August 29, 2010 in Business

Healthy need to share the wealth

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Corporate America must be in a bad way. Job growth has stagnated, the prospects for hiring, at least in the near term, seem grim, and the polls of top executives sound universally glum.

And yet, operating earnings of companies in the Standard & Poor’s 500 index jumped 38.4 percent in the second quarter compared with a year earlier, according to Thomson Reuters, and companies are sitting on an estimated $1.8 trillion in cash — by some measures, a record mound of cash.

Somebody’s making money in this economy. Unfortunately, it’s not the middle class or the working class. And that’s our real problem.

The business lobby talks as though the flat-lined job picture isn’t the fault of employers. Certainly it’s true that it’s not entirely the fault of employers. Chamber of Commerce-types overemphasize doubts about the strength of the economic recovery, the prospect of higher federal taxes and the costs of government initiatives such as health care reform.

Some aren’t above suggesting that American workers have simply become too lazy to get off unemployment and do some real work.

That was the theme of a recent article in the Wall Street Journal quoting several business owners marveling at the dearth of applicants for skilled job openings. But you had to do some math to find a clue to why this might be.

One business was looking to pay $13 an hour for machinists. That works out to about $27,000 a year (assuming vacation is paid for), or about the federal poverty line for a family of five.

Now, it’s possible that the business owner couldn’t possibly afford to pay a penny more. Or he might be thinking that with unemployment nosing 10 percent, he could try bidding down. But the article also quoted him saying his company could grow sharply if it only had the personnel, so perhaps he should consider bidding up.

The idea that only a shrinking proportion of American workers deserves a solid middle-class income seems to have become ingrained in parts of the business community over the last few years. That was the thought behind the punishing Southern California grocery lockout and strike of 2003-04, when the supermarket chains pressed for a wage and benefit system on which it would be difficult if not impossible to raise a family. (They got their way for new employees.)

How has that worked out? The share price of Safeway Inc., the owner of Vons and Pavilions and one of the chief drivers of the dispute, has barely budged since January 2004. The company swung from a profit of $560 million in 2004 to a loss of roughly $1 billion last year, a performance it largely blames on the crummy economy.

This is just one more manifestation of increasing income inequality in America, where the rich have gotten richer and the middle and working class have gone into debt to merely hang on. Whenever I write about the need for corporations and the wealthy to shoulder their fair share of taxes, I can count on receiving numerous e-mails instructing me that we need to cosset the rich because they’re the source of job growth. “I’ve never been offered a job by a poor person” is the usual refrain.

The answer to this argument is that there are precious few firms that can survive purely on the patronage of the top 1 percent of income-earners, or even the top 20 percent. When no one can afford to buy, no one has customers. Broadly distributing the fruits of economic growth is the only way to sustain that growth.

Ford Motor Co. understood as long ago as 1914, when it raised its daily wage to $5. The company’s new living wage all but eliminated absenteeism, built workplace loyalty and helped create a huge new market for automobiles. You want to call Henry Ford a “socialist” for implementing this idea? Go right ahead.

Corporate America, in the aggregate, has the apparent capacity to do the same today. The Federal Reserve reported in June that nonfinancial companies were holding cash totaling more than $1.8 trillion, having built up their hoards at a rate unmatched in more than 50 years.

Obviously there’s no way to force employers to hire more workers or to give the ones they have better pay, any more than there’s any way to force bailed-out banks to use their money to make loans. But funneling corporate wealth to shareholders at the expense of the workers who create that wealth isn’t any smarter today than it was 10 years ago, when it got us into this economic fix, and it sure won’t lead us to a brighter tomorrow.

Nine comments on this story so far. Add yours!

• 

  idahoguy on August 29 at 8:05 a.m.

  I bet you think you deserve more money as well….

  So what if the offered $13.00 per hour…so what. Our we now to expect to get paid more for a job because some elected to have children. That wage is NOT poverty for a single person and just to let you know the ad was there to hire just one person…not their entire freaking family!! If I was an employer again I would never offer more to an employee because they…needed it. They must bring more into the business bank roll in order to earn more back. That is the fair and just thing to do.

  Personal responsibility ( a foreign term to you) means to have the earning power and track record in place before you satisfy your lusts and reproduce children which you can not afford to pay for. This is NOT a Hillary Village around here and the smart hard working business owners are not the village idiots either!!

  Next thing you will blubber about is a person with a large mortgage deserves a larger pay check..ha h ha. Even Jesus said the owner of the vineyard had the right to set whatever wages he wished and to whom. No one had to take the job…right? Get it? No one had to….

• 

  ALH on August 29 at 9:36 a.m.

  Idahoguy, Are you looking for a machinist?

• 

  woodj64 on August 29 at 9:57 a.m.

  Idahoguy,
  You’ve had your way this year. We’ve had fewer children than any year in the past century. So I ask you, how will our economy thrive when our general population drops 10 to 20 million due to these times of economic hardship?
  Washingtonguy

• 

  wooglin52 on August 29 at 10:47 a.m.

  What clever, uttlerly biased “bull roar”. The Marxists are getting bolder.. I don’t think we’re losing our Constitutional freedoms; I think they are already lost.

• 

  cheddar on August 29 at 2:43 p.m.

  Consider the source, a syndicated columnist from the LA Times.. Such a feeble attempt to generate sympathy amongst others whose business model is failing.. He’s just trying to set his own safety net up because his paper can’t sell copies anymore.

  The REAL problem is that people would rather collect the $9 an hour from the gov’t for sitting on their butts than the $13 an hour for a real job. I challenge the article’s author to start a business, pay prevailing wage, don’t go into debt, and produce a quality product that people will buy, while also planning for the long term safety and growth of their company. What exactly does the author think the “huge corporations” should invest in? The gov’t is getting ready to drop the hammer with increases in taxes and new regulation, even those that save may not survive. It’s hard to compete against a gov’t that prints its own revenue.

• 

  misjustice on August 29 at 3:11 p.m.

  American workers are competing in the ‘global jobs auction’, a down ward spiral towards the race to the bottom. Many corporations would like to pay us the going global rate, a few pennies per hour plus a bowl of rice; while they shift their corporate ‘headquarters’ off shore to avoid paying taxes and pay their CEOs hundreds of millions of dollars [in the current tax structure CEO pay is tax deductible]. But this race to bottom harms not only the ‘middle class’ but the corporate bottom line.

  The mega rich can not, and will not, consume enough to keep corporate bottom lines from dipping into the red; they need middle class consumers, whose numbers once consumed enough to keep corporations profitable. Now, with wages at or near the poverty level, the disappearing middle class can barely survive let alone consume the newest shiny thing brought to us by the ‘free market’.

  Idahoguy, and others of his ilk, have bought into the corporate mantra and mimics it; even though it is against his best interest and it facilitates the corporate drive to make us all no better than a worker in an underdeveloped country.

  Why, Idahoguy, should we, members of the richest nation in the world, be made to compete against the poorest nations’ workers?

  It is families that will carry on the American ethos, yet you seem to defile and despise those that would produce the next generation. Just as you, no doubt, would despise those that are pro-creating at the highest rate, the Latino population. The next generation has to come from somewhere. And while I appreciate you not pro-creating [especially if your offspring would tout the same ideology that you embrace] the human race must continue and strive to exist in a world that is unfriendly to those not born with a silver foot in their mouths.

  The evidence is clear, most corporations have survived the economic downturn and have the means to hire workers. Their selfish desires to drive down wages further, to make us compete in the world arena of depressed wages, will ultimately harm their bottom lines, will result in fewer consumers for their goods, and will further hinder the recovery of our economy.

• 

  bdr on August 29 at 3:47 p.m.

  I totally agree with the Henry Ford statement I believe Henry was the only CEO that (GOT IT) in the last 100 years of business.
  and boy was he rewarded for it!

  Ford Motor Co. understood as long ago as 1914, when it raised its daily wage to $5. The company’s new living wage all but eliminated absenteeism, built workplace loyalty and helped create a huge new market for automobiles.

  Its clear that automation and race to the bottom global wages have given us worse quality for the dollar,worse global air,worse product quality, worse 3rd world working conditions.

  90% of all products built world wide are being built for the American market
  But 90% of the manufacturing wages are gone from America.

  A Ceo has to realize at some point the customers are going to run out of money for his product:
  If the product is built over seas.
  If the product is built by a robot

  Henry Ford chose American workers and also gave them a raise! (making him the smartest COE in America and leaving a legacy of a VERY SOLVENT car company, for the future CEO’s)

• 

  misjustice on August 29 at 4:30 p.m.

  Ford was a racist and an anti-Semitic but he did understand economics and the need to create new consumers for his tin Lizzy…hence his decision to pay his workers a living wage.

• 

  Dazzeetrader1980 on August 30 at 11:47 a.m.

  “Enlightened self interest” J. Ford knew he wouldn’t do well with workers who did work. Ford is theonly auto company who is turning a profit and the only American auto company that shunned Obama’s bailout. Perhaps there’s something of value there.
  I’m all for a solid living wage. The trouble is that somebody else defines “living wage”..ie unions….and they’re are war with companies. It’s perpetual. They safeguard nothing but themselves.

  We need an awakening to the concepts of profit and caring for each other. I have had charge of large plants in China, Romania, India and a few other remote places. Sure those workers produce lots for companies but frankly we, as Americans, should be far more worried about US and less about THEM. Enlighten self interest is something we need to embrace. It’s a deadend street we pursue taking government incentives to promote overseas operations at the expense of our own people. Obama’s done just that. He was skinned by Wall St and he’ll get skinned again by big business.

  This is a lost 4 years. We need to protect our people. We need to cherish their efforts. We, in some larger way, must be responsible for each other’s success in life. It goes beyond money but it does include it.