Today, someone wanted to know why families in the 1950s seemed to be more financially stable with just one parent working than families are today even with both parents working full-time. Reddit user StumbleOn provided the following excellent explanation reposted here with permission.
So imagine you have one Owner and Twenty Employees.
The enterprise makes 30,000.
Owner pays himself 10,000. He pays each employee 1,000.
Next year, they make 35,000.
Owner takes 1,000 and splits the difference to his employees. This is fairly normal way of doing things.
But, communications and shipping start becoming easier, faster, cheaper, better.
Now, Owner is able to buy the neighboring thing.
Now, he has fifty employees.
He says to one, “you manage.”
That manager makes 2,000.
The rest still make their original 1,000 + the first windfall.
A few years later, Owner has ten of these places, with a dozen managers, and an infrastructure that he no longer is personally connected to. Owner sees his people, that used to be his co-workers, as parts of a machine rather than living breathing humans with their own dreams. He feels entitled to the money his job provides, and therefore all the output his employees create.
So, he keeps getting raises, but his employees… don’t. At all.
Let’s go to the 80s, where the worst thing in American financial history was pitched to the public: Trickle Down Economics.
The thinking goes, if we take Owner and say “I’m going to cut your tax rate by 10%” that Owner will take that 10% and reinvest it in the company, by increasing wages or making more jobs.
But, Owner is already business savvy. He has had thirty years or so to figure out all the ins and outs of his business. He is running his operation efficiently. He has, in fact, hired cadres of schooled managers to make sure everything is done as cheaply as possible.
So, that 10% tax cut? He pockets it. Him, or his shareholders.
That is what happened, and that is where the problem kind of snowballs.
You see, each year, Americans do more with less. We make more wealth, but we don’t see literally any of the increase. This is because businesses stopped operating as a family/human level, and because the government enacted policies which acted as HUGE giveways to the wealthy.
Over the last decade, the American economy has grown by a lot. There is almost twice as much money flowing through the systems as there was before. Literally none of that extra cash flow is in the hands of the consumers. It is all tied up into exotic money endeavors which have the sole function of extracting as much wealth as fast as possible from the poor and middle class. You see, once money has left the middle class, it never comes back.
The force of Government should be the balancing force. Basically, the Peoples Corporation. Private business interests often work hand in hand with the consumer, but globalization kills this. You need tough regulations to prevent them from doing exactly what they did: make more money, take it out of our hands, and place it square into their holdings.
Americans were pitched a series of false narratives.
1: That we are all born equal (we aren’t) 2: That we can succeed if we work hard (you can’t always) 3: That wealth is achievable (currently the biggest predictor of your wealth is that of your parents) 4: Anyone who makes a dollar owns that dollar, no matter what they did to make it.
Other things came into play with this.
The rich have dismantled various safety nets. That is, systems that prevent you from falling into poverty if you fail at a job. They are there to make sure that you don’t become destitute, because crawling out of joblessness and homelessness is ridiculously hard and those that have had to do it have literally lost much of their actual productive earnings even if the period of poverty only lasted a few years. It is totally crippling.
So, take away all the nets, and it makes people less inclined to question or demand higher wages. You rally for more of the wealth you made? They will fire you and hire someone else. Some professions are mostly immune to this, and those are the professions which still pay pretty damn well. That will not always be the case.
So, in summary: Wealth grew, and the rich take all of it.
We were taught to believe that the rich earned ‘their’ money so anything we do to take it back is communism.
Various political factions removed our safety nets, which removed our ability to bargain effectively.
And to repeat the point because how important it is, all new wealth goes to the wealthy. All of it. Literally, 100% of it. Every penny. Every dollar. All. Of. It.