Middle Class economy 21st cen

Facebook IPO

The 2011 Fortune 500: The Big Boys Rack Up Record-Setting Profits

The Fortune 500 generated a total of $824.5 billion in earnings last year, up 16.4% over 2010. That beats the previous record of $785 billion, set in 2006 during a roaring economy. The 2011 profits are outsized based on two key historical metrics. They represent 7% of total sales, vs. an average of 5.14% over the 58-year history of the Fortune 500. Companies are also garnering exceptional returns on their capital. The 500 achieved a return-on-equity of 14.3%, far above the historical norm of 12%.


The billionaire trader who’s retiring at 38: Hedge fund trader and former Enron whizkid reveals he’s giving it all up (but he has got $3.5bn in the bank)


Revealed: Facebook founder Eduardo Saverin’s playboy lifestyle of supermodels, flashy cars and Singapore’s most exclusive clubs

Billionaire, 30, hangs out at private members bar and lives in luxurious penthouse

Rarely invests in companies but had given undisclosed sum to former Miss Singapore to fund her own cosmetics line

Party time: Saverin (second right) drinking champagne in Singapore where he has become renowned for his lavish lifestyle of fast cars and nightclubs

High class hang-out: Filter, the only private members club in Singapore at the Conrad Hotel, is said to be one of the Brazilian playboy’s favourite night spots


Facebook Co-Founder Saverin Gives Up U.S. Citizenship Before IPO


The Rise of the

F. Scott Fitzgerald was right when he declared the rich different from you and me. But today’s super-rich are also different from yesterday’s: more hardworking and meritocratic, but less connected to the nations that granted them opportunity—and the countrymen they are leaving ever further behind.

IF YOU HAPPENED to be watching NBC on the first Sunday morning in August last summer, you would have seen something curious. There, on the set of Meet the Press, the host, David Gregory, was interviewing a guest who made a forceful case that the U.S. economy had become “very distorted.” In the wake of the recession, this guest explained, high-income individuals, large banks, and major corporations had experienced a “significant recovery”; the rest of the economy, by contrast—including small businesses and “a very significant amount of the labor force”—was stuck and still struggling. What we were seeing, he argued, was not a single economy at all, but rather “fundamentally two separate types of economy,” increasingly distinct and divergent.

This diagnosis, though alarming, was hardly unique: drawing attention to the divide between the wealthy and everyone else has long been standard fare on the left. (The idea of “two Americas” was a central theme of John Edwards’s 2004 and 2008 presidential runs.) What made the argument striking in this instance was that it was being offered by none other than the former five-term Federal Reserve Chairman Alan Greenspan: iconic libertarian, preeminent defender of the free market, and (at least until recently) the nation’s foremost devotee of Ayn Rand. When the high priest of capitalism himself is declaring the growth in economic inequality a national crisis, something has gone very, very wrong.

This widening gap between the rich and non-rich has been evident for years. In a 2005 report to investors, for instance, three analysts at Citigroup advised that “the World is dividing into two blocs—the Plutonomy and the rest”:

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Mark Zuckerberg, the face behind Facebook

is worth billions, at age 30. He controls an amount of wealth unimaginable even to John D. Rockefeller in the heyday of unregulated greed: monopolies.

Unlike Standard Oil, Facebook is not part of the “real economy”, which actually impacts daily life: food, fuel, homes, cars, roads. Facebook does not provide employment for workers who make widgets or refrigerators. Businesses like Facebook do not create wealth — they transfer false wealth — paper profits — financialization.

Manufacturing creates wealth.

Labor Force Participation Is Lower Than It Has Been In 30 Years — Why It Matters And Why It Doesn’t

BRIAN BEUTLER MAY 4, 2012, 1:28 PM

Among the new employment figures the Labor Department released Friday morning is an obscure one that’s ripe for politicking: the labor force participation rate. It measures the percentage of the population age 16 and above who are actually working. The labor force participation rate fell last month to 63.6 percent, its lowest level since 1981.

In the midst of an economic recovery — albeit a slow one — why would the labor participation rate continue to be hover near four-decade lows?

If you take a long view of the figures, something becomes abundantly clear: there’s a lot more behind the country’s slumping labor force participation rate than today’s weak economy. The real reasons behind the fluctuations in the rate over the past several decades are fascinating, and they raise some of the biggest questions in the field of labor economics.

After climbing steadily for decades U.S. labor force participation plateaued about a decade ago, and began falling.

There’s no single, tidy explanation for what triggered the increase in the first place or why it’s come to an end, but the single clearest factor is that last century women began pouring into the work force — a phenomenon that came to an end in the last decade.

“The women who are going to enter have entered,” says Dean Baker, co-founder of the Center for Economic and Policy Research. All else being equal that explains why the labor force participation rate would flatten.

Other factors have combined to bring it down. The country’s aging population means we have an aging workforce — and that means a bigger-than-usual segment of the labor force is retiring in large numbers. Compounding that is the fact that large numbers of young working age men are not working. The Chicago Fed explored these trends in greater detail and concluded that the labor force participation rate will continue to decline well into the future.

As Justin Wolfers, an economist at the Wharton School of the University of Pennsylvania, pointed out, the macroeconomic implications are significant and could point to slow long-run GDP growth and the kinds of “jobless recoveries” that have marked the last two recessions.

“Applying this demographic view to recessions and recoveries suggests that the future recessions with historically typical cyclical behavior will have steeper declines and slower recoveries in output and employment,” conclude economists James Stock and Mark Watson.

If this is right, and current trends hold, our unemployment rate will remain high for a long time. That’s a scary thought, but as Wolfers noted, it depends on what’s underlying the trends. “If people are making other choices and are happy with those choices, it’s a great thing. But if women want to work and aren’t able to find jobs, it’s terrible.”

The data tell fascinating and important stories, but they aren’t the most telling indicators of the pace of the recovery. The U.S. has a much higher labor force participation rate than many other major economies, including some, like Germany, that weathered the global recession better than we have. The significance lies in broader demographic and policy differences between America and other countries.

“The differences with other countries are primarily women, young people, and old people,” Baker says. “We are pretty much in the middle of the pack in LFP for prime age men (25-55). We have higher rates of LFP for women than southern Europe, equal or lower than northern Europe (nordic countries are highest). For the young, we are very high. Students work in the U.S., they mostly don’t in Europe. This is conscious policy. They have stipend, we expect people to work. The same story applies to older workers. Most other countries have much more early retirement, people often can stop working in their late 50s. That is much rarer here.”


An economic recovery that leaves workers further behind

By Harold Meyerson, Published: April 10

Why is this recovery different from all other recoveries?

Many of the reasons are widely known: Rebounding from a financial crisis takes an excruciatingly long time; the huge decline in housing values has reduced Americans’ purchasing power; large corporations are making do with fewer employees — at least, in this country.

But what really sets the current recovery apart from all its predecessors is this: Almost three years after economic growth resumed, the real value of Americans’ paychecks is stubbornly still shrinking. According to Friday’s Bloomberg Economics Brief, “the pace of income gains is well below that of the past two jobless recoveries and real average hourly earnings continue to decline.”

The Bloomberg report cites one reason for this anomaly: Most of the jobs being created are in low-wage sectors. According to Bloomberg, fully 70 percent of all job gains in the past six months were concentrated in restaurants and hotels, health care and home health care, retail trade, and temporary employment agencies. These four sectors employ just 29 percent of the country’s workforce but account for the vast majority of the jobs being created.

Among the economy’s better-paying sectors, construction still has an unemployment rate of 17 percent. Given the persistence of mass foreclosures, the continuing decline of housing values and Republicans officeholders’ reluctance to allot public funds even for paving roads, construction isn’t coming back anytime soon.

Hiring has picked up in manufacturing, but manufacturing wages are falling nonetheless. The standard wage at Midwestern auto factories has declined from around $28 an hour to $15 an hour for workers hired during the past two years. New hires have their hourly wages contractually capped around $19, no matter how long they may work for the automakers. But the plunge in wages hasn’t stopped at $15. At a new high-tech locomotive plant in Muncie, Ind., Caterpillar is hiring workers at $12 an hour. That’s $24,000 a year — let’s say $30,000 with overtime, if there’s overtime — to assemble some of the most sophisticated machinery that this country builds. That’s not the kind of money you can send your kid to college on, or use to shop for much more than your daily bread.

So, if not to workers, where’s the money going? Of the companies that comprise the Standard and Poor’s 500, net income (chiefly, their profits) has risen 23 percent since 2007, the last year of the bubble, the Wall Street Journal reported this week. Their cash reserves have increased 49 percent during that time — in large part because they’re neither hiring in the United States nor boosting their workers’ incomes. Workers are producing more: “In 2007, the companies generated an average of $378,000 in revenue for every employee on their payrolls,” the Journal reported. “Last year, that figure rose to $420,000.” But workers are seeing none of that increase in their pay.

Profits and dividends are up and wages are down — which is why, as University of California economist Emmanuel Saez has documented, all income growth in the United States in 2010 went to the wealthiest 10 percent of households, and 93 percent to the wealthiest 1 percent. Profits and dividends are up largely because wages are down, as JPMorgan Chase chief investment officer Michael Cembalest has documented. “U.S. labor compensation,” Cembalest wrote in a newsletter to the bank’s major investors last year, “is now at a 50-year low relative to both company sales and U.S. GDP.”

Why is this recovery different from all other recoveries? Because American workers have lost all their bargaining power. That’s a function of ongoing high unemployment levels, but not only that. The 1981-82 recession had even higher rates of joblessness, but wages didn’t continue to decline during the ensuing recovery. There have been two fundamental alterations in the U.S. economy since Ronald Reagan was president, however. First, American multinational corporations now locate much of their production abroad. Second, with the rate of private-sector unionization down to a microscopic 6.9 percent, workers have no power to bargain for higher pay. Employers can serenely blow them off — and judging by the data, that’s exactly what employers are doing.

This recovery differs from its predecessors because it is concentrated among the affluent, and almost entirely among the very rich. Until we address the imbalance of power in the U.S. economy, and until Americans regain the clout that their parents and grandparents had to compel employers to share their revenue more equitably, the difference between our recoveries and our recessions will grow harder to discern.


Thursday, May 3, 2012

, analysts warn

Diane Stafford | McClatchy Newspapers
KANSAS CITY, Mo — The U.S. economic recovery – slow as is it – is leaving workers’ wages in the dust
Average hourly wages, which took a big hit in the Great Recession, are growing slower than they did before the recession, and their real value compared to inflation has fallen over the past year.

The National Employment Law Project said in a study published Thursday that weak wage growth is permeating all industries. But, equally worrisome for the consumer-fueled economy, most of the post-recession jobs being created are lower-paying.

“However you look at it, wages for most Americans are just limping along, and it’s become a real sap on the recovery,” said Christine Owens, executive director of the law project, an advocacy group for low-wage workers.

Michael Enriquez, an organizer of some of the 99 Percent Spring protests in the Kansas City area, said the income pinch has motivated people to join the rallies.

“Many working people are finding it harder to make ends meet,” Enriquez said. “They’re working harder and longer for comparatively less. Their wages aren’t keeping up with inflation, and that’s connected to the great income disparity in the country.”

According to the law project’s report, average hourly pay for all private-sector workers rose 2.1 percent from March 2011 to March 2012. But when the effects of inflation are factored in, the real value of hourly wages fell 0.6 percent.

To compare with pre-recession wage growth: In 2007, the year in which the recession began in December, inflation-adjusted wages grew 3.3 percent.

According to a similar wage-growth report released last week by The Conference Board, wage growth between 2008 and 2010 was the weakest since the 1960s.

“The severe depression of wage growth during the Great Recession … is likely to impact consumer spending, inflation, corporate profits, income inequality and employee engagement for many years to come,” said Gad Levanon, a co-author of the report for the non-advocacy, independent business membership and research organization.

“Moreover, the uneven distribution of this pain among different groups may carry deep social and political implications for the future development of the economy.”

Leigh Branham, managing principal of Keeping the People, a consulting organization based in Overland Park, Kan., said he finds “tremendous pent-up frustration from employees who have put up with lower pay increases for several years in a row.”

Branham’s survey research indicates that sluggish wage growth “has changed the give-get equation: Employees who feel like they’re being squeezed to give more with less pay are feeling like they’re not getting in relation to what they’re giving.”

The Conference Board research found that new college graduates are settling for lower-paying jobs than they expected. Also, employers are able to hire more educated and experienced employees at wages equal to or lower than they were paying before the recession.

“Thus far in the recovery, stagnant wages alongside constant or growing revenue has meant a rapid rise in corporate profits, shifting income to the wealthier households that tend to be top stockholders,” the board report summarized.

There is a small positive note in the board report, though. It said that continued slow wage growth “will make hiring U.S. workers relatively less expensive than hiring workers abroad or investing in labor-saving machinery – which may ultimately increase overall employment.”

The law project’s conclusions fall in line with another data point, also released Thursday, by the Society for Human Resource Management. The personnel association’s survey found that 32.1 percent fewer service-sector companies raised their new-hire pay rates in April this year than raised their pay rates in April 2011, said Joe Coombs, author of the human resource report.

Although overall hiring continues to be “fairly positive,” the human resource report also detected “employment expectations trending slightly down for May, especially in the service sector,” said Jennifer Schramm, the association’s manager of workplace trends and forecasting.

The AFL-CIO union, tracking collective bargaining settlements in the private sector, found that average wage gains for union workers echoed the rate for the private-sector workforce at large. Average first-year wage increases in the union contracts were 1.9 percent last year.

In addition to base pay squeezes, fewer workers are obtaining employer-subsidized health insurance.

The Employee Benefit Research Institute reported last week that nearly half of wage and salary workers aged 18-64 worked for employers that didn’t offer health benefits in 2010.

There’s no indication that work-based access to health benefits has increased since then.

“Fewer employers are offering the benefit, fewer workers are eligible for it, and fewer workers are taking advantage of the benefit when it is offered, largely due to cost,” said Paul Fronstin, director of the research institute’s health and education program.

Branham, the consultant who specializes in employee retention, said there is a tie between crimped pay and benefits, the do-more-with-less workplace, and employee health.

“This stress is causing people to be ill more often and miss more days of work,” Branham said.

For many, that means a pay cut because they lack paid sick days.

It’s also ramping up attention to the disparity between average wages and executive pay or corporate profits.

“Our recent research about why employees leave (their workplaces) shows that the relationship with senior leadership is more important than ever before,” Branham said. “Employees are asking if the leadership is selfishly interested in their own wealth accumulation, or are they interested in me?”


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By Peter Whoriskey, Published: February 19

HOLLAND, Mich. — This stretch of the Rust Belt might seem like an easy place to find factory workers.

Unemployment hovers above 9 percent. Foreign competition has thrown many out of work. It is a platitude that this industrial hub, like the country itself, needs more manufacturing work.

But as the 2012 presidential candidates roam the state offering ways to “bring the jobs back,” many manufacturers say that, in fact, the jobs are already here.

What’s missing are the skilled workers needed to fill them.

A metal-parts factory here has been searching since the fall for a machinist, an assembly team leader and a die-setter. Another plant is offering referral bonuses for a welder. And a company that makes molds for automakers has been trying for seven months to fill four spots on the second shift.

“Our guys have been working 60 to 70 hours a week, and they’re dead. They’re gone,” said Corey Carolla, vice president of operations at Mach Mold, a 40-man shop in Benton Harbor, Mich. “We need more people. The trouble is finding them.”

Through a combination of overseas competition and productivity gains, the United States has lost nearly 4 million manufacturing jobs in the past 10 years. But many manufacturers say the losses have not yielded a surplus of skilled factory workers.

Instead, as automation has transformed factories and altered the skills needed to operate and maintain factory equipment, the laid-off workers, who may be familiar with the old-fashioned presses and lathes, are often unqualified to run the new.

Compounding the problem is a demographic wave. At some factories, much of the workforce consists of baby boomers who are nearing retirement. Many of the younger workers who might have taken their place have avoided the manufacturing sector because of the volatility and stigma of factory work, as well as perceptions that U.S. manufacturing is a “dying industry.”

“Politicians make it sound like there’s a line out front of workers with a big sign saying ‘No more jobs,’ ” said Matt Tyler, chief executive of a precision metal company in New Troy, Mich.

“Nothing could be further from the truth.”

The shortage of skilled workers was noted before the recession, but the phenomenon has become more acute with the recent recovery.

Just this week, Tyler said, when a fracking company asked him to make pieces for pipes, his chief worry was whether he could find six new operators to do the work.

“This was never a problem I thought we’d be having,” he said.

The frustrations are shared across the country.

A recent report by Deloitte for the Manufacturing Institute, based on a survey of manufacturers, found that as many as 600,000 jobs are going unfilled. By comparison, the unemployed in the United States number 12.8 million, according to the Bureau of Labor Statistics.

“High unemployment is not making it easier to fill positions, particularly in the areas of skilled production and production support,” the Deloitte report found.

Similarly, the Bureau of Labor Statistics reported that although fewer machinists would be employed in the future, job opportunities “should continue to be good” because many young people with the right aptitudes were preferring other fields.



People are more important than profits. Beyond ego-gratification, what unified purpose does it serve for the favord few to obtain brontasaurus profits. Shared prosperity, A greater share in the wealth created by the Steve Jobs of the world would establish stronger communities and families

Apple: why doesn’t it employ more US workers?

Employees at a Foxconn plant in Shenzhen, China. Photograph: Qilai Shen/Corbis

…Using a mix of Apple’s own filings and industry data, the academics broke down the cost of making one product in particular: the wildly popular 4G iPhone. Assembled in China, the total cost of putting together just one phone was $178.45. Compare that with a sale price (including downloads) of $630 and Apple makes $452 on each phone: a whacking gross margin of 72%.

Chinese labour accounts for a tiny proportion of the company’s costs: $7.10 for each phone, which accounts for about eight hours of assembly. So what would it cost to make the same iPhone in America? The Cresc team took the average wage in the US electronics industry of $21 per hour and calculated that the total production cost would increase to $337.01. That is a big jump – but it still leaves Apple with a gross margin of 46.5% on each iPhone – a level that Cresc’s Sukhdev Johal estimates would probably still make it the most profitable phone in the world.

So: two models of making one of Apple’s most popular products, and two models for distributing the profits. The made-in-America model still leaves the California giant with a profit margin that most companies can only dream of, but would create hundreds of thousands of manufacturing jobs in the US to boot. That may strike you as laughably naive, but it’s more akin to enlightened self-interest: just think of the way Henry Ford raised wages so Ford workers could buy his cars.

The made-in-China model, on the other hand, has carried no such social benefits, either in Apple’s home country or in the People’s Republic. Last year, Apple built up cash reserves of $100bn – more than the US government. Indeed, it was so much money that the company was stumped how to dispose of it. Tim Cook, who is now CEO of Apple, announced a few weeks ago that he would begin buying back shares and paying dividends to investors. Among other people who benefited from this arrangement was Cook himself, who was awarded $376.3m in Apple stock when he took over last year. That pile of shares is now valued at around $634m. The people who win from the made-in-China model are big investors and top executives.

In the case of Apple, outsourcing manufacturing is not about keeping costs to customers down – they are still paying huge prices for the latest handset or tablet computer. Nor is it about the company’s survival: it would still do tremendously well were it to bring those factories back home. No, in the case of Apple, moving jobs offshore has become a way of directing ever more money to those at the top of American society.

This is not just my conclusion, or that of the Cresc team; it is backed up by the Asian Development Bank. In a 2010 study of an earlier model of the iPhone, ADB researchers concluded: “It is the profit maximisation behaviour of Apple rather than competition that pushes Apple to have all iPhones assembled in the PRC.”


How Apple Sidesteps Billions in Taxes

Published: April 28, 2012

RENO, Nev. — Apple, the world’s most profitable technology company, doesn’t design iPhones here. It doesn’t run AppleCare customer service from this city. And it doesn’t manufacture MacBooks or iPads anywhere nearby.

Yet, with a handful of employees in a small office here in Reno, Apple has done something central to its corporate strategy: it has avoided millions of dollars in taxes in California and 20 other states.

Apple’s headquarters are in Cupertino, Calif. By putting an office in Reno, just 200 miles away, to collect and invest the company’s profits, Apple sidesteps state income taxes on some of those gains.

California’s corporate tax rate is 8.84 percent. Nevada’s? Zero.

Setting up an office in Reno is just one of many legal methods Apple uses to reduce its worldwide tax bill by billions of dollars each year. As it has in Nevada, Apple has created subsidiaries in low-tax places like Ireland, the Netherlands, Luxembourg and the British Virgin Islands — some little more than a letterbox or an anonymous office — that help cut the taxes it pays around the world.

Almost every major corporation tries to minimize its taxes, of course. For Apple, the savings are especially alluring because the company’s profits are so high. Wall Street analysts predict Apple could earn up to $45.6 billion in its current fiscal year — which would be a record for any American business.

Apple serves as a window on how technology giants have taken advantage of tax codes written for an industrial age and ill suited to today’s digital economy. Some profits at companies like Apple, Google, Amazon, Hewlett-Packard and Microsoft derive not from physical goods but from royalties on intellectual property, like the patents on software that makes devices work. Other times, the products themselves are digital, like downloaded songs. It is much easier for businesses with royalties and digital products to move profits to low-tax countries than it is, say, for grocery stores or automakers. A downloaded application, unlike a car, can be sold from anywhere.

The growing digital economy presents a conundrum for lawmakers overseeing corporate taxation: although technology is now one of the nation’s largest and most valued industries, many tech companies are among the least taxed, according to government and corporate data. Over the last two years, the 71 technology companies in the Standard & Poor’s 500-stock index — including Apple, Google, Yahoo and Dell — reported paying worldwide cash taxes at a rate that, on average, was a third less than other S.& P. companies’. (Cash taxes may include payments for multiple years.)

Even among tech companies, Apple’s rates are low. And while the company has remade industries, ignited economic growth and delighted customers, it has also devised corporate strategies that take advantage of gaps in the tax code, according to former executives who helped create those strategies.

Apple, for instance, was among the first tech companies to designate overseas salespeople in high-tax countries in a manner that allowed them to sell on behalf of low-tax subsidiaries on other continents, sidestepping income taxes, according to former executives. Apple was a pioneer of an accounting technique known as the “Double Irish With a Dutch Sandwich,” which reduces taxes by routing profits through Irish subsidiaries and the Netherlands and then to the Caribbean. Today, that tactic is used by hundreds of other corporations — some of which directly imitated Apple’s methods, say accountants at those companies.

Without such tactics, Apple’s federal tax bill in the United States most likely would have been $2.4 billion higher last year, according to a recent study by a former Treasury Department economist, Martin A. Sullivan. As it stands, the company paid cash taxes of $3.3 billion around the world on its reported profits of $34.2 billion last year, a tax rate of 9.8 percent. (Apple does not disclose what portion of those payments was in the United States, or what portion is assigned to previous or future years.)

By comparison, http://investors.walmartstores.com/phoenix.zhtml?c=112761&p=irol-secWal-Mart last year paid worldwide cash taxes of $5.9 billion on its booked profits of $24.4 billion, a tax rate of 24 percent, which is about average for non-tech companies.


Apple’s tax rate: 9.8 percent?

Even Apple’s reported rate is significantly less than the 35 percent federal income tax rate. The company attributes its smaller tax burden to the tactics described in the Times report — “primarily to certain undistributed foreign earnings for which no U.S. taxes are provided because such earnings are intended to be indefinitely reinvested outside the U.S.”


How to grow the middle class

By Harold Meyerson, Published: April 18

So how do we re-create the American middle class?

Making our loopy tax code more equitable appears to be off the agenda, what with SenateRepublicans’ refusal Monday to allow a vote on a tax hike for millionaires. And even if the “Buffett Rule” were enacted, it would do nothing to alter the rocketing inequality in Americans’ pre-tax income. With the Southern wage for manufacturing — roughly $14 an hour — becoming the national norm, and with hiring more prevalent for low-wage restaurant and retail jobs than for positions in higher-paid industries, the incomes of most Americans will continue to stagnate, if not decline.

Recently, though, two proposals have emerged that could boost Americans’ incomes. One — part of an omnibus stimulus measure from Sen. Tom Harkin (D-Iowa) — would raise the minimum wage and index it to the cost of living. The second, laid out in the new book “Why Labor Organizing Should Be a Civil Right,” by Richard Kahlenberg and Moshe Marvit, would extend the employment protections of the Civil Rights Act — which forbids firing workers for reasons of race, gender, age and disability — to workers seeking to join a union.

Today, the federal hourly minimum wage is $7.25, which annualizes to a munificent $15,080. Had the minimum wage increased in line with productivity since 1968, when the wage reached its highest level as a percentage of the median wage, it would be $21.72, by the calculations of John Schmitt of the Center for Economic and Policy Research. But since the 1970s, all additional income from productivity increases has gone to the nation’s wealthiest 10 percent, according to economists Robert Gordon and Ian Dew-Becker.

Harkin’s bill would raise the wage to $9.80 over a three-year period and index future wage increases to the cost of living. It would also, over five years, raise the minimum wage for tipped workers from $2.13, where it has languished since 1991, to $6.85 and then index its value to 70 percent of the minimum wage.

Critics of the minimum wage argue that it’s really just a subsidy for teenagers, but Schmitt and his colleague Janelle Jones have documented that the average age of workers making $10 or less per hour is 35 years old and that the share of those workers who are teens dropped from 26 percent in 1979 to 12 percent in 2011. Some critics argue that the wage shouldn’t be raised when unemployment remains high. But pervasive low incomes, like high unemployment rates, reduce Americans’ purchasing power and retard economic recovery.

A similar Keynesian logic informs the proposal from Kahlenberg and Marvit. With only 6.9 percent of private-sector workers unionized, the vast majority of U.S. workers cannot compel their employers to boost their wages, no matter how productive they may be. It’s not that a majority of Americans have turned against unions. Polling by Peter Hart research over the past few decades has found a steady rise in non-managerial private-sector workers who would join a union if they could, reaching 58 percent in 2006.
In theory, the 1935 National Labor Relations Act (NLRA) gives workers that right, but employers have violated it with impunity in recent decades, firing workers involved in organizing campaigns (anywhere from one worker in 20 to one worker in eight, depending on the study) in attempts to thwart those campaigns. The NLRA explicitly outlaws such firings, but the penalties it imposes are so minimal (they average about $5,000 per fired worker) and are imposed so long after the fact (on average, nearly 16 months) that such firings have become routine.

During the Johnson, Carter, Clinton and Obama presidencies, Democrats have attempted to restore workers’ organizing rights, but their efforts to amend the NLRA by strengthening penalties on employers or changing the procedures for union elections have never surmounted the Senate’s 60-vote supermajority hurdle to cut off debate. Kahlenberg and Marvit propose a different remedy: including those workers who seek to join unions under the Civil Rights Act, which would enable them, as the NLRA does not, to sue their employers in federal court if they’re fired for exercising their rights. Workers would then be able to collect real, not symbolic, damages, which is likely to deter employers from routine firings.

Kahlenberg and Marvit’s proposal is not a silver bullet for unions: It doesn’t address, for instance, employers’ increasingly common refusal to bargain with workers once their union is certified. But it does speak more directly than other union-strengthening proposals to Americans’ belief in individual rights, which have expanded steadily since passage of the 1964 Civil Rights Act, even as workers’ nominally protected right to organize has been shredded. For a nation short on plausible plans to reestablish broad prosperity, Kahlenberg and Marvit offer hope that we can rebuild our middle class by affirming our most distinctly American values.


Nearly half of all doctors in the United States regret their career path as pay cuts and student loans bite

According to the Association of American Medical Colleges, young doctors who graduated from medical school last year had an average debt of $158,000.

Underpaid and Regretful: Just over half of all physicians (54%) would choose medicine again as a career according to a new Medscape survey


Low pay linked to poverty rates
Report: Wages in most jobs fall short in Ohio

By Catherine Candisky

The Columbus Dispatch Saturday May 7, 2011 5:48 AM

Of Ohio’s 10 largest occupations, only one pays enough for a family of three to pay for food, housing and other basic needs: nursing.

A report released yesterday found a job doesn’t always pay enough for families to be self-sufficient. Despite full-time employment, many still rely on food stamps, subsidized child care or other types of government assistance to make ends meet.

“Poverty persists because … we have a lot of lower-paying jobs,” said Philip E. Cole, executive director of the Ohio Association of Community Action Agencies, which commissioned the analysis.

“We need to focus on jobs with good benefits.”

Cole said he thinks Ohio is investing more than any other state into creating jobs, and he commended Gov. John Kasich for his efforts to attract and retain employers.

But planned cuts to the state’s subsidized child-care program will make it more difficult for many low-wage workers to keep their jobs because they can’t afford to pay someone to look after their kids, Cole said.

The governor’s budget plan, passed by the House on Thursday and sent to the Senate, would restrict child-care eligibility to even lower-income families and also cut the pay of those providing the care.

“The findings are sobering,” Kasich spokesman Rob Nichols. “It reinforces the importance of the governor’s crusade against joblessness and poverty. … We can’t have another situation like we had with DHL.”

Several thousand jobs were lost when the Wilmington, Ohio, freight company left the state nearly two years ago.

The association released two annual reports yesterday, “The State of Poverty in Ohio 2011: A Path to Recovery,” and “The Self-Sufficiency Standard for Ohio 2011.”

The reports note that 1.7 million Ohioans – 15.2 percent – live below the federal poverty level, the highest rate since the 1960s. Ohio has fallen to 35th in the nation for poverty, just above Michigan and the majority of Southern states.

Single mothers, minorities and high-school dropouts are the most likely to live in poverty. Among the state’s 10 largest cities, Youngstown has the highest rate, about 36 percent. Columbus is ninth with nearly 1 in 4 in poverty.

Still, the poverty rate is not the number Cole and other advocates rely on.

“We consider that to be a very inaccurate number,” Cole said. “In a majority of counties, it takes twice that to be self-sufficient.”

A self-sufficiency analysis aims to provide a more-accurate read of what families must earn to meet their basic needs. It calculates costs for housing, food, child care, transportation and health care in each of Ohio’s 88 counties. It does not include “luxuries” such as cable television and fast food.

For instance, a family of three is considered to be living in poverty if it earns $18,500 a year or less. But to be self-sufficient in Franklin County, the same-size family – a parent, preschooler and school-age child – would need $46,978 a year, according to the analysis conducted by Diana M. Pearce, director of the Center for Women’s Welfare at the University of Washington.

“Wages have not gone up in Ohio, but costs have,” Pearce said. “Even without a lost job or reduction in wages, many families are having a hard time.”

Housing and child care are the two biggest expenses for most families; the report found that parents of young children spend about half of their income on those two outlays.

So while a single adult in Franklin County can survive earning $8.98 an hour, a single parent with an infant and preschooler must earn $25.70 an hour to meet basic needs. A two-parent household with an infant and preschooler would each need to make at least $14.37.


More Ohio kids living in poverty, lunch program shows

A record 840,000-plus students are in the subsidized school-lunch program. Many suburbs have logged big increases.


America’s Best Kept Secret: Rising Suburban Poverty

By MICHELLE HIRSCH, The Fiscal Times

December 27, 2011
For years, the food pantry in Crystal Lake, Ill., a bedroom community 50 miles west of Chicago, has catered to the suburban area’s poor, homeless andunemployed. But Cate Williams, the head of the pantry, has noticed a striking change in the makeup of the needy in the past year or two. Some families that once pulled down six-figure incomes and drove flashy cars are now turning to the pantry for help. A few of them donated food and money to the pantry before their luck soured, according to Williams.

“People will shyly say to me, ‘You know, I used to give money and food to you guys. Now I need your help,’” Williams told The Fiscal Times last week. “Most of the folks we see now are people who never took a handout before. They were comfortable, able to feed themselves, to keep gas in the car, and keep a nice roof over their head.”

Suburbia always had its share of low-income families and the poor, but the sharp surge in suburban poverty is beginning to grab the attention of demographers, government officials and social service advocates.

The past decade has marked the most significant rise in poverty in modern times. One in six people in the U.S. are poor, according to the latest census data, compared to one in ten Americans in 2004. This surge in the percentage of the poor is fueling concerns about a growing disparity between the rich and poor – the 99 percent versus the 1 percent, in the parlance of the Occupy Wall Street movement.

But contrary to stereotypes that the worst of poverty is centered in urban areas or isolated rural areas and Appalachia, the suburbs have been hit hardest in recent years, an analysis of census data reveals. “If you take a drive through the suburbs and look at the strip mall vacancies, the ‘For Sale’ signs, and the growing lines at unemployment offices and social services providers, you’d have to be blind not to see the economic crisis is hitting home in a way these areas have never experienced,” said Donna Cooper, a senior fellow at the Center for American Progress, a progressive think tank.

In the wake of the Great Recession, poverty rolls are rising at a more rapid pace in the suburbs than in cities or rural communities. Between 2000 and 2010, the number of suburban households below the poverty line increased by 53 percent, compared to a 23 percent increase in poor households in urban areas, according to a Brookings Institution analysis of census data.

Last year, there were 2.7 million more suburban households below the federal poverty level than urban households, according to the Bureau of Labor Statistics. That was the first time on record that America’s cities didn’t contain the highest absolute number of households living in poverty. There are many reasons for the dramatic turnabout in the geographic profile of poverty.

“Now, the economy tanks, they lose their jobs, they’re poor, and they’re out in the suburbs on the edge once again.”

While many once depressed urban areas are being revitalized in an effort draw in more affluent residents, other areas are attracting lower-income families who have moved to the suburbs in search of more affordable housing and better schools. This shift in low-income families to the suburbs coincided with a move of low-wage, low-skilled jobs to those same suburban areas between 1970s and early 2000s, experts say. Meanwhile, the introduction of new commerce and high-cost housing in the urban neighborhoods pushed overall prices upward, providing added incentive for low-income people to head for the suburbs.

“These are families that were living on the edge in the city, but in many cases over the last 20 to 30 years, regained some stability when they found affordable housing in the suburbs,” said Cooper. “Now, the economy tanks, they lose their jobs, they’re poor, and they’re out in the suburbs on the edge once again.”

Both urban and suburban America were badly hammered by the financial meltdown and recession – leading to stubbornly high unemployment, widespread foreclosures and “underwater” homes, high food and gas prices and sharp cutbacks in government and private social services. But the overall impact has been worse in suburban areas, because many low-skilled jobs disappeared along with the plants and businesses that once provided employment. Other companies shifted their business strategy towards developing a high-skill, high-tech labor force.

To be sure, the picture of poverty in American suburbs is an uneven one. According to the census analysis, some suburban regions took bigger economic hits than others. Poverty rolls increased 121.8 percent in the Atlanta suburbs between 2000 and 2010, compared to a 6.8 percent increase in the city. Chicago and Seattle saw similarly large suburban-urban splits in poverty. The poverty rate increased by 76.3 percent in the Chicago suburbs compared to only 9.7 percent in the city during that period. In Seattle, the number of people living below the poverty line rose 74.4 percent in the suburbs versus 26.1 percent in the city proper over the decade.

The number of students qualifying for subsidized lunches grew by 63 percent this year, compared with a 46 percent increase in 2006.

The 10-year surge in suburban poverty is putting enormous budgetary pressure on county and local governments and non-profits, which are struggling to meet a rising demand for social services, counseling and financial assistance. The number of students qualifying for subsidized lunches in Conyers, an Atlanta suburb, grew by 63 percent  this year, compared with a 46 percent increase in 2006. Many suburban areas of Columbus, Ohio, have also seen their subsidized lunch enrollment more than double over the past five years, the Columbus Dispatch reported earlier this year.

According to a separate 2010 census analysis from the Brookings Institution, the typical suburban nonprofit in the Los Angeles, Chicago, and Washington, D.C. regions reported about a 30 percent increase in demand for their services between 2008 and 2009 and substantial increases in the number of clients with no previous connection to social service programs. Nearly half of the nonprofit organizations reported a loss in key revenue during that time frame.

“This is a shift that’s happened over time, steadily over the last 10 years, and for reasons in addition to the recession,” said Elizabeth Kneebone, a senior research associated at Brookings who compiled the data. “Even if the recovery were to take hold tomorrow, I wouldn’t expect this to reverse.”

In Gwinnett County, a suburb of Atlanta, a ballooning foreclosure crisis is forcing once middle and upper-income residents into poverty. One in 183 housing units received a foreclosure filing in November, compared to a national average of one in 579 units, according to RealtyTrac.

“People spent beyond their means without learning to save, so when everything came crashing down there was no reserves.”

A nonprofit called The Impact! Group handles about 60 percent of the county’s caseload of homeless individuals in need of temporary housing to help them get back on their feet. Tom Merkel, president and CEO of the group, and his 10 staffers almost exclusively served individuals with four and low-five figure salaries five years ago. Today, Merkel says, his caseload has doubled, and spans the socioeconomic ladder, with an ever-increasing number of once middle and upper-middle class families.

“We have people that were making six-figure salaries, doctors and lawyers who lived in nice homes on golf courses, knocking on our door,” Merkel told The Fiscal Times . “People spent beyond their means without learning to save, so when everything came crashing down there was no reserves.”

In the Seattle suburbs, the challenges of a burgeoning refugee and immigrant population are compounding economic pressures. In King County, which takes in both Seattle and neighboring suburbs like Kent, half of the population growth over the last two decades has come from immigrants and refugees, said Chandler Felt, King County’s demographer. The vast majority of those new foreign-born residents have settled into South King County suburbs, including Kent, instead of in Seattle to take advantage of more affordable housing, Felt said.

The surge in refugees and immigrants from East Africa, Eastern Europe, and Southeast Asia settling in Kent has made the community more culturally diverse, but it’s also helped push the poverty rate to 25 percent, compared to 9 percent ten years ago, said Katherine Johnson, the city’s housing and human services manager.

“All of a sudden, the resettlement agency’s finished with you six or eight months after you arrive, you’re not able to find a job, and you’re just starting to learn the language and assimilate,” Johnson said. “The next thing that happens is you have eviction notices, your utilities are turned off, and you have no finances to speak of.” The city has seen thousands of cases like that, she said. “The food pantry here is a very popular place.”

For Williams in Crystal Lake, the pantry’s growing traffic has meant food vanishes more quickly. Two or three years ago, a food drive’s proceeds would last four or five months, but now that food is out the door in two to three months. The rising demand has led Williams and her board to dip into their savings by $35,000 to keep dispensing basic food items like butter, cheese, milk, and eggs.

“Every day, it gets just a little clearer that people’s ideas of who a hungry or poor person is should be changing,” Williams said. “It’s not just people pushing shopping carts along the street in a place like Crystal Lake…. Sure, people may still have their Lexus, but what lots of people don’t realize is that in lots of cases, [the car] is one step away from being repossessed.”


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About Jerry Frey

Born 1953. Vietnam Veteran. Graduated Ohio State 1980. Have 5 published books. In the Woods Before Dawn; Grandpa's Gone; Longstreet's Assault; Pioneer of Salvation; Three Quarter Cadillac
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