Working Harder -- Earning Less

Monday, August 28, 2006

The economic data, as reported in the New York Times this morning, could not be more plain; "Real Wages Fail to Match Productivity." Translation: the middle class is getting clobbered. They're working harder as lay-offs, outsourcing, technological advances, etc., reduce the number of actual employees in businesses across America.

We've all seen how this works. I remember it all too well from my years in corporate America. Every so often a department is cut by an employee or two during an oh-so-necessary lay-off. The workload for the remaining employees increases, but the salaries do not. Thus the "productivity" of the average employee goes up. Stock holders are happy. Top management collects bonuses for their brilliance in extracting more work from people for less money. Average workers suffer the consequences... as do customers of those businesses.

Just last night I was discussing with my husband how much I despise the new self-checkout system that increasing numbers of supermarkets are using. I guess I can see the advantage to consumers who only need a few things and don't want to wait. But in real terms this is how it plays out. Supermarkets employ fewer cashiers so that long lines snake down the supermarket aisles. The self-checkout aisles also develop lines reducing the time-saved by motivated self-serve shoppers. So here's how it shakes out. Fewer people are employed. Those who are work nonstop to accommodate cranky customers who have been standing on line forever. And if you're using self-checkout you're paying the supermarket and working for them for free by checking and bagging yourself. It's another version of the scam gas stations pulled when they introduced self-serve gas and promised that it would cost less than full-serve; then simply raised the price on full-serve pumps. Net savings for consumers: none.

We're all frogs being brought slowly to a boil and, as the Times article makes clear, the water is getting hot enough that we just might begin to notice and start jumping. The economy feels bad enough to ordinary folks that the Republican Party is increasingly worried about the upcoming elections. They would probably be more worried if Democrats were offering a real alternative instead of taking potshots at Wal-Mart, which is not to say that they don't deserve it.

How bad is it for American workers? Here are some of the highlights from the Times:

With the economy beginning to slow, the current expansion has a chance to become the first sustained period of economic growth since World War II that fails to offer a prolonged increase in real wages for most workers....

The median hourly wage for American workers has declined 2 percent since 2003, after factoring in inflation. The drop has been especially notable, economists say, because productivity — the amount that an average worker produces in an hour and the basic wellspring of a nation’s living standards — has risen steadily over the same period.

As a result, wages and salaries now make up the lowest share of the nation’s gross domestic product since the government began recording the data in 1947, while corporate profits have climbed to their highest share since the 1960’s. UBS,the investment bank, recently described the current period as “the golden era of profitability.”

Until the last year, stagnating wages were somewhat offset by the rising value of benefits, especially health insurance, which caused overall compensation for most Americans to continue increasing. Since last summer, however, the value of workers’ benefits has also failed to keep pace with inflation, according to government data....

Economists offer various reasons for the stagnation of wages. Although the economy continues to add jobs, global trade, immigration,layoffs and technology — as well as the insecurity caused by them — appear to have eroded workers’ bargaining power.

Trade unions are much weaker than they once were, while the buying power of the minimum wage is at a 50-year low. And health care is far more expensive than it was a decade ago, causing companies to spend more on benefits at the expense of wages....
Average family income, adjusted for inflation, has continued to advance at a good clip, a fact Mr. Bush has cited when speaking about the economy.
But these gains are a result mainly of increases at the top of the income spectrum that pull up the overall numbers. Even for workers at the 90th percentile of earners — making about $80,000 a year — inflation has outpaced their pay increases over the last three years, according to the Labor Department.

“There are two economies out there,” Mr. Cook, the political analyst, said. “One has been just white hot, going great guns. Those are the people who have benefited from globalization, technology, greater productivity and higher corporate earnings.

“And then there’s the working stiffs,’’ he added, “who just don’t feel like they’re getting ahead despite the fact that they’re working very hard. And there are a lot more people in that group than the other group.”
[emphases added]

The rich are getting richer. Everybody else is getting poorer and working harder. Great.


Anonymous said...

The devolution of the United States to the status of a banana republic with nuclear weapons is probably inevitable.

The weight of history is against the country. The historical data clearly show that vast income inequity existed for most of American history. The relative equality that existed in the post-World War Two era was an anomaly, not the rule.

So now American society is merely reverting to its usual state of affairs. The social polarization that occurs in a society as gung-ho for "free market capitalism" as the US is inevitable. The only way to avoid this is to embrace a socialist model, and I don't see any political movement pushing for socialism in the US, absent another Great Depression.

Of course, in the long run, a democracy is untenable when you have a shrinking middle class and a growing concentration of wealth in the hands of very few people. The future of democracy, at least in the United States, is not a bright one.

Supreme Court Justice Louis D. Brandeis summed up the situation nicely when he wrote: "We can have democracy in this country, or we can have great wealth concentrated in the hands of a few, but we can't have both."