Tags: Sherman | middle class | income | economy

Financial Author Sherman: Middle Class Helps Foment Income Inequality

By Dan Weil   |   Thursday, 14 Aug 2014 09:56 AM

The top 1 percent generally receive all the blame for the growth in income inequality.

But while the ultra-wealthy are indeed culpable, "it is hypocritical for most people wringing their hands to point at the rich as the sole source of wage inequality," financial author Erik Sherman writes in an article for Forbes.

"The middle class has a big role in the problem and helps perpetuate it in a number of ways."

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For example, by purchasing the cheapest goods and services at the lowest prices possible, the middle class helps put a ceiling on wages.

"Virtually everyone is under monetary pressure. And yet, that push for lower prices is a major driver of income inequality," Sherman notes.

"If you eat at a chain fast food emporium, you are one of the people who keep wages down," he adds, explaining that to keep prices down, a business must keep expenses down, "and labor is one of the easiest areas in which to do this."

The same is true of discount retailers like Wal-Mart and Target, he writes.

"The goods imported from China, Vietnam, Bangladesh, and other places are cheap because wages overseas are miniscule and because companies aren’t forced to meet safety and environmental standards that are a given here."

Meanwhile, many economists say tearing down the wealthy isn't the way to solve the income inequality problem.

"Unless one regards envy as a virtue, the primary reason for concern about inequality is that lower- and middle-income workers have too little, not that the rich have too much," Harvard economist Larry Summers writes in the Financial Times.

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