Wednesday, April 09, 2008

Justice fails: Labor losing ground while corporate profits soar!

There were 5.37 million people who fell into poverty from 2000 to 2005; during the same time, there were 6.8 million more people without health insurance. . . . And the average wage of new jobs created in this decade is more than 20 percent below the average wage of jobs lost. . . .

All these developments occurred when the economy was growing, worker productivity was increasing, and corporate profits reached a forty-year high. . . . Unlike previous recoveries, this time working families are not gaining ground. The share of national income going to workers is the lowest on record, while the share of national income going to corporate profits is the highest on record. The Center on Budget and Policy Priorities reported that as of 2006, wages and salaries paid to workers as a percentage of GDP stands at the lowest level on record, 51.6 percent. The share of income going to corporate profits was the highest on record at 13.8 percent. In fact, slow wage growth is boosting corporate profits. According to Goldman Sachs, slow growth in labor compensation explains 64 percent of the increase in profit margins over the past year, and "the most important contributor to higher profit margins over the last five years has been a decline in labor's share of national income."

Bill Clinton, Giving: How Each of Us Can Change the World (New York: Alfred A. Knopf, 2007), pages 192-193

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8 comments:

Chris said...

I'm shocked that you would use Bill Clinton as a reference since he charges as much as $350,000 for a single speech.

Anonymous said...

Chris, It's not surprising that you are the first to comment - and always off topic. The Clintons are extremely generous in their giving - and pay their fair share of taxes on their wealth.

I don't profess to understand corporate finance, Wall St. influence, etc., but the fact that the disparity between the growth of corporate profits and worker income has continued to grow, indicates to me that something is wrong with the system. People who work should be able to have a decent standard of living, health insurance, a home over their heads and increase in income as profits go up. This statement, "In fact, slow wage growth is boosting corporate profits.", tells me that business isn't really concerned about the status of its workers - only impressing Wall St. with its ability to make profits and increasing the wealth of its stockholders. I don't advocate that businesses shouldn't make a profit, but somewhere someone needs to say "You don't make the profit without the people who work for you." "Life, liberty and the pursuit of happiness" implies to me that our gov't should create an environment where that is possible for all its citizens. Apparently that environment doesn't exist right now.

Thank you, Larry, for always keeping in front of us the need to be concerned for those who have no voice or influence.

Ann

Anonymous said...

The problem, in my view, does not lie with corporations or their profits in and of themselves. They are just playing by the present rules of the game. What we need to do is change the rules.

If Corp A is paying its workers better out of the goodness of its heart, and not because it needs to, all else being equal it is making less than its competitor, Corp B. Lower earnings make it a less desirable investment relative to Corp B, which hurts Corp A. And let's not make Corp B out to be the bad guy - as the better investment it's probably where your 401(k) money is going.

But set a higher minimum wage, and both Corp A and Corp B are now playing by the same (better)rules, and neither gets a competitive advantage out of skimping on labor costs.

It won't do any good to villify corporations which ARE in fact playing by the rules as they exist (if they're not, that's a different issue). If we don't like the macro-outcome, we need to change the rules.

Anonymous said...

Increasing minimum wage, it seems to me, is one way the government creates the kind of environment where working people can keep up their standard of living. Finding ways to reward those businesses (incentives?) who demonstrate their commitment to treating their employees well would be another way.

The system now, whether playing by the rules or not, seems to reward greed. I agree, changing the rules is what is required. How to do that while maintaining the freedom to start a business, make a profit, and then to treat workers fairly, is the question.

What rules would you change, other than minimum wage?
Ann

Anonymous said...

But by creating laws to be enforced, like minimum wage, we're promoting violence. Laws have to be enforced through violence, and violence is simply wrong. Christians cannot support this type of government-led violence. Enforcing law is wrong from a Christian standpoint.

(Sorry, no sign of Justin -- had to make sure his view was included.)

Larry James said...

Anon 11:40--couldn't agree more! Of course, not all corporations are public, but you're right about the rules needing to be changed to bring labor into the game more equitably. Charity never lifts a person, not permanently. Other forces must come into play for life change and community change to emerge. Let's change the rules.

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