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Executive Paywatch 2018: The Gap Between CEO and Worker Compensation Continues to Grow

Monday, May 21st, 2018

CEO pay for major companies in the United States rose nearly 6% in the past year, as income inequality and the outsourcing of good-paying American jobs have increased. According to the new AFL-CIO Executive Paywatch, the average CEO of an S&P 500 Index company made $13.94 million in 2017—361 times more money than the average U.S. rank-and-file worker. The Executive Paywatch website, the most comprehensive searchable online database tracking CEO pay, showed that in 2017, the average production and nonsupervisory worker earned about $38,613 per year. When adjusted for inflation, the average wage has remained stagnant for more than 50 years.

“This year’s report provides further proof that the greed of corporate CEOs is driving America’s income inequality crisis,” said AFL-CIO Secretary-Treasurer Liz Shuler. “Too many working people are struggling to get by, to afford the basics, to save for college, to retire with dignity while CEOs are paying themselves more and more. Our economy works best when consumers have money to spend. That means raising wages for workers and reining in out of control executive pay.”

Here are eight key facts you need to know about from this year’s Executive Paywatch report:

  1. America is the richest country in the world at its richest point in history. And once again, CEOs got richer this year. CEO pay for major U.S. companies was up more than 6% in 2017 as income inequality and outsourcing of good-paying American jobs increases.

  2. Total compensation for CEOs of S&P 500 Index companies increased in 2017 to $13.94 million from $13.1 million in 2016.

  3. The CEO-to-worker pay ratio grew from 347 to 1 in 2016 to 361 to 1 in 2017.

  4. For the first time this year, companies must disclose the ratio of their own CEO’s pay to the pay of the company’s median employee. This change was fought for by the AFL-CIO and its allies to ensure investors have the transparency they deserve.

  5. In 2017, the CEO-to-worker pay ratio was 361. In 2016, the ratio was 347. In 1990, it was 107. And in 1980, it was 42. This pay gap reflects widening income inequality in the country.

  6. Mondel?z is one of the most egregious examples of companies that are contributing to inequality. The company, which makes Nabisco products including Oreos, Chips Ahoy and Ritz Crackers, is leading the race to the bottom by offshoring jobs. New CEO Dirk Van de Put made more than $42.4 million in total compensation in 2017—more than 989 times the company’s median employee pay. Mondel?z’s former CEO Irene Rosenfeld also received $17.3 million in 2017, 403 times its median employee’s pay.

  7. So far for 2017, the highest-paid CEO in the AFL-CIO’s Executive Paywatch database is E. Hunter Harrison, CEO of CSX Corporation. He received more than $151 million in total compensation. In contrast, the lowest-paid S&P 500 company CEO was Warren Buffett who received $100,000 in total pay in 2017.

  8. The toy-maker Mattel had the highest pay ratio of any S&P 500 company. Mattel’s median employee is a manufacturing worker in Malaysia who made $6,271, resulting in a CEO-to-employee pay ratio of 4,987 to 1. Buffett’s company Berkshire Hathaway Inc. had the lowest pay ratio of all S&P 500 companies, just 2 to 1.

Our economy works best when consumers have money to spend. That means raising wages for workers and reining in out of control executive pay. Executive Paywatch is a tool that helps the U.S. pursue those goals.

Learn more at Executive Paywatch.

This blog was originally published at AFL-CIO on May 21, 2018. Reprinted with permission. 

About the Author: Kenneth Quinnell is a long-time blogger, campaign staffer and political activist. Before joining the AFL-CIO in 2012, he worked as labor reporter for the blog Crooks and Liars.

Republicans Working Against Workers

Wednesday, July 19th, 2017

Ever-worsening is the chasm between the loaded, who luxuriate in gated communities, and the workers, who are hounded at their rickety gates by bill collectors.

Even though last week’s Bureau of Labor Statistics report showed unemployment at a low 4.4 percent, wages continue to flatline, killing both opportunity and the consumer economy. Meanwhile, corporations persist in showering CEOs and their cronies with ever-fatter pay packages and golden parachutes when they mess up.

This would all be sufferable if workers felt those in control in Washington, D.C. were striving to turn it all around. But the Republicans, who boast majorities in both houses of Congress, are just the opposite.

Their legislation shows they’re indentured to big business. Ever since they took power, they’ve labored tirelessly to destroy worker protections. They’ve swiped money from workers’ ragged pockets and handed it to 1 percenters on a silver platter – a plate bought with massive campaign contributions by the 1 percent.

The most blatant example is Republicans’ so-called health insurance bill. Both the House and Senate versions would strip health care from tens of millions of Americans while granting corporations and the nation’s richest tax cuts totaling $700 billion.

The Tax Policy Center determined that households with incomes above $875,000 a year would get 45 percent of those benefits. For the wealthiest, the annual tax cut would be nearly $52,000, a big fat break that is almost exactly the entire household income for the median American family.

In other words, Republicans want to hand millionaires a check that equals what a typical family earns by working an entire year.

Those massive tax breaks for the rich cost workers big time. Republicans’ so-called health insurance bill slashes Medicaid, so workers’ frail, elderly parents will lose the coverage they need to remain in nursing homes, babies born with cancer and crippling congenital diseases will be cut off care, and relatives who are victims of the opioid epidemic will be denied treatment. But, hey, the rich get richer!

Meanwhile, Republicans are pushing legislation in Congress to hobble labor unions and suppress wages. One House bill would delay union elections, giving corporations more time to bully and fire workers who consider joining. This proposed legislation would also stop workers from organizing small groups instead of the entire roster of employees.

Yet another GOP proposal would change the definition of democratic election. As it is now, a congressional candidate wins when he or she receives the highest number of votes cast. Candidates aren’t deemed losers if they receive votes from fewer than half of all potential voters.

Securing ballots from more than half of potential voters would be a very hard standard to meet because in many elections little more than a third of eligible voters go to the polls. In the 2016 Presidential election, 58 percent of potential voters exercised their franchise. That means neither Donald Trump nor Hillary Clinton would have won under the more than 50 percent of eligible voters standard.

Even so, the bill under consideration in Congress would impose that standard on unions. When workers want to form a union, this legislation would require that they get positive votes from more than half of all eligible workers, not more than half of those who actually vote.

It is a standard no politician would want to be held to, but Republicans are willing to require it of workers to prevent them from organizing and bargaining jointly for better wages and working conditions.

At the bidding of corporations, Republicans are working against workers because labor organizations succeed through concerted action in wresting from fat cat CEOs a more fair share of the fruit of workers’ labor. Workers in labor unions receive higher wages, better health benefits and pensions and safer conditions.

When more workers were unionized, the space between rich and poor was more like a crack than the current chasm. In the 1950s, 33 percent of workers participated in labor organizations. Now it’s 10.7 percent. In the ’50s, the ratio of CEO-to-worker pay was 20-to-1. That means for every dollar a worker made, the CEO got $20. Now the ratio is 347-to-1. For every dollar a worker earns, the top dog grabs $347. CEOs of S&P 500 corporations pulled down an average of $13.1 million in total annual compensation in 2016, while their typical worker received $37,632.

The high point of unionization in America, the 1950s, was the low point in income inequality. It is called the time of the great compression. And a new study published by the National Bureau of Economic Research reaffirms that unionization produced better wages.

In a report titled “Unions, Workers, and Wages at the Peak of the American Labor Movement,” scholars Brantly Callaway of Temple University and William E. Collins of Vanderbilt University analyzed new data and determined “the overall wage distribution was considerably narrower in 1950 than it would have been if union members had been paid like non-union members with similar characteristics.”

They go on to say, “Our historical interpretation is that in the wake of the Great Depression, workers sought and policymakers delivered institutional reforms to labor markets that promoted  unions, reduced inequality, and helped lock in a relatively narrow distribution of wages that lasted for a generation.”

That time is gone. Unions have been declining for decades, largely as a result of onerous requirements legislated by Republicans. As unions shrank, so did worker bargaining power. The result is that while workers’ productivity increased, their wages stagnated for the past three decades.

Still, Republicans are squashing unions even more by, for example, reversing a rule requiring corporations to report when they hire union busters to strong-arm workers into voting against organizing.

And Republicans are working hard on other measures to ensure workers make even less money. For example, Missouri Republicans reversed a minimum wage increase in St. Louis and prohibited the state’s cities from requiring union-level wages on public construction projects.

In addition, in Washington, the Republican administration refused to defend in court a new rule that would have made millions more workers automatically eligible to receive time-and-a-half pay when they work overtime.

If workers feel like the system is rigged against them, that’s because it is. Republicans working at the behest of CEOs and the U.S. Chamber of Commerce have created a government by corporations for corporations.

And none of the government welfare and benefits that corporations and one percenters got for themselves in this process ever trickled down to workers.

This blog was originally published at OurFuture.org on July 14, 2017. Reprinted with permission.

About the Author: Leo Gerard is the president of the United Steelworkers International union, part of the AFL-CIO. Gerard, the second Canadian to lead the union, started working at Inco’s nickel smelter in Sudbury, Ontario at age 18. For more information about Gerard, visit usw.org.

When three days sick means losing a month's grocery budget

Monday, July 3rd, 2017

Nearly two-thirds of private-sector workers in the U.S. have access to paid sick leave, but as with so many labor and economic statistics, that masks serious inequality: 87 percent of the top 10 percent of earners have paid sick leave, while just 27 percent of the bottom 10 percent do. And what that means is that the people who can least afford to take a day off without pay are the ones who are forced to do so if they’re too sick to go to work. A new Economic Policy Institute analysis shows how devastating that choice can be:

Without the ability to earn paid sick days, workers must choose between going to work sick (or sending a child to school sick) and losing much-needed pay. For the average worker who does not have access to paid sick days, the costs of taking unpaid sick time can make a painful dent in the monthly budget for the worker’s household:

  • If the worker needs to take off even a half day due to illness, the lost wages are equivalent to the household’s monthly spending for fruits and vegetables; lost wages from taking off nearly three days equal their entire grocery budget for the month.
  • Two days of unpaid sick time are roughly the equivalent of a month’s worth of gas, making it difficult to get to work.
  • Three days of unpaid sick time translate into a household’s monthly utilities budget, preventing the worker from paying for electricity and heat.
  • In the event of a lengthier illness—say, seven and a half days of unpaid sick time—the worker would lose income equivalent to a monthly rent or mortgage payment.

State-level paid sick leave laws are starting to make a difference—in 2012, when the first such law was passed, in Connecticut, just 18 percent of low-wage private-sector workers had paid sick days. But workers outside of the five states with such laws need the federal government to act, and that’s not going to happen under Republican control.

This blog was originally published at DailyKos on July 1, 2017. Reprinted with permission.

About the Author: Laura Clawson is labor editor at Daily Kos.

Inequality’s Getting Worse. How Do We End This?

Wednesday, July 6th, 2016

On July 1, at the start of the Independence Day weekend, we learned that income inequality in this country became even worse last year.

Economic inequality produces scars that last a lifetime – and even longer. That’s one reason why President Obama said in 2013 that “increasing inequality … challenges the very essence of who we are as a people.”

Well, that challenge just became even greater. Economist Emanuel Saez’s groundbreaking studies of inequality have helped reshape the political debate. In a July 1 publication, Saez found that the wealth gap between the top 1 percent and the remaining 99 percent became even worse in 2015. Earnings for the top 1 percent reached a “new high” that year. The 1 percent’s income increase of 7.7 percent was nearly twice everyone else’s.

Saez revisited several years of data and found that:

“(I)ncomes (adjusted for inflation) of the top 1 percent of families grew from $990,000 in 2009 to $1,360,000 in 2015, a growth of 37 percent … (while) the incomes of the bottom 99 percent of families grew only by 7.6 percent–from $45,300 in 2009 to $48,800 in 2015.”

Saez adds, “As a result, the top 1 percent of families captured 52 percent of total real income growth per family from 2009 to 2015.” He concludes:

“This uneven recovery is unfortunately on par with a long-term widening of inequality since 1980, when the top 1 percent of families began to capture a disproportionate share of economic growth.”

1980 was the year Ronald Reagan first took office, heralding a new era of economic conservatism in the United States. The message of these numbers couldn’t be clearer: it’s time for that era to end. Our 35-year experiment with conservative economics has failed.

Saez’ figures included a slight consolation prize for the 99 percent: Its average income rose by 3.9 percent last year, the biggest increase in 17 years. That’s an improvement, of course, but it’s not nearly enough. The 99 percent has endured decades of wage stagnation, and its income was essentially frozen in place between the 2008 financial crisis and 2013.

A society with such extreme and growing inequality can’t sustain itself forever. Inequality interferes with economic growth, robs people of opportunity (and with it, hope), dooms millions to poverty or near-impoverished conditions, and offends that part of the human spirit that constantly searches for fairness and equality. An overly unequal society like ours is inherently unstable, especially when its political system gives extremely wealthy individuals and corporations excessive control over the government – thereby perpetuating and amplifying their own wealth and power.

It will take years of work to repair the economic damage caused by these levels of inequality. And it’s important to remember that, while we measure many of our economic statistics on a quarterly or yearly basis, the human damage often lasts much longer than that.

Workers who suffer a period of unemployment or a drop in pay typically see their earnings decline for the rest of their working lives. This effect is particularly pronounced among recent college graduates, many of whom graduated into one of the worst job markets in history. Their income is likely to suffer through their entire careers as a result – while, at the same time, they have been saddled with the greatest student debt burden in human history.

Lower incomes are tied to higher infant mortality, shorter life spans, and poorer mental and physical health for parents and children alike.

Economic damage is often carried down the generations, through the children. Poverty can inflict lifelong damage on a child’s health and ability to earn. Economic mobility is very low in this country; parental income has an enormous influence on the earning power of children, and studies have consistently shown that Americans enjoy much less upward mobility that residents of Canada and most Western European nations.

What can we do to reduce inequality and heal some of its deep, long-lasting wounds? Here’s a partial list: We can increase funds for antipoverty programs that provide food, shelter, and other services directly to the poor. We can improve our educational system and provide tuition-free public college to all qualified students. We can address the systemic racial injustice that deprives communities of color of economic resources. We can raise the minimum wage, which has fallen far behind inflation (and even farther behind productivity) since 1968. ($15 an hour is a good number.)

We also need to strengthen the labor movement. A recent study by the International Monetary Fund found that a “decline in union density has been strongly associated with the rise of top income inequality” and that “unionization matters for income distribution.” We must provide health insurance for all, and ensure that all working Americans have access to the paid leave programs and other benefits found in other developed countries. We must expand initiatives for worker-owned businesses.

What’s more, we need to do these things quickly, before income inequality – and the loss of democracy that accompanies it – grows so great that it becomes irreversible.

The Fourth of July has come and gone. But the scars of inequality are still here, depriving millions of us of the freedom to choose, to grow, and even to live. Our work has just begun.

This blog originally appeared in ourfuture.org on July 6, 2016.  Reprinted with permission.

Richard Eskow is a Senior Fellow with the Campaign for America’s Future and the host of The Zero Hour, a weekly program of news, interviews, and commentary on We Act Radio The Zero Hour is syndicated nationally and is available as a podcast on iTunes. Richard has been a consultant, public policy advisor, and health executive in health financing and social insurance. He was cited as one of “fifty of the world’s leading futurologists” in “The Rough Guide to the Future,” which highlighted his long-range forecasts on health care, evolution, technology, and economic equality. Richard’s writing has been published in print and online. He has also been anthologized three times in book form for “Best Buddhist Writing of the Year.”

Would You Trust Henry Kissinger with Your Social Security?

Thursday, June 16th, 2016

Years ago a political scientist said that the mass media can’t influence what people think, but it can influence what people think about. Today it does both. If you’re a billionaire who wants to manipulate public opinion, that means you’ll keep feeding it stories that serve your ideology and self-interest.

Hedge fund billionaire Peter G. “Pete” Peterson is a master of the art. At a time when 47 million Americans (including one child in five) live in poverty, when our national infrastructure is collapsing and the middle class dream is dying before our eyes, he’s managed to convince a few voters, a lot of politicians, and far too many major-media journalists that our most urgent problem is … federal deficit spending.

They don’t just want you to be concerned about it. They want you to be afraid.

The front for this effort (one of many assembled by the Peterson Foundation) is called “The Coalition for Fiscal and National Security,” and they’ve assembled a list of prominent figures to promote it. Let us consider the message, and the messengers.

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The group’s mantra is a statement that retired Admiral Mike Mullen first made when he was Chairman of the Joint Chiefs of Staff:

“The single biggest threat to our national security is our debt.”

That’s a surprisingly bold and naive proclamation, especially from someone of Mullen’s stature. It takes a lot of imagination, and some highly implausible assumptions, to believe that our national security is really endangered by federal deficits.

The Peterson Foundation provides both, of course. Unfortunately its manipulated facts and figures fail to make their case, even when taken at face value.

What would a rational list of nonmilitary risks look like? Climate change would almost certainly top the list. Many military experts already consider it a grave national security threat. A bipartisan group of 48 defense leaders and experts – including, perhaps paradoxically, some of the Peterson group’s signatories – signed a full-page ad let year entitled “Republicans and Democrats Agree: U.S. Security Demands Global Climate Action.”

One defense expert called climate change “the mother of all risks.”

It’s easy to see why. Rising sea levels threaten many of our coastal towns and cities, including most of lower Manhattan. Millions of Americans are likely to become internal refugees in their own country, posing the risk of widespread lawlessness and instability.

Climate change is expected to trigger a number of future conflicts around the globe, as nations and peoples compete for increasingly scarce resources. Some scientists believe that climate change contributed to the rise of ISIS in Iraq and Syria.

Wealth inequality also belongs near the top of the list. Extreme inequality makes a society unstable. Today millions are trapped in poverty while the20 richest Americans own more wealth than half the entire nation – some 150 million people in 57 million households.

Persistent poverty plagues minority communities, while the 400 richest Americans own more than the nation’s entire African-American population (plus one-third of this nation’s Latinos). There are growing rates of suicide, opioid overdose, and deaths from alcoholism among lower-income whites. Economist Anne Case calls them “deaths of despair.”

What will happen if the middle class continues to collapse, if poverty remains inescapable for generation after generation, if most people face working years filled with dashed hopes and retirements plagued by penury?

Despair can turn to rage, sometimes without warning.

That’s one reason why it’s especially imprudent for the corporate-friendly “Coalition” to target Social Security, along with the rest of the social safety net. Sure, they try to sound reasonable. They even mention cutting the military budget (although they tip their hand by emphasizing military health care and payroll expenses, rather than cost overruns or expensive weapons systems.)

But they always turn to social programs, sometimes with not-so-subtle transitions like this: “Defense spending is the largest single category of discretionary spending… In 2015, it was second only to Social Security spending.”

See what they did there?

There’s little chance of getting tax increases or cuts in military spending through this Congress or the next, and they know it. The drumbeat for lower deficits only serves to undermine the social safety net – when we should be spending more to rebuild our economy.

******************

When a group uses prominent people to promote its arguments, it’s prudent to ask: Who are these people? Can we trust them? Are they wise and just?

Well, there’s former Michael Hayden, who headed both the NSA and the CIA. History will remember Hayden for giving sworn testimony to Congress that contained numerous falsehoods, as documented by the Senate Subcommittee on Intelligence. (Experts say it’s very difficult to convict someone for lying to Congress, but it’s still wrong — and illegal.)

Hayden signed off on detainee abuses that he argues were not technically“torture.” He insists other torturers have done much worse, in case that’s your moral standard.

Madeleine Albright’s on the list too. She was widely criticized for answering “we think the price is worth it” when asked about the Iraqi children who died as the result of sanctions against Iraq.

But the most prominent name on the list is Henry Kissinger’s. Is Kissinger credible?  It’s true that he’s popular among media and political elites, but that sad fact only serves to remind us that some memories are short – and that, for some people, the ties of social status outweigh those of morality and decency.

It was Kissinger who reportedly fed confidential information to then-candidate Richard Nixon – information that was used to sabotage the Vietnam peace talks, extracting a massive toll in human lives just to boost Nixon’s election chances.

It was Kissinger who delivered the illegal order to bomb Cambodia and Laos. More bomb material rained down on these tiny nations than was used in all of World War II. His actions cost countless lives and gave rise to the mad, massacring Pol Pot regime.

It was Kissinger who ignored the pleadings of a US diplomat and gave the green light to Pakistani atrocities in what is now Bangladesh, praisingPakistan’s dictator for his “delicacy and tact” while ridiculing those who “bleed” for “the dying Bengalis.”

“Yahya hasn’t had so much fun since the last Hindu massacre!” Kissinger said of Pakistani dictator Yahya Khan. (The government of Bangladesh reported that 3,000,000 people died in the “fun.”)

Kissinger supported the violent overthrow of the Chilean government by a right-wing dictator. Kissinger gave the go-ahead to the Indonesian government’s massacre of from 100,000 to 230,000 people in East Timor. (Estimates vary.) Kissinger’s other offenses and blunders are too numerous to list here.

His intellect is overrated, too. Princeton professor Gary Bass writes that “Kissinger’s policies were not only morally flawed but also disastrous as Cold War strategy.”

Would you trust this man with your Social Security? Do you think he’d make wise and humane decisions about our society’s priorities?

******************

Sure, there are some decent people on the Coalition list. But they’ve been misled by tricksters and lulled by the groupthink that comes from decades inside a bubble of insular privilege.

And what a bubble it is. It’s a glassy gold bubble that filters out every color of the rainbow except its own, bathing its occupants in a warm autumn-colored glow as strangers shiver in the cold blue daylight outside. The bubble speaks with the voice of false authority. It’s a floating oracle with the soul of a confidence man.

But the crowd is thinning out. There are real threats to face outside the bubble: poverty, inequality, a crumbling infrastructure, a dying planet. It’s time for the bubble to disappear, as all bubbles eventually do, by blowing away on the wind or vanishing with a soft pop in the light of the midday sun.

This blog originally appeared in ourfuture.org on June 16, 2016.  Reprinted with permission.

Richard Eskow is a Senior Fellow with the Campaign for America’s Future and the host of The Zero Hour, a weekly program of news, interviews, and commentary on We Act Radio The Zero Hour is syndicated nationally and is available as a podcast on iTunes. Richard has been a consultant, public policy advisor, and health executive in health financing and social insurance. He was cited as one of “fifty of the world’s leading futurologists” in “The Rough Guide to the Future,” which highlighted his long-range forecasts on health care, evolution, technology, and economic equality. Richard’s writing has been published in print and online. He has also been anthologized three times in book form for “Best Buddhist Writing of the Year.”

More Evidence on Why Inequality Matters

Monday, May 23rd, 2016

William SpriggsThe evidence has mounted, and is clearly accepted, that extreme income inequality has grown in the United States over the past 40 years—and by extreme income inequality, I mean a huge imbalance in income growth favoring the top 1% of the population. This is extreme because it is large enough and sufficiently imbalanced growth that it must force a rethinking of economic policies.

Too much of the debate has been taken up on wage disparities between high-tech workers and low-wage service workers, between those who program the robots and those displaced by them. All those debates are limited to understanding the stagnant income growth within those in the bottom 90% of the income distribution. In net terms, those workers have gained nothing.

Unfortunately, however, that framework continues to dominate the global consensus debating solutions to the rising inequality, whether it is from the International Monetary Fund or the Organization for Economic Cooperation and Development, pillars of the so-called troika of policy centers that define neoliberal consensus on best practices for national policy. And, the concerns about inequality echo through the World Bank and the World Economic Forum.

Recent research is pointing to a new direction of understanding why inequality hurts growth. It is based on micro-economic evidence of firm-level success and points to why policies aimed at reversing income inequality are in the interests of businesses at the firm level. By exploiting new big data, economists are modelling a different challenge that inequality creates.

Last year, Simon Gilchrist and Egon Zakrajšek looked at differences in pricing behavior of firms during the recovery from the 2008 recession and uncovered that firms live and die based on their customer base. Growth of the firm is reliant on growth of their customer base. Firms that face stagnant customer base growth and loss of customer base then live or die on the availability of credit and their liquidity. Those firms are fragile. A downturn like 2008 means they face the strongest headwinds, their customer base freezes or shrinks as their incomes fall and their lack of credit from the financial collapse can easily mean they fail, or struggle to hold on by raising prices to their remaining customers.

The macro-economic implications are clear. If the bottom 90% of the income distribution rises by only 0.7%, then there will be a lot of firms facing no growth in their customer base. Another new study this week confirms that. Xavier Jaravel shows that those with low incomes consistently buy the same products year to year. This follows basic economic rationality. Consumers with the same income, assuming fixed tastes and preferences, should be observed buying the same things over time. Having revealed their preferences for goods, if their incomes don’t change, their preferences should also be stable over time. In business terms, they do not present themselves as new customers. So, firms do not chase them. These same consumers, therefore, do not realize any gains from “competitive” markets, fighting through prices to win dominance over new products. Instead, the firms that serve the poor are the firms Gilchrest and Zakrejšek point out must survive on raising prices to hold onto their total revenue during tough times.

The rich, Jaravel found, on the other hand, face great competition for them among firms chasing expanding customer bases. In short, the rich are not poor people with more money. They do have different tastes; as economic theory suggests, rising incomes change people’s tastes and preferences. Economists, in fact, label some goods as inferior goods because as incomes rise, demand for them falls; the rich buy foie gras, not baloney, craft beers, not Bud Light. When firms chase those customers, they compete, and the benefit is falling prices for those goods.

So, there are two distortions that hurt growth when income grows so unequally. First, if income grows equally, then the 127 million American consumer units (households and families that buy things) all become potential new customers. Firms would then chase them, and the competitive dynamics of the market would create new opportunities to grow or create businesses. But, when only 1% have rising incomes, that is a growth of 1.2 million potential new customers. That is a vastly smaller set of opportunities for firms to grow.

Second, it is a limited set of tastes and preferences to go after; it is a market that lacks the scale for creating large numbers of jobs and production efficiencies that come from a mass market of 127 million new customers. This hurts productivity growth, as more jobs are created and aimed at smaller scale production.

So, rather than ask individual firms, “What would a $15-an-hour wage mean in paying their workers?” firms should be asked, “What would a 100-fold increase in their customer base mean?” Most firms are more concerned about the latter, without an understanding of ways to make that happen. But, if the economy is to grow, be dynamic and benefit workers and companies both, companies need to think about what policies make growth more equal.

This blog originally appeared in aflcio.org on May 20, 2016.  Reprinted with permission.

William E. Spriggs is the Chief Economist for AFL-CIO. His is also a Professor at Howard University. Follow Spriggs on Twitter: @WSpriggs.

 

401(k) Retirement Plans Amplify Income Inequality and Racial Disparities

Thursday, March 3rd, 2016

Isaiah J. Poole

It’s bad enough that the move toward individual retirement plans has been a massive failure when it comes to providing average working Americans retirement security. But now there’s research that shows that our dependence on individual retirement plans adds fuel to the fire of racial and class inequities in ways that the pension plans that used to be common did not.

The Economic Policy Institute presented that research Thursday in its “State of American Retirement” report. The report underscores the need to keep up the fight for strengthening Social Security and increasing its benefits, rather than cutting them.

“We’re moving toward a retirement system that magnifies inequality,” said Monique Morrissey, the EPI economist who wrote the report. That happened, she said, as the percentage of workers who received a pension (a “defined benefit plan”) declined from 35 percent of private-sector workers in the early 1990s to less than 20 percent today. (In the early 1980s, the percentage of private-sector workers in large companies that had a pension exceeded 80 percent.)

Pension plans were surprisingly egalitarian, Morrissey said, in the sense that once you got a job with a pension, what you received in retirement was affected only by your wages and years with the company. With “defined contribution plans” – like 401(k)s and individual retirement accounts (IRAs) – differences widen by race and class.

According to the report, among the people in the top 20 percent of income, nine out of 10 have retirement account savings; among those in the bottom 20 percent, it’s worse than totally flipped; fewer than one in 10 have any retirement account at all. The workers at the top fifth of the income scale accounted for 63 percent of total income, but have 74 percent of the total stashed in personal retirement accounts.

Only 41 percent of black families and 26 percent of Hispanic families had retirement account savings in 2013; 61 percent of white households do. The average retirement account among African-American and Hispanic workers contains about $22,000; for whites, the average account contains $73,000. On top of that, research shows that African Americans are disproportionately in jobs where retirement plans are simply not offered. “401(k)s have really been a disaster for African Americans,” Morrissey said.

In fact, for all ordinary workers, “401(k)s were never designed to be a primary retirement plan,” Morrissey said. Yet they filled that role at the same time President Ronald Reagan and Congress cut a deal to improve the solvency of Social Security that pushed back the retirement age over time from 65 to 67 – and at the same time worker wages stopped keeping pace with productivity and with income gains for corporate executives.

The result is that today fewer Americans than ever will have a financially secure retirement. The Government Accountability Office in 2014 found that half of all households age 55 and older have no retirement savings at all; close to 30 percent also do not have a pension to rely on, either. Of those who do have a 401(k) or IRA-type plan who were between the ages of 55 and 64, their retirement savings would yield a monthly check upon retirement of about $310 a month.

Morrissey said these realities reinforce the case for expanding Social Security benefits. “That’s the number one thing we need to be doing,” she said. (To support the call for strengthening Social Security benefits, add your name to this petition.)

She added that while waiting for action at the federal level, states can play a role. For example, the California Secure Choice Retirement Plan would opt workers into making regular contributions to a state-managed plan if they did not have a retirement plan available in their job. The state plan would invest in a balanced portfolio of assets that would not be driven by the kinds of management fee incentives that often drive retirement plan investments.

This blog originally appeared at OurFuture.org on March 3, 2016. Reprinted with permission.

Isaiah J. Poole worked at Campaign for America’s Future. He attended Pennsylvania State University and lives in Washington, DC.

Here’s Some History to Help Understand the Racial Wealth Gap

Wednesday, January 27th, 2016
A company of 4th Regiment U.S. Colored Troops, (USCT) Infantry/Wikimedia

William Spriggs Next month is Black History Month. We will hear stories about black Americans and their successes in this country against the barriers (slavery, Jim Crow, poll tax just to name a few) thrown in their paths. Yet for every success story, there is still the nagging fact that the median net wealth of white households is 12.2 times greater than that of black households.

Because of well-documented gaps in unemployment rates, earnings, poverty and wealth, black working people are sometimes falsely seen as “bystanders” to America’s economy.  Unbelievably, there is a tendency to observe the gaps in economic success and blame African Americans for being disengaged and not trying to respond to clear economic realities; a lack of investment in education, skills, training and personal saving. This is patently absurd.

African Americans are fully aware of the barriers they face to success, and have been steadfast to struggle to remove them.  Indeed, Dr. Martin Luther King Jr. was assassinated during a campaign by black sanitation workers in Memphis, Tenn., to exercise their right to organize, strike and demand fair wages; a key theme of American worker advancement during the first 80 years of the last century and one repeated this past Dr. King Holiday by airport workers demanding a living wage.

The difference in wealth does not grow smaller when comparing white and black households headed by college graduates, or when controlling for differences in income.  Because the easy answers like education and income differences don’t explain the wealth gap—which measures accumulated savings over multiple generations—the fall back is often to blame the savings’ behavior of blacks.  And, here, old stereotypes of African Americans being profligate can easily substitute for documentation. But taking a closer look at history tells us the real story.

Those early years after emancipation are key in addressing the deep history of African Americans as their own agents.  During the Civil War, African American leaders, most famously, Frederick Douglass, campaigned hard to have black soldiers officially sworn into the fight to end slavery.  With issuing the Emancipation Proclamation, Lincoln also finally signed on that in 1863 not only would slaves in the rebellious states be free, but African American men would join the United States Army and Navy in quelling the Southern revolt.  Close to 180,000 black men signed-up as official members of America’s Armed Forces to defend the Constitution of the United States against all enemies foreign and domestic.  They became the largest paid workforce of African American men to that point in America’s history.

The issue quickly arose as to where could they deposit their paychecks?  A few fledgling efforts were made to start banks.  And, that effort culminated with the establishment of the Freedmen’s Savings and Trust by Congressional act in March 1865; the Freedmen’s Bureau bank.  Recently the U.S. Department of Treasury and Secretary Jack Lew dedicated an annex to honor the Freedmen’s Bureau Bank.

By 1870, the bank operated 37 branches throughout the South, with African Americans trained as branch managers.  In all, almost 70,000 African Americans made deposits in the bank, reaching savings of about $57 million.  Those facts stand to clearly demonstrate the efforts of a people, subject to slavery, freed with nothing from their previous labors to start anew having built wealth for others for free.

But, fate would intervene.  The accumulation of those savings came during a period when the federal government still stood in the way of restoring the South’s old hegemony of white southern planters.  And, it came when the nation’s banks were still conservative following the uncertainties of the Civil War.  Southern banking laid prostrate, devastated by the collapse of the Confederacy and the meaningless holdings of Confederate dollars, and the long mystery of the disappearance of the gold reserves that backed that currency on its desperate journey south from Richmond, Virginia in April 1865 as Robert E. Lee surrendered the fighting cause at Appomattox Court House under the vigilant eyes of 2,000 black men in seven units of the United States Colored Troops.

By the start of the 1870’s, the expansion west made possible by the Homestead Act and transcontinental railroad—both enacted during the Civil War—restored the nation’s prosperity and financial zeal.  The result was over speculation in railroading.  In Europe, financial pressures mounted from the Franco-Prussian War.  Germany refused to continue issuing silver coins.  This resulted in plummeting silver prices, and the eventual move by the United States to go from backing its currency in silver and gold, to use only the gold standard.  This led to the collapse of investments in silver mines in the western United States.  The result was a global financial collapse that swept Europe and the United States in 1873.  With it came the collapse of the U.S. banking system.

Sound familiar?  And, that collapse decimated the Freedmen’s Savings and Trust as well.  At a time of general financial collapse and no Federal Deposit Insurance Corporation—a creation learned from the Great Depression—many depositors lost their savings.  The millions in savings of the newly free went away, too.  Not too different than the 240,000 homes that disappeared from the African American community after the financial collapse of 2007.

In 1876, a compromise to resolve the Presidential election resulted in the removal of federal protection of African Americans in the South.  The end of reconstruction meant the restoration of southern white hegemony and the evisceration of voting rights for African Americans, the protection of the access to many occupations and the limiting of their equal access to education.  This too sounds familiar.

To accurately measure history, it takes measuring all the hills and valleys right.  Dedicating a building to the Freedmen’s Savings and Trust allows us to properly assess the toil and efforts of African Americans.  It shows the hard work and industrious nature of a determined people.  It reminds us of the mountains of betrayal as well.

This blog originally appeared in aflcio.org on January 22, 2016.  Reprinted with permission.

William E. Spriggs is the Chief Economist for AFL-CIO. His is also a Professor at Howard University. Follow Spriggs on Twitter: @WSpriggs.

Illegally fired for exercising your rights at work? You should be able to sue

Saturday, September 19th, 2015

Laura ClawsonThe new bill to strengthen penalties against employers who illegally fire workers for collective action that Sen. Patty Murray and Rep. Bobby Scott introduced in Congress on Wednesday would do more than just deter those illegal firings, argue the Century Foundation’s Richard Kahlenberg and Moshe Marvit: it would reframe union rights as civil rights.

The WAGE Act would give workers the same remedies as employees whose civil rights are violated:  the ability not just to get their jobs and back pay, which is the rule now, but to win punitive damages, to engage in legal discovery that gives lawyers access to an employer’s internal files, and win attorneys’ fees when workers prevail. Employees also can get a preliminary injunction to get their jobs back right away.

By giving workers a fresh way to think about becoming part of a union – as a civil right, rather than just joining a special interest – the idea has a chance to re-awaken a conversation that has languished in American politics. The decimation of the American labor movement has been catastrophic for the middle class, keeping wages down and weakening the voice of middle-class citizens in the political process.

As Kahlenberg and Marvit suggest, “the time may be right” for this idea to come up in the presidential campaign:

Hillary Clinton and Bernie Sanders have attacked inequality and offered good proposals, such as increasing the minimum wage, which will help move the poor into the working class. But only a strong organized labor movement – and new, alternative forms of worker representation — can help move large numbers of people from the working class to the middle class.  The WAGE Act is a simple, concrete proposal for change that would help both traditional unions and new, emerging organizations that represent workers. The presidential candidates should make it a central plank in their campaigns.

What a good idea. Ball’s in your court, Secretary Clinton, Sen. Sanders …

This blog was originally posted on Daily Kos on September 17, 2015. Reprinted with permission.

About the Author: The author’s name is Laura Clawson. Laura has been a Daily Kos contributing editor since December 2006  and Labor editor since 2011.

Put Working People First

Tuesday, January 13th, 2015

Leo GerardThe jobs report Friday set off cheering: a quarter million positions added in December; unemployment declining to 5.6 percent. This good news arrived amid a booming stock market and a third-quarter GDP report showing the strongest growth in 11 years.

It’s all so very jolly, except for one looming factor: wages. They’re not rising. In fact, they fell in December by 5 cents an hour, nearly erasing the 6-cent increase in November.

Hard-working Americans need a raise. Their wages are stuck, rising only 10.2 percent over the past 35 years. Workers are producing more. Corporations are highly profitable. CEOs, claiming all the credit for that as if they did all of the work themselves, made sure their pay rose 937 percent over those 35 years. That’s right: 937 percent!

It doesn’t add up for workers who struggle more every year. Something’s gotta change. The AFL-CIO is working on that. It launched a campaign last week to wrench worker wages out of the muck and push them up.

At a summit called Raising Wages held in Washington, D.C., last week, AFL-CIO President Richard Trumka said, “We are tired of people talking about inequality as if nothing can be done. The answer is simple: raise the wages of the 90 percent of Americans whose wages are lower today than they were in 1997.”

“Families don’t need to hear more about income inequality,” he said; “They need more income.”

The meeting attended by 350 union representatives, community group officials, economic experts and religious leaders was the first of many that will be conducted across the country by the AFL-CIO to spotlight the pain and problems that wage stagnation causes. The AFL-CIO will begin these meetings in the first four presidential primary states – Iowa, New Hampshire, Nevada and North Carolina.

The idea is to ensure that candidates, Republican and Democrat, can’t squirm out of dealing with the issue. And Trumka said labor won’t tolerate sappy expressions of sympathy. The federation will demand concrete plans for resolution.

Also last week, the AFL-CIO launched Raising Wages campaigns with community partners in seven cities – Atlanta, Columbus, Minneapolis, Philadelphia, San Diego, St. Louis and Washington, D.C. In addition to seeking wage increases for all who labor, these coalitions will pursue associated issues such as fighting for paid sick leave and equal pay for equal work.

At the same time, the AFL-CIO and allies will push for federal legislation to seriously punish employers who illegally retaliate against workers and to provide real remedies for workers unjustly treated.

At the summit, workers told their stories alongside experts. Among them was Colby Harris, who suffered illegal retaliation. A member of OUR Walmart, he was fired last year after participating in strikes for better conditions.

“They are trying to silence people for saying we need better wages and benefits. The average Walmart worker makes less than $23,000 a year. These companies have no respect for their workers,” Harris told the group.

Another speaker, Lakia Wilson, said that workers can do everything right, work hard, follow all the rules and still lose out in this economy. The Detroit native earned a bachelor’s degree in education and a master’s in counseling. While serving as a school counselor, she took a second job as an adjunct professor at a community college to make enough money to qualify for a home mortgage.

But then, in a cutback at the college, she was laid off. She lost the extra income, and the bank began foreclosure. It was, she said, a horrible, humiliating experience. She cashed out her retirement to save her home. Now her credit and retirement are shot. This happened to her, and to so many others, she said, even though they “did everything necessary to get a good job and get the American dream.”

U.S. Sen. Elizabeth Warren talked to summit attendees about why the economy does not work for people like Wilson and Harris. Though this economy is splendid for those who own lots of stock, it’s not for the vast majority of workers who get their income from wages.

Sen. Warren pointed out that the economy didn’t always work this way. From the 1930s to the 1970s, she said, workers got raises. Ninety percent of workers received 70 percent of the income growth resulting from rising productivity. The 10 percent at the top took 30 percent.

Since 1980, however, that stopped. Ninety percent of workers got none of the gains from income growth. The top 10 percent took 100 percent. The average family is working harder but still struggling to survive with stagnant wages and growing costs.

“Many feel the game is rigged against them, and they are right. The game is rigged against them,” Sen. Warren said.

The rigging was adoption of Ronald Reagan’s voodoo trickle-down strategy.  That economic plot puts massive corporations, Wall Street and the 1 percent first. Politicians bowed down to them, legislated for them, deregulated for them. In return, the wealthy were supposed to chuck a few measly crumbs down to workers.

They did not. Workers got nothing.

Despite that, workers still get last consideration. That, Sen. Warren said, must be reversed.

Accomplishing that, clearly, is a David vs. Goliath challenge. David won that contest, and workers can as well – with concerted action. Papa John’s worker Shantel Walker told the summit such a story – one of victory against a giant with collective action.

She discovered that a teenager at the New York franchise where she worked was putting in time that was not clocked. The restaurant was stealing wages.

Walker helped organize a protest at the restaurant. Between 80 and 100 people rallied for justice for the young worker. And they won. The restaurant paid the teen. “Now is the time to stop the poverty wages in America,” Walker said; “Raise the wage!”

Trumka said the AFL-CIO and its allies will demand that of lawmakers. He said they would insist that legislators “build an America where we, the people, share in the wealth we create.”

For that to occur, lawmakers must serve the vast majority first. They must stop functioning as handmaidens to the rich in an economic scheme that has failed the 99 percent from the very day the 1 percent got Ronald Reagan to buy it.

The AFL-CIO and its allies intend to help lawmakers see that they must prioritize the needs of America’s workers.

This article originally appeared in ourfuture.org on January 13, 2015. Reprinted with permission.

About the author: Leo W. Gerard, International President of the United Steelworkers (USW), took office in 2001 after the retirement of former president George Becker.

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