Why is there such a need for the social safety net? The number one reason is the lack of shared prosperity. From 1977 -2007, 89% of income growth has been kept by the top 10%. That leaves only 11% for the rest of the 90% of the working population.
When prosperity is consolidated into so few hands that means many working families are not receiving their share of economic growth.
Let’s break this down into small numbers. If we had 100 people in the country, and economic growth from 1977-2007 was $100 that means 10 people gained $89 of the economic growth, and 90 people have to split $11 in growth.
Breaking that equation down even further, per person, the top 10 people gained $8.90 each while the bottom 90 people gained 0.12 cents each.
This is the main reason for the growth in the amount of people on food stamps, Medicaid and other social programs. They just are not getting their fair share of economic growth.
If the Republicans and all conservatives were really concerned about how many people are on social programs and how much money we spend on these programs, they would address this first.
The more money people earn, the less likely it is that they will need food stamps etc. It just makes sense. If we went back to 1950 -1970, the share of economic growth going to the bottom 90% was 72%, and the top 10% gained 28%.
Using the same equation as above, this comes to the top 10 people splitting $28.00 and the bottom 90 people split $72. What does this come per person? It comes to each person in the top ten, gaining $2.80 in economic growth, and each person in the bottom ninety gaining 0.80 cents.
This is a BIG difference from what was in the above equation, where it was $8.90 going to each person in the top ten and only 0.12 cents going to the rest.
This type of shared prosperity relieves the use of the social safety net and strengthens the middle class. It also creates economic demand and strengthens the overall economy.
So what has changed from 1950-1970 and 1977-2007? Americans’ share of the nation’s prosperity was so much greater in the last generation?
I believe this has to do with a few things. One is the detachment of the corporations from the community. Back in the 1950s the owners of corporations were local businessman. If they decided to screw their workers by not giving them raises, they would be shunned in society. Today the owners of the corporations live in gated communities, and they have no connection to the community at all. So if they keep all the profits and growth for themselves, they don’t see the damage they are doing to the rest of America.
Second, is the destruction of unions. Since unions lost their influence in the market, union and non-union lost.
Back when unions were strong in the 1950s, 60s and 70s, labor made sure economic growth was shared with the workers.
This helped the non-union worker because it created competition. If a non-union shop wanted to keep their employees, they paid them equivalent to union wages. So unions not only increased the prosperity of their members but the community as a whole.
Free trade is the last reason. This last point is actually a reaction to of our first reason, connection to the community. A business owner in the 1950s would not have outsourced his factory to slaves, if he had to face his old employees at church on Sunday or in the grocery store during the week.
So will the conservative economic model work? No, of course not. It hasn’t worked at all. Prosperity and economic growth has not been shared with all working Americans. It has been consolidated more and more into the hands of a few.