ALAN MAASS reports on why Corporate America is making record profits--and
why U.S. workers face an increasingly difficult struggle to make ends meet.
Even Wal-Mart’s corporate mouthpieces were taken by surprise.
When a new store opened up just south of Chicago, the aggressively nonunion
and notoriously cheap retail giant had 325 positions to fill. More than 25,000
“In our typical hiring process, you’re pretty successful if you
have 3,000 applicants,” said a company official. “They were really
crowing about 11,000 in Oakland, Calif., last year. So to get 25,000-plus applications
and counting, I think is astonishing.”
The long lines to apply for a Wal-Mart job--where the average wage for a cashier
is $7.93 an hour, and less than half of the company’s 1.3 million U.S.
employees have health insurance--are the real symbol of the U.S. economy today.
“Our economy is healthy and vigorous,” George Bush claimed in his
State of the Union speech. For the bank accounts of the rich and powerful maybe.
But the majority of people in the U.S. are falling further behind.
According to Jared Bernstein of the Economic Policy Institute (EPI), the last
several years have seen an “unprecedented gap between the pace of overall
economic progress and the returns to working people.”
The statistics show that workers are being hit squarely in their wallets. According
to the Bureau of Labor Statistics, the median hourly wage dropped by 1.3 percent
during 2005, after accounting for inflation. Those at the bottom of the ladder
suffered the most--real hourly wages at the 10th percentile on the income scale
(where 10 percent of workers make less and 90 percent make more) fell by 1.9
Most households are poorer today than at the beginning of the decade. Median
household income (adjusted for inflation) fell every year between 1999 and 2004,
ending up almost 4 percent lower. Individual states in the industrial Midwest
have suffered depression-like declines. In Michigan, real household income dropped
by 18 percent between 1999 and 2004.
The consequences are grim, especially for the most vulnerable in society. The
number of people living in poverty has increased by 5.4 million since 2000.
The U.S. poverty rate is up from 11.3 percent in 2000 to 12.7 percent in 2004--the
child poverty rate is similarly up from 16.2 percent in 2000 to 17.8 percent
The number of Americans without health insurance has climbed by 6 million since
2000--the result of companies cutting back on providing health coverage for
workers. As of last year, only 60 percent of companies provided health care
for their employees, down from 69 percent five years before.
Workers are making up the shortfall by going deeper than ever into debt. Even
after adjusting for inflation, the debt of U.S. households is up by a whopping
35.7 percent over the last four years. Mortgage and consumer debt is significantly
higher than total after-tax household income, and the percentage of income going
toward paying off these debts is now at an all-time high of more than one in
every eight dollars.
Bush and the Republicans point to employment growth as a positive sign for
the economy as a whole, but a closer look at the jobs picture tells a different
For example, the Bureau of Labor Statistics reported last week that private-sector
employment increased by 194,000 in January--a seemingly solid performance, if
lower than economists expected.
But only 7,000 of those net new jobs were in manufacturing, where wages and
benefits are still the best. The big increases were in construction (a gain
of 46,000) and especially services (a gain of 135,000), the lowest-wage sector
of the economy.
This has been true throughout the Bush years. Roughly one in every six jobs
in manufacturing has disappeared since 2001--a net decline of 2.8 million. The
well-publicized mass layoffs of union workers in the auto industry, for example,
aren’t the exception in industrial America--they’re the rule. The
difference has been made up by employment growth in the service sector.
In fact, the overall net growth in private-sector employment--a net increase
of 2 million between 2001 and the projection for the end of 2006--is almost
entirely accounted for by the increased military budget, which the EPI estimates
will create 1.5 million private-sector jobs.
Even setting aside the question of what kinds of jobs are being created, the
net increases are extremely weak compared to past economic periods. For example,
last year’s total of 2 million new jobs represents an overall gain of
1.5 percent, less than half the increase at a similar point during the recovery
of the 1990s--which itself was known as the “jobless” recovery because
employment was so slow to increase.
If all these statistics confirm why a majority of people believe, according
to a January Gallup poll, that the U.S. economy is getting worse, it isn’t
hard to see who might think things are looking up.
Simply put, the money that’s disappearing from working people’s
paychecks is showing up on the bottom lines in Corporate America.
During this recovery, increases in corporate income have been radically skewed
toward profits. According to an analysis by the EPI, in five previous recoveries,
the share of corporate income growth going to profits was 25 percent--still
a hefty sum--while three-quarters of the growth went to compensation. In this
recovery, however, 59 percent of increased income went to profits, compared
to 41 percent for compensation.
Top executives have gratefully accepted big pay increases--average CEO compensation
went up almost 25 percent in two years, climbing from an already obscene $7.8
million in 2002 to $9.6 million in 2004.
Overall, control of those profits is becoming even more concentrated in the
hands of the super-rich. According to an analysis by the Congressional Budget
Office, the richest 1 percent of U.S. households--with annual incomes ranging
from $237,000 into the billions--owned 57.5 percent of corporate wealth as of
2003. That percentage of ownership has grown by half since 1991--while the share
of corporate wealth for every group below the top 1 percent fell.
The already enormous gap between rich and poor in America has become
a Grand Canyon. In every part of their lives, U.S. workers are having a harder
time making ends meet--while the fantastic wealth of a tiny few grows even more
Wal-Mart’s plea for the working poor
ONE CORPORATE announcement late last year cast a spotlight on the scale of
the crisis for working America--because it was so absurd.
Wal-Mart, the king of low-wage employers, declared that it was urging Congress
to pass a law increasing the minimum wage--and “other legislation that
can help working families,” CEO Lee Scott said in a speech.
“We can see firsthand at Wal-Mart how many of our customers are struggling
to get by,” Scott continued, apparently with a straight face. “Our
customers simply don’t have the money to buy basic necessities between
Tracy Sefl of the union-backed Wal-Mart Watch pointed out that Scott’s
new position on the minimum wage hasn’t led him to fire “lobbyists
such as Lee Culpepper, who oppose raising the minimum wage.” “[W]hen
a comment on raising the minimum wage is dashed off and it flies in the face
of Wal-Mart’s own corporate stance, that’s laughable,” Sefl
Wal-Mart certainly doesn’t do much to keep its own employees from struggling
to get by. The most common job at Wal-Mart--sales associate--pays an average
of $8.23 an hour, and the average workweek is around 30 hours. Over 52 weeks,
that adds up to an annual income of $12,839--which is almost exactly the same
as the official poverty line for a two-person family.
And as long as they can be kept at less than 34 hours a week, Wal-Mart employees
are classified as part-time--which delays their access to benefits like health