Author’s Note: This is a two-part series on income inequality in America.
“And I’ve gone to bed hungry many nights as a lad...”
—from “In The Good Old Days (When Times Were Bad),” as performed by Merle Haggard
One of the most famous photos in American history is that of a starving mother during the Great Depression. The woman is gaunt and thin, her countenance worried. Then, hunger was commensurate with soaring unemployment.
The face of hunger in America has changed, but the problem is growing more severe. Many families suffering from a lack of food today are headed by employed adults who still can’t afford life’s essentials. And this is not only bad for those suffering families, it’s bad for the wealthy, too, in ways in addition to obvious humanitarian concerns.
If one is invested in companies that produce food and household products, the more people with income to purchase those products, the better the share price and value of the company. As an investor in, say, pharmaceuticals, it is to your advantage if more people in need of medicine can afford to purchase it. More people buying products manufactured and distributed by the companies you’re invested in means more money in their coffers.
If you own a car dealership, the market for selling is far greater when more folks are in a position to buy. Henry Ford paid his workers a living wage for a variety of reasons; some workers indeed did buy his cars. But beyond that, he created a more stable, dependable labor force. Similarly, we need a strong middle class to purchase more products and services offered by businesses, which are often owned by and invested in by the wealthy.
Brazil has a significant income inequality issue, and the wealthy citizens there live behind electronic fences and even drive bulletproof cars. No American lives in a bubble, and we all benefit from residing in communities where it is safe to venture out.
Inflation has not risen dramatically, but costs have risen significantly on items we deem essential: housing, food and healthcare expenses, for example. A recent small uptick in wage growth was the first in many decades. The bottom line is that for the past 40 years, wage increases are falling far short of the increase in the cost of living.
As Tracie McMillan wrote in National Geographic, “In 1980 there were a few hundred emergency food programs across the country; today there are 50,000. Finding food has become a central worry for millions of Americans. One in six reports running out of food at least once a year. In many European countries, by contrast, the number is closer to one in 20.”
Margaret R. McDowell, ChFC®, AIF®, author of the syndicated economic column “Arbor Outlook,” is the founder of Arbor Wealth Management, LLC, (850.608.6121 – www.arborwealth.net), a “fee-only” registered investment advisory firm located near Sandestin.