The economic “recovery” just keeps getting worse for the average worker: U.S. employers squeezed their employees even harder than usual in the first quarter, leading to the biggest drop in hourly pay on record. Hourly pay for nonfarm workers fell at a 3.8 percent annualized rate in the first quarter, the Bureau of Labor Statistics reported on Wednesday.
… Hourly pay has grown by just 2 percent per year, on average, for the past four years, the weakest four-year stretch on record. At the same time, corporate profits are at record highs, and until a recent swoon, the stock market was setting records, too. Workers haven’t been reaping the rewards, but their employers have been.
“If we started in 1960 and we said that as productivity goes up, that is as workers are producing more, then the minimum wage is going to go up the same. And if that were the case then the minimum wage today would be about $22 an hour,” she said, speaking to Dr. Arindrajit Dube, a University of Massachusetts Amherst professor who has studied the economic impacts of minimum wage. “So my question is Mr. Dube, with a minimum wage of $7.25 an hour, what happened to the other $14.75? It sure didn’t go to the worker.”
Dube went on to note that if minimum wage incomes had grown over that period at the same pace as it had for the top 1 percent of income earners, the minimum wage would actually be closer to $33 an hour than the current $7.25.
It didn’t appear that Warren was actually trying to make the case for a $22 an hour minimum wage, but rather highlighting the results of a recent study that showed flat minimum wage growth over the past 40-plus years coinciding with surging inequality across a number of economic indicators.
Warren went on to argue that raising the federal minimum wage to over $10 an hour in incremental steps over the next two years — a cause championed by President Barack Obama in his State of the Union address and since taken up in the Senate — would not be as damaging for businesses as some critics have argued.
The “Make Work Pay: Why Empowering Workers & Holding CEO’s Accounable is Vital to Economic Growth” workshop at next weeks Take Back the American Dream conference, will examine why America can’t afford to go the way of Texas on jobs.
But perhaps the biggest price tag on low-wage jobs creation is the potential for a “lost decade” of economic growth. Fewer people working means fewer people purchasing goods and services, leading to a drop in demand, which leads to further job loss. Two reports. It’s simple enough, but Republicans swear that lowering wages — like Michele Bachmann, who advocates doing away with the minimum wage in order to “offer jobs at whatever level” — will reduce unemployment to nil.
Repeat after me: Workers are consumers. Consumers are workers.
We’re slouching toward a double dip, and the stock market is imploding, because consumers – whose spending is 70 percent of the economy – have reached their limit.
It’s not just the jobless who can’t spend. It’s mainly people with jobs. Median wages continue to fall. Weekly wages in July for Americans with jobs were 1.3 percent lower than eight months before.
America’s median earners are now earning less (adjusted for inflation) than they earned ten years ago.
Every CEO of every company that continues to squeeze payrolls (Verizon, are you listening? Ford?) needs to understand they’re shooting themselves in the feet. Where do they expect demand for their products and services to come from?
They’re doing the reverse of what Henry Ford did back in 1914 – paying his workers three times what the typical factory employee earned at the time. The Wall Street Journal called his action “an economic crime” but Ford knew it was a cunning business move. With higher wages, his workers became his customers, snapping up Model-Ts and generating huge profits.
Many on Wall Street are scratching their heads, trying to understand why the stock market is plummeting. After all, they tell themselves, corporate earnings are still near record highs.
But it’s becoming clear those earnings can’t be sustained. Corporate earnings are the highest they’ve been relative to worker wages and benefits since just before the Great Depression. And the richest 1 percent of Americans are getting a higher percent of total income since just before the Great Depression.
Get it? It was only a matter of time before the boom on Wall Street turned into a bust. Economic booms cannot continue without American workers participating in them.
Foreign consumers have helped sustain earnings, but that won’t continue, either. The European economy is sinking and China is pulling in the reins on growth.
What will happen to the Dow Jones Industrial Average when corporate earnings revert to their historic average relative to American wages? I’ve seen various estimates. They’re not pretty.
In other words, deunionization has allowed income inequality to rise partly because unions are negotiating wages for fewer people than they used to, and partly because unions no longer have the power to force the political system to pay attention to the needs of the middle class. But if income inequality has to be reduced in order for middle class wages to grow—and it does—and if robust middle class wages are a key driver of the liberal project—and they are—then we’re all in big trouble. Mass unionization is gone, and it’s not coming back. This means we still need something to take its place, and we still don’t have it. Until we do, the progressive movement will continue to tread water. -Kevin Drum