Income inequality is unsustainable – just ask Harvard Business School

Last week, when fast-food workers and their allies in 159 U.S. cities ramped up pressure on McDonald’s and other chain restaurants — orchestrating boycotts, walking off the job, engaging in civil disobedience and subjecting themselves to arrest under the banner of “$15 per hour and a union” — detractors aggressively responded on social media.

I grew fascinated by the passion and plenitude of their tweets and comments. Reading through dozens of them, I distilled six arguments: 

1. Protests (and unions) are silly and pointless.
2. Fast-food workers should get a better-paying job.
3. Burger-flipping and fry-frying hardly merit their current hourly minimum, let alone $15.
4. Everyone is broke these days, so the fast-food workers should stop complaining.
5. McDonald’s and other mega-franchisors would go bankrupt if they had to pay such wages.
6. There is nothing wrong with paying multi-million-dollar salaries to corporate executives.

None of these ideas are new, but I was honestly surprised by the frequent appearance of numbers 4, 5 and 6. I had taken for granted the fact that most working people feel underpaid and underappreciated, stiffed by corporations and ready to claim their fair share.

Since that appears not to be the case, it’s worth reviewing two related features of our present economy:

1. Worker productivity far outpaces worker pay. Statistically and historically speaking, American workers are earning too little. Between 1979 and 2012, the median wage earner became 74.5 percent more productive but saw just a 5 percent increase in pay, and since 2000, compensation has declined or stagnated for the bottom 70 percent. A full-time, minimum-wage employee — in fast food, for instance — now earns just $15,000 per year before taxes, only technically above poverty. This is true even as corporate profits continue to grow, so where’s the money going? Today, just 75 percent of corporate-sector income, down from over 80 percent, is spent on salaries and benefits — and that includes remuneration for highly paid CEOs. Large companies, it seems, are keeping more for themselves.
   
   
2. The rich-poor divide is wider than ever and a hindrance to progress. Since 1980, the chasm between low- to middle-income-earners and high-income-earners has grown consistently, reaching levels not seen since before the Great Depression. The gap comes with emotional and material consequences: Politicians and academics, from President Obama to professor Thomas Piketty to Standard and Poor’s economist Beth Ann Bovino, warn that inequitably distributed resources hamper overall growth.
   
   And now, even Harvard Business School (HBS), storied incubator of the hyper-elite managerial stratum, has concluded that this class “divergence is unsustainable.” In its latest report on U.S. competitiveness, based on an alumni survey, HBS researchers observe: “Labor force participation in America peaked in 1997 and has now fallen to levels not seen in three decades. Real hourly wages have stalled even among college-educated Americans; only those with advanced degrees have seen gains.” The result: A flagging majority (fewer, less-prepared workers in the pipeline) and an ever-ascendant economic elite.

With these facts in mind, the numbers driving the fast-food demonstrations are almost trifling. What’s $15 an hour when your boss is earning $4,000 in that same chunk of time?