Blog on the Run: Reloaded

Thursday, November 20, 2014 7:45 pm

Here’s where a good part of the middle class went — and what Obama could do to fix it

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.

And he points out a way that the problem can be fixed, singlehandedly, by the president.

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.

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Saturday, May 10, 2014 8:37 pm

Actually, only PART of the 1% is the problem. But we don’t know which part.

OK, strictly speaking, it’s the top 8%: CNBC commissioned a poll of U.S. households with $1 million or more of investable assets. And to a significant (and, to me, surprising) extent, they think a lot like you and I think on the economy:

  • 51% believe income inequality is a “major problem” for the country.
  • 64% support higher taxes for the wealthy.
  • 63% support increasing the minimum wage.

Now, they don’t think exactly like us; they’re likely to overestimate the effect of a good education and hard work (America tops only the U.K. in social mobility among the 20 wealthiest nations), and they tend to underestimate the effect of inherited wealth and luck.

But the fact remains that close to two-thirds of millionaires think they, themselves, should be paying more taxes and that the minimum wage should be higher. Just thought you should know we have some support among their ranks.

 

 

Monday, April 7, 2014 6:59 pm

Do peons dream of loyalty?

I spent my 16th, 17th, and 18th summers working in food service at the Carowinds amusement park on the N.C./S.C. line near Charlotte. It was hard, hot, sticky, messy, occasionally dangerous work — hot frying fat is nothing to mess with, which doesn’t keep teens from messing with it, and I once got knocked back 10 feet into a stream cabinet when I accidentally touched a bare wire on a 440-volt grill I was trying to unplug. (Had I not been wearing rubber-soled shoes, an electrician told me, I might’ve been killed.) When I finished my first full day of work — 9 hours in a steamy kitchen on a humid April Saturday — I was in outstanding physical shape and still as physically tired as I would ever be in my life until I got E. coli food poisoning two decades later.

We had all kinds of rules about customer relations, grooming (sideburns no lower than the earlobe), our itchy-ass polyester uniforms, not sitting while on duty, and so on.

So when I read this post on working in retail by ex-journalist Joseph Williams, I didn’t find a whole lot that was new to me, other than the vastly increased amount of theft-prevention activity. But a lot of it was new to him, or forgotten since his last stint in retail 30  or so years ago. And there’s a small part of me that wants to criticize his ignorance, because retail and restaurant work is one of the fastest-growing segments of the labor force in an economy that is not, generally, creating enough new jobs even to match growth in the working-age population, let alone bring down the un- and under-employment rates. If journalists know nothing else about the economy, they need to know that, and what the ramifications are for the growing numbers of Americans for whom this is real life.

Obtaining work in retail had changed a lot since the 1980s. What used to require a paper application and a schmooze with the manager has turned into an antiseptic online process where human interaction—and the potential for an employment-discrimination complaint—is kept to a minimum.

That put me at a distinct disadvantage.

In person, thanks to good genes, people often assume I’m younger than I am. On paper, however, I’m just another overeducated, middle-aged, middle-class refugee whose last retail experience dates to the Reagan administration.

Not to mention retail employers these days have their pick of applicants: the Great Recession added countless numbers of desperate workers like me to the annual labor-market influx of college students and high schoolers. According to an Economic Policy Institute report, “In 1968, 48 percent of low-wage workers had a high school degree, compared to 79 percent in 2012.” Likewise, the percentage of people in these jobs who have spent some time in college has skyrocketed, jumping from under 17 percent to more than 45 percent in the same time. All of us are in a race to the bottom of the wage pool.

Although older job candidates bring experience and skills to the table, their job applications typically blink like red warning lights to retail managers: overqualified, overpaid, and probably harder to manage than some high school or college kid. In a word: trouble.

“Think about it, Joey—that’s why there are online applications,” my sister, a veteran human-resources professional, told me. “If you apply online, and you never hear back, they don’t have to tell you why they rejected you and face a discrimination lawsuit.”

I soon realized the only way I’d have a shot in retail is if I dumbed down my job application, met directly with the person in charge before applying, and used my journalism story-telling skills to sell myself, stretching the truth past the breaking point.

He also discusses how “wage theft” — essentially, employers ripping free labor from employees, works, and this, too, I remember from Carowinds:

Working in retail takes more skill than just selling stuff. Besides the mindless tasks one expects—folding, stacking, sorting, fetching things for customers—I frequently had to tackle a series of housekeeping chores that Stretch never mentioned in our welcome-aboard chat. Performed during the late shift, those chores usually meant I’d have to stay well past the scheduled 9 p.m. quitting time.

Mop the floors in the bathroom, replace the toilet paper and scrub the toilets if necessary. Vacuum. Empty the garbage. Wipe down the glass front doors, every night, even if they don’t really need it. It was all part of the job, done after your shift has ended but without overtime pay.

In at least one respect, I had it better than this guy: Once in a while, I actually did get overtime pay. Not always. Not often. But once in a while.

This guy was paid $10 an hour in a state where the minimum wage is $7.25. He has an interesting take on whether the minimum wage should be raised, and once again, it involves wage theft (highlighted text below):

Proponents [of a minimum-wage increase] argue that three extra dollars an hour can lift hundreds of thousands of workers out of poverty. Opponents say a raise for hourly-wage workers would keep some businesses from hiring and force others to make layoffs to stay in the black.

As a worker who earned $10 an hour, I say: Neither argument is entirely true.

Sporting Goods Inc., I came to realize, was fine with paying me a few dollars more than the minimum wage—officially $7.25 an hour in Maryland—because it had other ways to compensate itself, including disqualifying me from overtime or paid sick days. Requiring me to play Cinderella on the closing shift also saved management the money it would have had to pay a cleaning company to maintain the store. Yet even $10 an hour—about $400 a week before taxes—can barely keep a single adult afloat in a city like Washington.

A modest studio apartment in a safe neighborhood would easily consume an entire month’s pay. Meanwhile, depending on circumstance, an annual salary of roughly $20,000 might not automatically qualify a retail worker for government assistance. One of my co-workers, a young single mother I called Flygirl, lived with her mom and commuted 40 minutes, one-way, from a far-flung suburb to make ends meet. Most of my co-workers, in their early 20s or 30s, had roommates, spouses, or second jobs. None of them seemed to be making it on their retail salaries alone.

Even though I was living rent-free in a guest bedroom, my every-other-Thursday paycheck couldn’t help me climb out of my hole, particularly after the state took half my pre-tax, $300 weekly salary for child support payments. Grateful just to have a job, I didn’t think twice when I noticed Stretch sometimes cut me from the daily crew and kept my hours under 30 per week—until Mike, a longtime friend and a former union shop steward, explained.

“You’re part-time,” he told me. “If you work 40 hours or more, they’ll have to give you benefits.”

Because I live across town, meanwhile, I had an hour-long commute that cost as much as $10 a day round-trip on public transportation.

“Dude,” my best friend Jamie said. “After taxes, you’re making just enough to get to and from work each day.”

And when the writer finally finds a new job, one that pays a living wage, he tells his boss, who promptly criticizes his work ethic and  loyalty.

We seldom get to pick either the messages we receive or the messengers from whom we receive them. And it would have been nice if this guy hadn’t landed in poverty through his own doing, at least in part. But his story matters no matter his personal failings, because his story is pretty much the story of everybody who works in retail.

As was discussed in the Ideas section of Sunday’s News & Record, North Carolina still has about three unemployed people for every available job opening, and that doesn’t even count the so-called “discouraged” workers who have stopped looking for work and therefore are not counted as unemployed. Nor does it count the people who, though qualified for better jobs, are working part-time or minimum-wage jobs because that’s all they can find.

Their experiences are not hugely different from this guy’s. If you’re not one of them, you probably know many people who are. The American economy is screwing them to the wall, and it’s happening because of conscious and intentional decisions made by lawmakers in thrall to large corporations. It’s 21st-century peonage. And it needs to stop.

There is dignity and morality in honest work, even in retail, as long as workers are paid and treated fairly. But there is no dignity for the worker, and no morality for the employer, in taking from the worker what is rightfully his and debasing and degrading him while doing so.

 

Monday, October 28, 2013 8:38 pm

Econ 101, 2013 version

It’s so simple even Bill Maher gets it:

This is the question the Right has to answer. Do you want smaller government with less handouts or do you want do you want a low minimum wage because you cannot have both. If Coronel Sanders isn’t going to pay the lady behind the counter enough to live on, then Uncle Sam has to. And I for one is getting a little tired of helping highly profitable companies pay their workers.

And spare me the crap about how raising the minimum wage kills jobs because 1) it doesn’t, 2) CEO pay relative to worker pay is at an unprecedented height, and it ain’t because CEOs are, in general, competent at running providers of goods and services rather than gaming the system, and 3) corporate profits are at an all-time high.

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