The Transylvania Times -

The Widening Economic Gap

 

September 3, 2018



Based on the unemployment figures and stock market, it would appear that the American economy is doing well. But those numbers are misleading when it comes to working people, the vast majority of Americans whose main source of income is from the wages they earn.

The unemployment numbers are down, but that does not reflect a real growth in people’s wages. According to the U.S. Bureau of Labor Statistics, wages in the past year have increased roughly 2.7 percent: however, after accounting for inflation, there has been no real increase in wages for most Americans. The $10-$12 per weekly wage increase Americans have seen has been negated by the increase in gas and food prices.

Another factor hurting middle class Americans is the continuing increase in health care costs. Since 1999, according to the U.S. Bureau of Labor Statistics, employee contributions for health care premiums have increased more than 250 percent, which is more than four times what employee earnings have increased during that same period. That is just the increase in premiums; that does not reflect the cost Americans pay out of their own pockets for doctor’s visits, medication, surgeries, etc.

The improvements in the stock market also do not equate for economic improvement for most Americans. The top 10 percent of Americans own 84 percent of all stocks. The growth in the stock market has not provided much benefit to the other 90 percent.

Many economists believe that a significant proportion of growth in the stock market is due to stock buybacks, which were illegal until 1982. These buybacks increase the price of stocks, potentially inflating the value of the stocks. As a result of the buybacks, that money is no longer available for use to increase spending for research and development, capital improvements or employee wages – things that could spur the economy to even greater growth and a better life for working people.

Last month an article in Forbes magazine, entitled “By Tripling Its Stock Buybacks, Apple Robs Workers and the Economy,” stated “Despite historically high profits and trillions in cash, corporations refuse to pay workers more. Instead, they use their earnings to buy back stock or increase dividends. The Trump tax cuts are magnifying this behavior, which is what happened after the 2004 American Jobs Creation Act, another time when corporations repatriated foreign cash holdings at a lower tax rate.”

Annie Lowrey, in the July 31 online issue of The Atlantic, was more specific about the negative impact of buybacks on workers when she wrote, “Lowe’s, CVS and Home Depot could have provided each of their workers a raise of $18,000 a year. Starbucks could have given each of its employees $7,000 a year, and McDonald’s could have given $4,000 to each of its nearly 2 million employees.”

According to Lowrey, between 2015 and 2017, U.S. publicly traded companies across all industries spent three-fifths of their profits on buybacks.

Despite the apparent good economic news, most Americans are actually falling behind or just keeping even. Roughly 25 percent of working Americans make less than $10 per hour. Many middle class Americans are seeing apparent gains capped or negated. Many companies are switching to temporary employees so that they do not have to provide certain benefits.

Workers’ losses have not only been economic, but also legal. For example, earlier this year the U.S. Supreme Court ruled that employers can force employees to accept individual arbitration instead of pursuing class action suits. Workers are more likely to file successful suits when they can pursue class action suits. This ruling effectively benefits employers, who already have more financial resources available to win legal claims. Other rulings have handicapped labor unions, which have lost most of their political and economic clout in recent years.

Today, Americans are supposed to celebrate the common worker – welders, carpenters, electricians, nurses, teachers, law enforcement officers, cooks, waitresses, roofers, etc. But there is little for them to truly celebrate. In fact, instead of celebrating with a day off, many of them will be working, and, given recent trends, falling just a little bit farther behind in an economy in which the gap between the top 10 percent and everyone else continues to widen.

 
 

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