The real problem is that companies in the U.S. do not pay enough, and that they have conditioned themselves (and their investors, and board, and employees, and politicians) NOT to raise wages even as their profits and cash holdings rise to record levels. Consider that corporate profits have soared from $1.2 trillion in 2009 to about $2 trillion this year, and that between the end of 2006 and mid-2013, corporate America’s cash holdings rose from $850 billion to $1.48 trillion. And yet the response to this remarkable turnaround has been effectively to reduce wages. Median household income in 2012 was BELOW where it was in 1999, and has risen in only five of the last 12 years.
Unfortunately, many of America’s largest employers—including Walmart and McDonald’s—have made paying the lowest possible wages a bedrock component of their business model. To be sure, that business model—just like the American economic model—is starting to creak under the weight of its own contradictions. (Walmart always wonders why its customers, who occupy the lower ends of the income ladder, never seem to have enough money to spend at Walmart stores.) And yet the executives fail to see the connection between the low wages they pay and the low consuming power of their customers.
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