Income inequality in America isn’t just squeezing the middle class – it’s keeping the rich from getting even richer, former labor secretary Robert Reich said Monday in La Jolla.
“The wealthy do better when they are part of a region or part of a country in which everybody is doing better,” Reich told an audience of several hundred at the Museum of Contemporary Art. “They do better with a smaller share of a rapidly growing economy and a rapidly growing region than they do with a very, very large share of a region … because you simply don’t have a middle class capable of purchasing all that is being produced.”
Income inequality has already become a big part of the presidential election. Reich, who was a key adviser to President Bill Clinton, said he expects the issue to be non-partisan in that both Democrat and Republican candidates will offer solutions.
Incomes have been growing faster for those at the top than those at the bottom. For instance, over the last 10 years, the average weekly wage for the lowest 10 percent of earners rose 2.2 percent to $370. Meanwhile, average weekly wages for the top 10 percent of earners increased 7.2 percent to $1,898 in that same time period, the Bureau of Labor Statistics reports.
Monday’s event centered on Reich’s 2013 award-winning documentary called “Inequality for All,” in which the self-deprecating, 68-year-old interviews Americans at all income levels about their successes and struggles. He also examines historic tax cuts and regulations that exacerbated the situation.
Reich proposes various solutions, such as tax increases, more infrastructure projects, minimum wage hikes, and limiting executive pay to make the situation more even. He said globalization, automation, and rising tuition costs have accelerated income inequality over the last few decades. He defines the middle class as being within 25 percent of the nation’s median income, which in 2014 was $51,939, according to the census.
“We should not assume that every young person has to have a four-year college degree in order to the middle class,” Reich said in a meeting with media before the event. “We need a world class system of technical education. Our infrastructure has got to be upgraded, how do we pay for all of this? We’ve got to raise taxes on people at the top.”
Kelly Cunningham, economist at the National University System Institute for Policy Research, said more regulation and government is not the way to end income inequality. He said it is far more important to end what he called productivity inequality.
“This suggests if there is anything to be done about income inequality, we should focus on giving people greater capability to provide services which are valued by raising their productivity,” Cunningham said. “Instead of government redistributing wealth or restricting opportunities by mandating businesses pay wages exceeding the workers’ productivity and denying on-the-job training, we should remove barriers or restrictions to the market operating as freely and efficiently as possible.”
Lynn Reaser, chief economist at Point Loma Nazarene University, said income inequality wouldn’t necessarily prevent the wealthy from selling their products, because they can adjust what they offer to fit different budgets. She noted that the recently unveiled Apple Watch ranges from $349 for a sport model to a $17,000 gold version.
Reaser served as an economic adviser to Republican Gov. Pete Wilson in the 1990s, and currently is chief economist at the state Controller’s Council of Economic Advisors. She said time will also help ease the income inequality issue because the unemployment situation is improving, meaning there will be upward pressure on wages.
“It’s not just about income inequality, it’s not just about shares of the pie, it’s about how big the pie is,” she said. “We would like to raise the standard of living for all Americans, and certainly for many of those who have not benefited particularly from the boom in technology.”
Reich said while the improving job market would help, it would not benefit those at the bottom of the income spectrum because they historically have higher levels of unemployment.
The event was hosted by the San Diego Foundation and the UC San Diego/Blum Cross-Border Initiative, which promotes undergraduate poverty research and practice in the San Diego-Tijuana region.
