Workers’ Wages Fall Further and More Americans Have to Work Past 65 While U.S. Executives’ Pensions Soar in Value

On a New Form of Indentured Servitude

November 10, 2009

The Confluence - There’s so much going on in the USA that warrants attention these days that it’s hard to know where to start. But, since I’m an economist I’m going to start here.

“There are families not eating at the end of the month,” said Stephen Quinn, executive vice president and chief marketing officer at Wal-Mart Stores, and “literally lining up at midnight” at Wal-Mart stores waiting to buy food when paychecks or government checks land in their accounts.

Among the steps Wal-Mart is taking to address the changes in shopping habits, Mr. Quinn listed an overhaul of the retailer’s private-label brand, Great Value, which is promoted in commercials describing how families can fix dinners with Great Value products “for less than $2 a serving.”

The really sad thing about this blurb is that I got it from the Media & Advertising section of the New York Times. It did not come from the op-ed page, it did not come from the business section nor the politics section. It’s there because Walmart is having to work on its product mix to reflect hunger in those families living below the poverty living in one of the richest countries in the world – The United States – and I am deeply ashamed as a citizen of that country to read this anywhere STILL after all these years.

There’s been an academic discussion about the disconnect between what some of our nation’s statistics tell us is going on and the reality on the ground. There was a conference this weekend to talk about re-working the way the nation calculates its GDP. This is extremely important.

Because of globalization, we are most likely over stating our performance in way that is throwing off our policy targets. We are losing per capita income from the lowest to middle quintiles, and we are hemorrhaging well-paying jobs for our most vulnerable citizens. They are not able to get enough to live on, and they are not wealthy enough to buy health care insurance or to pay premium taxes to feed an already over-bloated, costly, and inefficient industry.

A widening gap between data and reality is distorting the government’s picture of the country’s economic health, overstating growth and productivity in ways that could affect the political debate on issues like trade, wages and job creation.

The shortcomings of the data-gathering system came through loud and clear here Friday and Saturday at a first-of-its-kind gathering of economists from academia and government determined to come up with a more accurate statistical picture.

The fundamental shortcoming is in the way imports are accounted for. A carburetor bought for $50 in China as a component of an American-made car, for example, more often than not shows up in the statistics as if it were the American-made version valued at, say, $100. The failure to distinguish adequately between what is made in America and what is made abroad falsely inflates the gross domestic product, which sums up all value added within the country.

American workers lose their jobs when carburetors they once made are imported instead. The federal data notices the decline in employment but fails to revalue the carburetors or even pinpoint that they are foreign-made. Because it seems as if $100 carburetors are being produced but fewer workers are needed to do so, productivity falsely rises — in the national statistics.

The most interesting thing about this is that the argument is that our workers supposedly have become increasingly more productive over the last decade or so. What we might be measuring are impacts from trade instead. This goes a long way in explaining why the returns on labor (MRP or marginal revenue product) and the returns on capital are becoming so disparate.

The statistical distortions can be significant. At worst, the gross domestic product would have risen at only a 3.3 percent annual rate in the third quarter instead of the 3.5 percent actually reported, according to some experts at the conference. The same gap applies to productivity. And the spread is growing as imports do.

That may help to explain why the recovery from the 2001 recession was a jobless one for many months and why the recovery from this recession is likely to generate few jobs for many months.

In addition, more detailed import data would help to explain wage inequality, by linking some low wages more accurately to particular industries exposed to import competition.

On another front, many argue that labor productivity is rising faster than the pay of workers who made the greater productivity possible. That argument would be watered down if more accurate data showed that productivity had been overstated.

Just as more and more working class families fall into the cracks, we also have the latest sham of health care where families now struggling to make ends meet will face a tax if they don’t buy health insurance from overpriced insurance industry plans. Let me point you back to a piece in Politico for this beauty.

Page 29, sentence one of the bill introduced by Senate Finance Committee Chairman Max Baucus (D-Mont) says: “The consequence for not maintaining insurance would be an excise tax.”

And the rest of the bill is clear that the Finance Committee does, in fact, consider it a tax: “The excise tax would be assessed through the tax code and applied as an additional amount of Federal tax owed.”

The bill requires every American, with few exceptions, to carry health insurance. To enforce this individual mandate, the Senate Finance Committee created the excise tax as a penalty for people who don’t have insurance – and it can run as much as $3,800 a year per family.

The House bill also refers to the penalties for not carrying insurance as a tax. It calls for a “tax on individuals without acceptable health care coverage” and amends the tax code to implement it.

I have to ask what it is wrong with this country? It seems to pushing its poor to the brink of destruction during a time of when its also funding (through direct funds and also extremely low interest rates) arbitrage profits for the already rich at places like Goldman Sachs.

We might as well just call them all Princes and call ourselves the new corporate serfs because we’re going to be paying for our indentured status for some time under what’s going on right now. We’re tithing for the benefit of huge financial institutions, be they investment bankers, insurance, or mortgage brokers. They’ve become the residents of the neoGothic cathedrals of the 21st century dark ages of America. We’re back to ‘Still Hungry in America’ and this is ever so wrong.

Oh, meanwhile, via CNN breaking news:

The Dow hits 10,170 in intraday trading, its highest level in more than a year.

For Americans, Deficit Pain is Felt Close to Home

November 4, 2009

Reuters - Christopher O'Neill is worried about the deficit. The deficit, that is, in his personal income after the 26-year-old Miami finance analyst was forced to find a temporary job paying $20,000 a year less than he earned until January when he was laid off from his auditor's post in Miami.

From Miami to Milwaukee, ordinary Americans are counting the cost to their own lives of the recession, which has seen the U.S. budget deficit swell to a record $1.4 trillion in the 2009 fiscal year -- the biggest shortfall since World War Two.

While President Barack Obama and his top advisers rack their brains over how to goad the sluggish U.S. economy back into robust growth that boosts jobs and exports and reduces debt, most citizens are still struggling to fill the gaps in their jobs, incomes and lives caused by the downturn.

"What budget? Which one of mine do you want to start with?" said Wilma Kemper, 59, a retired office worker in Nashville, Tennessee, when asked about the federal budget deficit.

"Do you think the politicians care what we little people think about the national budget when we don't have a single say-so about it?," she added bitterly.

A new Thomson Reuters/Ipsos poll confirms the impression that many Americans find it difficult to see beyond the recession-muddled fog of their daily lives to the more elevated zone of policy-making and the relevance of the budget deficit.

The poll shows that most Americans, when asked about the economic issue they're most concerned about, rate the federal budget deficit well below high unemployment.

"My biggest worry is having a job," said O'Neill in Miami, adding that he welcomed all immediate efforts by Obama's administration, including economic stimulus initiatives, to bring down the jobless rate and revive the economy.

A rebound in U.S. growth between July and September ended the worst economic slump in 70 years, but unemployment has jumped to 9.8 percent and is seen going higher.

In the poll, high unemployment was listed by 33 percent of those asked as their top concern, followed by higher taxes (22 percent) and the budget deficit, lagging third (16 percent).

The poll showed 68 percent ranking unemployment and jobs as the top priority issue for their leaders, followed by economic growth (53 percent) and terrorism/war (50 percent).

The federal budget deficit lagged as a perceived priority with 48 percent, behind healthcare (49 percent), but ahead of taxes (38 percent) and the weak dollar (37 percent).

While Americans were more immediately worried about keeping their jobs, homes and cars in the recession, many expressed an awareness that the huge looming bulk of the deficit, a direct effect of U.S. economic strategy in recent years, was somehow intrinsically linked to the country's problems and future...

Workers’ Wages to Fall Further, International Labour Organization Warns

November 4, 2009

WSWS - The International Labour Organization (ILO) warned Tuesday that global growth in workers’ real wages, which fell sharply in 2008, will decline even more in 2009, despite what is being touted by governments around the world as an economic recovery...

U.S. Executives’ Pensions Soar in Value While More Americans Have to Work Past 65

November 4, 2009

WSWS - Workers in the US are increasingly giving up on the idea of retiring at 65, or even 67, while top CEOs are planning to quit their positions and live like royalty...

The Two Americas

Hunger in America: Half of Our Kids on Food Stamps

November 3, 2009

ChattahBox - A new study finds that nearly half of all American children will need to use the federal food stamp program to eat at some point in their childhood, with the number much higher for African American children, at a startling 90 percent. And the current recession, with persistently high unemployment rates, will cause the numbers of children on food stamps to rise even higher, say researchers.

The researchers, Mark R. Rank, PhD of the George Warren Brown School of Social Work, Washington University, St Louis, Missouri and Thomas A. Hirschl, PhD of the Department of Development Sociology, Cornell University, Ithaca, New York used thirty years of longitudinal data from the Panel Study of Income Dynamics survey.

The study concluded that:

“American children are at a high risk of encountering a spell during which their families are in poverty and food insecure as indicated through their use of food stamps. Such events have the potential to seriously jeopardize a child’s overall health.”

The alarming results showed that between the ages of 1 to 20 years, nearly half (49.2%) of all U.S. children will live in a household that receives food stamps. Broken down by race, 37 percent of white children use food stamps, compared to a whopping 90 percent of black children...

U.S. Wages and Salaries Rise at Record-Low Levels

October 31, 2009

WSWS - Employment costs in the US rose at the lowest annual amount in at least 27 years, according to data released Friday by the Labor Department. Stagnant wages and salaries are the outcome of government policies designed to lower the living standards of workers.

Over the past 12 months, the Labor Department’s Employment Cost Index rose by 1.5 percent, marking the lowest wage and salary growth since these figures started to be collected in 1982.

Meanwhile, compensation costs for the three-month period ending in September increased by 0.4 percent, among the lowest level since quarterly records began in 2001. This figure was unchanged from the previous quarter, and up slightly from the 0.3 percent growth in the first quarter of the year.

In the 12-month period before September 2008, employment costs rose by 2.6 percent.

These figures were led by falling government wages, which shrank by 0.1 percent in the third quarter, while benefits rose by a smaller-than average 0.3 percent. Compensation costs in private industry rose by 0.5 percent, with benefits rising 0.3 percent.

The decline in government wages is a direct result of policies initiated by states and cities in response to their budget crises. Local governments have laid off thousands of teachers, city workers, and bus drivers in response to their budget shortfalls. Those workers who remain have been forced to take furloughs and pay cuts.

In Detroit, Michigan, for instance, both city workers and teachers have been told to take a 10 percent pay cut.

These cuts are the direct outcome of the Obama administration’s policies, which have left states to fend for themselves amid falling tax revenues. The administration has made it clear that states must balance their budgets through spending cuts. Many states are required to have a balanced budget, and nearly all have resorted to wage and salary cuts, together with layoffs, to meet their obligations.

Consumer spending, meanwhile, fell significantly in September, according to figures released Friday by the Commerce Department. Spending fell by 0.5 percent last month, negating a good chunk of the 1 percent gain in the previous month. Disposable income for households also fell by 0.1 percent in September, in the fourth consecutive monthly decline.

The fall in consumer spending, the largest since December, is in part the result of the end of the government’s cash-for-clunkers program on August 24. Economists have said that this program, among others, accounts for much of the increase in third-quarter consumer spending and GDP...

A picture of the real state of things emerges from these figures. Real wages in the US are declining, while consumer spending can only be maintained, at least in the short term, by government stimulus programs.

Meanwhile, the real living conditions for regular people are becoming more and more intolerable. Wages for non-managerial workers have fallen by 1.4 percent so far this year, according to an article in USA Today, and are on track for even further declines. The official unemployment rate has reached 9.8 percent, and when one takes into account discouraged workers and people who are underemployed, it is at 17 percent.

While the Obama administration has spent trillions to bail out the banks and financial speculators, it has done next to nothing to address the massive employment crisis.

The White House released a report on Friday cynically claiming that its stimulus program had “saved or created” 640,239 jobs, based on data from a non-governmental monitoring board. This is based largely on inflated estimates of how many additional jobs might have been destroyed—in addition to the far higher figure that have in fact been destroyed.

The number of workers the federal government has actually employed in new projects is miniscule—estimated at 30,000 by the administration itself in a report released earlier this month.

In some states, the impact of federal programs has been negligible—including about 400 in Michigan, which has the highest unemployment rate in the country at 15.2 percent.

In reviewing these figures, the Associated Press found significant reporting errors, with certain new positions being counted as many as five times. The analysis showed that, based on the government’s records, the figure should have been 25,000, not 30,000...

Since the recession began in December 2007, 7.6 million jobs have been eliminated from the economy, and 3 million since Obama’s stimulus program was approved. Even if one were to accept the government’s estimates, a stimulus program that would address the unemployment crisis would need to be at least ten times the size of the one that has been passed. Instead, the Obama administration has rejected any further stimulus measures.

In fact, mass unemployment has been part of a deliberate policy, allowing for corporations to exploit workers’ fears over the poor labor market. The financial and corporate elite has used the economic crisis it created to carry out a massive redistribution of wealth. The bank bailouts will be paid for through attacks on the working class—including austerity measures, cuts in social programs and a continual attack on wages and benefits.