Pressures on the System Threaten the Wealthy's Income Stream

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ROBERT REICH WEARS many hats. He is a professor of Public Policy at UC Berkeley. He brought his economic expertise to Republican Gerald Ford and Democrat Jimmy Carter's administrations. As Secretary of Labor during Bill Clinton's first stint in the White House, Reich oversaw an increase in the minimum wage and was an outspoken advocate of everyday Americans.

Reich is the focal point of the 2013 documentary 'Inequality For All.' His central assertion in the film is that while inequality drives the free market, severe wealth inequality makes the market stagnant. When the gap between the haves and have-nots is such that the bottom 47% of Americans have no wealth (and likely have significant debt), and 400 billionaires at the top have capital comparable to 80 million families, everyone loses out.

While I felt aligned with Reich's agenda from the beginning of the film, I did wonder how he would substantiate the claim that massive wealth inequality is bad for the very rich. I hoped that his rationale would go beyond some sort of moral-ethical dilemma of the one-percenters. As the film progressed, I got the quantitative documentation I was looking for.

During 'Inequality,' we follow a number of people, some billionaires, some struggling to keep enough food on the table for a family of four. The most telling interview came from the successful, thoughtful billionaire named Nick Hanauer. When asked about his yearly salary, he responds "anywhere from 10 million to 30 million." He acknowledges this is an absurd amount of money for one person to collect.

Hanauer describes how the gulf between ordinary Americans and a small circle of billionaires is actually bad for his business, and for the free market in general. As it turns out, billionaires only need a few pairs of blue jeans a year; they only purchase one or two pillows when necessary.

According to Hanauer, if his money was more evenly allocated throughout working class Americans, more consumers would be able to afford a new pair of jeans, and he would move more pillows. Sales would increase. Despite incredible capital and his position on the top of the economic ladder, Hanauer's bank account is hurt by inequality. The wealth disparity limits the free market system and each agent, rich or poor.

The documentary is not short on ways to address the widening wealth gap in the United States. Each facet of Reich's plan is rooted in years of economic research, not in dogma or partisan ideology. Some suggestions are a no-brainer. Decades ago, Japan showed the world that investing in education can be profitable for everyone. As Japan developed, officials prioritized training the workforce and made trade schooling widely available. Now, Japan is one of the wealthiest countries in the world.

Other calls for action are a thorough reform of Wall Street, more equitable tax policies, and greater oversight in the power of amassed wealth in the political system. Whether campaign contributions come from a multi-millionaire or a multi-national corporation, a small number of oligarchs are assuming the arms of democracy and monopolizing the ears of politicians, as per the Supreme Court decision in Citizens United.

While the challenge is great, Reich wants his viewers to feel empowered. Empowered to demand change, to refashion 'equality' from a buzzword to a basic requisite of the American way, to make sure that every person's voice is heard in their political system, regardless of the number of zeros and commas in his or her paycheck.

Follow Michael on Twitter Twitter: @nahmias_report Contributing Editor: @MAndrewRansom

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The Thievery of McDonald's Execs

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Michael Ransom, Contributing EditorLast Modified: 04:35 a.m. DST, 22 May 2014

Protesters at McDonald's, Photo by Phil Dragash

OAK BROOK, Illinois -- Yesterday, 21 May 2014, over 1,000 people protested against the McDonald's corporation at their corporate headquarters, located in suburban Chicago. The peaceful demonstration was the second attempt to bring attention to wage inequality in the internationally known, globally recognized food chain.

The localized protests are part of a larger international campaign to raise awareness of poverty wages and the role that fast-food giants play in the servitude.

The movement is taking place throughout 33 different countries, where McDonald's and other restaurant "whoppers" like Burger King, KFC and Wendy's have uniquely tailored menus and strong market footholds. Hundreds of McDonald's employees came to the rally in Oak Brook wearing their uniforms, some of whom boycotted shifts to participate.

The concept of a wage hike is nothing new to CEO Donald Thomson, whose earnings have seen a steady appreciation in recent years. He is expecting to earn $9.5 million next year. While executives count their pay increases in the hundreds of thousands, the average hands in the assembly line bring home a paycheck that is not even consistent with inflation.

Over 100 McDonald's employees were arrested and over 30 union members and spiritual leaders are in police custody after demonstrators occupied campus buildings yesterday. Headed by organizations such as Fast Food Forward and Service Employees International Union, the collective was relatively small but extremely vocal. The action was purposefully orchestrated one day before an important shareholder meeting, scheduled for today, 22 May, at the corporate offices. In anticipation, an entire branch of campus was encouraged to stay home and work remotely yesterday.

The day before the annual meeting proved to be an excellent platform for the collected grievances. Those with partial ownership of McDonald's will weigh in on Thomson's salary during the shareholder's meeting. His pay is over 600 times that of his average foodservice employee, which is not totally surprising. McDonald's is famous for their minuscule raise policies. They also supplement profits with various forms of wage theft.

These Illinois protests are just one voice in an international chorus of dissent. The similarities between Japanese, Indian and Brazilian strikes shows the vast subjugation that sustains the American-based restaurant machine.

In the past year, business tycoons and politicians have been critical of demands to raise the minimum wage in the United States. In the same vein, critics of the striking employees are calling the terms of the demonstration absurd.  But, even the twofold increase to $15-an-hour would be below the living wage in the US, according to a breakdown by Massachusetts Institute of Technology.

The MIT Living Wage Calculator indicates the severity of the poverty that fast-food employees almost necessarily face. At $7.25-an-hour, an individual making minimum wage in New Orleans, Louisiana is earning well under the regional living wage of $10.51. In an expensive city like Washington, D.C. the minimum wage is set at $8.25. But the living wage for a one parent, one child household is $26.37, according to MIT statistics. The average McDonald's worker supporting one child in the District is not making even a third of the baseline living wage.

Notably, research indicates that more women are pigeonholed into poverty wages than male coworkers.

Opponents of the measure claim that increased wages will cause a decreased number of jobs. And by simple arithmetic, this may be true.

But so often, the rhetoric of corporate employers follows the notion that the company is creating job opportunities as if some sort of charity. Obviously, a business is not going to extend a job at the expense of the bottom line.

In reality, it is a give-and-take, as the corporation is only viable with hard-working men and women on the ground, and people need opportunities to make money. With McDonald's' lobbying effort to paralyze the minimum wage, and their ban on unions, the ideal "give-and-take" is actually veiled exploitation.

Follow Michael on Twitter Twitter: @nahmias_report Contributing Editor: @MAndrewRansom

Gina Rinehart's Delusion of Class Envy

Ayanna Nahmias, Editor-in-ChiefLast Modified: 20:25 PM EDT, 25 September 2012

Gina Rinehart (Cropped), Photo by Panorama MercantilIn the United States 2012 Presidential election one of the candidates has been labeled as out of touch plutocrat, a perception reinforced by his numerous faux pas, gaffes, and seeming inability to connect with voters.

The perception held by the public and the media is that Mitt Romney desires to become president for the sole purpose of advancing tax policies and legislation that will benefit the rich to the detriment of the middle class.

These assertions have been vigorously denounced by other wealthy Americans who have subsequently accused the public of class envy.

Though they claim to be beneficent and caring about the lower and middle classes, this proclaimed sentiment belies what many believe to be the truth. This feeling was evidenced in a statement made by Mitt Romney in May 2012 to wealthy donors attending a $50,000 a plate fund raising event.

Unbeknownst to Romney, he was caught on video expounding upon his view that 47% of working and lower class Americans were in their predicament because they lacked both drive and a sound work ethic.

This, despite the fact that he and other wealthy individuals like him inherited their wealth. Lest global citizens think that Mr. Romney is an aberrant case of an extremely wealthy individual who can’t or won’t sympathize with those who were not born with the same privileges and advantages, Gina Rinehart proves this assumption wrong.

Ms. Rinehart is an Australian mining tycoon who inherited a fortune which is now worth $19 billion and is considered the world’s richest woman. She also claims class envy as the reason why commoners dislike her. However, public derision of Rinehart stems from her 30 August 2012 statement to Amy Coopes, a reporter for AFP in which she advised people of lesser means on how to become one of the uber-wealthy.

"If you're jealous of those with more money, don't just sit there and complain," she said in a magazine piece. "Do something to make more money yourself -- spend less time drinking or smoking and socializing, and more time working."

Today, speaking at the Sydney Mining Club, Rinehart reiterated her opinion about those less fortunate than her. In her speech she asserted that the mining industry in Australia cannot compete with nations that are willing to pay workers less than $2 a day for their sweat and labor, and therefore, Australian businesses should be allowed to lower employee salaries to match or beat this amount.

Rinehart has been urging Australian lawmakers to cut the minimum wage, ostensibly to prevent these jobs from being outsourced, but in reality it is because she doesn’t want to pay a living wage or benefits afforded most employees in industrialized nations, preferring to use the labor of immigrants from nations with emerging economies.

Like the American public, the Australian Prime Minister Julia Gillard didn't buy Rinehart’s specious and self-serving argument. The truth of her position is much like other rapacious plutocrats, corporate raiders, and venture capitalists who believe that the poor should be grateful for any job even if they are paid little or nothing.

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Twitter: @nahmias_report Editor: @ayannanahmias