Working families are the backbone of our economy and our democracy. But for the last 50 years they have fallen farther and farther behind, yet no one seems to have even noticed except for the working families themselves. We see that growth is slowing and our politics becoming ever more polarized, but no one has made the connection to the shrinkage of working family purchasing power.
For most American families, headlines and news bulletins detailing the day’s economic news feel almost completely removed from their day-to-day reality. They don’t spend the value of the stock market or the unemployment rate, nor do the prices they pay have any relationship to those indicators. What actually determine a working family’s ability to live The American Dream (i.e. affordable housing, food, health, transportation, education and retirement) are their wages and the cost of goods and services. That’s why news of a booming economy rings so hollow to working families – we’ve been paying attention to the wrong measurements.
What we should be looking at, what actually matters to the lives and wellbeing of the vast majority of the American people and ultimately determines our fate as a nation, is the size of our workers’ slice of the economic pie. The American Affordability Index is very simple. It’s just a measure of the average working family’s ability to purchase the fruits of their labor. Taken nationally, that is the total amount paid out in the form of wages as a percentage of the total value workers add to the economy as measured by our GDP.
For a quarter century from 1948 to 1973, the American Affordability Index hovered around 50 percent. During that period, we had a win-win economy for workers and business owners as well as a stable democracy with a large political center. This proved that the economy is not a zero-sum game where workers can only improve their lives at the expense of business owners. In the decades since, the Index has fallen to 43 percent and we have seen working families increasingly radicalized as they have lost hope of ever living The American Dream.
This 7 percent drop in the Index may seem like a minor change, but it represents over $1.3 trillion a year that is no longer going to working families and can no longer be spent to drive economic growth. In order for us to restore working families’ share of the economy to the same level as 1973, we would need to raise wages by about $1,000 a month for every full-time worker.
The fall in the American Affordability Index is an indicator of the single biggest problem with our modern economy – that $1.3 trillion a year taken from our workers and sucked out of demand for goods and services has now become excess profits flowing into the pockets of monopolies who use it to buy more businesses, political influence and their own stock.
We have allowed monopolies to form in virtually every sector, stifling the critical competitive component of capitalism that ensures strong purchasing power for working families and we are now rapidly transitioning to a lose-lose economy. These monopolies have not only refused to reduce prices to reflect lower labor costs due to automation, many have even gouged consumers by raising prices arbitrarily.
It may not be politically convenient to say it, but monopolies in health care insurance, pharmaceuticals, fuel, electric power and communications are playing a leading role in destroying The American Dream and our democracy.
If we want to return to a win-win economy and a stable democracy, where workers once again drive economic growth, we need reforms that increase working family purchasing power by breaking up dangerous monopolies. Our democracy and economy will shine when the federal government once again serves to “…promote the general Welfare” by ensuring competition, health and safety for all our citizens. In fact, the federal government should take every opportunity to give workers more purchasing power, including reversing the Trump Tax Cut flim-flam, passing Medicare for all, raising the minimum wage and negotiating for drug prices while investing in R&D, retraining, renewable energy and infrastructure.
Robert Goldschmidt is a member of the Patriotic Millionaires. Proud “traitors to their class,” members of the Patriotic Millionaires are high-net worth Americans, business leaders, and investors who are united in their concern about the destabilizing concentration of wealth and power in America. The mission of The Patriotic Millionaires organization is to build a more stable, prosperous, and inclusive nation by promoting public policies based on the “first principles” of equal political representation, a guaranteed living wage for all working citizens, and a fair tax system.