Skip to Content

Share

Robert Reich: One Answer to Low-Wage Work: Redistributing the Gains

December 9, 2013

We can finance much of this redistribution to the working poor by ending unnecessary redistributions to the wealthy.

http://www.guernicamag.com/wp-content/uploads/2013/12/Surplus_Foods_Are_Quality_Foods.gif
Image via Wikimedia Commons

By Robert Reich
By arrangement with Robert Reich

The President’s speech last week on inequality avoided the “R” word. No politician wants to mention “redistribution” because it conjures up images of worthy “makers” forced to hand over hard-earned income to undeserving “takers.”

But as low-wage work proliferates in America, so-called takers are working as hard if not harder than anyone else, and often at more than one job.

Yet they’re still not making it because the twin forces of globalization and technological change have reduced their bargaining power and undermined their economic standing—while bestowing ever greater benefits on a comparative few with the right education and connections (and whose parents are often best able to secure these advantages for them).

Since the recovery began, 95 percent of the gains have gone to the richest 1 percent; some direct redistribution of the gains is necessary.

Better education and training for those on the losing end is critically important, as will several of the other proposals the President listed. But they will only go so far.

The number of losers is growing so quickly, and so much of the economies’ winnings are going to a small group at the top—since the recovery began, 95 percent of the gains have gone to the richest 1 percent—that some direct redistribution of the gains is necessary.

Without some redistribution, the losers are likely to react in ways that could hurt the economy. They’ll demand protection from global markets they believe are taking away good jobs, and even from certain technological advances that threaten to displace them (rather than smash the machines, as did England’s 19th-century Luddites, they’ll seek regulations that preserve the old jobs).

Without some redistribution, our ever-increasing number of low-wage workers won’t have enough money to keep the economy going. (This is one reason why the current recovery has been so anemic.)

The Earned Income Tax Credit is a wage subsidy for the working poor and the nation’s largest anti-poverty program. It’s like a reverse income tax.

And without some redistribution, America’s growing army of low-wage workers may fall prey to demagogues on the right or left who offer convenient scapegoats for their frustrations.

One way we already redistribute is through the Earned Income Tax Credit, a wage subsidy for the working poor, which, at about $60 billion a year, is the nation’s largest anti-poverty program. It’s like a reverse income tax—larger at the bottom of the wage scale (now around $3,000 for incomes around $20,000) and gradually tapering off as incomes rise (vanishing at around $35,000).

The EITC subsidy should be enlarged and extended further up the wage scale before tapering off.

How to pay for this? By cutting subsidies and special tax breaks for the oil and gas industries, big agribusiness, military contractors, hedge-fund and private-equity partners, and Wall Street banks. And by capping individual tax deductions (deductions are the economic equivalent of government subsidies) for gold-plated health care plans, lavish business junkets and interest on giant mortgages.

In other words, we can finance much of this redistribution to the working poor by ending unnecessary redistributions to the wealthy.

Robert B. Reich, Chancellor’s Professor of Public Policy at the University of California at Berkeley, was Secretary of Labor in the Clinton administration. Time Magazine named him one of the ten most effective cabinet secretaries of the twentieth century. He has written thirteen books, including the best sellers Aftershock: The Next Economy and America’s Future and The Work of Nations: Preparing Ourselves for 21st Century Capitalism. His latest, Beyond Outrage, is now out in paperback. He is also a founding editor of the American Prospect magazine and chairman of Common Cause. His new film, “Inequality for All,” is now in theaters.

Readers like you make Guernica possible. Please show your support.

Tagged with:

Share on FacebookShare on TwitterAdd to BufferShare on LinkedInShare on TumblrSubmit to StumbleUpon
Submit to redditShare on App.netShare via email

You might also like

Leave a comment




Anti-Spam Quiz:

Subscribe without commenting