Let’s make this simple:
Corporate profits are up and real wages are down to their lowest levels in 60 years.
It’s all going to plan for the George Bush Republicans. The rich are getting filthy rich, the middle class is working harder and longer without compensation, and most Americans are too distracted by missing white girls to notice.
The New York Times has the story:
Real Wages Fail to Match a Rise in Productivity
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.
That situation is adding to fears among Republicans that the economy will hurt vulnerable incumbents in this year’s midterm elections even though overall growth has been healthy for much of the last five years.
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.” Think about that. We're all getting poorer yet working more hours than ever to get there and corporate profits are up. Does that make sense to you?
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.
At the very top of the income spectrum, many workers have continued to receive raises that outpace inflation, and the gains have been large enough to keep average income and consumer spending rising. AT THE VERY TOP OF THE INCOME SPECTRUM...what a surprise!
In a speech on Friday, Ben S. Bernanke, the Federal Reserve chairman, did not specifically discuss wages, but he warned that the unequal distribution of the economy’s spoils could derail the trade liberalization of recent decades. Because recent economic changes “threaten the livelihoods of some workers and the profits of some firms,” Mr. Bernanke said, policy makers must try “to ensure that the benefits of global economic integration are sufficiently widely shared.”
Political analysts are divided over how much the wage trends will help Democrats this fall in their effort to take control of the House and, in a bigger stretch, the Senate. Some see parallels to watershed political years like 1980, 1992 and 1994, when wage growth fell behind inflation, party alignments shifted and dozens of incumbents were thrown out of office.
…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. Not to mention jobs that are being added are low wage and low skilled. And for middle class jobs corporations are demanding more hours but not matching those with more income.
Together, these forces have caused a growing share of the economy to go to companies instead of workers’ paychecks. In the first quarter of 2006, wages and salaries represented 45 percent of gross domestic product, down from almost 50 percent in the first quarter of 2001 and a record 53.6 percent in the first quarter of 1970, according to the Commerce Department. Each percentage point now equals about $132 billion.
In Europe and Japan, the profit share of economic output is also at or near record levels, noted Larry Hatheway, chief economist for UBS Investment Bank, who said that this highlighted the pressures of globalization on wages. Many Americans, be they apparel workers or software programmers, are facing more comptition from China and India.
In another recent report on the boom in profits, economists at Goldman Sachs wrote, “The most important contributor to higher profit margins over the past five years has been a decline in labor’s share of national income.” Low interest rates and the moderate cost of capital goods, like computers, have also played a role, though economists note that an economic slowdown could hurt profits in coming months.
But in recent years, the productivity gains have continued while the pay increases have not kept up. Worker productivity rose 16.6 percent from 2000 to 2005, while total compensation for the median worker rose 7.2 percent, according to Labor Department statistics analyzed by the Economic Policy Institute, a liberal research group. Benefits accounted for most of the increase.
“If I had to sum it up,” said Jared Bernstein, a senior economist at the institute, “it comes down to bargaining power and the lack of ability of many in the work force to claim their fair share of growth.” And guess who is against this or increasing this…you guessed it…Bush and Republicans.
But in a sign that Republicans may be growing concerned about the public’s mood, the new Treasury secretary, Henry M. Paulson Jr., adopted a somewhat different tone from Mr. Bush in his first major speech, delivered early this month.
“Many aren’t seeing significant increases in their take-home pay,” Mr. Paulson said.
At the same time, he said that the Bush administration was not responsible for the situation, pointing out that inequality had been increasing for many years. “It is neither fair nor useful,” Mr. Paulson said, “to blame any political party.” That could not be farther from the truth. Make no mistake, one party wants this to occur because it makes them and their financers rich. And while Democrats have been bought out by the same corporate interests our core, the people who make it up, can not be defined the same way.
While it’s true the Democratic Party has offered no answer to this problem it's clear the soul of the Democratic party believes our society can change it. |