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William Brennan Institute for Labor Studies


Published by Omaha World Herald, Monday, September 5, 2011

Midlands Voices:

Share Nation's Wealth Broadly

By John Kretzschmar

The writer is director of the William Brennan Institute for Labor Studies at the University of Nebraska at Omaha.

Traditionally, Labor Day is the long weekend that ends the summer. It is also a time when the nation increases its level of political rhetoric. Moreover, it is a time when thoughtful people assess the state of the American worker.

Labor Day is a national holiday dedicated to the 90 percent of us who earn a living by selling our intelligence, experience and strength to an employer. As such, it is the holiday when the nation takes a moment to assess the state of our individual, community and national well-being.

Americans are generous people who affirm deeply held egalitarian values. We believe this is a nation where everyone is endowed with inalienable rights; we believe in both shared sacrifice for the common good and a society that provides "liberty and justice for all." Unfortunately, when it comes to how broadly our nation's wealth is shared, that idealism sometimes influences how we perceive reality.

Research by Michael Norton and Dan Ariely asks a representative cross-section of Americans to estimate how our national wealth (personal net worth, or what you own minus what you owe on it) is distributed, and to identify what an "ideal" wealth distribution should look like. The researchers broke the nation into five equal groups called quintiles.

The representative cross-section estimated that the wealthiest quintile owned about 60 percent of the nation's wealth. The next best-off quintile owned roughly 20 percent, and the middle quintile owned just over 10 percent of the nation's wealth. That left the poorest two quintiles, or 40 percent of American families, to divide what remained — just under 10 percent of the nation's wealth.

That estimate was too lopsided in favor of the wealthy to be consistent with the deeply held egalitarian values of the respondents. When asked what an "ideal" wealth distribution would look like, they responded this way: top quintile just over 30 percent; next quintile just over 20 percent; middle quintile at 20 percent; leaving the poorest 40 percent with just over 20 percent to divide among themselves.

Unfortunately, Americans do not have a very good grip on economic reality. Respondents vastly underestimated how wealth is actually distributed. Wealth is much more highly concentrated than most Americans realize and certainly more concentrated than they would prefer.

In reality, the wealthiest quintile of U.S. families owns 84 percent of the nation's wealth; the next quintile 11 percent; and the middle quintile just under 4 percent. That leaves the poorest 40 percent of the nation's families to divide less than 1 percent of the nation's wealth!

According to Joseph Stiglitz, Nobel laureate in economics, wealth concentration is becoming more skewed. A quarter century ago, the wealthiest 1 percent of American families took in 12 percent of the nation's income and owned 33 percent of the nation's wealth. Current numbers are closer to 25 percent of the nation's income and 40 percent of the nation's wealth.

As a people, these numbers are incompatible with the world in which Americans want to live. A quick look at history suggests a tool for returning to a better, more just, fairer and more egalitarian time. There was a brief quarter century, following World War II, when the nation's income and wealth was broadly shared and every quintile saw its income double. During this period, the middle class grew and the American Dream became a reality for millions of ordinary workers. Some remember this time as the "good old days."

What was the secret to that time? I suggest it was a high level of the work force belonging to labor unions (union density). Following World War II, union density allowed for a strong independent voice in the workplace. This leveled the playing field between employer and employee. Unions were able to negotiate a 1-for-1 increase in wages for every percentage increase in worker productivity.

Fairly negotiated wages and fringe benefits became the benchmark that, in turn, raised wages in non-union sectors of the economy. Significant union density helped build the large coalitions needed to enact laws like the Equal Pay, Civil Rights, Voting Rights and Occupational Safety and Health Acts.

Labor Day is a time to reflect on American ideals and how to ensure that our nation's wealth is again broadly shared. Reversing the current trend would improve the well-being of the entire nation.

It is time for the nation to return to our core values of fairness, justice and equality of opportunity. It is time to once again examine the benefits that flow from increased union density.