Thursday, August 13, 2015

Political Corruption and Corporate Greed Killed the Middle-Class

Because, as Donald Trump so honestly pointed out, our elected politicians do the bidding of the their biggest campaign donors, who also just happen to wield the most economic power. So when a big corporate job creator like Donald Trump calls a local member of Congress and says, "I think that law will be bad for my business" — the politicians listen and vote accordingly.

This applies to the minimum wage law, tax laws, labor laws (etc.) — so the average voter/worker doesn't have a chance; because for ANY law that will benefit the worker, most of the business owners will say it's bad for their business.

From Robert Solow - The Future of Work: Why Wages Aren't Keeping Up

One of the more puzzling and damaging features of the American labor market in the last few decades has been the failure of real (i.e. inflation-adjusted) wages and benefits to keep up with the increase in productivity. ...

The custom is to think of value added in a corporation (or in the economy as a whole) as just the sum of the return to labor and the return to capital. But that is not quite right. There is a third component which I will call “monopoly rent” or, better still, just “rent.” ...

The suggestion I want to make is that one important reason for the failure of real wages to keep up with productivity is that the division of rent in industry has been shifting against the labor side for several decades. This is a hard hypothesis to test in the absence of direct measurement. But the decay of unions and collective bargaining, the explicit hardening of business attitudes, the popularity of right-to-work laws, and the fact that the wage lag seems to have begun at about the same time as the Reagan presidency all point in the same direction: the share of wages in national value added may have fallen because the social bargaining power of labor has diminished. ...

Now I would like to connect this hypothesis with another change taking place in the labor market..., the casualization of labor. The proportion of part-time workers has been rising... So are the numbers of workers on fixed-term contracts and independent contractors...

Casual workers have little or no effective claim to the rent component of any firm’s value added... If the division of corporate rents has indeed been shifting against labor, an increasingly casual work force will find it very hard to reverse that trend.

Robert Reich - The Outrageous Ascent of CEO Pay

Corporate apologists say CEOs and other top executives are worth [their exorbitant salaries] because their corporations have performed so well over the last three decades that CEOs are like star baseball players or movie stars. Baloney. Most CEOs haven’t done anything special. The entire stock market surged over this time. Even if a company’s CEO simply played online solitaire for thirty years, the company’s stock would have ridden the wave.

For the last thirty years almost all incentives operating on American corporations have resulted in lower pay for average workers and higher pay for CEOs and other top executives.

Consider that in 1965, CEOs of America’s largest corporations were paid, on average, 20 times the pay of average workers. Now, the ratio is over 300 to 1.

Corporations might otherwise have devoted this sizable sum to research and development, additional jobs, higher wages for average workers, or dividends to shareholders.

The new SEC rule requiring disclosure of pay ratios could help strengthen the hand of American shareholders. The rule might generate other reforms as well – such as pegging corporate tax rates to those ratios.

CEOs don’t create jobs. Their customers create jobs by buying more of what their companies have to sell. So pushing companies to put less money into the hands of their CEOs and more into the hands of their average employees will create more jobs.

In a recent (somewhat "wonkish") post about labor productivity at the Economic Populist, the author writes:

What you see these days in productivity is not what it appears. The press will claim increased productivity is a great thing, and maybe that's true for corporate profits, but it's clearly not translating into wages and jobs for workers. Labor share is a measure of how much of the economic pie goes to workers. If labor share increases, this implies labor is benefiting from increased economic growth. When the compensation to productivity gap widens, labor share falls and that means workers are not reaping the economic rewards of their sweat and toil.

Republicans killed labor unions to benefit the CEOs and Democrats passed bad trade deals to benefit the big corporations. Both parties passed tax laws favoring the rich and big corporations — those who wanted most of the gains in productivity to go to them, rather than sharing the profits with wage gains to employees that could have been negotiated by labor unions.

There's no mystery as to why wages have been stagnant, and in many cases, in decline for the past 35 years: Political corruption and corporate greed. If we had 535 members of Congress who thought like Bernie Sanders, America's middle-class would be totally awesome.

1 comment:

  1. Dean Baker: Is the C.E.O. of Walmart Worth More than Tom Brady?

    As for "real" wages (not "nominal" or "average", but "median" inflation-adjusted wages), 50% of all wage earners in the U.S. make less today that they did in 1999.

    Per Social Security wage data, currently the "median wage" is $28,031 a year.