Monday, November 28, 2005

The Working and Middle Classes Get Fucked Again By Corporate America

Surprise, surprise...Corporate profits up, worker's wages stagnant. From the LA Times:

This is Wall Street's version of comfort food: Corporate earnings keep rising at a double-digit pace while workers are lucky to get even low-single-digit wage increases.

For the last few years, those trends have been dependable and soothing for many stock market bulls — if not for the average worker. It's a world in which share prices are underpinned by healthy earnings while inflation risks are muted because employee pay isn't in danger of an upward spiral.

The story continued in the third quarter ended Sept. 30. With nearly all of the companies in the blue-chip Standard & Poor's 500 index now having reported their earnings for the period, the year-over-year growth rate was once again in double digits.

By S&P's reckoning, operating earnings for the S&P 500 companies rose 11.5% in the quarter. It was the 14th straight quarter of double-digit growth, the data firm says.

Because profit growth rate calculations can vary depending on the definition of operating results (i.e., earnings before one-time gains or losses), the results look even better by some yardsticks. Boston-based Thomson Financial, another data cruncher, estimates that S&P 500 profit rose 16% in the latest quarter.

In any case, the double-digit growth pace has gone on a lot longer than many analysts expected. For 2005 overall, S&P expects blue-chip earnings to be up 13.4%. And it predicts an 11.5% rise next year.

As for the workers whose toil is producing these handsome results, wages and salaries for all private-industry employees rose 2.2% in the 12 months ended Sept. 30, according to the government's employment cost index. That was down from a 2.6% increase in the year ended September 2004.

Add in benefits such as healthcare coverage, and total employment costs were up 3% in the most recent 12 months, compared with 3.7% in the previous period, government data show.

Now, there are many ways to measure compensation, and "average" pay gains can be as misleading as "average" earnings growth. For example, it's logical to assume that employees of energy companies have a lot more to look forward to, pay-wise, than employees of auto companies, given the profit trends in those two industries.

But few on Wall Street would dispute that corporate earnings have been fattened in recent years in large part because the rewards of the economic expansion — and spectacular gains in worker productivity — have primarily flowed to companies' bottom lines, not into employees' pockets.

"It's accurate to say that most of the productivity dividend has not gone to labor," said Ken Goldstein, an economist for the Conference Board, a business-sponsored research organization.

Historically, companies have reaped most of the financial benefits of economic growth at the beginning of expansions, when workers are in relative excess supply and thus have less leverage to demand higher pay.

As expansions wear on, however, and the labor supply tightens, the pendulum is supposed to swing toward workers: They make more, at the expense of corporate earnings. Labor is, of course, the largest single expense for most companies.

"What's different this time is it's taking longer for the pendulum to swing back," Goldstein said.

Based on the U.S. unemployment rate, which was 5% in October, down from 6% two years ago, workers arguably should feel more confident about demanding better wages. And in some occupations, especially technical ones in manufacturing, there's no doubt they can.

Overall, though, compensation data suggest employees don't believe that they have much leeway with the boss.

And that's usually how most companies finally agree to share more of their profit with workers, says Milton Ezrati, an economic strategist at investment firm Lord, Abbett & Co. in Jersey City, N.J.: "It's not largesse; it's because of pressure" from employees who are ready to find a better job, he says.

Yet even with the unemployment rate falling for the last two years, there are legitimate reasons workers may not feel confident about their prospects. General Motors Corp.'s announcement last week of 30,000 job cuts was hardly a morale booster. And many people rightly believe that they're now competing with other workers worldwide, not just within the U.S.

The fear is that "if you argue too loud that 'I need more money,' you're going to get a pink slip," Goldstein said. "Whether it's true or not, that perception is out there."

The squeezing of the working classes and middle classes just gets worse and worse every year. Most Americans feel very scared about their own economic futures. Prices are up, college costs are way up, and health care costs are through the roof while their wages are stagnant, their pensions are at risk of disappearing, and layoffs are always just around the corner.

Yet the morons on the TV talk shows can't figure out why Americans are worried about the economy and give Preznit Bush and the GOP low approval numbers on their handling of the economy. Just tonight, John Fund, wanker extraordinaire from Opinion Journal, said on Hardball that the economy is doing really well but Americans aren't giving Bush the credit he deserves. Fund decided it was a perception problem which could be solved by getting the message out their that the economy is doing great cuz' the market is doing great.

But of course the problem with the economy for most Americans is not a perception problem. It is a stagnant wage, high health care/college costs/prices problem compounded by layoffs, offshoring/globalization, and Bush's ownership society economic policies where the top 1% of the nation reaps most of the economic and tax benefits.

That's the problem. But of course Fundie doesn't actually work for a living, so what the fuck does he know? He just looks at his stock portfolio, salivates at the double-digit increases and says "What a great economy!"

John Fund - another arrogant, clueless member of the investment class.

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