Robert Reich: It's All About the Wages--Our Economy Would Be Fine If Everyone Made Their Fair Share

[kpete]

Robert Reich
It's All About the Wages -- Our Economy Would Be Fine If Everyone Made Their Fair Share
When virtually all the gains from growth go to a small minority at the top, the result is deep-seated anxiety and frustration.
July 13, 2010 |




Missing from almost all discussion of America's dizzying rate of unemployment is the brute fact that hourly wages of people with jobs have been dropping, adjusted for inflation. Average weekly earnings rose a bit this spring only because the typical worker put in more hours, but June's decline in average hours pushed weekly paychecks down at an annualized rate of 4.5 percent.

In other words, Americans are keeping their jobs or finding new ones only by accepting lower wages.

Meanwhile, a much smaller group of Americans' earnings are back in the stratosphere: Wall Street traders and executives, hedge-fund and private-equity fund managers, and top corporate executives. As hiring has picked up on the Street, fat salaries are reappearing. Richard Stein, president of Global Sage, an executive search firm, tells the New York Times corporate clients have offered compensation packages of more than $1 million annually to a dozen candidates in just the last few weeks.

We're back to the same ominous trend as before the Great Recession: a larger and larger share of total income going to the very top while the vast middle class continues to lose ground. And as long as this trend continues, we can't get out of the shadow of the Great Recession. When most of the gains from economic growth go to a small sliver of Americans at the top, the rest don't have enough purchasing power to buy what the economy is capable of producing.

more:
http://www.alternet.org/economy/147531/it%27s_all_about_the_wages_--_our_economy_would_be_fine_if_everyone_made_their_fair_share/

[zipplewrath]

1. Union busting

Reagan's union busting is working out just as they hoped. Between that and NAFTA, they've done well at undermining the middle class.

[shanti]

28. yup

and they're still at it in california.

[mediaman007]

2. These are the very same people who are hoarding their money!

It would be one thing if they spent their money. That would lead to employment. But once the money goes to them, circulation stops.

Better to give the money to people who will spend it and make the economy move again.

[Hydra]

9. They can never spend enough to make up for the lost consumers

I used to work in the tourism industry. Our clientele were mostly middle class people. Each of them would come on vacation in the area once or twice a year and spend about $7000.

Let's say we would get about 2000 of those per year through our office and about 15 per year that would spend 2-3x that. Last year, when we had to close up shop, the average sale went down to about $4000, the number of clients was under 1000. We had about 30 that bought something over $10,000, so that group actually grew a little, but they would come 1x per year max.

Ergo, yes the people at the top spend, but why would they want to come here often enough to make up for the 1000 x 7000 people?

[mediaman007]

17. What the people at the top spend becomes the wages

for the people who supply goods and services. My point is that the wealthy are taking their money out of circulation.

[Hydra]

18. Right, but you missed what I was saying

They don't have to take their money out of circulation for the gap to be a killer. Even if they spend it like water, they can't possibly spend as much as the middle class people did before en masse.

Say they buy 3 cars per person. High end, yes. Still, the same amount of money available to 100 people might have resulted in 150 car sales.

The idea that a plutocracy can or will spend enough to replace the dying middle class is basically impossible. A) They don't really need it, and B) They want things that last, and things that will be worth more later.

Something will have to give, and it won't be them.

[mediaman007]

21. My theory being that their purchasing power, or in fact,

investing their money, would lead to more hiring in fields that would enlarge the middle class.

Although, I do see your point. The money involved cannot come close to bringing back the middle class.

I accept your position.

[Hydra]

24. The investment is a good theory

But again, the breakdown comes in the actual spending.

The billionaires investing want a high return on their stuff. That usually means war companies, exploiters, polluters, etc. The money goes into the system and leaves disaster in its wake.

It's amazing how vicious the cycle gets when wealth gets concentrated- it's like a feedback loop. More, better, faster, harder, deader.

It's really too bad- if the 1%ers were halfway responsible, we could be living in a paradise right now.

[Warpy]

3. He's correct about that, it is all about the wages

because people wouldn't have had to go into debt and wouldn't be defaulting on that debt had wages kept pace with real inflation. Health care costs wouldn't be seen as astronomical. Food pantries wouldn't need to be so numerous and there would be far less need for homeless shelters.

Unfortunately, back in the 1970s, labor was blamed for OPEC inflation and OPEC inflation was allowed to continue because Nixon and then Ford refused to deal with it because it might have cut the windfall profits the oil giants were raking in.

We've had a sustained 40 year war against labor in this country, with the economy kept on the artificial life support provided by easy access to credit.

The bills are coming due now. Either this country will have to return to the sane policies of high taxes on the rich, a livable wage floor, targeted tariffs, and the abandonment of Empire, or there will be a revolution.

I hope they do the former because I sure as hell don't want to live to see the latter.

[FooshIt]

4. I think it's about time that wages get indexed to inflation

It is ridiculous that someone could be paid less year after year when their skill at the job is only improving.

[WingDinger]

6. They will claim that thru automation, we could get chickens to do our work.

So, a living wage is out of the question, we will have to be trained to have LOW expectations of comfort.

[FooshIt]

7. I'd love to see a chicken do what I do

[WingDinger]

10. Relatively speaking, of course.

[Spazito]

5. Mr. Reich is right but here's my problem...

Mr. Reich was in a unique position, while serving as Clinton's Secretary of Labor from 1993 to 1997, to change the dynamics he points out as being the "problems" yet he was unable to do so. Why is that? Has the political climate changed such that what was not possible, during the time he was able to make the kind of changes he is espousing in his article, is now possible? If yes, how so? If not, why did he not do what he is espousing be done in this article:

"The puzzle is why so little was done to counteract these forces. Government could have given employees more bargaining power to get higher wages, especially in industries sheltered from global competition and requiring personal service: big-box retail stores, restaurants and hotel chains, and child- and eldercare, for instance. Safety nets could have been enlarged to compensate for increasing anxieties about job loss: unemployment insurance covering part-time work, wage insurance if pay drops, transition assistance to move to new jobs in new locations, insurance for communities that lose a major employer so they can lure other employers. With the gains from economic growth the nation could have provided Medicare for all, better schools, early childhood education, more affordable public universities, more extensive public transportation. And if more money was needed, taxes could have been raised on the rich.

Big, profitable companies could have been barred from laying off a large number of workers all at once, and could have been required to pay severance -- say, a year of wages -- to anyone they let go. Corporations whose research was subsidized by taxpayers could have been required to create jobs in the United States. The minimum wage could have been linked to inflation. And America's trading partners could have been pushed to establish minimum wages pegged to half their countries' median wages -- thereby ensuring that all citizens shared in gains from trade and creating a new global middle class that would buy more of our exports." (I agree with him)

He includes the years he served as being part of the problem (I agree)and his inclusion of those years causes me to ask this:

If he, in the powerful position he was in, was unable to bring about these critical changes, how does he see another Democratic Administration/Congress succeeding where the Clinton administration (which included him) and Congress failed?

[DJ13]

13. His position didnt have much power

Labor Secretary doesnt have any say in economic matters, nor enough pull to change the minds of the DLC'ers who infested the Clinton WH.

[Spazito]

14. Okay, so I ask again, if he, serving as Clinton's Sec of Labor, has little influence...

even within his department and even less in the economic 'divisions', if you will, then I must repeat my question but will phrase it differently this time in hopes of adding clarity:

Mr. Reich stated this:

The puzzle is why so little was done to counteract these forces. Government could have given employees more bargaining power to get higher wages, especially in industries sheltered from global competition and requiring personal service: big-box retail stores, restaurants and hotel chains, and child- and eldercare, for instance. Safety nets could have been enlarged to compensate for increasing anxieties about job loss: unemployment insurance covering part-time work, wage insurance if pay drops, transition assistance to move to new jobs in new locations, insurance for communities that lose a major employer so they can lure other employers. With the gains from economic growth the nation could have provided Medicare for all, better schools, early childhood education, more affordable public universities, more extensive public transportation. And if more money was needed, taxes could have been raised on the rich.

Big, profitable companies could have been barred from laying off a large number of workers all at once, and could have been required to pay severance -- say, a year of wages -- to anyone they let go. Corporations whose research was subsidized by taxpayers could have been required to create jobs in the United States. The minimum wage could have been linked to inflation. And America's trading partners could have been pushed to establish minimum wages pegged to half their countries' median wages -- thereby ensuring that all citizens shared in gains from trade and creating a new global middle class that would buy more of our exports."

What he does not provide is the road map: How do we get from here (the present untenable situation) to there (his iteration cited above)? What is the process? Identifying the problem without providing a practicable solution is of little or no use, imo. It is merely a rant, makes one feel better but changes nothing.

[csziggy]

20. Robert Reich tried to do what he could while in the Clinton administration

Reich later joined the administration as Secretary of Labor. During his tenure, he implemented the Family and Medical Leave Act (FMLA), successfully promoted increasing the minimum wage, successfully lobbied to pass the School-to-Work Jobs Act, and launched a number of job training programs. At the same time, he lobbied Clinton to address bigger societal issues, countered Robert Rubin and others in the administration who wanted Clinton to pare his investment agenda, and pushed for improvement of conditions for those in poverty.

In addition, Reich used the office as a platform for focusing the nation's attention on the need for American workers to adapt to the new economy. He advocated that the country provide more opportunities for workers to learn more technology, and predicted the shrinkage of the middle class due to a gap between unskilled and highly skilled workers.
http://en.wikipedia.org/wiki/Robert_Reich

Reich resigned during Clinton's second term - at the time it was said he did so to spend more time with his sons but I have always wondered if he was frustrated that he could not do more.

[Spazito]

22. I understand his history...

and, as I posted above, I agree with what he states in his article but my problem with it remains unresolved. In a nutshell, he very clearly states the problem and what 'should be done', what he does not do is lay out the process for actually getting it done. Identifying the problem and saying what the solution should be without laying out, filling in the how-to process is, again, of little or no use, imo.

Identifying the problem is the easy part, the hard part is fashioning a practical, workable process to solve it. The first part is usually done, the second part is usually missing as it is in this article.

[csziggy]

23. Unless one is in a position to actually do something, what's the point?

For one thing, he cannot know all the tools available to the people currently in charge, so how can he give detailed steps to a resolution? The processes available to the powers that be have vastly changed since he was inside government - remember how much deregulation took place in Clinton's last term as well as in Bush's tenure.

Reich has consulted with the Obama White House so maybe he has tried to give them specific steps to take. Maybe they are just choosing to not follow his ideas and this is his way of getting the ideas across to the general public.

[Spazito]

32. If Mr. Reich doesn't know the tools available given his previous position...

who should? If Mr. Reich has given the current Administration specific steps to take why would he not also put those steps in his article as opposed to merely say 'this is what should be done' but, again, no concrete steps included.

You state "Reich has consulted with the Obama White House..." so would he not know what "processes.....have vastly changed..." and would, therefore, incorporate those changes into his thinking? Because there were no steps provided to achieve remedies to the problems iterated by Mr. Reich in his article, we don't know what the processes are, how they have changed and how to incorporate them in steps provided to solve the problems.

I have tried on more than thread to discover what the 'fix' should be and how it would be achieved, in practicable terms, from posters who freely state the problem but fail to provide a corresponding solution, but run into a stone wall. It is frustrating.

[snot]

29. Thank you for trying to get at a solution. Just bec. no one's come up with one yet

doesn't mean it's impossible.

I often feel frustrated that so few here seem interested in trying to help create solutions.

[Spazito]

31. It certainly my frustration as well ....

Pointing out what is wrong is all well and good but without proposing a workable remedy, it, to me, amounts to complaining for complaining's sake and nothing more. Very frustrating.

[Citizen Worker]

30. Bill Clinton and Al Gore are both DLC

At the time Clinton made his run in '92 he was serving as chair of the DLC. He resigned in order to run.

[Juche]

8. Wall street self pay is about 150 billion a year

You can support nearly 4 million people on middle class wages for that kind of money. Corporate profits and the income of the top 1% are a huge % of GDP. I think 40% or more.

It is going to take decades to address issues like this. Not just domestically either. Globally income inequality is a huge problem (latin america and Asia are seeing huge problems with it too). There is more than enough wealth on earth, it is just not distributed well.

[FooshIt]

11. thats about how many homeless people we have

I say pave over Wall Street and give the homeless the money. The homeless can buy a house, the middle class doesn't see their money stolen from them. Everyone wins! Except the bankers that is.

[WinkyDink]

33. Not "decades"; REVOLUTIONS.

[WingDinger]

12. If lettuce needs pickin', By darn, americans can do the stoopin'!

The dreamed about plan, to boot illegals, and force the unemployed, to enter chaingang, grapes of wrath, contracts of labor, if you can call them that. Fuedalism, is their goal.

[TwilightGardener]

15. You know what will fix this situation, don't you? That's right:

TAX CUTS FOR THE RICH!! Just throwing that out there. No matter the question, it's always the answer.

[stray cat]

16. would you sacrifice your pay to bring someone else up?

[WinkyDink]

34. We tithe to charities. Next question?

[WillyT]

19. HUGE K & R !!!

Thank you Robert!!!

:yourock:

:kick:

[DefenseLawyer]

25. So so so so true.

I wonder if any of the fucks in charge will ever be able to look past the quarterly balance sheet and see the big picture? I doubt it.

[HCE SuiGeneris]

26. Wage inequity, and unsustainable salaries,

will bring about needed change. It is not going to be a pretty transition.

[Commie Pinko Dirtbag]

27. More corroborating data: you know why Brazil's economy is doing rather well lately?

Simple: the Lula administration pushed up the national minimum wage, slowly but steadily.

Did wonders to all sorts of local industries. And there wasn't runaway inflation.

[Love Bug]

35. Higher wages = higher US revenue through the IRS

Duh.