Something has been clear in every single Bureau of Labor Statistics monthly jobs report over the last several years: The growth in the number of jobs has largely been in low-wage positions. In other words, the jobs that are coming back aren’t the same ones that went away during the Great Recession. Service jobs, part-time jobs, dead-end jobs are a significant portion of the recovery that we’ve seen. Even on the upper end of the wage spectrum, there’s been increased employee turnover.
For a large portion of employers, there’s simply no need to offer more of anything to employees. There are still millions who are out of the labor market and whom the government has officially stopped counting as unemployed. These people aren’t sitting on personal wealth that can fund a permanent vacation, nor are they kicking back and enjoying the life of accumulated wealth that comes from meager employment benefits that have expired. What they desperately need is a livable income, preferably at a level that they can begin again to have a pool–maybe a wading pool, but a pool nonetheless–of discretionary income to purchase items they want in addition to items that they need. Perhaps more importantly, they need a stream of income for which they can feel minimally confident regarding its longevity and stability if they are to even attempt to budget responsibly for themselves and their families. Sadly, unless politicians of the conservative persuasion come to their senses (or at least common decency), only low-wage, uncertain, and easily replaced positions are expected to prop up the unemployment rates and keep the current fragile recovery from being derailed.
The distinction between the wants vs needs purchasing power of average Americans dictates whether the fragile recovery the U.S. economy has managed to squeeze out of the last recession will have a solid foundation or be made of sand. Consumerism drives capitalism….not the other way around!
Further exacerbating the problem, there are multiple options that companies are utilizing despite the damages they cause to the U.S. economy. Companies can outsource and have done so at alarming rates; although that’s often more a matter of avoiding environmental and safety regulations, because, for many businesses, labor has already become a diminished portion of the cost of their goods. The larger issue is how industries have increasingly automated operations and services, or simply loaded more duties and workloads on the few employees that remain. Once those remaining have collapsed under the added strain, there is a ready pool of unemployed from which to squeeze their last pound of low-wage flesh.
When even the work of anesthesiologists can be automated, as Johnson & Johnson JNJ -1.15% has done with its Sedasys system, how can anyone expect any job to be secure? The combination of high education, high demand, and need to administer a service locally was supposed to be the benchmark of professional security. But it no longer exists; low wage or otherwise.
Perhaps reality will finally sink in when CEOs realize that their jobs can also be sent overseas to thoroughly competent managers in a global marketplace who will cost the company less money. But for now, the emphasis is still on reducing human costs to increase profits, while falsely claiming that they can’t help it because there’s a legal mandate to “maximize shareholder value”.
Ah yes, the legendary “maximum shareholder value”. Now there is a convenient myth if there ever was one. Originally started by University of Chicago economists like Milton Friedman, many a conservative memes have been attributed to the necessity of increasing “maximum shareholder value”. What a crock.
Lawyers, economists, and experts in corporate governance have combed through state and federal laws and found that concept to have been completely fabricated. Common sense even supports the ignorance of this widespread pile of cow pie.
How can one define, much less achieve, a common interest of shareholders when they all have different reasons for ownng a particular stock?…..some of them want to buy and hold stock, others might want to split a firm up to sell it off piecemeal to increase their shares’ value (think: Danny Devito in the movie“Other People’s Money”), and still other stockholders could actually want a stock to drop because they’ve shorted the stock? The truth? There is no single definition of shareholder interest because there is no singular definition of shareholder strategy. But the propaganda machine has eloquently convinced the less-informed masses that this is the sole purpose of all capitalistic existence.
As William Lazonick, professor of economics at the University of Massachusetts Lowell, wrote in the Harvard Business Review, we currently have profits without prosperity. Corporate profits are high and the stock market has never done better, but the vast preponderance of Americans don’t get any of the benefits. As Lazonick wrote, “While the top 0.1% of income recipients—which include most of the highest-ranking corporate executives—reap almost all the income gains, good jobs keep disappearing, and new employment opportunities tend to be insecure and underpaid.”
Companies aren’t investing their capital and are even borrowing money, especially since the cost of borrowing has been almost nil for years. Any idiot can see that if a business can borrow money at nearly zero percent to buy their own stock driving up its price and making its value grow at, say 4%, the stock market will look rosy as a baby’s chubby cheeks. This is an incentive in keeping wages low and not hiring people for expansion—and a vicious cirlular ponzi scheme is the result that will come crashing down when interest rates inevitably have to rise, and the whole thing collapses in on itself. From 2003 to 2012, the 449 companies that were in the S&P 500 over the entire period put a combined 54 percent of their earnings into stock buybacks. Even shareholders are getting concerned because, without investment, companies are eating the seed corn, (which is a rural colloquialism for consuming that which is meant to ensure future prosperity).
Why? Because CEOs are paid largely in stock and, as Lazonick argues, buybacks increase share prices and, as a direct result, their own compensation. Corporate boards are also endemic of this type of self-enrichment system because they typically are filled by executives who have their own compensation to consider.
It’s an incestuous economic system combined with a sense of perceived entitlement. Case in point: a Jamie Dimon, CEO of JPMorgan Chase JPM -2.48%, will claim that banks are “under assault” by U.S. regulators. Forget that the entire economy was under assault by the banks, which brought the globe to its financial knees. “Why do we need regulation?” the executives wonder; I’m doing fine.
We need it because maximizing the value of a few at the expense of the many is an unsustainable situation, and just this past December, both houses of Congress passed a “cromnibus spending bill” that directly places the burden of any “Too Big to Fail” banks/businesses on we, the poor, lonely taxpayers. How in the hell can we not remember that this is EXACTLY the same thing that happened at the end of George W. Bush’s tenure but with real estate rather than stock?
Where was the conservative outcry at this travesty of making government responsible for business failures? Where was the liberal outcry at making it THE LAW to make American taxpayers directly responsible for any major bank’s losing bets? Where was ANYBODY not raising hell because if / when the next crash happens, the CEO’s will again get off scott-free….and probably get a bonus….for gambling with yours and my taxes?
But so long as executives are short-sighted (and greedy) — and while personally wealthy congressional representatives, with 18 times the net worth of an average American household, take no action — nothing will change.
As it now stands, income inequality seems here to stay for the long run, with exactly the results that no one at the executive level, nor the politicians who are the recipients of their influence, will acknowledge.
Harvey A. Gold