Wednesday, April 25, 2012

Wages: Yesterday, Today, and Tomorrow

Tell Ann Romney that a middle-class wage in 2012 is $45,000 a year after taxes, but 50% of all U.S. workers earn less than half that before taxes.

In the Old Days

Since first being established at 25 cents an hour by FDR in 1938 under the Fair Labor Standards Act, the federal minimum wage has been raised only 22 times since then. Today the Republicans want to abolish it.

Over sixty years ago, during and after World War II, one could leave their rural community and obtain a government job (civilian or in armed service) and earn a decent living. Since then, "government" was, and always has been, America's single biggest "job creator". (Yes Speaker Boehner, government does create jobs.)

Or they could have left the family farm and moved to the big city and found work paying good wage in a mill or factory, without even having a high school diploma.

In 1952 the president of Jones and Laughlin Steel Company complained that the cost of the union's wage and benefit package was $1.08 an hour (or $2,246 a year). The average median salary at that time was $2,992 a year during the 1950s, when the U.S. population was half of what it is today. By that time the minimum wage had risen to $0.75 an hour.

J & L Steel (known to its employees as simply "J & L") provided the most competition to the Carnegie Steel Company in the Pittsburgh vicinity. Back in those days a man could go to work at the local steel mill and provide a decent living for his family of four while his wife stayed home to raise their children. (Yes Mrs. Romney, the wife could afford a "choice" to be a stay-at-home mom.)

What it Costs to Live a Middle-Class Life Now

Today in 2012 the average mean wage for a steelworker is $24.11 an hour, or $50,160 a year -- about what a typical teacher, fireman, or police person might earn. That's because they are represented by unions, and their wages have kept pace with the rising cost of living over the past sixty years. They also maintained their family healthcare plans that were provided by their employers. They're not over-paid as the Republicans like say, they're just earning an average and comfortable middle-class most of us did back in the 1950s.

In 2012, it costs at least $45,000 a year (after payroll taxes) to meet the minimum cost for a typical American middle-class family of four, living in an average home, in an average neighborhood, and driving average cars.

A typical monthly budget might look like this:

That would equal $45,000 a year, which would be needed AFTER payroll taxes are deducted. That does not include emergency savings for repairs, clothes, entertainment, or a savings account for retirement and college. If the spouse also works, babysitters or daycare expenses would be deducted from those additional earnings.

$45,000 a year equals $21.63 an hour BEFORE payroll taxes are deducted. Remember, steelworkers now earn an average of $24.11 an hour (a middle-class wage).

* High-cost metropolitan areas such as NYC, Boston and San Francisco would be much higher. You can transpose $150 of the monthly budget from electricity to natural gas or oil if you use that for heat.)

Prevailing Wages For Average American Workers

Half the entire U.S. workforce now earns less than $12.67 a hour. The federal minimum wage of $7.25 an hour is about 1/3 of a middle-class wage of $21.63 an hour. Last year the average CEO earned $10.8 million and paid a lower tax rate (15%) than those middle-class steelworkers, firefighters and teachers (25%). (See tax brackets and rates here)

As of the last quarter of 2011, the total median household income was $52,378 a year (that's just $26,188 per person in a two income household.)

Last year 50% of all U.S. workers earned less than $26,364 a year (that's $12.67 an hour) when the poverty level for a family household of four is considered to be $22,314 a year (which is a very low government assessment). $22,314 year is about what Ann Romney spends every year just to feed and care for her favorite horse.

By contrast, for those out of work, the average American collected only $295 in weekly unemployment benefits ($15,340 a year) which only replaced about a third of the average worker's previous salary.

If one were working a full-time 40-hour per week job (providing they could find one) and earned the federal minimum wage of $7.25 an hour, they would only be earning $290 a week, or $1,257 a month, or $15,080 a year.

As for retired workers, their average monthly Social Security benefit was about $1,230 a month at the beginning of 2012 ($14,760 a year).

Disabled workers on Social Security disability averaged $1,111 a month ($13,332 a year).

At least 8 million unemployment Americas exhausted all their unemployed benefits without ever finding work again. Some retired early, some became disabled (many denied SSD benefits), and others moved in with family or friends. Millions now earn $0 and hour, or $0 a week, or $0 a year --- and now just subsist on food stamps.

Are these the people that the Republicans are complaining about, who aren't paying their fair share of federal income taxes, and that they should "put more skin in the game"?

The poverty level $22,314 a year is only HALF the income needed in 2012 that would be necessary for a family of four to live on for a middle-class life-style without a spouse who is also working (if they had made a "choice" to be a stay-at-home mom.). The poverty level of $22,314 a year would include EVERYBODY who are dependent on unemployment benefits, Social Security funds, and disability payments.

How can a spouse (a mom or dad) earn $22,314 or less a year and expect a parent to "choose" to stay at home to raise their children? They can't, and the don't. Both parents must work to live a middle-class life-style. A divorce could be financially catastrophic for both parents, and one or both could end up on welfare and food stamps, just to survive.

The Role of Labor Unions

Union membership exploded during and after World War II, nearly doubling between 1938 and 1946. It was after World War II that American Exceptionalism became most valid, when the United States emerged as the advanced, capitalist democracy. At 35%, the unionization rate in 1945 was the highest in American history.

A concerted drive by the CIO to organize the South called "Operation Dixie" failed dismally in 1946. Unable to overcome private repression, racial divisions, and the pro-employer stance of southern local and state [Republican] governments, the CIO's defeat left the South as a non-union, low-wage domestic enclave and a bastion of anti- union politics (which still is today).

Then, in 1946, a conservative Republican majority was elected to Congress, dashing all hopes for any renewed post-war New Deals.

The quarter century after 1950 formed a ‘golden age' for American unions. Established unions found a secure place at the bargaining table with America's leading firms in such industries as autos, steel, trucking, and chemicals. Contracts were periodically negotiated providing for the exchange of good wages for cooperative workplace relations. Rules were negotiated providing a system of civil authority at work, with negotiated regulations for promotion and layoffs, and procedures giving workers opportunities to voice grievances before neutral arbitrators.

Wages rose steadily, by over 2 percent per year and union workers earned a comfortable 20 percent more than non-union workers of similar age, experience and education. American wages were higher and growth was rapid enough to narrow the gap between rich and poor, and between management salaries and worker wages.

Unions also won a growing list of benefit programs, medical and dental insurance, paid holidays and vacations, supplemental unemployment insurance, and pensions. Competition for workers forced many non-union employers to match the benefit packages won by unions, but unionized employers provided benefits worth over 60 percent more than were given non-union workers.

* Because of outsourcing, we now have a glut of labor, high unemployment, and lower wages.

In no other country have women and members of racial minorities assumed such prominent positions in the labor movement as they have in the United States. The movement of African-American and women to leadership positions in the late-twentieth century labor movement was accelerated by a shift in the membership structure of the United States union movement.

The union participation rate has declined in all industries since the "golden age" for American workers: from 35% in 1945, to 30% in 1970, to 24.7% in 1980, to 17.6% in 1990, to 11.8% today. That is the Republican legacy for average American workers, and why the economy is where is today. (Source)

The Auto Industry at a Glance

Besides the steel industry and government jobs, the U.S. auto industry used to be one of the best places to work in the 1950s.

GM’s president “Engine Charlie” E. Wilson told Congress in 1953, “What’s good for America is good for General Motors, and vice versa.” He took home $586,100 a year when the minimum wage was $0.75 an hour and gasoline was $0.27 a gallon.

During this time 80 percent of the world’s auto production and assembly was centered in Detroit. Back then GM was the world's largest corporation and had 46 percent of the American auto market. At its peak, the company employed more than 600,000 Americans.

But little by little over the past few decades, instead of exporting their products, the auto manufacturers (like all other major American manufacturers) began exporting their factories and our jobs instead. Now American companies employee people all over the world. Just under George W. Bush alone we've lost 52,000 factories.

Through NAFTA, we have guaranteed an endless hemorrhaging of our manufacturing base out of the United States. GM is now the largest Mexico. Since 1978, General Motors has built more than 50 parts factories in Mexico, which today employ 72,000 workers and pays thousands of Mexican workers between $1 to $2 an hour.

Then GM took their second taxpayer bailout to the tune of $49.5 billion and received bankruptcy protection in 2009 to cut its costs. (GM's first big bailout was right after Work War II.)

Auto workers in the U.S. saw their wages drop by 50% since the auto bail outs. Longtime auto workers still earn about $28 an hour (a nice middle-class wage of $58,240 a year before payroll taxes). But GM's new workers start at only $15.78 an hour, about half the prevailing rate paid to the company's production employees before the bail out --- which is about what a GM janitor was once paid in 1980, or a little more than double the minimum wage today. Yet GM's CEO Daniel F. Akerson is expected to earn at least $9 million in stock and salary in 2012.

The same for Ford, who didn't even need a bail out, but agreed to raise the hourly wages of entry-level employees from $15 an hour to about $19. Ford's CEO Alan Mulally ranked #1 in auto CEO pay with $29.5 million. Mulally's compensation was up 11% from 2010 and brings his cumulative take to $148.3 million since joining Ford six years ago. Some 120,000 Ford employees have lost jobs under Mulally's reign, and Ford shareholders saw their shares dropped 36 percent last year. So much for "pay for performance" and "job creators".

Foreign automakers are placing their U.S. factories in the southern states because of generous tax incentives and anti-union sentiment, presenting a huge challenge to the once-formidable United Auto Workers. Bob King, president of the UAW, says "We keep putting more taxes and lower wages on the people who are working in this nation and keep giving tax breaks to the wealthy," he said. "And that will destroy our democracy."


We can look back to the "golden era" of the middle-class, when rural folks left the farms to work in the steel mills and auto factories. The Waltons (Wal-Mart) got super-rich from their abundant labor supply of underemployed and unemployed people living in the rural anti-union south, who were desperate for employment, when even a minimum-wage job was seen as step up from rural poverty.

It was nice that Ann Romney had made the "choice" to stay at home and "work hard" raising her sons, but most average working Americans no longer have the luxury of a "choice" if they're only earning $15, $12, $10, or $7.25 an hour. They would need to earn at the very least $25 an hour to live like a steelworker or autoworker did sixty years ago.

But those jobs went overseas and across our borders, so that American corporations could pay their foreign workers at factories like Foxconn $1 an hour, while the CEOs could rake in millions every year. And that's a fact.

Yet the Republicans refuse to raise taxes on the CEOs, the rich, and themselves to help pay down government debt. They want to eliminate the current $7.25-an-hour federal minimum wage altogether, instead of raising it. The GOP wouldn't be happier if they could eliminate all labor unions, pay school teachers and firefighters half as less, lower the corporate tax rate to 0%, and force those earning only $26,364 a year to "put more skin in the game" -- and all while the GOP cuts food stamps and TANF for the poor and all of our Social Security and Medicare benefits.

The Republicans complain about the cost of welfare and food stamps, but their corporate sponsors (and people like Mitt Romney) forced these people into poverty to fatten their own wallets. If this is what's called a "shared sacrifice" by wealthy Republicans, then why would the middle-class or poor ever vote for a Republican?

That's why our solders in Iraq and Afghanistan kept re-enlisting. They had no good paying jobs to come home to. Typical pay in the military for an enlisted 20-year-old E-2 is $37,637 a year -- or married with two children is $41,021. After four years an E-4 with a wife and two children is $48,180 a year. A new officer starts at $54,800 a year. (Pay figures do not included special combat pay, reenlistment bonuses, allowances, etc.)

Tomorrow the "job creators" will pay all of us $1 an hour, just like they now do in China and Mexico today, once they make us all desperate enough for their ridiculously low-paying jobs. Corporate America is turning us into a third world county. The average "household" will no longer need two incomes to survive, but will need four incomes at the rate we're going. A vote for Mitt Romney is a vote for George W. Bush, but probably much worse.

* The Jones and Laughlin Steel Company eventually merged with Republic Steel in 1984 to form LTV Steel. In 2002 International Steel Group purchased LTV. International Steel Group was ranked #426 on the Fortune 500. It was later acquired by Mittal Steel in 2005, and in 2006 it merged with Arcelor to become the world's largest steel company, ArcelorMittal, which is headquartered in Luxembourg.


  1. America's economy is now dominated by the service industry. Wal-Mart and McDonalds would need to double and triple their employees' wages, instead of paying them $8 an hour. (The Walton's and Mrs. Kroc can afford it).

    The same is true for Food Preparation and Serving workers, including all fast food, Dishwashers, Counter Attendants, Dining Room Attendants And Bartender Helpers, Cashiers, Hosts and hostesses, Amusement park attendants, Movie theater ushers and ticket takers, Farm workers, and Personal and home care aides - - pay them all $25 an hour and provide them with healthcare insurance.

    It's no wonder this country is turning into a "welfare state" - - all the money is being hoarded by the top 1%, and is not being re-circulated throughout the economy. No one can live on less in 2012 without food stamps.

  2. Wal-Mart CEO Mike Duke received compensation worth $18.1 million in 2011. Investigators found evidence of millions of dollars in bribes given to Mexican officials in exchange to help Wal-mart aggressively expand in region.

  3. Wal-Mart Spent $5 million Lobbying To Amend Anti-Bribery Law

  4. well,quit shopping there take away the power and you take care of the problem

  5. How come story did not talk about Clinton signing NAFTA. New epa rules,guys getting fired at j and l for taking a nap ,getting fired and union making j and l hire him back .also got caught smoking pot,ten weeks paid vacation,only so much blood from a stone you can get

    1. I've done LOTS of blog posts about Bill Clinton and NAFTA. Google search "Bud Meyers Bill Clinton"

    2. You didn't address this problem:

      When companies and/or unions unable to set a standard of excellence and merit, they are simply a method of mass extortion. Doesn't "collective bargaining" mean the excellent employees get paid exactly the same as bad, intoxicated or otherwise undesirable ones?

  6. For every argument, there's always someone who will bring up an anecdotal story to make a counter-argument as if one or two instances is a true representation of the entire spectrum.