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“Falling Further Into A Hole”: Wage Stagnation Puts The Squeeze On Ordinary Workers

Laurie Chisum works as a manager for a small office-equipment company in Orange County. She puts in about 30 hours a week on the job and spends much of her time at home caring for her mother, who is afflicted with Alzheimer’s disease.

She’s not complaining — she’s thankful to have a steady paycheck. But no matter how hard she works, it feels as if she just can’t get ahead.

“It’s been six years since anyone at our company has had a raise,” said Chisum, 52. “It seems like I just keep falling further into a hole. The price of gas has gone down, but nothing else has.”

It’s a refrain we’ve heard throughout the year: wealth gap, income inequality, wage stagnation.

No matter how you say it, the upshot is the same. The rich are getting richer and everyone else is feeling squeezed.

The wealth gap in this country is now the widest it’s been in decades, according to a report this month from the Pew Research Center.

The median net worth of upper-income families reached $639,400 last year. That’s nearly seven times as much as for those in the middle and almost 70 times what people at the lower end of the economic spectrum are making.

That’s not just a data point. It’s sad proof of a system that grossly favors the rich over ordinary working families — even when the economy is improving.

“Far too many people simply aren’t feeling the benefits of this economic growth,” said U.S. Labor Secretary Thomas Perez. “People are working harder and smarter, but their sweat equity hasn’t translated into financial equity.”

David Neumark, director of the Center for Economics and Public Policy at the University of California, Irvine, said that “people at the top have had phenomenal wage growth,” whereas “people at the lower end of the spectrum have seen their real purchasing power decline.”

Corporate profits are at or near record levels. So’s the stock market. Chief executives are doing just fine, thank you very much. A recent report found that some of the biggest U.S. companies pay their CEOs more than they pay in federal income taxes.

For ordinary working stiffs, the numbers are more sobering. Average hourly wages rose an itsy-bitsy 0.4 percent in November, according to the Labor Department. And this was seen as good news because average wages increased a pitiful 0.1 percent in October and didn’t budge in September.

For the year, average hourly earnings through November rose 1.7 percent, according to the Bureau of Labor Statistics. Since the end of the recession in 2009, they’ve gained about 11 percent.

At the same time, though, the consumer price index — the cost of living — has increased 1.3 percent since the beginning of the year and about 11 percent since the end of the recession.

Wages, in other words, are barely keeping pace with overall inflation. That’s why many people feel as if they’re stuck in a financial rut.

“You wonder from month to month what else you’re going to have to cut back on,” said Chisum, a single mom who also is caring for a grown son with Down syndrome.

Things look even tougher when you tighten the focus on specific expenditures, such as food and rent.

Average food costs have climbed 12.5 percent since the end of the recession, according to the bureau. Average residential rents have risen 12 percent. The average cost of healthcare has jumped nearly 17 percent.

In that context, the 11 percent gain in wages since 2009 means that each of these necessities has taken a bigger bite out of family budgets and has left fewer dollars for other expenditures, such as the occasional restaurant meal or movie.

“There’s no evidence I can see that this is going to change in the near future,” said Edward Lawler, a professor at the University of Southern California’s Marshall School of Business. “These are tough times for workers.”

One key issue, he said, is that labor unions have less clout than they once enjoyed. This denies workers a unified voice at the bargaining table.

Improvements in technology have boosted productivity and allowed employers to limit hiring. And it’s become easy to ship jobs abroad, where people are willing to work for a fraction of the cost of American workers.

All these factors conspire to keep wages down while profits and the compensation of senior managers skyrocket.

Earlier this month, Microsoft shareholders approved an $84-million pay package for the company’s new chief executive, Satya Nadella, making him one of the country’s highest-paid corporate leaders. He’s run the company for less than a year.

Boeing, Ford, Chevron, Citigroup, Verizon Communications, JPMorgan Chase and General Motors each paid their CEOs more last year than they paid in income taxes to Uncle Sam, according to a report from the Center for Effective Government and the Institute for Policy Studies.

A recent study by Harvard Business School found that most Americans believe chief executives make roughly 30 times what the average U.S. worker makes. That was indeed the case in the 1960s. Nowadays, CEOs pull down more than 350 times the average worker.

Chief executives are important people, to be sure. But is their importance to a company 350 times that of their employees? I doubt most people — other than CEOs — would think so.

More effective unions would help, as would programs to give workers the skills they need to compete better in the 21st century workplace.

Chris Tilly, director of the University of California, Los Angeles’ Institute for Research on Labor and Employment, said a key step would be establishing a national minimum wage of $10 to $12 an hour, and then indexing that wage to consumer prices so that paychecks automatically rise with inflation.

“That way you wouldn’t have to wait for Congress to act every year,” he said. “This would be a basic decision that wages would keep up with the cost of living.”

Perez, the labor secretary, also called for a higher minimum wage, plus “strengthening overtime protections” and “ensuring that workers have a strong voice in the workplace.”

A rising tide lifts all boats. At least that’s how we’re told things are supposed to work.

The reality is that the tide is rising in a big way for some, and they’re comfortably sunning themselves on the decks of their yachts.

For most others, that rising tide is more like a stormy sea threatening to swamp the family lifeboat.

We’ll likely hear a lot in the coming year about how the economy is improving and businesses are thriving. Chief executives will point toward fast-rising stock prices as proof that they’re worth every million they’re paid.

And everyone else will try to make their 0.4 percent hourly pay hike go as far as they can.

 

By: David Lazarus, Columnist, The Los Angeles Times; The National Memo, December 29, 2014

January 1, 2015 Posted by | Corporate Welfare, Minimum Wage, Workers | , , , , , , , | 1 Comment

Corporate Tax Cuts Don’t Stimulate Job Growth

Prevailing conservative  wisdom dictates that businesses need tax cuts—and investors need capital  gains tax cuts—to get the economy moving. But two very well-executed articles  on wages and taxes published recently suggest that targeting tax cuts at  business executives may do little to improve the dismal unemployment picture.

The Washington Post offers a startling  analysis of income disparity, noting that the gap between the very rich and the rest of us has  grown dramatically in the past few decades, reaching current levels that have  not been seen since the Great Depression. In 2008, the Post reports, the top one-tenth of one percent of earners took in  more than a tenth of the personal income in the United States. But the moneyed  class is not dominated by professional athletes or big-name artistic performers  or even hedge fund managers, the Post found.  Instead, it is due to a big increase in executive compensation, even as real  wages for some of their workers have dropped:

The top 0.1 percent of earners make about $1.7 million or  more, including capital gains. Of those, 41 percent were executives, managers  and supervisors at non-financial companies, according to the analysis, with  nearly half of them deriving most of their income from their ownership in  privately-held firms. An additional 18 percent were managers at financial firms  or financial professionals at any sort of firm. In all, nearly 60 percent fell  into one of those two categories.

The New York Times has a fascinating story that serves as an unwitting companion piece to the Post story. Corporate executives, the  paper reports, are clamoring for a tax holiday to encourage them to bring their  offshore profits back to the United States. And the money in question is big,  the Times notes: Apple has $12 billion  in offshore cash, while Google has $17 billion, and Microsoft, $29 billion. The  companies with money sitting offshore argue that if the federal government were  to offer them a huge tax break—say, a one-year drop from 35 percent to 5.25  percent—the businesses would bring the money home and operate as a  private-sector economic stimulus.

However, the Times notes:

(T)hat’s not how it worked  last time. Congress and the Bush administration offered companies a similar tax  incentive, in 2005, in hopes of spurring domestic hiring and investment, and  800 took advantage. Though the tax break lured them into bringing $312 billion  back to the United States, 92 percent of that money was returned to  shareholders in the form of dividends and stock buybacks, according to a study by the nonpartisan National Bureau of Economic Research.

Who needs a tax cut, then? The U.S. economy is  very much consumer-driven; companies aren’t hiring, many business owners say,  because people aren’t buying. The past behavior of corporations that have  received huge tax cuts has not necessarily been to use the money to hire more  people; the Bush-era tax cuts have been in place for a decade, and the  unemployment rate is still 9.1 percent. And executive compensation has grown.  Executives may feel entitled to earn more and more if their companies are doing  well and expanding. But without customers, those companies will go bust.

By: Susan Milligan, U. S. News and World Report, JUne 20, 2011

June 23, 2011 Posted by | Businesses, Class Warfare, Congress, Conservatives, Consumers, Corporations, Economic Recovery, Economy, GOP, Government, Ideology, Income Gap, Jobs, Labor, Middle Class, Politics, Republicans, Taxes, Unemployment, Wealthy | , , , , , , , , , , , , , , | Leave a comment

   

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