Here’s another reason to vote in the mid-term elections this November: Conservatives think you need a pay cut. As I’ve said once or twice before, conservatives’ bottom line message is simple: America has economic problems because too many people have had it good for too long; and when they’re worse off again, the nation and its economy will be better off. The people they think had it too good for too long are you and me, and almost anyone who punches a clock to pull a paycheck.
Of course, right now they’re focused on people who earn minimum wage; Republican candidates like Alaska senate hopeful Joe Miller and West VA Senate wannabe John Raese want to abolish the minimum wage because they say it’s unconstitutional, while Connecticut Senate candidate Linda McMahon can’t make up her mind.
Never mind that the constitutional arguments are apparently due to conservatives constitutional inability to comprehend the constitution. Never mind that it seems they want to turn back time to 1787 when the constitution was ratified, or 1792 when the Bill of Rights was ratified. Never mind that, according to their logic they should shut down their campaigns, because even though the Constitution establishes Congress as a legislative body, it doesn’t give congress anything to do since it can’t do anything that the constitution doesn’t literally include. That is, it has to literally “say” the words — like “minimum wage” — or we’re limited to only those solutions and ideas that existed in 1987.
Never mind that two thirds of Americans support raising the minimum wage, which hasn’t kept pace with inflation for years.
Never mind the obvious insanity of all that. Their economic reasons for wanting to abolish minimum wage don’t add up either. Both Miller and Raese claim that abolishing minimum wage will create jobs, presumably because businesses will be spurred to hire more workers because they can pay them (even) less. Reality is actually quite the opposite.
And that’s where the rest of us come in. First, they’re coming for the paychecks of minimum wage orders. But yours and mine are next.
Even if we earn less than the minimum wage — like servers in the food industry, for example — conservatives like Minnesota candidate for governor Tom Emmer want to make sure we earn less, by even abolishing tips.
Even if we earn far more than minimum wage, conservatives believe you and I earn way more than we should. They rarely say so, but everyone in a while of them tests the water by saying thins like what Bloomberg columnist Kevin Hassett did recently: “Your fat paycheck is keeping your neighbor unemployed.”
So here comes the leap into ice-cold water: The biggest problem with the labor market right now is that wages are too high. As Washington again turns to government spending as a cure for unemployment, some against-the-grain thinking is in order.
Economics teaches that full employment would be reached if wages adjust downward, to a level that better reflects current circumstances. At lower wages, employers would desire more workers. Labor markets generate persistent unemployment only if wages are sticky, failing to fall as demand declines.
A number of reasons help explain why wages don’t and won’t drop, beginning with federal and state minimum-wage laws.
Never mind that millions of Americans have already had their wages reduced though unpaid furloughs and reduced working hours.
Meanwhile, wage growth among people who have jobs has just about stopped. The Economic Policy Institute reports that between 2006 and 2008, wages grew at an annualized rate of 4.0%; by contrast, over the past three months annual wage growth has plummeted to just 0.7%. At the same time, furloughs — requiring workers to take unpaid vacations — are on the rise: recent surveys show 17% of companies imposing them. More than 20% of companies have suspended their contributions to 401(k)s and similar pension plans.
So why isn’t the media screaming? Partly because these job and wage losses are not, for the most part, falling on the segment of our population most visible to the media. They’re falling overwhelmingly on the middle class and the poor. Unemployment among those who have been in the top 10 percent of earnings is closer to 5 percent, and their earnings continue to climb — although, to be sure, much more slowly than before the meltdown.
Many of those who are lucky enough to still have work have seen their hours and benefits cut back, or have been forced to take unpaid furloughs. Twenty percent of companies have suspended their contributions to 401(k) plans or other pensions.
And wages are stagnant, and have been for some time.
Going all the way back to 2000, wages have grown less than 1 percent a year, adjusted for inflation, according to the Economic Policy Institute.
Meantime, the richest Americans have seen their wealth skyrocket, so much so that now we have widest gap between the rich and the poor since 1929.
Never mind that companies long ago figured out they can increase productivity without hiring, by increasing productivity without increasing wages — provided that workers are desperate enough to kept their job and they paychecks no matter how little they make in comparison to how hard they work.
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.”
Never mind that corporations have found that layoffs can even pay for executive bonuses.
Corporate America. CEOs in one company after another are throwing workers onto the unemployment rolls and dodging taxes to boost short-term profits and fatten their own paychecks. They are shifting the burden of a poor economy onto the public purse — while continuing to line their own pockets.
According to a new report by the Institute for Policy Studies, CEOs from the 50 firms that have laid off 3,000 or more workers since the onset of the crisis took home nearly $12 million on average in 2009. That’s 42 percent more than the average for CEOs of S&P 500 firms as a whole.
On this side of the looking glass, what the rest of us call “reality,” corporations and businesses are sitting on tons of capital — some $1.8 trillion in cash, at present.
But anyone looking closely at the American economy today would see this is nonsense. American corporations have an unprecedented $1.8 trillion of cash. The Fed, meanwhile, has slashed interest rates to essentially zero – a record low – and is still holding over $2 trillion in securities that it said last week it will keep from shrinking. And a Federal Reserve survey released earlier this week showed that banks have been making it easier for businesses of all sizes to get loans. Credit standards for small firms have been loosened for the first time since late 2006.
In other words, businesses have all the capital they need. They’re sitting on it or can borrow it more cheaply than ever. But they aren’t using it to create jobs.
Why not? Because there’s not enough demand for their products or services. Consumers aren’t buying.
They’re using it to their give executives bonuses instead of investing in their businesses or hiring more workers.
Corporate executives, in reality, are not suffering at all. Their pay, to be sure, dipped on average in 2009 from 2008 levels, just as their pay in 2008, the first Great Recession year, dipped somewhat from 2007. But executive pay overall remains far above inflation-adjusted levels of years past. In fact, after adjusting for inflation, CEO pay in 2009 more than doubled the CEO pay average for the decade of the 1990s, more than quadrupled the CEO pay average for the 1980s, and ran approximately eight times the CEO average for all the decades of the mid-20th century.
American workers, by contrast, are taking home less in real weekly wages than they took home in the 1970s. Back in those years, precious few top executives made over 30 times what their workers made. In 2009, we calculate in the 17th annual Executive Excess, CEOs of major U.S. corporations averaged 263 times the average compensation of American workers. CEOs are clearly not hurting.
It’s clear enough that wage cuts don’t help boost unemployment, because lack of capital isn’t what’s keeping corporations from hiring. In fact, wage cuts will likely make them even less likely to hire, if workers are desperate to hold on to their jobs at any cost, in the midst of record-high unemployment.
Companies don’t hire because they have extra money lying around. They hire because demand for their products and services rise, and they need more workers to meet that demand with an adequate supply. Wage cuts, for those making minimum wage and above, will only serve to further reduce demand, because it takes money out of the pockets of people who are more likely to spend it.
Conservatives, on the other hand, want to put more money in the hands of people who probably won’t spend it.
Give the wealthiest Americans a tax cut and history suggests they will save the money rather than spend it.
Tax cuts in 2001 and 2003 under President George W. Bush were followed by increases in the saving rate among the rich, according to data from Moody’s Analytics Inc. When taxes were raised under Bill Clinton, the saving rate fell.
…When tax legislation was signed by Clinton in 1993 —
raising the top tax rate to 39.6 percent from 31 percent — the
saving rate fell from 12.1 percent in the second quarter to 9.5
percent in the first quarter of 1994. The Standard & Poor’s 500
Index rose 1.9 percent from July through September, after little
change the previous three months.
When the first Bush tax cuts were signed into law in June
2001, pushing the top rate down to 35 percent, the wealthy
boosted savings. The saving rate climbed to 2.8 percent in the
first quarter of 2002 from minus 2 percent in the second quarter
of 2001. The increased savings coincided with a 1.1 percent
decline in the S&P 500 index.
Maybe that’s why they fought so hard to protect bonuses and compensation for Wall Street banksters. They will likely fight as hard to reduce your paycheck and mine as they did to protect Wall Steet’s excesses.
It’s not hard to figure out why.
It’s not just that conservatives are opposed to minimum wage. It’s like with Social Security. It’s not that conservatives are opposed to Social Security, the program. They are, of course. It’s that their really opposed to the idea of social security (with a small “s”) for any American who work for a living and make less and a few $100K a year, at least. What they’re in favor of is social security only for those whose bank statements prove they deserve it.
It’s not that conservatives are opposed to a minimum wage. They are, of course. What they’re in favor of minimal wages for everyone. Or almost everyone, anyway.