Here’s a letter to the Wall Street Journal – a letter pointing out only some of the flaws in Greg Ip’s latest column.
Editor:
A new report showing that real hourly wages have risen by 3% since 2019 while profits have risen by 50% has Greg Ip worried “about the political stability of an economy in which ever more output flows toward shareholders instead of employees” (“The Record Divide Between Corporate Profits and Worker Pay,” May 29).
Mr. Ip misses two important realities that should calm his fears.
First, more than half of American workers already own corporate shares through their retirement plans. Thus, a large portion of the “ever more output flows toward shareholders” are flows also toward employees rather than, as Mr. Ip writes, “instead of employees.”
Second, nothing stops workers from more directly profiting from the boom in equity values. Buying corporate shares is today easier than ever; it can be done inexpensively with a smartphone. And because shares can be purchased in small lots, almost every American worker can, even apart from his or her retirement plan, afford to join the ranks of capitalist investors. If and to the extent that workers don’t take advantage of this opportunity, that result reflects workers’ free choice rather than a problem with the economy.
It’s intellectually fashionable to portray workers in free markets as haplessly pitted against capitalists in a zero-sum struggle for wealth. Yet for the reasons given above – and well as because capitalists’ earn wealth only by producing goods and services that improve the living standards of the masses – this portrayal is false.
Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030
