I saw an odd note in today’s Chicago Sun-Times. New York Knicks player J.R. Smith was fined $25,000 for “directing hostile and inappropriate language to another player via his Twitter account.” My first puerile thought was: What did he say? After that, however, I considered the amount of the fine in relation to a recent post I wrote about the median income in the U.S. Most people in the U.S. make $27,000 or less. One ballplayer was nearly fined that much for a tweet. The next time someone argues that there is not income inequality in this country, remember J.R. Smith’s expensive tweet. It says a lot about what is happening in this country. What it says is not good.
Timothy Eagan of the New York Times has written a great editorial on the current declining state of the middle class. Corporations get tax breaks from the government. Then they do whatever they can to drive down wages. Eagan looks at the case of Boeing, which received an $8.7 billion tax break and then asked its unions to make concessions. The Machinists Union said, “No.” Now Boeing is threatening to leave the state for one where wages are lower (“Right to Work for Less State”).
Is Boeing in trouble? Eagan writes: “Boeing is on a roll, its stock at a record high despite the troubled rollout of its 787 Dreamliner, and the pay of its C.E.O. boosted 20 percent to a package totaling $27.5 million last year.” If Boeing can give its leader such a raise, why doesn’t it want to compensate the people that build its planes? That’s the magic question, and the answer is that executives and boards of directors do not care about their workers or the health of the national economy. All they know is that they want more and more, which means working people have to make less and less.
A client told me a sad story today. He has worked for a large retail company as an Assistant Manager for over 8 years. He currently makes $25 dollars per hour in a managerial role. Next month his position will be eliminated and replaced by one making $11-$14 dollars per hour. In addition to this big pay cut, the company is increasing the position's responsibilities. My client could not accept such a demotion, and he gave notice. Some would say that no one should quit a job before securing another. Given the changes in his company, my client felt he had nothing to lose. He is confident he can find a job that will pay him more than $14 per hour.
This story surprised me only in the degree of the pay cut. Since 2008, clients have told horror stories about pay cuts, furlough days, changes in commission, and increased health care contributions. While pay increases go to the top of the income scale, the middle class and lower wage workers keep facing greater and greater stress. This trend cannot continue, or we will learn what our grandparents and great-grandparents went through in the 1930s. "Brother, can you spare a dime?"
The former Labor Secretary asks a good question: Can one worker or family have too much? This is a moral question, not a legal one. Of course, it is legal for a CEO to make a ratio of 150:1 to the average worker at her company. Is it right? At a time when most of the jobs being created are low wage, we need to think about wages and who benefits most. That is what Reich explores in his commentary.
To put the question another way, how can we justify a situation where six heirs of a man who was a business genius (Sam Walton) hold more wealth than the bottom 40% of all Americans? This is not just a question for the bottom 40% (more than 100 million Americans). Wage disparity makes us all poorer because we have become a society that lives by fear rather than hope. This gap between rich and poor cannot continue to grow as it has over the last 30 years. Sooner or later, the cradle will fall.
Good advice? Once upon a time, American society offered mobility, especially to those who made the sacrifice to get a good education. Writing in Daily Kos, Laura Clawson finds that things are different now in the U.S. If you want to get ahead, there’s one path to success: Be born rich.
College graduates still have better prospects than those with less education. But the research Clawson cites has found that a person without a college degree born to rich parents is 2.5 times more likely to be wealthy than the college grad who is not born to rich parents. As Ed Schultz puts it, its all about membership in the “lucky sperm club.”
I was listening to Ed Schultz’s radio show today, which included an interview with the great union leader Leo Gerard, President of the United Steelworkers, who asked this question: Why do CEOs and executives get the security of contracts? A small faction of unionized employees have such security, but that piece of the labor pie gets smaller every day. The best paid employees – the executives – are also the most secure.
Corporations now specialize in transferring risk from the company and executives to workers. I met with a client today who drives a small truck. His company is being put out of business by competitors that require drivers to purchase their trucks and routes, which is a method FedEx uses for some of its vehicles. When the company is no longer responsible for the vehicle, it can cut its price while increasing its profit. The company wins, so does it customer. Who loses? The employee who now has to own the truck, maintain the vehicle, and eventually replace it.
This example is just one way that workers are carrying the burden of “productivity.” The more a company can ask of its workers: own the vehicle, own your tools, pay for your entire pension, pay for most of your health care; the more it can take as profit. Those who believe in the “free market” will argue that these business models would be impossible if workers did not accept the terms. I think a more accurate way of describing this situation would be that desperate people will make bad choices. Those bad choices will cause all of us to suffer. First we will pay more to support social programs accessed by low wage workers. The next step will be much worse. What happens when wages fall so low that the shrinking middle class can’t subsidize the system that pushes money up? Our lives will be very ugly.
We need a system that offers real security as well as the opportunity for reasonable profit. Our current system is out of balance, asking the least of those who have the most, setting up a system where those who are most secure are getting even more security.