Lessons From Mexico On Combating Poverty

Given all its present woes, Mexico would not strike most as a model to follow. But as I have mentioned before, for all its political and socioeconomic challenges, namely with respect to crime and corruption, one of the world’s largest economies has a lot going for it. As a “newly industrialized nation” with a broadening middle class, the country of 120 million is taking steps to better harness its burgeoning economic potential.

A good place to start is with the agricultural workers who make up a bulk of the country’s most impoverished people. One state is taking a simple yet profound approach to the problem, as The Atlantic reports:

In the Mexican state of Baja California, which exports huge amounts of strawberries, cucumbers, and tomatoes to the U.S., labor is taking a different tack that might take some of that pressure off of employers, for better or for worse: The local government is reportedly leaning toward paying a portion of farmworkers’ wages, bringing them up to 200 pesos (about $13.30) per day.

The terms of the agreement between farmworkers and the government have yet to be nailed down (for example, how much of the wage increase will be shouldered by government versus industry) but it is refreshing to see a government recognize that significant amounts of workers simply don’t make enough money to live comfortably, and to try to do something about it. And wages are only one part of the equation. The agreement would also have the government take pains to make sure workers are receiving the healthcare and social-security benefits they’re guaranteed by law, and hopefully would make it rarer for crew bosses to sexually harass female farmworkers.

In essence, the government is filling the gap between livable wages and what most companies offer. This might seem like an unlikely or unwarranted solution to most Americans, but it is already the reality, albeit less directly:

A recent study from UC Berkeley’s Labor Center found that nearly three-quarters of people participating in government programs such as Medicaid and food stamps are in families headed by workers. The authors, calling this a “hidden [cost] of low-wage work in America”, estimated that through these programs, taxpayers provide these families with about $150 billion in public support. Additionally, programs such as the Earned Income Tax Credit essentially subsidize the wages of workers whose income is below a certain level.

Shouldn’t companies be making up this difference instead of taxpayers? That’s how some state legislatures feel. Starting next year, California will publicly name any company that has more than 100 employees on Medicaid. And in Connecticut, state legislators are considering a bill that would require large employers to pay a penalty for each worker on their rolls earning less than $15 an hour.

Ultimately, what the government of Baja California intends to do is improve the situation that workers are in—something, one would hope, that companies start feeling the pressure to do as well.

It is very telling that the forces that most strongly oppose raising the minimum wage, or providing some sort of government support to workers, are the same ones directly responsible for underpaying their workers and shifting more and more of their companies’ profits to shareholders and top executives.

If businesses (and their supporters) do not want to do more to compensate their employees better, yet also do not want the government to help make the difference, then what exactly is the end game? A sclerotic economy where everyone is just barely getting by, and the demand for goods and services — which these same businesses claim is woefully lacking — remains low? Why should poverty — in any nation, much less the richest one — be seen as an unavoidable fact for so many working people?

Reflections On International Workers’ Day

International Workers’ Day, also known as May Day and Labor Day, is a holiday that honors the working classes and the labor movement, and also commemorates the Haymarket affair of 1886, in which workers went on strike for rights like an eight-hour workday and better working conditions (it soon became violent due to police brutality and a fatal bombing of unknown origin — you can read the details of the tragic unfolding of events here).

Despite being a seminal event in the history of the labor movement and the United States as a whole, the Haymarket affair (also known as the Haymarket massacre or riot), is given little attention in school or media. The event was one of several that captured the frustrations and concerns regarding growing inequality, workers’ exploitation, and class tension. It also contributed to the sorts of rights we now take for granted in the workplace, from safer conditions to more reasonable working shifts.

It is telling that while much of the world celebrates, the U.S. forgoes any formal recognition and instead observes “Law Day”, which affirms the importance of law in the foundation of the country, and “Loyalty Day” (formerly “Americanization Day”), which emphasizes patriotism towards American heritage and values. Both these holidays have roots in the First Red Scare of the early 20th century, and formalized in the context of the Second Red Scare that took place during the Eisenhower administration.

The participation of socialists and anarchists in what was a fairly broad-based movement did little to endear the holiday to the American establishment, especially in the context of the Cold War. Even to this day, when one speaks of workers’ rights and the like, it draws suspicion and outright ire, as if only the far-left should or could have an interest in the well-being of the majority of society (especially the vulnerable segment that does some of the toughest, most important, yet most poorly treated work).

Amid reversals in the rights and prospects of workers — from stagnating wages and salaries, to lesser job security — it is little surprise that a global holiday that recognizes the rights and well-being of workers would be overlooked and even subject to fear and contempt. Now more than ever do we need to restore a sense of consciousness and dignity among working people who are underpaid, mistreated, and deprived of opportunities for socioeconomic advancement. The auspicious absence of an American equivalent to May Day — our own Labor Day is celebrated in a different time and context — is both a symptom and cause of hostility and apathy towards the plight of working class people.

But given where the economy is headed, and how many people are getting dragged down with it, how long will that sentiment prevail? How long until we realize that labor rights and the labor movement are of interest to anyone seeking a more just, equitable, and thus thriving society for all? More people enjoying more opportunities, more dignified work, more spending power, which in turns helps businesses and grows jobs.

Of course it is not easy and it will take time and effort, perhaps unprecedented in scale. But it is a worthy endeavor for which we need to get started on as soon as possible, given the time it will take and the number of human lives being immiserated or even lost in the face of poverty and exploitations, both in the U.S. and abroad (it is International Workers’ Day for a reason).

May Day and the associated events and movements it recognized helped precipitate a more prosperous economic system, and within decades produced a culture and environment in which more and more people could share in the fruits of work and commerce, with empowerment in both the commercial and political spheres. Perhaps the second time around we can restore these now beleaguered values and go even further.

Big Business is One Thing — Corporate Influence is Quite Another!

That is basically the sum of Americans’ attitudes towards large corporations, according to a survey conducted by CNBC and public relations firm Burson-Marsteller. It gathered the responses of about 25,000 participants from 25 countries, including both rich and developing economies, regarding big business, its relationship with government, and similar issues (note that results for developing countries are skewed towards the wealthier and better educated citizens with computer access, and thus may be less representative — you can find the full report here).

The results, reported by the New York Times, were interesting in their nuance: although famously pro-business, Americans were nonetheless pretty skeptical when it came to the confluence of business and politics. When asked whether corporations have too much, too little, or just the right amount of influence over the country’s economic future, 48 percent of Americans chose “too much” — roughly the median between China, the lowest scorer at 24 percent, and Brazil, the highest at 63 percent.

Countries that are more concerned than America about big business’ role on economic future include the U.K., France, India, Japan, the Netherlands, Singapore, and Russia; among those that express more reservations than the U.S. are Italy, Spain, Australia, Germany, South Korea, Mexico, and Canada.

However, when the question regarding corporate influence was phrased in a different way, the results altered: when ask whether it a good thing or bad thing for corporations to be strong and influential, only 31 percent of Americans answered that it is a good thing, among the lowest of the countries surveyed, and well below the levels of major emerging economies like India, Mexico, Turkey, and China (in which 60 to 70 percent of respondents were favorable to greater business influence).

In fact, only Germany, Poland, the U.K., and Hong Kong were more cynical about companies having greater influence, although Australia, the Netherlands, Japan, and Canada were not far behind the U.S. in their dim view of more powerful businesses. Yet when asked whether corporate lobbyists exercise a high amount of influence over the national government, 59 percent of Americans responded in the affirmative, second only to Italy.

So what gives with this apparent contradiction? Times columnist Niel Irwin offers his assessment of the results:

When it comes to business exerting power over the economy, Americans have mixed views but are generally comfortable. But when it comes to business exerting power over government, they are much more exercised.

Americans aren’t antibusiness, in other words. They’re just against business having what they see as too much power in Washington.

Compare that with China, where citizens seem to view businesses as less powerful in terms of lobbying (only 19 percent seeing a lot of influence by corporate lobbyists, a full 40 percentage points lower than in the United States) but are more likely to believe it is good for companies to be strong and influential. One might imagine that Chinese citizens see less a phenomenon in which business overly influences government and one more in which government overly influences businesses.

Indeed, a remarkable pattern stands out. In some of the places where big business has the least power and capitalist economies are the least developed, optimism and support for the corporate sector is highest.

In Communist Party-led China, 74 percent of respondents agreed with the statement that “it is a good thing when corporations are strong and influential, because they are engines of innovation and economic growth.” That is around three times the level of support found in capitalist paradises like Britain, the United States and Australia.

Indeed, when asked whether the role of corporations in the future is a reason for hope or for fear, the U.S. and most other rich nations expressed the highest level of apprehension; conversely, the greatest amount of hope in the corporate sector were in the emerging economies like Indonesia, China, Malaysia and India.

As Irwin notes, it basically comes down to the fact that the less developed a corporate sector is in a given country, the more hopeful its people are that it will be a force for the better. Perhaps this is because these nations have yet to experience the large scale of business malfeasance than the long-industrialized West; or maybe it reflects greater trust in private institutions as opposed to the public ones — in most of these nations, particularly India and Brazil, governments are far less trusted.

Of course, it bears reminding that respondents from the developing world represent a smaller and more elite proportion of their respective nations — perhaps the average worker in these countries feels far less hopeful and trustworthy towards their corporations? What are your thoughts?

Restless Americans

To add insult to the injury of a stagnating economy, a report by economists Dan Hamermesh and Elena Stancanelli found that Americans are not only working longer than before (partly because they are making less per hour), but are increasingly more likely to toil outside of work hours, particularly at night and on weekends. As The Atlantic reported:

They found that on a typical weeknight, a quarter of American workers did some kind of work between 10 p.m. and 6 a.m. That’s a lot, compared with about seven percent in France and the Netherlands. The U.K. is closest to the U.S. on this measure, where 19 percent work during night hours. On the weekends, one in three workers in the U.S. were on the job, compared to one in five in France, Germany, and the Netherlands.

All of this adds up: According to the OECD, the U.S. leads the way in average annual work hours at 1,790—200 more hours than France, the Netherlands, and Denmark. That works out to about 35 hours a week, but a recent Gallup poll found the average to be much higher than that—at 47 hours weekly. And perhaps that’s not surprising, when 55 percent of college grads report that they get their sense of identity from their work.

As usual, technology serves as the double-edged sword: in many respects, it has made work a lot easier, not to mention all the new leisure activities (video games, Netflix, game apps, etc). But technology also allows work to be more accessible from home or even while on vacation, making it harder for employees to ignore emails, calls, and assignments — and easier for employers to expect, if not demand, such extra labor.

The consequences of such a work-centered culture are dire: strained social life, reduced sleep, frayed romantic and sexual activity, increased stress and, with all that, worsening mental and physical health. With the boundaries between work and leisure increasingly blurring, will jobs come to dominate our lives in the same way they once did during the early Industrial Era (when child labor, 12-hour workdays, and other such practices were the norm)?

If that is the case, then the solution is more or less the same now as it was then: more solidarity and activism among workers in all the relevant spheres — economic, public, and political. There is no sense in making people work more for less, especially when employers themselves stand to lose a lot in terms of reduced productivity, moral, and health among their employees.

We also need a serious assessment of how our business culture — and culture at large — operates counter-productively for human flourishing. It is becoming accepted practice, once again, for companies to squeeze out more and more from their beleaguered workers while simultaneously offering little to nothing to recompense (on the contrary, the trend is for ever-meager benefits, raises, and upward mobility).

More distressingly, it seems that far too many Americans consider this arrangement to be, at the very least, tolerable, if not acceptable. Ours is a work-obsessed culture that celebrates sacrificing leisure and even health for the sake of being productive at some task, even if it is for a company we hate and for benefits that do not make up for it. I can devote a whole other blog to assessing why it is that the U.S. seems especially enthusiastic about toiling at our own expense, but for now I ask that we at least question what it is we value in terms of quality of life; separating work from leisure is the very least we can do to that end.

The Plight of Restaurants Workers

Throughout the recession and subsequent recovery, one of the few job opportunities that have remained largely unaffected, if not growing, has been food service. From eateries to fast-food chains, this broad industry has gained an impressive 30 percent in employment since 1990, accounting for nearly one out of ten private-sector jobs in the U.S.

Unfortunately, a recent report by the Economic Policy Institute exposes some very disquieting things about one of America’s fastest-growing employers. Here are some of the highlights courtesy of Mother Jones:

The industry’s wages have stagnated at an extremely low level. Restaurant workers’ median wage stands at $10 per hour, tips included—and hasn’t budged, in inflation-adjusted terms, since 2000. For nonrestaurant US workers, the median hourly wage is $18. That means the median restaurant worker makes 44 percent less than other workers. Benefits are also rare—just 14.4 percent of restaurant workers have employer-sponsored health insurance and 8.4 percent have pensions, vs. 48.7 percent and 41.8 percent, respectively, for other workers.

 

Unionization rates are minuscule. Presumably, it would be more difficult to keep wages throttled at such a low level if restaurant workers could bargain collectively. But just 1.8 percent of restaurant workers belong to unions, about one-seventh of the rate for nonrestaurant workers. Restaurant workers who do belong to unions are much more likely to have benefits than their nonunion peers.

 

As a result, the people who prepare and serve you food are pretty likely to live in poverty. The overall poverty rate stands at 6.3 percent. For restaurant workers, the rate is 16.7 percent. For families, researchers often look at twice the poverty threshold as proxy for what it takes to make ends meet, EPI reports. More than 40 percent of restaurant workers live below twice the poverty line—that’s double the rate of non-restaurant workers.

 

Opportunity for advancement is pretty limited. I was surprised to learn that for every single occupation with restaurants—from dishwashers to chefs to managers—the median hourly wage is much less than the national average of $18. The highest paid occupation is manager, with a median hourly wage of $15.42. The lowest is “cashiers and counter attendants” (median wage: $8.23), while the most prevalent of restaurant workers, waiters and waitresses, who make up nearly a quarter of the industry’s workforce, make a median wage of just $10.15. The one that has gained the most glory in recent years, “chefs and head cooks,” offers a median wage of just $12.34.

 

Industry occupations are highly skewed along gender and race lines. Higher-paid occupations are more likely to be held by men—chefs, cooks, and managers, for example, are 86 percent, 73 percent, and 53 percent male, respectively. Lower-paid positions tend to be dominated by women: for example, host and hostess (84.9 percent female), cashiers and counter attendants (75.1 percent), and waiters and waitresses (70.8 percent). I took up this topic in a piece on the vexed gender politics of culinary prestige last year. Meanwhile, “blacks are disproportionately likely to be cashiers/counter attendants, the lowest-paid occupation in the industry,” while “Hispanics are disproportionately likely to be dishwashers, dining room attendants, or cooks, also relatively low-paid occupations,” the report found.

 

Restaurants lean heavily on the most disempowered workers of all—undocumented immigrants. Overall, 15.7 percent of US restaurant workers are undocumented, nearly twice the rate for non-restaurant sectors. Fully a third of dishwashers, nearly 30 percent of non-chef cooks, and more than a quarter of bussers are undocumented, the report found. So a huge swath of the people who feed you pay payroll taxes and sales taxes yet don’t receive the rights of citizenship.

All of this reflects a rather disturbing overall trend in the U.S. economy: the loss of stable, well-paying jobs to less secure, low-wage ones. Not only has job growth not kept pace with the needs of the labor force, but the relatively few options that remain share largely the same characteristics: meager pay, little to no benefits, no paid sick leave, poor upward mobility, and so on. And since this has become standard across the industry — baring only a few examples — most companies have little incentive to offer anything better to their workers — in essence, it is a race to the bottom, one that desperate workers of all ages have no choice but to take up.

Needless to say, this is not a sustainable model for prosperity. Not only do individual employees suffer, but so do their families and communities (the poorest of which often have few options beyond food service and equally low-paying retail). The national economy as a whole cannot thrive when such a large chunk of its consumer base is too poor to afford goods and services, or too unhealthy and demoralized to work at optimal productivity. These highly profitable employers have as much an interest in investing more in their labor force as the workers themselves.

For its part, the EPI report suggests legislative solutions, including a  higher minimum wage, mandated paid sick leave, and a path to legal status for undocumented workers. I would add unionization or some sort of labor collective as a big step, too. For its part, MoJo recommends that those wishing to learn more about the working conditions in America’s food industry read the 2013 book Behind the Kitchen Door by Saru Jayaraman.

As fast-food, retail, and other service work continues to take the place of increasingly obsolete but better-paying positions, we need to start adjusting the way we value such labor; otherwise, unpleasant, beggaring jobs will be the new normal, and that cannot last.

 
 

Working Hours in Developed Countries: 1990 and 2012

Nowadays, most people feel that they’re working harder and longer than ever — and with a lot less to show for it. There’s certainly a degree of truth to this, as real wages and incomes have remained stagnant despite rising productivity.

But according to research by the OECD, an association comprising most of the world’s richest nations, average working hours have actually declined for most developed economies over the last two decades, as the following graph from The Economist shows:

Understandably, many people might be skeptical of this finding, given what we’ve all seen and experienced in this miserable economy: people having to pull in two jobs or work overtime just to barely scrape by, all the while contending with a greater workload and less (if any) compensation. Indeed, The Economist article also notes some caveats:

The Greeks are some of the most hardworking in the OECD, putting in over 2,000 hours a year on average. Germans, on the other hand, are comparative slackers, working about 1,400 hours each year. But German productivity is about 70% higher.

One important question concerns whether appetite for work actually diminishes as people earn more. There are countervailing effects. On the one hand, a higher wage raises the opportunity cost of leisure time and should lead people to work more. On the other hand, a higher income should lead a worker to consume more of the stuff he or she enjoys, which presumably includes leisure.

In other words, how much you work is a separate matter from how hard your work, even the two are often seen as one in the same. Of course, working longer hours still means you’re spending less time doing leisurely things; conversely, someone who works hard may nonetheless end up with more time for themselves to enjoy (though some word argue that you may also become too burned out to actually enjoy most of that extra free time). But wait, there’s more:

Some research shows that higher pay does not, on net, lead workers to do more. Rather, they may work less. A famous study by Colin Camerer and colleagues, which looked at taxi drivers, reached a controversial conclusion. The authors suggested that taxi drivers had a daily income “target”, and that:

“When wages are high, drivers will reach their target more quickly and quit early; on low-wage days they will drive longer hours to reach the target.”

This may very well explain why so many companies seem intent on paying their workers as little as possible, despite nonetheless demanding more from them. Of course, there’s also research suggesting that higher pay boosts productivity — and corporate profits — by leading workers to be more invested in their jobs. This improves morale, reduces turnover, and minimizes the likelihood of cutting corners or stealing from the company. Basically, if people are treated better, they’ll work better.

Anyway, there’s more to how we look at work:

Alternatively, the graph above might suggest that people who work fewer hours are more productive. This idea is not new. Adam Smith reckoned that

“[T]he man who works so moderately as to be able to work constantly, not only preserves his health the longest, but in the course of the year, executes the greatest quantity of works.”

There are aberrations, of course. Americans are relatively productive and work relatively long hours. And within the American labour force hours worked among the rich have risen while those of the poor have fallen. But a paper released yesterday by the New Zealand Productivity Commission showed that even if you work more hours, you do not necessarily work better. The paper made envious comparisons between Kiwis and Australians—the latter group has more efficient workers.

Pretty complex stuff, to say the least. Clearly, there’s more to take into account than just how hard you work, for how long, and for what amount of compensation. What is certain is that humans value their free time as well as the material and monetary means to use it. I suspect that if you pay people better and give them fewer hours, they’ll generally work harder.

Otherwise, the next best thing might be to just make their work experience more pleasant; too many companies have skimped on perks that used to make our jobs a little more enjoyable. Company trips and parties have been cut, break times shortened, schedules less reliable and flexible — for too many people, work is simply too miserable. If we’re going to spend so much of our waking life working, it should at least be fulfilling, enjoyable, or at the very least well-paying. Indeed, as the great Bertrand Russell observed many decades ago:

So maybe we should be more self-critical about how much we work. Working less may make us more productive. And, as Russell argued, working less will guarantee “happiness and joy of life, instead of frayed nerves, weariness, and dyspepsia”.

Speaking from experience, I can certainly attest to my quality of life improving since getting a job that treats me better and compensates me more. Frankly, even when I was making less money working a part-time job before that, I still enjoyed my life more given the greater leisure time I had. What about you guys? What are your thoughts and concerns?

Bangladeshi Factory Workers Still Without Justice

Several months after a horrific factory collapse killed over 1,000 Bangladeshi laborers — exposing the callous and pervasive disregard for workers in that country’s biggest industry — there has still been little change in businesses practices in one of the world’s poorest nations. A recent investigation by Richard Bilton of the BBC uncovered yet another disturbing practice: forcing already-low paid and neglected employees to remain at work for nearly 20 hours.

We’ve been told this factory — Ha Meem Sportswear — works incredible hours; we’re hiding in the shadows to get the proof.

There’s a guard sitting in front of the main gate. He hasn’t spotted us.

He’s about to do something shockingly dangerous.

At 01.15 – with workers still busy inside – he locks the main factory gate and wanders away.

This place had a fire a few weeks ago and they’re commonplace in the industry. If anything goes wrong tonight, the workers are trapped inside.

The shift finally ends at 02.30. That’s a nineteen and a half hour day.

One worker agrees to talk. He earned about £2 for the shift and he’s exhausted. He has to be back at work again for 07:00.

He says: “My feelings are bad and my health is too. In the last two weeks, approximately, it has been like this for eight nights.”

Two days later, I return to Ha Meem Sportswear. I am going undercover as a buyer from a fake British clothing company.

I want to hear what the factory owners say about shifts.

We are shown around. The factory is old and cramped. One woman is working under a table.

The managers show us the order they’re working on: 150,000 pairs of jeans and dungarees for the discount supermarket Lidl.

I ask about working hours and I’m assured the factory closes at 17:30.

I ask about whether gates are ever locked: they say they are always open.

It’s clear the buyer is told what he wants to hear.

They even provided timesheets for the night I watched the factory. They say the shift ended at 17:30.

The paperwork looks convincing. If I hadn’t seen it myself, I would never know that workers were being forced to work such long days.

Ha Meem Sportswear is far from the only clothing manufacturer pulling this trick.

Kalpona Akter, from the Bangladesh Center for Worker Solidarity, says many factories hide the truth about working hours from Western retailers.

“The factory owners, they keep two different books. So one they show to the buyers, the other they show to the worker. These retailers’ so-called audits really don’t work.”

It’s practices like this — common throughout the third world — that make me cynical about industry opposition to regulation and unionization. If this is the sort thing they do in the absence of any sort of oversight or check on their power, why should we give them more freedom? If firms don’t want labor movements or the state coercing them to be ethical, then they should be setting the example by treating their employees better on their own. 

Indeed, there has already been significant pushback against this widespread abuse, as thousands of garment workers have gone on strike to demand an ultimately modest rise in their pay.

More than 100 Bangladeshi garment factories were forced to shut on Monday as thousands of workers protested to demand a $100 a month minimum wage and about 50 people were injured in clashes, police and witnesses said.

Garments are a vital sector for Bangladesh and its low wages and duty-free access to Western markets have helped make it the world’s second-largest apparel exporter after China.

But the $20 billion industry, which supplies many Western brands, has been under a spotlight after a series of deadly incidents including the collapse of a building housing factories in April that killed more than 1,130 people.

Workers took to the streets for a third day on Monday, blocking major roads and attacking some vehicles in the Gazipur and Savar industrial zones, on the outskirts of the capital, Dhaka.

At least 50 people, including some policemen, were injured, witnesses and police said, as police fired teargas and rubber bullets, and workers responded by throwing broken bricks.

Some workers also vandalised factories, witnesses said.

“We had to take harsh actions to restore order as the defiant workers would not stop the violence,” an Gazipur police officer said.

The monthly minimum wage in Bangladesh is $38, half what Cambodian garment workers earn.

The government is in talks with unions and factory owners on a new minimum wage.

Bangladesh last increased its minimum garment-worker pay in late 2010 in response to months of street protests, almost doubling the lowest pay.

Recently, factory owners offered a 20 percent pay rise which workers refused, calling it “inhuman and humiliating”.

“We work to survive but we can’t even cover our basic needs,” said a protesting woman worker.

The fact that a billion dollar industry is reluctant to pay people a mere $100 a month — not including any benefits of perks — speaks volumes about the culture of greed and elitism that has taken hold of many corporations. It also says a lot about the sort of environment such firms would rather operate in, and what their vision of America would be like were they given the chance to implement.

The Cruelty and Inefficiency of a Low Minimum Wage

According to the Center for Economic and Policy Research, it took a minimum-wage worker 130 hours to earn a year’s worth of health benefits in 1979. That comes down to three-and-a-half weeks of full-time, minimum-wage work. By 2011, the same health coverage costs 749 hours, or 19 weeks of full-time, minimum-wage work. In other words, you’d have to work nearly half the year to afford only healthcare, and nothing else. Note that half of all minimum-wage workers are adults over the age of 25 — these are middle-aged people working the sorts of jobs that were once reserved for teenagers starting off at the job market. 

Meanwhile, the Bureau of Labor Statistics (BLS) found that only around 10 percent of low-paid workers had any kind of healthcare benefits, and roughly the same amount had life insurance or a retirement plan. Only 20 percent took sick leave, and only 39 percent took any kind of vacation. Only 9 percent of US wages are paid out in the form of benefits, compared to a 16.2 percent average for 30 countries surveyed by the BLS, placing the US at 29th out of 30. Note that low-wage jobs represent the bulk of new employment opportunities now available (e.g. many of the fastest-growing industries are the lowest-paying ones).

As an article by Heidi Moore of the Guardian details, this arrangement is not only obviously harmful to these workers and their families, but to the nation as a whole:

It’s time to get real. Allowing the federal minimum wage to be so low means knowing that it will cost us all in Medicare, food stamp and social security payments later. While some in Congress – particularly on the conservative side – have mistakenly insisted on austerity and complained about the rising cost of federal benefits, they also seem not to have done the math to figure out why those costs are going up.

The solution is simple: raise the minimum wage, add benefits, and so reduce government benefit spending. If the minimum wage remains low, and benefits sparse, government spending on benefits will continue to rise.

These questions are ever more relevant – in the economic recovery “that isn’t”. Low-wage jobs are becoming the new normal, and they’re creeping up the generational spectrum: about 43% of minimum-wage jobs are in the food industry, which used to employ mostly teenagers, but now employs adults. Maybe these employers should start paying people like adults, too.

Raising the minimum wage will boost the economy. But just as importantly, so would adding benefits. If America wants to reclaim the mantle of economic leadership, this is how to do it.

 

As I’ve said before, if companies want to avoid what they feel is onerous regulation, then they must do their part to be socially and economically responsible, or else the populace — one way or the other — will strike back, as they did in the early 20th century. Most of these low-wage employers are highly-profitable, and can certainly spare to pay their workers just enough to at least get by. How else do they expect to get the consumer demand they collectively complain is too low?

Link

Corporate Profits Soar as Workers’ Incomes Slump

There is yet more evidence that our economy has become a zero-sum affair, where the growth of corporate profits (and by extension the coffers of the elites) come at the expense of average workers.

With the Dow Jones industrial average flirting with a record high, the split between American workers and the companies that employ them is widening and could worsen in the next few months as

That gulf helps explain why stock markets are thriving even as the economy is barely growing and unemployment remains stubbornly high.

With millions still out of work, companies face little pressure to raise salaries, while productivity gains allow them to increase sales without adding workers.

“So far in this recovery, corporations have captured an unusually high share of the income gains,” said Ethan Harris, co-head of global economics at Bank of America Merrill Lynch. “The U.S. corporate sector is in a lot better health than the overall economy. And until we get a full recovery in the labor market, this will persist.”

The result has been a golden age for corporate profits, especially among multinational giants that are also benefiting from faster growth in emerging economies like China and India.

These factors, along with the Federal Reserve’s efforts to keep interest rates ultralow and encourage investors to put more money into riskier assets, prompted traders to send the Dow past 14,000 to within 75 points of a record high last week.

While buoyant earnings are rewarded by investors and make American companies more competitive globally, they have not translated into additional jobs at home.

And why not? There is plenty of money to go around. Companies can well afford to hire new workers and pay their current ones better, and still have plenty of profits left over for their CEOs and shareholders.

As a percentage of national income, corporate profits stood at 14.2 percent in the third quarter of 2012, the largest share at any time since 1950, while the portion of income that went to employees was 61.7 percent, near its lowest point since 1966. In recent years, the shift has accelerated during the slow recovery that followed the financial crisis and ensuing recession of 2008 and 2009, said Dean Maki, chief United States economist at Barclays.

Corporate earnings have risen at an annualized rate of 20.1 percent since the end of 2008, he said, but disposable income inched ahead by 1.4 percent annually over the same period, after adjusting for inflation.

“There hasn’t been a period in the last 50 years where these trends have been so pronounced,” Mr. Maki said.

 

The problem is simple: corporations don’t want to to pay their workers better because their standards of sufficient wealthiness are getting ever higher. Business elites are finding their growing appetites for money ever more difficult to satiate. It used to be that making a million or so dollars was more than sufficient —  but nowadays, it seems every executive wants tens of millions, if not hundreds of millions, and their shareholders and board members are no better.

When a handful of people want more and more money, the natural consequence is to make cuts (e.g. layoffs, benefits, hours) and withhold investment (e.g. raises and benefits). Otherwise, where else will all this money come from? Consider the following  case in point:

“Right now, C.E.O.’s are saying, ‘I don’t really need to hire because of the productivity gains of the last few years,’ ” said Robert E. Moritz, chairman of the accounting giant PricewaterhouseCoopers.

At 218,300 employees, United Technologies’ work force is virtually unchanged from seven years ago, even though annual revenue soared to $57.7 billion in 2012 from $42.7 billion in 2005.

The relentless focus on maintaining margins continues, even though profit and revenue have never been higher; four days after the company’s shares soared past $90 to a record high last month, United Technologies confirmed it would eliminate an additional 3,000 workers this year, on top of 4,000 let go in 2012 as part a broader restructuring effort.

“There’s no doubt we will continue to drive productivity year after year,” Mr. Chenevert said. “Ultimately, we compete globally.”

And that last sentence denotes a bit part of the problem: even if a company’s executive or board wants to be ethical and pay their workers better, they’ll come under relentless pressure by investors and shareholders to provide a bigger return on investment. Competition is cutthroat and no-holds-barred, and this country’s particular hyper-individualism and dog-eat-dog mentality only makes it worse. There is no sense of social obligation — it’s all about the bottom line and how much one can make for themselves, regardless of the costs to others, the environment, or society as a whole.

Our culture and attitudes need to change. How to do so is a different story altogether.

Executives vs. Workers

CEO Pay

 

The data in question can be seen here. I understand that the Economic Policy Institute (EPI) is considered a left-leaning think tank, but regardless of its slant, I’ve yet to see this data disputed. From what I’ve read, the raw data pretty much confirms what most people are observing anecdotally: that our once widely-perceived meritocratic and classless society is becoming socioeconomically stratified like never before. Even the tax-heavy social democracies we regard as anti-business and “socialist” offer greater opportunities for upward mobility (as I discussed in a previous post).

A HuffPo piece that cites the article adds further detail (emphasis mine):

Income inequality between CEOs and workers has consequently exploded, with CEOs last year earning 209.4 times more than workers, compared to just 26.5 times more in 1978 — meaning CEOs are taking home a larger percentage of company gains.

That trend comes despite workers nearly doubling their productivity during the same time period, when compensation barely rose. Worker productivity spiked 93 percent between 1978 and 2011 on a per-hour basis, and 85 percent on a per-person basis, according to the Federal Reserve Bank of St. Louis.

Meanwhile, workers saw their inflation-adjusted wages fall in recent years as corporations postponed giving raises while adding to their record corporate profits.

Certainly, there are many reasons why our economy is faltering, but it seems that a major factor is the increasingly greedy and predatory nature of America’s business culture. Profits for most companies are at record highs, yet so too is unemployment.America has one of the lowest minimum wages in the developed world, while also having the highest proportion of its workforce employed in low-wage jobs, yet still many businesses – often the most profitable ones – continue to cut benefits, freeze wages, and work their employees harder. Companies are no longer investing in their workers.

These same self-entitled business elites crow for small government and the free-market; but in essence, they’re undermining their own ideology. If they want low taxes and less state involvement in the economy, then they must step up their social responsibility. If people got paid better, they wouldn’t need to rack up private debt or fall back on government programs to get buy. East Asian countries can get away with low taxes and low public spending partly because their communitarian societies, for the most part, take care of each other. It’s not a perfect arrangement, obviously, but it’s something to consider.

Whatever the case may be, this arrangement cannot lot. As history has shown time and again, a society cannot sustain such vast inequities – and the social dysfunctions that emerge as a result – for very long.