The shrinking middle class, stagnating wages, and economic inequality won’t get better if the only federal policy is to offer job training and expand education. The retrained workers need to earn a constant wage share as expressed by Bowley’s law
PBS Newshour, Rethinking College “How the Pandemic is Propelling Demand for Short Term Degrees” January 26, 2021 https://www.pbs.org/newshour/show/how-the-pandemic-is-propelling-demand-for-short-term-college-degrees Accessed 27 January 2021
Robert Reich “Everything You Need to Know About The Economy” https://www.youtube.com/watch?v=fMmH_2EYohQ&t=0s Accessed 26 January 2021
minute 1:47 The conventional story isn’t completely wrong, and education and training are important. But the conventional view leaves out some of the largest and most important changes, and therefore overlooks the most important solutions.
minute 02:50 [Considering the post WWII economic boom] The great economic thinker John Kenneth Galbraith asked: Why is capitalism working so well for so many? His answer was as surprising as it was obvious: American capitalism contained hidden pools of what he called “countervailing power” that offset the power of large corporations, Wall Street, and the wealthy: labor unions, state and local banks, farm cooperatives, and small retail chains, for example. All of these sources of countervailing power had been fostered by the New Deal. They balanced the American economic system.
Monthly Labor Review, “Estimating the U.S. Labor Share” BLS.gov February 2017
Estimating the U.S. labor share : Monthly Labor Review: U.S. Bureau of Labor Statistics (Links to an external site.) Accessed 256 January 2021
Some facts turn out to be temporary. This is what John Maynard Keynes would have discovered had he lived to see the decline in the labor share during the second half of the 20th century. Keynes and other economists had accepted as fact that the share of national output accruing to workers as compensation was relatively constant. In fact, this idea had become so well accepted that some economists even began using the supposed constancy as an issue to be addressed in theories of production and economic growth. Estimating the U.S. labor share, Feb 2017 footnote 1 The term “Bowley’s Law,” referring to a 19th-century economist who had compiled statistics on the issue, was even coined to describe this stability. Bowley’s law Wikipedia
Trickle Down Economics supposed that tax cuts given to corporations and the wealthy would trickle down to the middle/ working class through capital investments and improved labor compensation. We were told a rising tide would lift all ships. It did not. The rich got richer and income inequality grew.
The earliest Data is 1989 Q-3 up to 2024 Q-1
If Trillions of dollars are too much to imagine consider the percentage of wealth distribution reported by group for the first and last quarters, and the change in percent of total in this table and the graph beneath:
| % 1989 Q-3 | % 2024 Q-1 | Change |
| 8.56% | 13.62% | +5.06% |
| 14.24% | 16.82% | +2.58% |
| 38.06% | 36.55% | -1.51% |
| 35.67% | 30.51% | -5.16% |
| 3.47% | 2.49% | -0.98% |
Wages do not include passive income from investments, so even though the top 0.1% have seen their percentage of household wealth increase by 5.06% of total household wealth, they have also seen their wages increase $1,328,475.30 (+52.8%) from $1,488,960.30 in 1989 to $2,817,435.60 in 2022 while the average wage for the bottom 90% only increased $9,119.00 (+28.7%) for the same period from $31,725.60 in 1989 to $40,844.60 in 2022. Economic Policy Institute, State of Working America Data Library, “Wages for Top 1.0%, 0.1% and Bottom 90%,” updated April 2024.
Global data demonstrates that the wage share has declined since the 1980s with indications that Bowely’s law of the constant wage share started eroding as early as the 1960s.
As I continue my pursuit of a Master of Science in Applied Economics from Woods College of Advancing Studies at Boston College, I will continue to share my observations, thoughts, and questions.
Namaste
Christine Heinicke 