Category Archives: usa labour news
Large, Profitable Companies Employ Most Minimum-Wage Earners
George Zornick http://www.thenation.com
If you’ve ever had a conversation about the minimum wage with friends and family, you invariably hear an argument about how raising it would hurt small businesses.
There is compelling academic research that increasing the minimum wage doesn’t dramatically impact employment levels, but a new study released today underscores another important point—most people earning minimum wage work for large, profitable corporations.
The National Employment Law Project looked at Census data from 2009–11 and found that 66 percent of low-wage workers are employed by large businesses with over 100 employees. Moreover, it found that the fifty largest employers of low-wage workers have all recovered from the recession and are in strong financial positions:
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92 percent were profitable last year.
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78 percent have been profitable for the last three years.
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75 percent have higher revenues now than before the recession, and 73 percent have higher cash holdings.
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63 percent have higher operating margins than before the recession.
Also, the study found that at these fifty firms, executive compensation averaged $9.4 million, and they have returned $174.8 billion to shareholders in dividends or share buybacks in the past five years.
Low-wage workers are concentrated in the service industry, and dominate the following sectors:
You can guess from looking at that list who the biggest abusers of low-wage labor are. Walmart, for example, employs 1.4 million Americans, and a vast majority of them at wages under $10 per hour. The highest-paid executive, however, earned over $18.4 million last year. Other key offenders are Yum! Brands (Taco Bell, Pizza Hut, KFC), McDonald’s, Target, Sears, Doctor’s Associates Inc (Subway), TJMaxx and Burger King.
Amazingly, one in four American jobs pays less than $10 per hour (26 percent), according to the study. And it’s not just those workers who suffer—big businesses that pay collectively pay millions of workers low wages set a basement for the rest of the wage scale and depress earnings above $10, too.
As we noted last month, some Congressional Democrats have joined forces with Ralph Nader to pass a bill that would raise the minimum wage to $10 per hour immediately, and then index it to the Consumer Price Index after one year.
But they are unlikely to find many allies on the other side of the aisle. This week, Representative Sean Duffy, a Tea Party star, was taped getting in a Jetta and driving away from a constituent asking him for help in raising the minimum wage:
Another, Representative Bill Young of Florida, somewhat oddly told a constituent asking about the minimum wage to “get a job” before walking away:
I’ve Always Hated The Idea Of Labor Unions, But It May Be Time To Reconsider
Henry Blodget Dec. 2, 2012 http://www.businessinsider.com
I’ve always hated the idea of labor unions.
Why?
Several reasons.
- They create an “us versus them” culture within companies, instead of putting everyone on the same team
- They create a culture of entitlement
- They restrict flexibility and hurt competitiveness
- They drive companies to move jobs out of the country, to places where there are no unions
- They often become career employment for their leaders, who pay themselves well (much better than the workers they’re representing)
- They maintain ludicrous compensation and benefit levels for jobs based purely on seniority (some bartenders in one of the New York hotel unions, for example, apparently make ~$200,000 a year)
- They force companies to treat all union employees equally, regardless of the relative skill and value of particular employees–thus reducing incentives for people to do a great job
- Etc.
And all those are indeed negatives.
But we’ve now developed a bigger problem in this country.
Namely, we’ve developed inequality so extreme that it is worse than any time since the late 1920s.
Contributing to this inequality is a new religion of shareholder value that has come to be defined only by “today’s stock price” and not by many other less-visible attributes that build long-term economic value.
Like many religions, the “shareholder value” religion started well: In the 1980s, American companies were bloated and lethargic, and senior management pay was so detached from performance that shareholders were an afterthought.
But now the pendulum has swung too far the other way. Now, it’s all about stock performance–to the point where even good companies are now quietly shafting other constituencies that should benefit from their existence.
Most notably: Rank and file employees.
Great companies in a healthy and balanced economy don’t view employees as “inputs.” They don’t view them as “costs.” They don’t try to pay them “as little as they have to to keep them from quitting.” They view their employees as the extremely valuable assets they are (or should be). Most importantly, they share their wealth with them.
One of the big problems in the U.S. economy is that America’s biggest companies are no longer sharing their wealth with rank and file employees.
Consider the following two charts:
1) Corporate profit margins just hit an all-time high. Companies are making more per dollar of sales than they ever have before.
Business Insider, St. Louis Fed
2) Wages as a percent of the economy are at an all-time low. This is closely related to the chart above. One reason companies are so profitable is that they’re paying employees less than they ever have before.
Business Insider, St. Louis Fed
When presented with these charts, many people invoke one of two arguments. First, technology is making employees irrelevant. Second, low-skill jobs command low pay.
Both of these arguments miss key points: Technology has been making some jobs obsolete for 200+ years now, but it is only recently that corporate profit margins have gone through the roof. Just because you can pay full-time employees so little that they’re below the poverty line doesn’t mean you should–especially when retention is often a problem and your profit margin is extraordinarily high.
More broadly, what’s wrong with this picture?
What’s wrong is that an obsession with a narrow view of “shareholder value” has led companies to put “maximizing current earnings growth” ahead of another critical priority in a healthy economy: Investing in human and physical capital and future growth.
If American companies were willing to trade off some of their current earnings growth to make investments in wage increases and hiring, American workers would have more money to spend. And as American workers spent more money, the economy would begin to grow more quickly again. And the growing economy would help the companies begin to grow more quickly again. And so on.
But, instead, U.S. companies have become so obsessed with generating near-term profits that they’re paying their employees less, cutting capital investments, and under-investing in future growth.
This may help make their shareholders temporarily richer.
But it doesn’t make the economy (or the companies) healthier.
And, ultimately, as with any ecosystem that gets out of whack, it’s bad for the whole ecosystem.
So, for the sake of the economy, we have to fix this problem.
Ideally, we would fix it by getting companies to voluntarily share more of their wealth with their employees. But the “shareholder value” religion has now been so thoroughly embraced that any suggestion of voluntary sharing is viewed as heresy.
(You’ve heard all the responses: “The only duty of a company is to produce the highest possible return for its owners!” “If employees want to make more money, they should go start their own companies!” Etc. Beyond basic fairness and the team spirit of we’re-all-in-this-together, what these responses lack is any appreciation of the value of personal loyalty, retention, respect, and pride in the workforce. People love working for companies that treat them well. And they’ll go to the mat for them.)
Anyway, it would be great if companies would start sharing their wealth voluntarily. But, as yet, with a couple of notable exceptions (Apple recently gave its store employees a raise it didn’t need to give them), they’ve shown no signs of doing that.
So if companies can’t be persuaded to do this on their own, maybe it’s time to rethink our view of labor unions.
Although correlation is not causation, the chart below suggests that labor unions might be able to help induce companies to share their wealth, at least in some industries.
This chart is from EPI. It is based on the work of Piketty and Saez (the deans of inequality research).
The chart shows the correlation between the share of the national income going to “the 1%” with membership in labor unions. What it suggests is that, as unions have declined, income inequality has soared.
Again, right now in this country, we have the painful juxtaposition of the highest corporate profit margins in history, combined with one of the highest unemployment rates in history. We also have the lowest wages in history as a percent of the economy.
That’s not good for the economy… because rich people can’t buy all the products we need to sell to have a healthy economy (they can’t eat that much food or drive that many cars, for example).
And it’s also just not right.
Healthy capitalism is not about “maximizing near-term profits.” It is about balancing the interests of several critical constituencies:
- Shareholders
- Customers
- Employees
- Society, and
- The Environment
It’s time more of our business leaders started to understand that.
New Report: Unions Shield Workers—and States—Against Recession
Friday Jul 12, 2013 3:34 pm http://inthesetimes.com
Although the economy is improving, income inequality remains high in Illinois. Neal Jennings/Flickr/Creative Commons)
A new report by Robert Bruno and Frank Manzo of the University of Illinois, The State of Working Illinois 2013: Labor in the Land of Lincoln, paints an all-too-familiar portrait of a state economy that has righted itself from free-fall to “tepid growth” but has yet to reach pre-recession levels. With decreased labor-force participation, nearly 10 percent unemployment, wage stagnation and the top 1 percent earning 635 percent more than the median employed worker, Illinois has a long way to go before true recovery.
But unlike other accounts of today’s economic woes, the authors don’t attribute the blame solely to the global financial collapse. The report’s findings strongly suggest that the decline of unionization has played a considerable role in the increase of income inequality in Illinois, which can in turn slow economic growth. The report also suggests that lags in union membership put a strain on the social safety net, sapping resources that could otherwise be invested to speed the state’s recovery.
The State of Working Illinois, released Tuesday, found the union membership among working-age Illinois residents has fallen from 20.6 percent in 2002 to 17.2 percent. The findings also suggest that this decline may have been a factor in pushing income inequality to extremes. The salary boost of belonging to a union worker—some $10,682 for workers making a median wage of $43,687—goes up for low-income workers. The bottom 25 percent of nonunion earners make an average of $15,471, while the bottom 25 percent of union earners makers $27,406. A similar gap appears in the bottom 10 percent of each group, with union workers earning an average of $14,685 and non-union workers earning an average of $3,701. The authors conclude that with the power to considerably boost incomes in the lowest brackets, unionization can prevent the lower-earning workers from descending into poverty.
At the other end of the spectrum, union gains are more modest: For the top 25 percent of union workers, incomes average $61,884, compared with $57,692 for nonunion workers. And, strikingly, the top 10 and 1 percent of nonunion workers actually make more than their unionized counterparts. Overall, this means that union wages are far more compressed than nonunion wages in the state, with a $100,319 discrepancy between the highest- and lowest-earning brackets of union workers, compared with a $296,404 gap among nonunion workers.
According to coauthor Frank Manzo, some degree of income inequality isn’t necessarily a bad thing. It can “encourage hard work, the acquisition of skills and education, and innovation.” But “when income inequality gets too high, like the levels we see today, it can negatively impact economic growth.” This is because “the ‘marginal costs’ of inequality—such as lower equality of opportunity and lower class mobility, declining middle and working class wages, higher chances of financial crises, and even decreased national happiness—are outweighing the ‘marginal benefits,’” Manzo explains.
Given this, the report’s findings indicate that higher unionization could help shrink Illinois’ income gaps and lead to economic growth.
There’s another way that unions can be a powerful agent to combat the detrimental effects of weak economies. Despite some improvement, Illinois workers still have only “somewhat more financial security and slightly higher prospects for finding a job” than during the darkest days of the recession. Even under these grim conditions, unionized workers generally have higher wages and have more financial security for their retirement—benefits that nonunion workers don’t always enjoy, rendering them more vulnerable to the dire effects of economic recession.
This means that lower unionization rates not only hurt workers, but also put a strain on Illinois’ social safety net. With union membership on the decline, the authors hypothesize that the growing ranks of nonunion workers are sapping public resources that could otherwise be used to boost the economy by, for instance, “subsidizing college education and investing in early childhood education programs”—investments that the authors suggest would improve Illinois’ long-term labor market prospects.
The authors conclude by recommending that Illinois help combat the decline of unionization. The state could, for example, require employers to post notices in every workplace detailing the “collective acts to improve pay, working conditions, and job-related problems that are lawful even if workers are not in a union” so that workers know it is their legal right to seek justice and improved working conditions.
Although the authors make clear that cooperation from the state—in the form of investments in public infrastructure, increases in the minimum wage and reforming the tax code—is vital for positive economic growth, The State of Working Illinois shows that unions can provide workers and economies with invaluable armor to withstand crises like the Great Recession.
Andrew Phillip Chernoff 