Welp, in today’s blind-pig category, self-described “wealthy capitalist” Nick Hanauer identifies one reason why the middle class is weaker than it used to be.
And he does it in the pages of Politico, which will never be mistaken for a publication interested in the concerns of the middle class (or, to be more forthright, will never be mistaken for a publication interested in interrupting the greatest theft from the middle class in history).
If you’re in the American middle class—or what’s left of it—here’s how you probably feel. You feel like you’re struggling harder than your parents did, working longer hours than ever before, and yet falling further and further behind. The reason you feel this way is because most of you are—falling further behind, that is. Adjusted for inflation, average salaries have actually dropped since the early 1970s, while hours for full-time workers have steadily climbed.
Meanwhile, a handful of wealthy capitalists like me are growing wealthy beyond our parents’ wildest dreams, in large part because we’re able to take advantage of your misfortune.
So what’s changed since the 1960s and ’70s? Overtime pay, in part. Your parents got a lot of it, and you don’t. And it turns out that fair overtime standards are to the middle class what the minimum wage is to low-income workers: not everything, but an indispensable labor protection that is absolutely essential to creating a broad and thriving middle class. In 1975, more than 65 percent of salaried American workers earned time-and-a-half pay for every hour worked over 40 hours a week. Not because capitalists back then were more generous, but because it was the law. It still is the law, except that the value of the threshold for overtime pay—the salary level at which employers are required to pay overtime—has been allowed to erode to less than the poverty line for a family of four today. Only workers earning an annual income of under $23,660 qualify for mandatory overtime. You know many people like that? Probably not. By 2013, just 11 percent of salaried workers qualified for overtime pay, according to a report published by the Economic Policy Institute. And so business owners like me have been able to make the other 89 percent of you work unlimited overtime hours for no additional pay at all.
The president could, on his own, restore federal overtime standards to where they were at their 1975 peak, covering the same 65 percent of salaried workers who were covered 40 years ago. If he did that, about 10.4 million Americans would suddenly be earning a lot more than they are now. Last March, Obama asked the Labor Department to update “outdated” regulations that mean, as the president put it in his memo, “millions of Americans lack the protections of overtime and even the right to the minimum wage.” But Obama was not specific about the changes he wanted to see.
So let me be specific. To get the country back to the same equitable standards we had in 1975, the Department of Labor would simply have to raise the overtime threshold to $69,000. In other words, if you earn $69,000 or less, the law would require that you be paid overtime when you worked more than 40 hours a week. That’s 10.4 million middle-class Americans with more money in their pockets or more time to spend with friends and family. And if corporate America didn’t want to pay you time and a half, it would need to hire hundreds of thousands of additional workers to pick up the slack—slashing the unemployment rate and forcing up wages.
But … but … wouldn’t this be bad for business?
But here’s a little secret from the corner office: The arguments that the corporate lobbyists are making—about how badly business will be hurt—just don’t add up. What is adding up instead is the trillions of dollars in corporate profits and stock gains that corporations have made over the same decades that your hours climbed and your wages fell. From 1950 to 1980, during the good old days of U.S. economic might—the era in which the Great American Middle Class was created—corporate profits averaged a healthy 6 percent of GDP. But since then, corporate profits have doubled to more than 12 percent of GDP. That’s about a trillion dollars more a year in profit. And since then, wages as a percentage of GDP have fallen, you guessed it, by about the same 6 percent or 7 percent of GDP. Coincidence? Probably not. What very few Americans seem to understand is that that extra trillion dollars isn’t profit because it had to be, or needs to be or should be. That extra trillion dollars is profit because powerful people like me prefer it to be. It could have been spent on your wages. Or it could have gone into discounts to you, the consumer. We capitalists will tell you that our increasing profits are the result of some complex economic force with the immutability and righteousness of divine law. But the truth is, it is simply a result of a difference in negotiating power. As in, we have it. And you don’t. …
Of course, capitalists like me will tell you that when we cut into profits, the entire economy is damaged. And think of all the investment that corporate profits make possible. What do executives like me do with all that extra money? Why, invest in creating good-paying jobs for middle-class Americans like you, of course.
Unfortunately, that’s not exactly true either. Mostly, we use profits to manipulate our stock price for personal gain.
Here’s a little history that will explain how: Back in the 1970s, when the share of total U.S. income that the top 0.1 percent of households got was at a 100-year low, corporate executives received most of their compensation in the form of a salary, just like you. But since the late 1980s, the largest component of income for the top 0.1 percent has been stock-based pay. This shift toward compensation via stock options and grants means that CEOs are directly incentivized to increase the share price of their company’s stock.
Building better products that lead to higher sales and fatter margins are the traditional way for a CEO to push up the price of his stock. But that’s so old-fashioned. So yesterday. Instead, ever since a former Wall Street CEO in charge of the Securities and Exchange Commission back in 1982 loosened the rules that define stock manipulation (beginning to see a historical pattern here?), U.S. corporations have increasingly resorted to stock buybacks to prop up share prices.
(Aside on this point: There is an economic climate in which taking this action would have the effect that the corporate critics say — a climate of wage inflation and full or near-full employment. But we’re nowhere near either and haven’t been in decades.)
The president is going to announce his new, unilateral immigration policy in a few minutes, and that’s good. It’s so good, in fact, that Congressional Republicans have threatened to impeach him over it (although Reagan and Bush 41 did basically the same thing) is gravy.
That’s no reason not to change immigration policy. But if the president really wants to pick a hill to die on, this is the one. It benefits pretty much every wage earner making less than $70,000 a year (and the median total household income in this country is only about $53,000). It would pump up the economy significantly, directly benefiting the Americans who most need the help. It would be a strong substantive AND symbolic response to the complaints of voters in the 2014 elections that Democrats weren’t hearing their concerns about the economy. And it’s just the right thing to do on the merits.
Unfortunately, as Hanauer points out, there’s little indication that Obama understands why this is the right thing to do. Perhaps you can help him out on that one.
Hanauer agrees that that’s the right thing to do — for purely selfish reasons:
Contact the White House. Do it for yourself. Or, at the very least, have the courtesy to do it for me. Because honestly, I’m beginning to run out of customers.