief, and the savings that grew as a result of that help left consumers in an unusually strong financial position.
More people than had been typical had money in the bank, paid down debt, didn’t need credit cards as much, and were better able to handle adversity. Which is how it should be in a capitalist economic system, according to some of the more ardent proponents. And that might be true, but that is when capitalism is working correctly — that is, divisions of labor and industry and markets setting prices without people’s thumbs on the scales.
That isn’t how it works in the U.S., which is why the country has the highest degree of income inequality of similarly developed nations.
Back to the CFPB report. Average financial well-being has returned to its state of 2019. And given how much the interests of upper middle class have wealthy advanced, you might suspect that math says others had to do worse. That’s true and not something new. Below is a chart based on U.S. Census data by economic class, with lowest fifth meaning the households in the lowest fifth of incomes, top 5 percent being families in the top 5% of family incomes, and so on.
For a brief historical moment and no more, people on the whole did better. The CFPB uses a definition of financial well-being as “a state of being wherein a person can fully meet current and ongoing financial obligations, can feel secure in their financial future, and is able to make choices that allow them to enjoy life.” The organization uses a zero-to-100 scale based on answers to brief surveys.
In various ways, conditions are on the decline after a brief improvement. Here’s a table from the agency showing the changes by time and different selections of groups.
What contributes to less financial well-being is such things as having greater trouble paying bills and rent; covering lost income; and managing income variability handling shocks to income and expenses.
The country seems at a crossroads, the CFPB says:
· While things are still a bit better than before the pandemic, the direction in which people’s fortunes are going is down.
· There are significant disparities in financial health and access to credit by racial and ethnic groups.
· If a recession occurs, more people will face difficulties making ends meet in utilities, food, medical expenses, and rent or mortgage payments.
At the same time, corporations on the whole have, as usual, continued to see a trend of expanding after-tax profits, as the graph below from the Federal Reserve Bank of St. Louis shows.
Companies need to pay people more. Not at the top, but to those in the bottom four-fifths of the economy. Too much money is collecting in the hands of those who have far more than they need. Increase salaries and wages and you can decrease the need for government aid. Increase salaries and wages and you allow people to begin building wealth. Increase salaries and wages and you support the consumers who spending makes up 68% of GDP. Increase salaries and wages and you let people stand on their own feet and improve their sense of themselves.
This isn’t charity and it’s not a payment out of pity. This is a matter of equity, of fairness, and of intelligent recognition that if you want a stable society that can exist beyond what you experience, you need a more equitable and sustainable distribution of reward to all the people who make it possible, the balance of which generally are those who receive the least.