Employed Taking Deeper Pay Cuts (Except on Wall Street, of Course)

Deflation, anyone?

One of the staples of Japan’s lost now two decades has been an unrelenting squeeze on worker wages and work conditions. New graduates used to get full time jobs. Now man are “freeters” in a sort of temp purgatory. And given how important social networks are in Japan, the lack of a real position and an assured wage is far more stressful than it is in the US. And young men in this fix are not viewed favorably in the marriage market either.

Even workers that have jobs have dim prospects. Japan was never a place for big pay, but most workers could expect a reasonable progression over their careers. Because Japanese companies have tried to preserve employment, they have wound up cutting raises to more senior managers. How would you feel about a career path that had you taking on more responsibility and stress for pretty much no more money? But you can’t quite because the alternatives are worse.

The US version, as set forth by Louis Uchitelle, does look worse: you do the same job for less money. And not a little less money, but in some cases, a lot.

I do find it a bit odd that Uchitelle used a pilots as his case example, as did Michael Moore in Capitalism:
A Love Story
. This might have been sheer coincidence, but if not, Uchitelle should have made some reference to Moore.

From the New York Times:

[Bryan Lawlor] is now in the co-pilot’s seat in the 50-seat commuter jets he flies, not for any failure in skill. He wears his captain’s stripes, he explains, to make that point. But with air travel down, his employer cut costs by downgrading 130 captains, those with the lowest seniority, to first officers, automatically cutting the wage of each by roughly 50 percent — to $34,000 in Mr. Lawlor’s case.

The demotion, the loss of command, the cut in pay to less than his wife, Tracy, makes as a fourth-grade teacher, have diminished Mr. Lawlor, 34, in his own eyes…“I don’t want to be a 50-year-old pilot earning $40,000 a year,” he said, adding that his wife does not want to be married to a pilot with so little earning power….pay cuts, sometimes the result of downgrades in rank or shortened workweeks, are occurring more frequently than at any time since the Great Depression.

State workers in Georgia are taking home smaller paychecks. So are the tens of thousands of employees in California’s public university system. The steel company Nucor and the technology giant Hewlett-Packard have embraced the practice. So have several airlines and many small businesses.

The Bureau of Labor Statistics does not track pay cuts, but it suggests they are reflected in the steep decline of another statistic: total weekly pay for production workers, pilots among them, representing 80 percent of the work force. That index has fallen for nine consecutive months, an unprecedented string over the 44 years the bureau has calculated weekly pay, capturing the large number of people out of work, those working fewer hours and those whose wages have been cut. The old record was a two-month decline, during the 1981-1982 recession.

Yves here. What is striking (per the earlier comment, that Lawlor’s wife does not want to be married to a now inferior earner) is how deeply ingrained the “my paycheck is my worth as a man” ethic is ingrained. Lawlor is concerned his kids will think less of him if they get less under the tree at Christmas. He has been depleting his savings to keep up appearances with his own children! This is truly sick:

Bryan and Tracy Lawlor, who is also 34, have hidden their straitened circumstances from their four young children, mainly at his insistence. But as their savings dwindle, Christmas, a key indicator in the Lawlor family, will mean fewer presents this year. The Lawlors have made a practice of piling on toys and new clothes for their children at Christmas, buying relatively less the rest of the year. That will make a cutback noticeable this holiday season, and the parents are concerned that their children will begin to realize why.

“You don’t want to see disappointment on their faces; that makes me feel horrible,” Mr. Lawlor said. “You can be the best pilot in the airline and make the best landings, and in their eyes, I am not going to be as important as I was.”

Yves here. My father got a second graduate degree very late, when I was six years old, and quit his job to pursue it full time. I can look back on our Christmas photos and see that the pile under the tree was smaller those two years than before or after. I have NO recollection of being disappointed. In fact, one of my all time favorite presents was the sled I got that year. But that was more than 40 years ago, and kids have been trained to become smarter consumers in the meantime.

In fairness, the wife was interviewed at length, and she seems better reconciled to their situation than he is:

One year later, even after such a big pay cut, Mrs. Lawlor sees her husband’s shorter commute to his new base at Newark as a blessing she is reluctant to give up. Her husband says that moving back up to captain, with a captain’s pay, might mean commuting again to California. “If that is what it takes, I’ll do it,” he said, and this time his wife winced.

“I would probably not be happy,” she said. But she “wouldn’t trade him for another husband,” as she put it, and while she had never wanted her husband to be a pilot, at this point she would be alarmed if he left aviation in an attempt to please her.

“He likes what he does,” she said, “whereas before he did not like what he did. That has made him easier to be around, whereas before he became a pilot, he wasn’t happy at all.”

But the fact that she has even though of whether she would “trade him in” is telling. What has happened that Americans are so ill equipped to deal with adversity? Although a New York Time story is a very artificial window, one can imagine with Lawlor’s job that his social network beyond his family and co-workers is limited. Pilots work schedules that put them out of synch with most 9 to 5 (or 7) types. And that has become endemic in the US as most jobs have become more demanding and community ties have weakened. Weak or thin social networks are strongly correlated with lower mental health scores.

In other words, the US has unwittingly done a great job of conditioning many of its citizens to be even more dependent on their standing at work than they otherwise would be.

Contrast that New York Times story with the lead item at the Wall Street Journal, “Wall Street on Track to Award Record Pay“:

Major U.S. banks and securities firms are on pace to pay their employees about $140 billion this year — a record high that shows compensation is rebounding despite regulatory scrutiny of Wall Street’s pay culture.

Workers at 23 top investment banks, hedge funds, asset managers and stock and commodities exchanges can expect to earn even more than they did the peak year of 2007, according to an analysis of securities filings for the first half of 2009 and revenue estimates through year-end by The Wall Street Journal.

Total compensation and benefits at the publicly traded firms analyzed by the Journal are on track to increase 20% from last year’s $117 billion — and to top 2007’s $130 billion payout. This year, employees at the companies will earn an estimated $143,400 on average, up almost $2,000 from 2007 levels.

Print Friendly
Tweet about this on Twitter0Digg thisShare on Reddit0Share on StumbleUpon0Share on Facebook0Share on LinkedIn0Share on Google+0Buffer this pageEmail this to someone

50 comments

  1. Almuixe

    Nice post as always.
    I sincerly hope that with the crisis americans will come to realize that some of their values are skewed at least. “L’argent est un bon serviteur, mais un mauvais maitre”.

    Of course it maybe easier in europe to dispise money since we’ve got our basics need secured : medical assurance for everyone and free education. However, affordable housing has vanished… But we are clinging hard to the others…
    I remind a NYT article picturing youngs graduate in law, full of enthousiasm and idealists, who had to drop their job as a public servant because the pay was so low and their debt so high they could not make ends meet. I found it scary for the future of the US…

  2. jedwards

    The statements made by the pilot aren’t very shocking. The fact that in the US, people are judged by their jobs and by how much they make has been ingrained for at least a couple of generations now.

    When I was a kid, I distinctly remember my friend’s dad lamenting to us that when he was young, you could be a janitor, but if you were a hard working janitor, you could still be considered an honorable man. He said that wasn’t the case anymore, and that was over 30 years ago.

    That very same friend with whom I’ve grown up with, when to Chile with his Chilean wife, and he remarked that absolutely no one talked about their job or their work when they were talking amongst each other. It was a faux pas to even mention that, whereas in the US, the first thing you ask someone is “what they do”.

    I have no perspective on Europe, but at least in the US and Asia, what you do and how much you make is paramount to who you are, which is unfortunate.

    1. DownSouth

      Your second paragraph reminded me of something Hannah Arendt said:

      Although we know that human beings are capable of thinking—of having intercourse with themselves—we do not know how many indulge in this rather profitless enterprise: all we can say is that the habit of thinking, of reflecting on what one is doing, is independent of the individual’s social, educational, or intellectual standing. In this respect, as in so many others, “the good man” and “the good citizen” are by no means the same, and not only in the Aristotelian sense. Good men become manifest only in emergencies, when they suddenly appear, as if from nowhere, in all social strata. The good citizen, on the contrary, must be conspicuous; he can be studied, with the not so very comforting result that he turns out to belong to a small minority: he tends to be educated and a member of the upper social classes.
      –Hannah Arendt, Crises of the Republic

      And your comments about Chile reminded me of this from the Mexican writer Carlos Fuentes:

      The culture of Spanish America also brings its own gifts. When asked, both new immigrants and long-established Hispanic Americans speak of religion—not only Catholicism, but something more like a deep sense of the sacred, a recognition that the world is holy, which is probably the oldest and deepest certitude of the Amerindian world. This is also a sensuous, tactile religion, a product of the meeting between the Mediterranean civilization and the Indian world of the Americas.

      Then there is care and respect for elders, something called respeto—respect for experience and continuity, less than awe at change and novelty. This respect is not limited to old age in itself; in a basically oral culture, the old are the ones who remember stories, who have the store of memory. One could almost say that when an old man or an old woman dies in the Hispanic world, a whole library dies with that person.

      And of course there is the family—family commitment, fighting to keep the family together, perhaps not avoiding poverty but certainly avoiding a lonely poverty. The family is regarded as the hearth, the sustaining warmth. It is almost a political party, the parliament of the social microcosm and the security net in times of trouble. And when have times not been troubled? The ancient stoic philosophy from Roman Iberia is deep indeed in the soul of Hispanics.
      –Carlos Fuentes, The Buried Mirror

    2. Thomas

      It is still a game one chooses to play. I was raised on a dairy farm (very poor) much differently than the story above, and I believe I am a better person because of it.

      When I was growing up (I am 35 by the way), we were asked what type of “present” we wanted, not “presents”. I remember quite well savoring the time before opening my christmas present as well, as I almost always was the one that waited until last…. I am sure the excitement I felt was no different than a kid with a dozen presents. As I got older we didnt have presents anymore, but the focus became much more on being together as a family to doing one’s part to help….

      In short…. Scarce resources builds depth in a person…. Plenty of resources erodes it…

      1. DownSouth

        Thomas,

        I can still remember a sermon my Southern Baptist pastor gave when I was just a kid. It concerned the following verse from the Bible:

        And we know that all things work together for good to those who love God, to those who are the called according to his purpose. – Rom_8:28

        He was one of those old-time Baptist moderate-liberals, back before the denomination was taken over by militarists and prosperity theologians. Preachers like him have of course long since been exiled into oblivion by the Southern Baptist Convention.

        He lamented the fact that a new school of theologians had rewritten that passage to read “we know that all things are good to those who love God.”

        Who knows whether America has enough moral fiber left to turn, as it did during the 1930s, to what Frederick Lewis Allen called the “religion of social salvation.” It seems many religious leaders in America have sold out. And “science” has suffered an even more dismal fate. Just look how the vast majority of economists also have their lips glued to the bung holes of the financiers.

        The great risk of course is that the country will not turn to “the religion of social salvation” as it did during the Great Depression, but to something similar to Nazism or Communism.

        I try to remain optimistic, because what’s the alternative? Defeatism or nihilism? But I must confess the current moral state of America gives me great cause for concern.

    3. DownSouth

      And you know, jedwards, this conversation about the American character vs. the Hispanic character raises another interesting question. Will the Americans get up on their hind legs and rebel against being colonized by the neoliberal/neoconservative jet set, as the Iraqis and Afghanis have done? Or will their reaction be more like that of the Hispanic world, one of docility and compliance?

      In the conclusion to his book, The Mexicans: A Personal Portrait of a People, Patrick Oster recounts the story of how the CIA agent Brian Latell, after visiting Mexico and documenting the “urban and rural unrest, large foreign debt, enormous capital flight, and widespread corruption,” concluded that Mexico was on the verge of revolution.

      Oster says Latell’s mistake in making his dire predictions “had been to assume that Mexicans would react the same way that Americans would to such conditions. Americans would revolt.”

      So it will be interesting to see how Americans react, and whether any inkling of the spirit of the American Revolution still burns in the heart of Americans or not.

  3. bb

    isn’t it ironic: when the big airlines were filing for bankrupcy a few years ago, their pilots were making $200k on a three day workweek. now they have to be content with 1/3 or 1/6 of that bounty. and they never expected their income to fall in line with the value they add…

    that which is unsustainable, will not be sustained (Herbert Stein)

    1. Thomas

      The young guys never did make the big incomes… Only the current retirees… That is the part that is so frustrating, which is that they when from an unsustainable union based situation to a just as unsustainable exploitation situation. They need to move more to a coop relationship moving forward if they want to survive longterm. Meaning, clearly public run companies are a thing of the past, while co-op “type” private companies is the best deflationary strategy in the immediate future.

  4. John

    What I find to be sickest of all in this article is the obscene and fraudulent amount of Wall Street pay. Since mark-to-market has been suspended, the banks can pretty much make the numbers up and they have. This is just more looting of America by Wall Street. And everyone else is paying for this looting by taking pay cuts so that Wall Street can rake in record bonuses. That is truly disgusting and abhorrent to me.

    As for the pilot, of course he’s going to feel like crap. He was previously making $68,000 and his pay has been cut to $34,000. Plus, there is no apparent path forward for his career. There is probably no one who reads this blog who has even an inkling as to what it’s like to make $34K per year. Comparing the pilot’s situation (no control) to someone who has consciously chosen to go to grad school does not compute. The person going to grad school can expect that they are just going through a temporary blip down in earnings and that things will be better in the future. The pilot’s situation is pretty much out of his control so of course it’s going to have a much more negative effect mentally.

    1. giggity

      “There is probably no one who reads this blog who has even an inkling as to what it’s like to make $34K per year.”

      You’re right. I make $31K per year. And I’m not in grad school, but I do have a BA in Economics. But I’ve been unable to find a job to “use” that knowledge since I graduated in 2006.

      I’m keenly aware of what it’s like to make so little money. But I’m also relatively frugal (although my savings is small), and have no children (and no plans for them).

      What I repeatedly see in stories like the pilot’s is that these “average Americans” breed constantly and without considering the consequences. They assume they can spend on the biggest and best, while also having these large families of 3, 4, or more kids.

      It is quite sad that his pay was cut, for sure, but people can’t assume they will be raking in the cash forever, with growth on a yearly basis.

      Well, except for Wall St. They’re better than the rest of us. More talented, right?

    2. Yves Smith Post author

      You chose to misconstrue my point, which was narrow, namely, that kids (at least when I was young, it may not be the case now) were not sensitive to how many Christmas presents were under the tree. The Lawlors are running down their savings to maintain a lifestyle (apparently for their children) which is not sustainable. That is a big message in the story that does not come out clearly enough. They had the misfortune to buy a bigger house right before he got his pay cut.

      As for “no one who reads this blog knows what is it like to make $34K”, sorry, I know people personally who made zero and declared bankruptcy in the dot com bust (it hit both tech people and consultants) and are blog readers. And some live in New York City, where $34K takes you much less far than in other parts of the country. Many people took huge downdrafts in 2001 and 2002. Many, but not all by a long shot, have seen some recovery in their incomes. One friend who had had a hugely successful track record as an operator (but overseas, working for a big company, in diverse roles, which does not sell well in the US, they like narrow experts) came back to the US, her personal network eroded, spent several years unable to find work or gin up a consulting practice, and had to go back to Poland and live with her mother. This was someone whose latest accomplishment was turning around a business headquartered in France (where you can’t fire people, the usual way Americans turn around businesses) that spanned 11 time zones.

      The difference between self employment and unemployment is thin indeed.

  5. John

    ‘that which is unsustainable, will not be sustained (Herbert Stein)’

    Unless you work on Wall Street. Then the government will take from the masses in order to inflate your pay.

    1. bb

      the difference in fortunes of pilots and bankers shows that trade unions cannot protect their members’ interests as well as lobbying does. had pilots been donating to political campaigns and spending on lobbying, their interests would have been protected long time ago.

  6. rj

    With all due respect Ms. Smith, I find your analysis of the Lawlor family 100% wrong. The man feels like he has let his wife and his children down even if it’s no fault of his own. It’s his job as the man to put food on the table and provide for his family. So he feels like he has let them down.

    And the woman is just stating that she enjoys spending more time with him even though he is making less money, and would rather him continue doing a job that makes him happy even though he makes less doing it. Your whole notion of “she even considered trading him in” is not corroborated by what she said.

    But she “wouldn’t trade him for another husband,” as she put it…

    I feel like you started writing this blog with a pre-conceived idea of what to write and made the article fit the point you were making.

    In other words, the US has unwittingly done a great job of conditioning many of its citizens to be even more dependent on their standing at work than they otherwise would be.

    I have to make money to have a roof over my head and pay for my food. I’m not a leech that’s not going to do any work and wants everything handed to me. You can perhaps make the point that people in reference to how much money they make spend too much of it and not saving enough for a rainy day, which I would certainly agree with.

    1. Peter T

      > It’s his job as the man to put food on the table and provide for his family.

      Patriarchalic BS. If the wife earns more, the family is as well served by those dollars.

      > I have to make money to have a roof over my head and pay for my food.

      The parents have to provide for their children, yes, food and a roof over their head. Multiple Christmas presents are not on that list.

  7. Egg

    If economic recovery were to happen, the resulting world demand for oil would shoot prices to $200/barrel. The airline industry is toast in a world of triple digit oil.

    Our pilot may be a recovery away from no paycheck at all.

  8. rj

    And you know, jedwards, this conversation about the American character vs. the Hispanic character raises another interesting question. Will the Americans get up on their hind legs and rebel against being colonized by the neoliberal/neoconservative jet set, as the Iraqis and Afghanis have done? Or will their reaction be more like that of the Hispanic world, one of docility and compliance?

    In the conclusion to his book, The Mexicans: A Personal Portrait of a People, Patrick Oster recounts the story of how the CIA agent Brian Latell, after visiting Mexico and documenting the “urban and rural unrest, large foreign debt, enormous capital flight, and widespread corruption,” concluded that Mexico was on the verge of revolution.

    Oster says Latell’s mistake in making his dire predictions “had been to assume that Mexicans would react the same way that Americans would to such conditions. Americans would revolt.”

    So it will be interesting to see how Americans react, and whether any inkling of the spirit of the American Revolution still burns in the heart of Americans or not.

    It doesn’t.

    A lot of people thought they were doing a revolution with Obama’s election. Very naive they are.

    When you have half the population that thinks guns are “horrible, dispicable, and evil”, you’re not going to get a revolution. In other countries where the perspective of guns is even worse, you still won’t have a revolution. New York City, the home of Wall Street, just put a football player in jail for two years for carrying one on his person. How can you have a revolution in such a society as that?

    Not to mention most of said revolutionaries would be called “terrorists” that are not representing the true will of the people as represented by democracy and elections. People think war is evil, but it is sometimes necessary to correct the wrongs of the world. With the type of idiots across most of Western Civilization nowadays that think isolationist pacifism is the only acceptable course, they don’t understand that and in due time they’ll realize how wrong they are unfortunately. And the people that run Western Civilization – the elites of all stripes – know that their people think this way and take advantage of them as if they were feudal serfs.

    1. DownSouth

      Why do you assume a revolution has to be violent?

      This flies in the face of almost all experience for the last fifty years or so: the non-violent racial revolution led by Martin Luther King in the 60s, the overthrow of the Greek junta in 1974, of the autocracy in Portugal that same year, and the transition to democracy in Spain in 1975. The long parade of revolutions that followed included, among others, the Solidarity movement in Poland in the 1980s, the ouster of the Argentinean junta in 1982, the fall of the military dictatorship in neighboring Brazil in 1985, the expulsion of the dictator Fernando Marcos in the Philippines in 1986, in the revolution by “people power,” the fall of the autocrat Chun Doo Hwan in South Korea, the collapse of the Soviet Union and its empire in the late 1980s and early ‘90s, the replacement of the apartheid regime of South Africa with majority rule I the early nineties, the fall of Slobodan Milosevicz in 2003, the “Rose Revolution” in Georgia in 2003, and the “Orange Revolution” in Ukraine in 2005.

      Most of these tended to look no longer at the French, Russian or Chinese models to revolution but rather at one another or the American Revolution, which has suddenly recovered international attention and respectability.

      1. gatopeich

        Hello from Spain, 34 years after our “Revolution”.

        Wealth & power in this country pretty much belongs to the same elite/families as then. Now they enjoy a lower public profile which, if something, gives them more time to enjoy, makes their rule very sustainable and dignifies them internationally. Some even own huge banks of worldwide influence.

        But ours was not a revolution, only a dictator’s passing.

        Regarding the call to arms, it would probably be favored by a generalized hunger, and probably only in response to State violence.

        On the other hand, there are means to remove revolutionaries ‘in time’, remember JFK, perhaps?

        1. Diego

          gatopeich, you are wrong. While some wealthy, powerful people in Spain may have fascist ancestry, most don’t or that is unrelated to their status now.

          More importantly, the Spanish economic/social system now has nothing to do with Franco’s Spain. Inequality in Spain was at Latin American levels in 1970 (over 0.5) and they’re now similar to other Western European countries, like France (0.3). Things you take now for granted, such as universal access to healthcare or university education, were mostly reserved for the wealthy classes then.

          On the other hand, I happen to know a couple of people with fascist, wealthy ancestry whose family wealth was lost as soon as democracy came.

          So yes, we had a revolution!

    2. giggity

      Agreed. It’s horrifying to listen to the “average American” talk down about protesters and activists as if they were all “lunatics” and “nutjobs” and, well, “terrorists.”

      There will not be any meaningful revolution here, only apathetic debt slaves.

      What few true intellectual revolutionaries we have will be silenced, socially and/or financially ruined, jailed, or even killed. The true nutjob wingnuts will be embraced by TPTB to divide and conquer, pointing to them and now given a “good reason” to suppress all political backtalk and activism as terrorism. While the ex-middle class, Sunday Night football-watchers, and $900 baby stroller yuppies will meekly cave and whimper, begging for survival.

      I hope I’m wrong.

    3. ArmchairRevolutionary

      As others are hoping for, I too hope that we will have a non-violent transition; but I believe there will be violence. It will begin when those 50% that have always been for gun control start to buy guns. I think those 50% tend to be more rational. If they buy guns, it means they are about to be used. When I start hearing about liberals buying guns, that’s when I am going to get worried.

  9. wally

    That the financial industry is making more profit even as there is less earning, less investment and less money flowing in the general economy is very telling, isn’t it?
    Pray tell, off what are they making their money… it is clearly not off business.
    Face facts: they are the beneficiaries of money taken from others and given to them.

  10. Charles Kiting

    Have a couple of family members who are pilots. The squeeze on pilot salaries has been going on for several years, it’s not a phenomenon of the financial crisis. Simply supply and demand. My niece went to college with aspirations of being a pilot, then switched majors half-way in because she noticed so many grads not getting anything better than part-time work/teaching jobs. She now makes more than her pilot boyfriend and landed a job that required a pilot’s license but where piloting is only about 2% of the job, if that much. She’s able to fly about 15-20 hours a year so she gets flight hours.

    Willingness to adapt paid off for her. But too many find adapting to be compromising and compromising to be “wimpy” or “quitting”. (I chalk that up to an over-emphasis on sports and athletics in our culture over the last 25-30 years.)

  11. Tortoise

    As paychecks shrink, businesses that cater to consumers tend to suffer. That is why I am skeptical when people think that just giving more credit to businesses will be helpful to the economy and particularly employment. If there already is overcapacity in restaurants, then giving credit to help someone open a new restaurant certainly means that someone else’ s restaurant must close. I cannot say what is the “best” solution but there certainly is a mismatch between what consumers can pay and what businesses can provide.

    As for the pay in the financial district, what can I say? Perhaps that, as always, to the victors (of lobby wars) go the spoils.

  12. Michael Fiorillo

    Down South,

    While I certainly agree with you that revolutions need not be violent, I must point out that some of your examples are not altogether valid: the “People Power” event in the Philippines, while inspiring for the commitment of the civilain population, was fundamentally about the replacement of a pair of autocratic and kleptocratic arrivistes with a more traditional plutocratic regime (Cory Aquino came from the Cojuanco family, among the wealthiest land and sugar barons on the islands): the “Rose” and “Orange” revolutions in Georgia and Ukraine were largely manipulated,marketing campaigns, spurred by the geopolitical machinations of the US in its efforts to surround Russia with NATO client states.

    And, by the way, wasn’t the American revolution a rather violent affair?

    1. DownSouth

      Michael,

      You are clearly more knowledgeable about some of these events than I am. To be quite honest, I lifted the list from Jonathan Schell’s introduction to the Penguin Books’ edition of Hannah Arendt’s On Revolution.

      Schell remarked that all the revolutions he listed “were largely nonviolent, not to speak of terror.” And yes, you are correct when you say the American Revolution was a “rather violent affair,” but it nevertheless did not descend into the terror that the French, October or Chinese revolutions did.

      I also failed to include something else Schell said, which seems to be very much in line with what you’re saying:

      Most were aimed at establishing conditions of freedom rather than solving social questions. (In consequence these social questions were unfortunately left on the table in the new world of market globalization, which, having proved unable or unwilling to deal with them, now faces a powerful backlash, in South America and elsewhere.)

      Some Pitt students are organizing to respond to what happened on their campus during the G-20, and they’ve created a blog. I’ve been having a long and running debate on the subject of the use of violence with some left-wing firebrand–she’s not a student but nevertheless has attached herself to the group—on their blog:

      http://www.whathappenedatpitt.com/forum/viewtopic.php?id=34

      While I am by no means a pacifist, I nevertheless believe that any discussion of the use of violence for violence’s sake at this point is entirely premature. I believe the “non-violent” methods deployed by Martin Luther King and his followers are entirely appropriate at this point in time. That’s why rj’s comment struck me as being a little overwrought, even though I must confess that, with what I see happening in America at this moment, I am leaning more and more towards his position in favor of private gun ownership.

      I of course do not know to what extent our financial overlords will go to maintain their inordinate and unmerited privileges in society. I think there is evidence we are bordering on fascism, but not Nazism or Communism, at least not yet. I believe it is prudent to assume the situation is not unlike how George Orwell described England in 1941:

      An illusion can become a half-truth, a mask can alter the expression of a face. The familiar arguments to the effect that democracy is “just the same as” or “just as bad as” totalitarianism never take account of this fact. All such arguments boil down to saying that half a loaf is the same as no bread. In England such concepts as justice, liberty, and objective truth are still believed in. They may be illusions, but they are very powerful illusions. The belief in them influences conduct, national life is different because of them. In proof of which, look about you. Where are the rubber truncheons, where is the castor oil? The sword is still in the scabbard, and while it stays there corruption cannot go beyond a certain point. The English electoral system, for instance, is an all but open fraud. In a dozen obvious ways it is gerrymandered in the interest of the monied class. But until some deep change has occurred in the public mind, it cannot become completely corrupt. You do not arrive at the polling booth to find men with revolvers telling you which way to vote, nor are the votes miscounted, nor is there any direct bribery. Even hypocrisy is powerful safeguard. The hanging judge, that evil old man in scarlet robe and horsehair wig, whom nothing short of dynamite will ever teach what century he is living in, but who will at any rate interpret the law according to the books and will in no circumstances take a money bribe, is one of the symbolic figures of England. He is a symbol of the strange mixture of reality and illusion, democracy and privilege, humbug and decency, the subtle network of compromises, by which the nation keeps itself in its familiar shape.
      –George Orwell, “England Your England”

      Such a situation calls for the use of the tactics of “non-violence,” not violence.

  13. Martin

    Focusing on pilot pay is hardly a good way to make an argument regarding pay deflation. While it’s true pilot pay has been pressured downward severely since 9/11, it was at stratospheric levels beforehand, and this in an industry that has never to my knowledge been consistently profitable in its entire existence. I have a good friend who is a pilot and I know a decent amount about pilot compensation from him.

    First, anyone becoming a pilot should know that you should expect to make a fairly low salary for the first 5 years at least. I am not particularly impressed by Lawlor’s predicament. Certainly it is a strain on his family, but he should have known when he became a pilot that he might have high income volatility for at least the first 10 years of being a pilot; that is the post 911 world for airlines, and since he began training to be a pilot in 2003 he damn well should have known that.

    Second, does everyone realize that the $34,000/yr he is making is for doing 70-80 hours of work per month? Pilots are limited to a maximum of flight hours per month and get a minimum of credited hours regardless of how much they fly for that month. I think the max is 85 hrs and the minimum is 70-75 hours. This means even if it’s a slow month and you fly 30 hours you still get paid for the minimum set in your contract. In other words, you can have 2-3 weeks off per month while making $34,000/yr…I’d say that’s pretty decent compensation for the additional training it takes to be a pilot…and remember that he is now making almost the minimum you can possibly make working for a commercial airline.

    By no means is being a pilot as glamorous or highly compensated as it once was, but Lawlor knew or should have known that going in. He works for a lowly commuter airline which are known for even more hiring and furlough volatility than the legacy carriers and he was a captain far earlier than many who get into the business. The proper way for him to have looked at being a captain so soon after deciding to become a pilot should have been that he was far ahead of his peers, the fact he is now tracking his peers more closely is just the reality of the career he chose. It’s unfortunate for him that things aren’t going perfectly in his life, but the whining over it is pathetic, he knew the risks going in, he should have planned accordingly.

    1. Martin

      Also, if anyone is interested, http://www.airlinepilotcentral.com/ has the pay rates for pilots for every carrier in the US. It also shows the number of furloughed pilots for each carrier. ExpressJet, Lawlor’s employer has 314 active pilot furloughs right now…Lawlor is damn lucky he isn’t one of them. Being a pilot now more than ever is all about paying your dues while working towards seniority…he is paying them now, he will be compensated well in the future for the work he puts in. Until then he gets to spend weeks per month of quality time with his wife and kids, name another profession where you can do that.

      1. Fluffy

        And postings like these, where ex-Middle Class folks take potshots at the other victims of wage deflation, are exactly why there will never be any significant uprising over the way the 1%’ers have stolen your salary and your pension and your childrens future.

        No, far better to turn on one another, at the behest of a media controlled by Wall Street, and spend your day arguing that the other guy deserved the way he or she got screwed out of a fair wage by someone with a golden parachute.

        Why do you think the NYT used PILOT pay? Because of the widespread misconception that pilots were all and always overpaid prima donnas. What better way to stoke the flames of “wage deflation is just some other poor sod getting what he deserves”.

        Unions once were about workers sticking together against the rich, and now that they’re gone, those at the top have succeeded in turning us against ourselves. Good work if you can get it.

        1. James R

          I think you’re being overly pessimistic, Fluffy.

          The American public oscillates between favoring big government and small government. We just had 8 years of a big-government, corporatist President who masqueraded as a small-government President. Now we have a President who is committed to not just huge government, but outright fascism.

          Government thinks that the financial meltdown that occurred in 2008 is something they can solve with stimulus and deficits. But they are wrong. What happened in 2008 is that the entire system—the credit expansion that started just after World War II, and has continued (with virtually no interruptions) since—has finally popped.

          In other words, the economy as it existed up to 2008—Americans borrowing and consuming, while the rest of the world saved and produced—is dead. It cannot be revived. The task ahead of us is to transition from an economy based on consumption to an economy based on production.

          Some people have figured this out. Ron Paul’s Campaign for Liberty is growing, and his bill to audit the Federal Reserve has majorities in both houses. Around a million people marched on DC on 2009-09-12 as part of the 912 Project.

          As time goes on, and Americans see other nations recovering while the American economy flounders, trust in government will be replaced with anger at government. More and more people will realize that government is not the solution to our problems, but the source of them.

          Thanks to the Founding Fathers, we don’t need the ammo box to have a revolution; all we need is the soapbox and the ballot box. In 2010 and 2012, I predict that they’re going to be used very heavily, and those who have favored big government will be in retreat (if not outright shambles).

  14. Alice

    It is interesting that public employees unions have set it up so government employees don’t have to worry about losing their jobs or pay cuts.

    Although most public employees make less than the elite on Wall Street, there are a heck of a lot more public employees than elite bankers and financiers. And government is growing at mach speed.

    So when you ignore the huge erupting volcano under your feet in order to complain about the few wispy clouds above, your grasp of reality may come into question.

    Or not. This is, after all, the age of Obama and Pelosi. The age of talking points and politically correct speech and thought.

  15. ron

    The idea that life has risks including the fact that one or even the country could be so poor that finding enough to eat difficult and living in tents the norm is beyond the awareness level of most Americans. The idea that Americans are entitled to the designer life style has been the key aspect of the shopping mindset and as it comes to a grinding halt for the vast majority could produce some very unwanted social side effects.

  16. Davis

    COMPLETELY OFF TOPIC:::Is Michael Pettis’ web blog down? I havn’t been able to read any of his posts this month. Did the PRC shut him down? Any news would be appreciated . Thanks

  17. DownSouth

    Alice and ron,

    Above and beyond the fact that I dispute the truthfulness of your comments, and the fact they are totally devoid of any sense of proportion, do I detect a bit of Schadenfreude there?

    You seem to be taking entirely too much pleasure in seeing the American middle class meet its demise.

  18. Michael Fiorillo

    DownSouth,

    I had no intention whatsoever of suggesting that violence is an answer (although I do not consider myself a pacifist). Most folks who romanticize violence are just getting off on their bravado, and underestimate the willingness of Men With Guns to use them.

    I suppose my point was that history is a trickster, and draws people into events and processes where the deeper structures are not apparent and/or confound their intentions.

    I also didn’t mean to suggest that, despite their compromised natures, some of the “revolutions” I mentioned might not have provided improvements in the lives of the people in those countries. The Philippines is without question a freer country than it was under Marcos, although poverty has increased and, as a result of the grip of neo-liberal trade policies, it has gone from being one of Asia’s largest rice exporters to a large importer of rice. The ecological destruction of the country, witnessed by the floods and landslides resulting from widespread deforestation, that began under Marcos continues apace. I only mention the Philippines because my wife’s family hails from there, and thus I have some familiarity with the place.

    As for fascism, latent or otherwise, in the US, I’m mostly in agreement with you. Author Bertram Gross used the term “Friendly Fascism,” in which the iconic fascist images of book burnings and so forth are largely absent. On the other hand, as Pittsburgh showed, when resistance develops, the response of the overlords might not be so friendly.

  19. Ron

    DownSouth: Driving around the suburbs of Calif one finds little evidence that the average household income is 60K since the 3 cars, boats,ATV’s,RV’s line the streets, side yards and storage lots not to mention the ranch style 3bd 2 bath house. These loss employment stories along with the parade of foreclosure pain are gearing Americans up for a down leg in economic lifestyle. The fact that this downsizing will occur does not make me happy but I do accept that we all cannot party on.

  20. S

    Eight years working at my job and I just took a small pay cut on a management job that pays roughly 100K a year. My medical benefits also took a hit.

  21. Dave Raithel

    Whewww….

    But one brief thought (and yes, more evidence is required) on the ancillary matters raised;

    Non-violent revolutions tend to be those where the revolting demand the civil and political rights exercised by the enfranchised classes – people want in, to play by the rules AS enfranchised.

    Violent revolutions are about dispossessing the possessors.

  22. KD

    Yves,

    It seems that you like to talk about Japan, a country supposed to decline for a foreseeable future. I’m a little bit curious about it because nobody is now going to mention Japan in favor of China. Anyway, I as a Japanese would like to share my idea with you.

    “a career path that had you taking on more responsibility and stress for pretty much no more money”

    This is quite true right now, especially for those who have experienced the so-called “bubble economy” in the late 1980’s. My former boss once lamented to me that it took more than fifteen years that his income surpassed what he got as a new graduate in the late 1980’s. Of course, looking back, the bubble economy era was egregious and everybody got much more than what he deserved. It’s no wonder my former boss’s salary shot up at the time. But even so, the loss after the bubble economy was so forceful that Japan’s nominal (yes, it’s nominal, not real, because Japan has been in deflation since the mid 1990’s) GDP in 2008 is less than that in 1995. Counting that Japan’s population has been growing since then, albeit very slowly, you find more terrible facts that Japan’s nominal GDP per capita in 2008 is less than that in 1994 and slightly more than 1992. Which means our income hasn’t grown for more than fifteen years.

    I’m not intending to scare you to show Japan’s analogy to the current US. It’s quite contrary. The resilience of the US economy has kept me wonder how US has weathered the worst crisis since the Great Depression. My only concern is that Japan is now turning away from the US economic models saying that it created the current crisis, although Japan has until now achieved far lower than US in sustaining growth.

    1. Yves Smith Post author

      Thanks for your comment.

      My remarks on Japan are based on what I have heard from a colleague who is now well into his 60s, so I think his perspective extends beyond the bubble years. But you are correct, anyone who lived through that period would find the adjustment particularly difficult.

      Two different factors may be at work. First I am not at all convinced the US will get off as easy as many now seem to believe. There was a one year (maybe even longer than a year) period, 1931 in the US, I believe 1992 in Japan, of stablization after the initial financial shock. But the real economy damage continued, and then the downward slide resumed. The fact that we have not engaged in real reform (it never really happened in Japan, didn’t start till 1933 in the US, and is clearly not happening now) is a big worry.

      But one thing that may have put Japan in a worse situation than the US is its debt bubble may have been worse. There is not much data on this, and most reports I have seen put debt to GDP at lower levels pre crisis than in the US. But I am told a friend of a friend will be putting out some research which says the debt overhang in Japan was much worse. That might explain the continued weak performance.

  23. SueB

    “Yves here. What is striking (per the earlier comment, that Lawlor’s wife does not want to be married to a now inferior earner) is how deeply ingrained the “my paycheck is my worth as a man” ethic is ingrained. Lawlor is concerned his kids will think less of him if they get less under the tree at Christmas.”

    Yves, please read the comments to the NYT article where he responds to the quotes in the article (the remarks about his wife’s attitudes and his own) and where in fact the journalist also responds to Mr Lawlor’s comments. He clearly felt somewhat misconstrued. The NYT has had a habit recently of stories where the protagonists are presented as victims and this was of the same ilk.

  24. bondinvestor

    among the many industries i cover in my capacity as a buy side securities analyst is the airline industry. i’ve covered the industry for nearly 10 years now.

    i am going to try to keep emotion and religion out of my analysis. i have some strong views on what is “wrong” with the US airline industry and a number of opinions on how to fix it.

    but, i thought it would be interesting to pose the following question to everyone who opined on this issue:

    would you be willing to spend an additional $50-100 per flight in order to restore mr lawlor’s salary to its previous rate of $70k per year?

    i can assure you that there is no meaningful margin opportunity in the airline business. between financing costs, fuel costs, operating costs, taxes and salaries, there is no excess cash flow for anyone in the food chain.

    therefore in order for mr lawlor to see his pay restored to prior levels, either oil prices need to return to $30/bbl (highly unlikely, given the global supply situation) or fares need to be 30-60% higher.

    the good news from mr lawlor’s perspective is that with all of the capacity withdraws in the US system, the likelihood of severe upward price spokes over the next few years is high. if he can just hang on for another 3-5 years, i think he will be surprised at how high his compensation goes when the cycle finally turns for good.

    (NOTE: for those of you who are not well versed in the intricacies of the airline industry, deflation came to this industry in 1998 when the internet created price transparency at the point of sale. this happened to coincide with a wave of new plane orders that were placed by players with intrinsically high cost structures. unfortunately for the firms involved, the capex was funded with debt and the resulting deflationary debt spiral has been brutal for everyone involved in the industry. the good news for stakeholders is that we are nearing the end of this process and i expect the next upcycle to be massive in scope and extremely long in duration. it will reward the patient souls who have stuck with the industry through the dark years. the bad news for the rest of you is that you will be unlikely to travel for anything close to what you became accustomed to in the late 90’s and 2000’s for decades to come.)

Comments are closed.