Do Businesses Hate Their Workers? (Income Disparity Myths Edition)

In America, it isn’t hard to answer the question in the headline “yes.” The oft recited, “Our employees are our greatest asset” is pure Orwellian prattle; most companies treat employees as liabilities, doing everything they can to minimize labor costs, getting rid of workers whenever possible. And this now extends well up into the management ranks, with most people who are still on the corporate meal ticket assigned responsibilities that would have constituted 1.5 to two jobs a decade ago.

And before readers argue that this is a necessary response to globalization, the evidence does not support that view. If companies were simply responding to tougher competition (in this case, lower cost suppliers from overseas), you’d expect to pressure on wages AND profits. Instead, we’ve seen wage stagnation (save at the very top) with (pre bust) record profits.

If you look at past post-war expansion periods, the vast majority of GDP growth went to labor, in the form of increased hiring and higher wages. The post war average (pre the last upturn) was close to 60%; the low was 55%. The jobless recovery lived up to its billing, with under 30% of GDP gains going to workers. By contrast, the portion of GDP growth that went to profits was an all-time record.

Similarly, as any properly-trained MBA will tell you, companies can compete on other axes besides cost: convenience, product features, speed of delivery, other types of service. And US businesses have a huge advantage: physical proximity to the biggest consumer market. Offshoring and outsourcing create considerable rigidity and risk (more coordination required, which increases the odds of snafus) Some evidence supports the idea that outsourcing is a fad that US companies embraced whether or not it fully made sense. Most companies find outsourcing to be overrated as a cost saver. A former senior executive at Ethan Allen told me there was not reason for the US to cede anywhere close to as much furniture manufacturing as it did, particularly given the cost of shipping (often two ways, since much of the raw materials come from North America). But in Ethan Allen’s case, Wall Street wanted to hear they were manufacturing overseas, and they complied.

Moreover, other countries, equally exposed to globalization, have not seen a squeezing down on workers to the benefit of the top 1% to anywhere the degree the US has, nor is the international pattern consistent with globalization (or other common culprits) being the driver. The Luxembourg Income Study (LIS) group put out a working paper by Andrea Brandolini and Timothy Smeeding with some international comparisons on income inequality, titled “Inequality Patterns in Western-Type Democracies: Cross-Country Differences and Time Changes”:

National experiences vary during the last four decades and there is no one overarching common story. There was some tendency for the disposable income distribution to narrow until the mid-1970s. Then, income inequality rose sharply in the United Kingdom in the 1980s and in the United States in the 1980s and 1990s (and still continuing), but more moderately in Canada, Sweden, Finland and West Germany in the 1990s. Moreover, the timing and magnitude of the increase differed widely across nations. Inequality did not show any persistent tendency to rise in the Netherlands, France and Italy. Commonality seems to be greater for market income inequality: in five of the six countries for which we have data, we observe an increase in the 1980s and early 1990s and a substantial stability afterwards.

Changing public monetary redistribution appears to be an important determinant of the time pattern of the inequality of disposable incomes. Changes in inequality do not exhibit clear trajectories, but rather irregular movements, with more substantial changes often concentrated in rather short lapses of time. Together with the lack of a common international pattern, this suggests to look at explanations based on the joint working of multiple factors which sometimes balance out, sometimes reinforce each other, rather than to focus on explanations centered on a single cause like deindustrialization, skill-biased technological progress, or globalization. Identifying and characterizing episodes and turning points in the dynamics of inequality may reveal more fruitful than searching for overarching general tendencies.

Other factors are that changes in policy have reduced the bargaining power of workers, and to a much greater degree than most realize. For instance, MIT economists Frank Levy and Peter Temin argued that, “Institutions and norms affect the distribution of economic rewards.” The paper combines some novel analyses with a Depression-to-present-day narrative of evolving labor-business-government relationships (one nice touch is a comparison of starting salaries at Cravath versus that of average graduate degree holders to illustrate the rise of “winner take all” inequalities).

Government also gave signals through tax structures and other mechanisms of their view of the appropriate level of labor compensation. For example, when Kennedy implemented tax cuts, the Council of Economic Advisers announced wage and price guidelines that indicated that labor should share pro rata. The paper describes other ways that the government let businesses know that it expected productivity gains to be shared with workers. Again, these measures took the form of guidance rather than intervention, but also reflected prevailing ideas of fairness.

By contrast, a piece today in Firedoglake (hat tip reader John D) illustrates how much values have changed, first with a graphic, and some scathing commentary:

Friday, a group of Trade Associations ran a full-page ad in the New York Times demonstrating their loathing for the employees of their members:

Expensive new mandates on businesses will result in lost jobs, lower wages, less flexibility and higher health care costs.

Let me translate that from scary talk to plain English. Business will dump every last cent of the costs of health care on employees. No business will give up a single penny of its profits to keep its workers healthy. Anyone who wants health care has to pay for it at whatever price the insurance companies want to charge, and business will cooperate in shifting costs to workers. And there is nothing you can do about it. The profits we suck out of your labor belongs to us, and you don’t get any.

Sound a bit like class warfare? It’s not a surprising reaction when one party keeps cutting itself the an overly large slice of the pie, and then adding insult to injury through spurious rationalizations.

Print Friendly
Tweet about this on TwitterDigg thisShare on Reddit28Share on StumbleUpon0Share on Facebook0Share on LinkedIn0Share on Google+0Buffer this pageEmail this to someone

75 comments

  1. Carrick

    Murdoch could block Google searches entirely
    http://www.guardian.co.uk/media/2009/nov/09/murdoch-google

    “Rupert Murdoch says he will remove stories from Google’s search index as a way to encourage people to pay for content online.

    In an interview with Sky News Australia, the mogul said that newspapers in his media empire – including the Sun, the Times and the Wall Street Journal – would consider blocking Google entirely once they had enacted plans to charge people for reading their stories on the web.”

    1. ndk

      I have no idea how this is related to the topic at hand, but FWIW, I applaud this move and I hope it works.

      I’m one of those luddites who believes people and organizations should be compensated for their efforts. Yes, even conservatives. This encourages them to produce more and better things in the future, and enjoy a higher standard of living as a result.

      The Web in general and Google in particular have been savaging the information economy for years. Google Book Search is but the most egregious example. The professional journals and their overlord publishers are getting reamed and are on the brink of giving up.

      I don’t want to see the quality of information converge towards Wikipedia. I do want to see all employees and employers who do meaningful work rewarded, and rewarded fairly. I think society is better for it, unless and until we have a suitable replacement.

      1. gj

        Honey, I don’t think you understand how the internet works. When a site like google posts a story from FOX news it drives more traffic to FOX news. Traffic that in many cases would not go there otherwise. If it weren’t for sites like Huffingtonpost or Drudge many younger readers would never go to stories posted by MSM. And given the economic climate this is a really bad move. That is why big media is fighting net neutrality as well. Blocking sites from linking to other sites will kill the traffic going to FOX. No traffic means no ad revenue. Large media corporations are just having a very difficult time figuring out how to make money on the web and sustain the high salaries they are used to in traditional entertainment venues. They need to slim down, cut off the excessive salaries on the top and learn to get by on ad revenue only. Having other sites direct traffic there way is a plus not a negative. FOX is cutting off the hand that feeds it.

        1. ndk

          See, the article quotes Murdoch as saying: “There’s not enough advertising in the world to make all the websites profitable. We’d rather have fewer people coming to our websites but paying. There are no news websites or blog websites anywhere in the world making any serious money, some may be breaking even or making a couple of million.”

          And of course, for sites that provide original content, he’s right. The Drudge Report may be profitable because it has 2 people on staff, no original content, and huge traffic, but anyone who wants to support a real news organization on Web advertising alone is absolutely deluded. Just watch NYT slowly sinking.

          And if it’s this bad for consumer-oriented stuff, well honey, can you imagine how it is for resources that have a niche audience, like scientists? They make most of their money extorting lawsuit protection money from universities that have some random individual on campus go rogue and send a bunch of material to sites in China.

          If your argument is, then, that there are only link aggregators and those who try to source materially originally are dead, well, that’s not a world I want to see. I’d like the NYT to carry out routine layoffs every year, and you know, be able to actually play the Fourth Estate role that has been so important to our democracy.

          1. eric anderson

            I hate to break it to you, *honey*, but the paid media has totally fallen down on the job reporting what is happening to our country. The paid media appear more as conduits for press releases of the rich and powerful. Their death is well-earned.

        2. farang

          Exactly. And coming at a juncture when Murdoch states he is going to charge for his internet info….is he daft? Free customer direction to your website, and he wants to end it?

          What am I missing here?

  2. john bougearel

    We have certainly seen wage stagnation, but the idea of pre bust “record profits” could well be a statistical lie this past decade. I do not know how much the financial sector contributed to overall earnings growth rates in 2003-2008, but seeing as those earnings were largely fictitious, the “record earnings” are flawed and in need of serious revision by historians, because the statisticians will never catch the error. By one account, it is said the the losses in ML in 2008 wiped out all the earnings they claimed to have earned between 2004-2007.

    Yes, if we look at past post war expansion periods, policies were targeted toward bolstering middle class, and companies were quite paternal, with many employees staying with their same employer for life. These employees were “company men.” Was that because the company was paternal and benevolent? There has been a shift, these days the only “company men” cultures seem to at GS.

    And I have learned too that outsourcing is overrated as a cost saver, dispelling the glorious wonders of globalisation.

    But, in attempting to connect a few dots along the lines of Naomi Klein’s Shock Therapy, how much of this shift can be attributed to the Friedmanites out of the Chicago School of Economics, that graduated and went to take on key economic posts in gov’ts around the world, the IMF and World bank…

    Friedman was no fan of Keynesian economics, and was a big proponent of so-called “free markets,” globalization, and allowing foreign companies to come in and buy up the assets of state-owned companies for pennies.

    I am off to bed, still putting these thoughts of mine together, and will check back later in comments.

    1. Fifi

      Outsourcing is overrated as a cost saver on its own.

      The real purpose of outsourcing is not save by paying less for the outsourced service but to :
      1 – Scare the bejesus out of your local workers into compliance and concessions.
      2 – Emotional detach and isolate workers from their job and reduce the “emotional” cost for the managers of cutting labor costs. Much easier to inflict on workers 10,000 miles away than on guys downstairs on the shop floor (and less risky physically).
      3 – Satisfy the ideological biases of managers, shareholders, business media, etc.

  3. Gavin Smith

    “The profits we suck out of your labor belongs to us, and you don’t get any.”

    Aren’t employees are compensated for their labor by getting paid?

    So you think your employer should cover your healthcare? Maybe they should pay for your rent, food and water since you obviously can’t take care of yourself.

    1. Yves Smith Post author

      Gavin,

      With all due respect, can you read? I suggest you employ that skill before opining.

      The point of the post, which FDL took up more pointedly, is that businesses have been keeping pretty much all the benefits of productivity gains for themselves for a very long time and squeezing workers. International comparisons show that that is not necessary for the viability of companies, since it isn’t seen in other countries. That is reflected in the fact that business plan to put all health care costs on to workers, rather than passing some to workers and bearing some of the cost themselves.

      And you demonstrate considerable ignorance re US history. It was not uncommon of for companies to provide workers and management with housing in factory towns, either free to employees or heavily subsidized. Three of the houses I lived in while growing up (one quite glam, I might add) were company houses.

      And as for this dubious remark, “So you think your employer should cover your healthcare? Maybe they should pay for your rent, food and water since you obviously can’t take care of yourself,” pray tell who exactly is “you” here?

      1. Garcon

        Yves, didn’t you know that people should be independently wealthy so they wouldn’t have to rely on a job to support themselves in order to pay for such frivolities as food?

        Geez. As everyone knows, it’s the simplest matter in the world to get wonderful private health insurance when you go it alone.

        I can’t believe I have to explain such obvious things!

      2. Peripheral Visionary

        Yves, I feel obliged to point out that companies that provided housing to their workers were not exactly models of humane treatment of their workers. The provision of company housing made the workers more dependent on the company, as did “company store” policies that limited workers’ ability to shop anywhere else but company-owned properties. That high level of dependence gave the company a dominant position in negotiations with its employees, the result being the low wages and inhumane working conditions that the factory towns were notorious for.

        As such, I find company involvement in the provision of healthcare to be a factor that shifts the balance of power in the company’s favor, not the employee’s. The illusion of lower costs–I say illusion, since so many people receive insurance through their company plans that individual costs aren’t comparable–is more than offset by the simple fact that people cannot risk changing jobs, specifically to jobs, such as with small businesses or an entrepreneur, that do not have insurance coverage. That obviously stifles the rate of formation of new businesses and the growth of small businesses, to the benefit of large businesses, which I do not see as being in the best interest of either the working population or the American economy.

    2. Daniel de Paris

      So you think your employer should cover your healthcare? Maybe they should pay for your rent, food and water since you obviously can’t take care of yourself.

      Quite a lot of people cannot take care of themselves, and not only because they are fatty or addicted to drink or other substances. Just because life was not fair. Should you say “bad luck” that those people and let them deprived from a minimal health support.

      Society has to make sure that people are reasonably fit. For some obvious moral reason. But also because a healthy people is more effective at work. That also applies to education.

      Which does not mean “no accountability, no responsibility” of course.

      1. Bob the Banker

        I don’t think the issue is compassion. There are all kinds of supports out there for those that had a bad start. I know many personally. The issue is with fair pay verses how productive you are. Take my job for example. I am an Investment banker(personal level) and of course my job is to provide loans, investment options, checking accounts, you name it. If the bank can offer it, I sell it. But the past 3 years, even at the height of the bubble they kept playing with the commission schedule. They would create a new system, put some spin on how it was better and you could make more money then before, but when you really sat down and did the math on it, they were ripping you off. I went from 40k-50k in a year in bonus to 15k-25k if I am lucky. And now that the bubble popped, they have slimmed the commission down so low the only reason you sell is to make your numbers look good enough to not loss your base.

    3. Richard Kline

      Gavin Smith: “Aren’t employees are compensated for their labor by getting paid?” No, and that you ask the question that way makes it clear that you’ve never held a working class job in your life for more than a month or two. The equation you just defined in that question is, ‘I give you this dollop of money, and in return I _own_ you and your time.’ Most of us think more of our days on this earth than that, which is why _work conditions_ have always been a major bone of contention between labor and employer: the money alone does not compensate for dysfunctional, unhealthy, injurious, or grossly unfair conditions. Which, be it said, employers have scant compunction about imposing throughout the history of capitalism and before. Workers cannot trust that management or ownership will either pay them fairly (or even accurately), protect their persons, negotiate in good faith, or in any way act like members of a civil society. Labor has had to fight for every concession on every one of these points, a few humane employers down the _centuries_ notwithstanding.

      Personally, I think that it was, and is, very poor policy to tie _access_ to health care to tenure of a particular job. We can all think of many inefficiencies, here. But the historical grounds for it having developed in this way were not entirely irrational. Health care as a job benefit was largely union won, and in industries—heavy construction, assembly line factories, and the like—where workers faced DAILY health and safety impacts. Furthermore, labor in these industries was so cumulatively hard that workers there were physical wrecks after their thirty years, and thus very keen on gaining _continuing_ health coverage. How did they get it?: By making concessions on wages during their working years. That’s right, those ‘unearned’ benefits were not at all, they were time-shifted compensation for labor provided. A secondary, and pernicious reason why health care became widespread in the US as a job-based rather than government based benefit was that those in well-paying industrial jobs who had made gains on getting their own health covered were loath to have taxes put in place on their own companies which would be used to pay for better health care for Those Other People.

      I think as of today a majority in the country would trade their company based health care for publicly financed single payer with companies being adequately taxed for their expected contribrution including a surcharge on excess profits. Care to sign up for THAT, Mr. Smith?

      Labor has always bargained for a _fair_ working environment, of which wages are an important aspect but scarcely the only one. That anyone even thinks for a second that money alone entitles management to sneer at, work to death, rip off, and sicken their workers brands said ‘thinker’ as an ignoramus. And NONE of the remedies for those behaviors are forthcoming from management or ownership—not historically, nor presently, not conceivably—without labor, and more important without GOVERNEMENT beating said management and ownership over the head with statute and injunction. When and as we can trust management to deal fairly, then we can talk about ‘personal responsibility.’ Those who work for a living are going on three hundred years in this country without a fair shake, Mr. Smith, and your attitude shows a large part of the reason why.

  4. Advocatus Diaboli

    How can business (short term mercantile thinking) grasp the importance of paying workers well (medium term rational thinking).

    The funny thing.. workers enthusiastically participate in screwing over each other.

  5. winterwarlock

    Labor must earn and demand 51% return on the economy, which can only come from healthy new family formation, to constantly feed the system with oxygen, new talent, and leverage new product development with the necessary confidence to invest in durable goods production.

    Otherwise, the system automatically liquidates, because the corporations are only equiped to distribute new processes and liquidate old ones. With no new domestic product origination, US companies had little choice but liquidate assets for income, through financial leverage and global replication.

    Labor and Corporation must rest in balance to grow the fulcrum and support everyone. As the rank and file, including prospective doctors, allowed themselves to be induced over to the other side, the fulcrum tipped and the system liquidated.

    Doctors didn’t always want to be millionaires, and parents did not always equate money with happiness. From the perspective of the old economy, talent doesn’t exist; everyone can and will be replaced. It’s a race to the bottom now, with everyone competing for the same carrot, which was replaced with numbers in a computer, subject to arbitrary, capricious, and malicious management.

  6. Paul

    That graph of productivity and wage growth would look different if wages + benefits were also plotted. See here for one paper on the subject.

    My income comes from a few sources, one of them part time retail. Full timers now get $3/hour in employer health benefits, $6/hr if they have one or more family members on the plan. Typical wages are around $12/hr. As a part timer, I get nothing.

    Suppose our laws or culture change so that corporate profits return to immediately post-war levels, but health care inflation continues or accelerates. No matter how good we think it is to pay for someone else’s health care, wages will have to reflect that inflation, and it won’t take long before the lower profits have been eaten up.

    1. Yves Smith Post author

      Paul,

      I am pretty skeptical of anything by Watson Wyatt on the subject of worker pay. They have a substantial executive search business. Thus they have reason to gin up “research” that flatters their corporate clients (meaning top execs). The literature is absolutely overwhelming as far as the rise in income and wealth disparity in the US is concerned.

      Moreover, I doubt they adequately capture the massive shift from defined benefits (pension based on a % of final salary) to defined contribution (company puts a fixed amount aside, employee bears investment risk). Defied benefit was pretty close to universal as of the 1970s. Pensions were far richer in the past, and any effort to say benefits are better now is hard to believe.

  7. Jolt

    just as important, the american worker hates his/herself. they have been condition by politicians, employers and the media to always, always see themselves as lesser than someone else (money, material, job title, etc). this creates a very easy to manipulate individual who can be easily intimidated and cowered into compliance. people who scared can be easily pitted against each other.

    1. attempter

      Yes, though you forgot school and religion.

      It is appalling how successful the machine has been at eradicating class consciousness among workers, while driving it to a by now psychopathic intensity among economic elites.

      Though it’s worst among right-brainwashed What’s the Matter With Kansas types, the attitude combining timidity in the face of the power structure with disdain for any kind of proletarian consciousness or attempts to organize along those lines seems endemic regardless of surface politics.

      And what’s the odds that’ll change, now that the debt-created “middle class” sinks inexorably into lower class status?

      We’re already seeing the same old pattern, with the more stupid and brutish among them massing as proto-fascists. The teabaggers lack only a real leader to organize them, and once they have that (the real leadership will probably arise from among their own ranks, not be imposed “from above” according to some Republican plan) they’ll be full-fledged fascists.

      So far there’s really no reason at all to believe the workers/progressives will even begin to organize to fight back against all this. Health care “reform” has been a complete debacle, including at the netroots level.

      1. eric anderson

        Clearly your understanding of the Tea Party movement is next to nothing. They want less control, not more. The party in power today is creating the kinds of alliances with the largest industries (finance, health care) which resemble a sort of benign fascism, consistent with the picture portrayed in Ayn Rand’s Atlas Shrugged.

        Even if a small government is fascist, by nature of its smallness, it has little influence. Big government is dangerous because of its control. The closer we get to absolute power, the closer we get to absolute corruption.

        Please join the Tea Party movement and help us minimize government and maximize freedom.

        1. attempter

          And how precisely do they intend to get rid of big corporations?

          Anybody who truly loves freedom is against all large structures, and especially corporate ones which are psychopathic in principle as well as practice (while governments are only sometimes so and only in practice).

          For some reason I haven’t heard about that part of the plan.

        2. Skippy

          Yes by all means! Bring on the Corporate rule of law! As a share holder I’m sure my voice will be heard!

      2. Jolt

        “The teabaggers lack only a real leader to organize them, and once they have that (the real leadership will probably arise from among their own ranks, not be imposed “from above” according to some Republican plan) they’ll be full-fledged fascists”

        this will not happen. the “tea baggers” is not a grass roots movement and the rank-and-file does not contain any real leaders, per se. if it did, it would not be possible for michelle bachmann and others of her ilk to use these folks for their own personal self-promotion – with the purpose of getting reelected to the big government machine in d.c.

        in addition, although the tea baggers may be able and willing to demonstrate together against a common enemy (healthcare change last week), they are a disparate bunch consisting of everything from pro-lifers, gun nuts, libertarians, ultra conservative republicans, as well as your run-of-the-mill hypocritcal seniors who are kept alive thanks to medicare …. and everything in between.

        (that said, the people who use them for their own purposes, e.g. bachmann, boehner, etc. are indeed facists.)

        1. attempter

          That’s why I said they’re still waiting. The real leaders haven’t arisen yet. Bachman, Palin, Beck and others are too scatterbrained, while the Rep establishment has indoctrinated the base so well with the anti-elitist mindset that the mandarins won’t be able to control them. (That’s probably also why Palin can’t get far. She seems like a know-it-all idiot who wouldn’t be able to stick to an “expert” strategy if Mark Hanna himself gave it to her.)

          But they certainly are fascists waiting to happen, waiting to be organized as thugs on behalf of the banks and other corporations, as we saw with how easily they were riled up on behalf of the health insurance and drug rackets.

  8. Paul

    I agree that income disparity has increased substantially. Forget Watson Wyatt. Health care is now about 17% of GDP, rising by 7% last year. The proposed reform package is not expected to bend the cost curve downwards. This year’s increase is 1.2 % of GDP. I’m in favor of reducing star labor and capital’s share of national income, but pouring that money into a leaking health care bucket will contribute little to our wellbeing. (I’ll assume I don’t have to justify that statement but if anyone wants me to, I’ll oblige.) Since the leak keeps increasing, it will still have to be fixed someday. I was arguing with the Firedog contributor, not directly with you.

  9. rp

    It comes straight out of Ayn Rand. It’s a philosophy that exalts capital above all else and rewards a narrow short-term view. It infected Wall Street in the 1980’s and has traveled from the top down. It is embraced by greedy people.

    One would hope for a sort of enlightened citizens revolt. We might see one in the next generation. When I was a kid in the 1980’s, all you ever heard was how you needed to be hyper competitive in order to have any chance at a middle class life. It’s interesting how it all worked out. There are now many highly educated, hard working people who are out of a job and heading towards financial ruin. The job market is impossibly competitive, and resembles a lottery more than anything. Do you think these people will tell their kids the same thing?

    1. cougar_w

      Yes they will.

      We are two generations away from being free to think for ourselves. A lot of people harboring insanely self-destructive notions are going to have to grow old and die.

      cougar

  10. eh

    No business will give up a single penny of its profits to keep its workers healthy.

    I don’t know that mandating health insurance is the same as keeping people healthy. Individuals could do more to that end simply by changing their diet, losing weight, and exercising more.

    And in my experience, throughout the world having employees pay a significant share of the costs for health insurance is more the norm than the exception. In the US, I rarely paid anything toward my own coverage — my employer paid the entire premium. But in Germany, eg, typically the employee pays half, and premiums are assessed as a percentage of your income (currently approx 14-16%), meaning of course that low earners pay less, often a LOT less, for the same service, and, in general, the premiums are higher. But everyone is covered, including the unemployed.

    I don’t follow the healthcare reform debate closely, but imo any talk of being able to save money via some kind of reform that ends up covering everyone is crazy, dishonest nonsense. And that does even include the changing demographics in the US.

    1. eh

      And that does even include the changing demographics in the US.

      Should be: And that does not even include the changing demographics in the US.

    2. cougar_w

      Then let’s paraphrase:

      “No business will give up a single penny of its profits to allow workers time to keep themselves even minimally mentally and physically healthy.”

      Fact.

      Not. One. Penny.

      cougar

      1. eh

        “No business will give up a single penny of its profits to allow workers time to keep themselves even minimally mentally and physically healthy.”

        What the hell is “allow workers time to keep themselves even minimally mentally and physically healthy” supposed to mean? What sort of “time” are they supposed to be ‘allowed’? They cannot keep themselves fit, eg visit a gym, on their own time? Or what?

        And you write that after I just posted this: for a very large number of employed Americans with health insurance, the employer pays the entire premium for the employee. Don’t you think that a business would be more profitable if it didn’t do that? And many times the employee’s contribution, when required at all, is no more than nominal; that was certainly the case with me — it never even approached half.

        So I don’t get where the stridency comes from.

        Makes me even happier that I do not bother following the ‘reform’ circus.

        1. ndg

          “What the hell is “allow workers time to keep themselves even minimally mentally and physically healthy” supposed to mean? What sort of “time” are they supposed to be ‘allowed’? They cannot keep themselves fit, eg visit a gym, on their own time? Or what?”

          It’s inarguable that workers are expected to work longer and harder than used to be the case. As Yves said in the very first paragraph, many people have the responsibilities that would have previously been delegated to 1.5 people or more — jobs that used to be 9-to-5 are now 8-to-6 (plus unpaid overtime). In certain careers you might be stuck with an unofficial standard of 7-to-10.

          I live in another country where I *can* work 9-to-5, and I ride a bicycle to work and have time to cook real food at night and get sufficient sleep.

          cougar_w’s point is that health care is just the tip of the iceberg: employers have been getting more out of their employees, for less.

  11. Michael Fiorillo

    Productivity = Fewer people doing more work for less money.

    Now, shall we talk about effciency?

    1. Skippy

      Did you say efficiency?

      See link:http: //www.adultswim.co.uk/video/index.jsp?maven_playerId=adultswimvideomain&maven_referralPlaylistId=2bc568eea59f32c4f5283304df84793858644759&maven_referralObject=4744346

      Bear market conspiracy theory’s.

      See link: http://www.adultswim.co.uk/video/index.jsp?maven_playerId=adultswimvideomain&maven_referralPlaylistId=2bc568eea59f32c4f5283304df84793858644759&maven_referralObject=4744380

      Skippy…Harvey Birdman aka Stephen Colbert lol.

    2. cougar_w

      Around where I live, for most families both the husband and wife work.

      Around where I live, lots of people work overtime without pay.

      People work at home, on the weekends, and in their cars. The work during vacations and don’t complain, and then get laid off “for business reasons”. Every. Day.

      My boss thinks I’m not in the proper spirit because I ride a bicycle to work instead of driving, his complaint seems to hinge on the theory that the time I spend on my bike is HIS time, not mine, and is thus cutting into profits. Whoop-dee-fucking-doo to that.

      People like that are so blind with greed and power-hunger that they drove the entire global economy off a cliff. People like that will kill us all. Before they do we should eat them, and then start over with different people.

      cougar

      1. eric anderson

        You seem not to have tumbled to the notion that we have met the enemy and he is us. “New people” will be just like the old people, unless they are enculturated, educated in the principles of liberty. Reading the biographies of the founding fathers the past few years, I have found much inspiration. Unfortunately the ground is becoming less fertile for those exalted ideas to be re-planted and grow. Maybe after another depression and World War. Perhaps.

  12. RavingRaven

    How did it come to be that it is almost un-Anerican to exhort the public to buy American? Because of the influence of wrongheaded ideas on uncritical minds. Dumb economists have long celebrated the benefits of business migration to the cheapest labor markets. I don’t believe that calculation ever considered the hefty non-labor costs imposed on the collective as a whole. One example is what companies are experiencing now—lost markets, lost consumers. And where the business either downsized considerably or closed, instability migth be instilled in a community that will likely require additional government expenditure to repair.

    That’s the bad idea. The uncritical minds are largely those of the middle class. These people–in and out of Kansas–have allowed their focus to drift to preventing working class employees (e.g. auto workers) from making a living wage–apparently not understanding how their wages as working class people provided a buffer against lowering of their own salaries.

  13. Toby

    Doesn’t the roundly disparaged idea of technological unemployment have something to do with the trend so well captured in this article; that of labor’s gradually diminishing power to bargain for, and get, a fair slice of the GDP pie? Could it be at all possible for employers to manipulate events so successfully in their favor, for so long, without assistance from technological developments rendering human labor less and less necessary, less and less powerful?

    In countries like Germany and Sweden, where income distribution is fairer than in the UK and US, unemployment has sadly been a good bit higher in recent decades. It may well be that one cost of distributing profits more fairly, whether by taxes or more equal pay, is high unemployment (Japan seems to be an exception to this, boasting equal income and relatively low unemployment, though unemployment has been climbing of late). The article’s one chart shows what is probably a global phenomenon, namely that increasing productivity does not necessarily lead to increasing demand for labor. Regardless of tricks and measures to beat labor into submission, if there were an increasing need for labor as a result of improving efficiencies, surely this would show up in wage levels due to simple supply and demand mechanics?

    I am aware of the lump of labor fallacy, and orthodox theory positing that increasing productivity leads to rising demand for labor, but where is the data to support this, over, say, the last three decades? Furthermore, technological unemployment does not imply that the amount of work to be done in an economy is fixed, it states, rather, that the amount of work that need be done by humans is finite, and that our ability to replicate human abilities via technology improves steadily over time, initially in agriculture, then in manufacturing, and now in services as human soft skills are taken on by computers and AI, both in their infancy. After our soft skills have been mostly replicated, what will the economy need us for? Again, this is a slow, generational process, but that does not make it an insignificant concern.

    I don’t see how any monetary system can cope with this challenge, since they all require strong purchasing power to stay viable, but am no expert. In my (inexpert) view, only a slow and deliberate transition towards a resource-based economy offers any long-term hope of welcoming this process as the emancipation from unwanted drudge and slog that it could be. Such a decision would represent a huge shift on many levels, not least psychological and cultural, but beginning to take the idea of a resource-based economy seriously today is already important. Whatever happens, which ever direction we take, continuing technological development is unstoppable. It’s one of the things we humans do. We can only choose to turn it to our advantage, or let it upend civilization because of one inflexible socioeconomic model or the other.

    1. Peripheral Visionary

      Well put, and many of your concerns echo my own thoughts on the matter. Blaming the situation in the US on issues specific to the US, such as the libertarian influence, miss the simple fact that unemployment has been on the march across the Western world, from Spain to Germany to the UK to the US. I can scarcely believe that Ayn Rand is responsible for all of it.

      Much more likely is that the efficiencies of technological improvement have dramatically reduced the need for labor, with uncertain implications for Western society. We have been attempting to fill that gap with “make-work” policies that artificially create jobs and support income levels, whether by expanding the government sector, the legal sector, the academic sector, or, most notoriously, the financial sector.

      The issue that we face is that we are now up against overseas competitors who are not attempting to artificially support employment and income levels through make-work programs, and who therefore are fundamentally more competitive, with lower wages for workers and lower taxes for businesses. At present, we have no easy answers to that challenge.

      1. DownSouth

        Peripheral Visionary said:

        The issue that we face is that we are now up against overseas competitors who are not attempting to artificially support employment and income levels through make-work programs, and who therefore are fundamentally more competitive, with lower wages for workers and lower taxes for businesses. At present, we have no easy answers to that challenge.

        Sure we have an easy answer. It’s called protective tariffs and other trade barriers.

        But is it the right solution?

        I for one question the whole us vs. them paradigm.

        I was watching a lecture by Tony Haymet, director of the Scripps Institution of Oceanography, the other day and saw where he noted there are at least “four different ways we have to destroy the whole planet”–carbon dioxide, DDT, ozone hole and nuclear war.

        These are all problems that transcend national interests. Human cooperation must evolve to a new level if they are to be successfully dealt with.

        Peter Turchin gives a great review of how we got to where we are now, but also why that will not work going forward:

        Our ability to form huge cooperative societies has a dark side. Large-scale sociality and large-scale warfare are intimately connected; they coevolved as a dynamical complex during the last ten thousands years. This does not mean that the humanity is forever doomed to lethal conflict. Warfare is not in our “genes,” and evolutionary history is not destiny. However, current attempts to find other bases for cooperation at the scale of the whole humanity (such as the United Nations) have, so far, proved inadequate to stop the wars. It is imperative that we have a clear understanding of why war occurs in order to be able to evolve beyond it. Multilevel selection, as I hope this paper shows, provides a fruitful theoretical framework for working towards such an understanding.

        http://cliodynamics.info/PDF/WarComplx.pdf

        So I’m on the same page with Toby in that we need a whole new socioeconomic paradigm if the species is to survive.

        1. Toby

          Thanks for the link — the beginning is very interesting.

          The connection between large scale sociality and warfare makes a lot of sense to me. In Mutual Aid (Kropotkin, 1902) a link is drawn between cooperation and courage; only social animals are capable of courage. Courage, bizarrely, strikes me as one (of many) prerequisites for war. For example, ants engage in warfare and are feared by all solitary insects.

          Cooperation is for winners, competition for losers! (Oxymoron intended ;-) )

    2. DownSouth

      Toby,

      You make excellent points.

      Hannah Arendt pursues this line of thought, pointing out that almost all gains in production are due to scientific and technological advancements and not due to increases in labor productivity. She explains that labor was despised throughout history, and it was Marx who championed labor, enabling labor to garner a bigger piece of the production pie. But Marx’s ideology was materialistic–labor’s claim to a bigger piece of the production pie was based on its contribution to the making of that pie. But now that labor’s role in the making of that pie has diminished, Marx’s justification for labor’s deserving a bigger piece of the pie is no longer operative.

      The perversity of what we see happening now is that it is not scientists and technicians—those most responsible for increasing the production pie–who are garnering the biggest piece of the pie. Quite the contrary, those adept at gaming the system, contributing little to productivity or even destroying productivity, are the ones seizing a bigger piece of the pie. Certainly the biggest offenders are in the finance sector, but highly egregious examples are present everywhere—medicine, religion, art, science, education, etc.

      Imagine a universe where machines produce everything, and no human labor or work (including the work of scientists and technicians) is needed. Then how should the pie be distributed? Would only the owners of the machines be allowed to live? If labor and work no longer play a role in production, should their practitioners be allowed to starve?

      So I’m with you. I think we need a new “socioeconomic model.” I’m not sure what the “resource-based economy” you advocate entails. But it seems to me that any new socioeconomic model cannot be exclusively materialistic (like capitalism or Marxism), but must also incorporate other human attributes such as empathy, fairness and justice.

    3. Toby Russell

      Thank you DownSouth and Peripheral Visionary (cool name!) for engaging. DownSouth, I agree with everything you say. Te only reasonable conclusion possible from this analysis is that the radical has to be looked at seriously.

      A resource-based economy is a production to consumption system without exchange, and therefore without ownership. Its premise is that providing material abundance to all people is possible, and that any and all mediums of exchange can be slowly rendered redundant. This direction requires the transcending of the nation state, so that the Earth’s resources can be declared the common heritage of mankind. A resource-based economy seeks further the careful dismantling of party political governance, by assigning to the “state” solely the provisioning of food, water, energy, education, energy, etc., that is, the equal distribution, in abundance, of those things necessary for a physically healthy life. There is no waged-labor in such an economy, and as mentioned no medium of exchange, which means truly important things like human dignity and the ecosystem can be prioritized. Currently we have the weird and sad situation of having the know-how and resources to make many of humanity’s problems history, technically speaking, but not the money. Put crudely, we cannot afford to save ourselves while we rely on money to fund the endeavor. Surely we are more important than money!

      It is impossible to cover the ramifications of such a bold departure from current orthodoxy in such a short space, and the above paragraph is merely a foretaste of what it would imply, a paragraph I fear that can only disappoint. I have written a collection of articles, which together represent my (ever evolving) take on what all this means, and why it is pragmatic to take the idea seriously enough to test (my name above is a link to my site where the articles are available should you be interested in looking into it more deeply). I am an expert in nothing, an autodidact in everything I know, so welcome corrections and assistance, as do all others involved in making the idea seem palatable to a very cynical and dumbed-down world.

      One thing is certain; we do face radical challenges, and need therefore to entertain radical solutions. None of socialism, capitalism, fascism and marxism can operate without labor and purchasing power. A resource-based economy may never have been tried by a modern civilization — although “primitive” versions have existed, particularly on the Island of St Kilda off the north coast of Scotland — but its theory does address well the challenges confronting us, at least on paper. (Notable on St. Kilda was the absence of crime and sickness, by the way!) The new needs friends, and having never been tried, this particular new idea is in need of all the friends it can get.

      I just want to mention this before I sign off: abundance probably sounds crazy, like an invitation to party hard and indulge forever at the planet’s cost. It is not. Scarcity is the problem here, since it encourages hoarding and greed, and necessitates competition over “scarce” resources. Reorienting society to deliver abundance would require a total redesign of its infrastructure from the ground up. The way things are today does not allow abundance at all. We are not ready for it, either in terms of infrastructure, or culturally. A long, painful and uncertain transition would be necessary, but the means are, as they say, the ends ;-)

    4. Mickey, Akron, Ohio

      Toby,

      I too am convinced that technology has resulted in a situation in which there are more potential employees than there are jobs/gainful employment available. The difference in Western Europe is that “social dumping” is much more difficult. Here economists refer to it as labor market flexibility…

      One possibility would be to mandate a decrease in the standard 40 hr work week, reducing it commensurately by a certain rate for every increase in productivity without a reduction in wages thereafter. That way the great bulk of the productivity increase would not accrue to capital and the subsequent demand for labor, I’m hoping, would help to reduce unemployment.

      The Fair Labor Standards Act establishing 40-hours as the standard full time work week was enacted in 1935. Productivity has increased several fold since then but the work week has remained fixed. Maybe we have crossed that inflexion point and it’s time to begin to consider reducing the work week commensurate with an increase in productivity instead of increasing the wages of fewer workers still employed. And to the extent that fewer workers are employed their bargaining power decreases as well because the reserve army of the unemployed exerts donward pressure on their wages.

      Resistance to such a chnage would likely come from all sides… but the present situation is not sustainable -economically or politically.

      1. Toby

        Mickey,

        yes, reducing the work week is probably the only way to go, as a key part of the process of transition. I’ve read there was a Senate Subcommittee report on labor and automation in 1961 that found only 10% of the US work force was engaged in the production of essentials, but have not been able to find the report. So if we go down that road of reducing the work week — and I believe we should — we need also to recognise that the underlying socioeconomic system must be altered too, at least such that GDP growth is no longer a prerequisite for health. We need a total redesign, not just tinkering. (There is also the small matter of the ecosystem to consider!) And you’re right, vested interests would be 100% against such a proposal, but this is down to us now. The “status quo” (whatever that really is) has shown itself to be totally unprepared, and indeed even incapable of addressing the situation as it is. This is probably because the necessary changes can, in my view, only result in power draining away from those who currently enjoy wielding it so much. TPTB are in our way.

        Technological development is accelerating faster than we can possibly collectively understand, certainly faster than economists can understand. The proportion of the global work force we actually need to power the economy, today, if we really went at this with focus and proper care, is probably very low indeed. There is so much chaff in the system it is clogged to bursting. Similarly pressing, indeed essential, is the need to ween ourselves off fossil fuels. The tech to help us do this is there, only the will is lacking.

  14. middyfeek

    Yves, re your comment, “With all due respect, can you read”? That statement is self-contradictory. Words have meaning or we’ve got nothing.

  15. ian

    Company owners and managers don’t hate their workers. That would imply regard for them as humans worth emotional reaction. In practice, they view workers the same way as they view pens, notepads, computers, or trash cans. Useful for a little while, and completely disposable.

    1. eh

      Company owners and managers don’t hate their workers.

      Of course they don’t. It’s just a load of ludicrous hyperbole, like so/too much of the discussion.

  16. john

    I’d like to see that chart with Finance and Health Care removed. Productivity increase likely much less steep, while wages are probably declining more so.

    1. Yves Smith Post author

      Actually, productivity gains are probably not great in health care. In general (this is well discussed in the economics literature) service industries show lower productivity gains than manufacturing.

  17. craazyman

    And it came to pass that as Don John and his disciples watched the workers in the field and saw that they did their duty before the lord of hosts and smote them, yeah, that abandoned their work, that a man came to them and said, “Tell us by what authority thou doest these things” for the multitude was weary from work and hungry and there were some therein that had fallen into weeping and lamentation.

    And Don John answered the man and said unto him “I will ask you one thing and answer me, who posseth the field on which you labor and who profiteth from your labor yeah even beyond the setting of the sun.”

    And the man reasoned among himself and said “Yeah if I say the field and the fruits belong to men then I will be smitten and lose my portion, but if I say they belong to the master then I will be humbled before my bretheren and ashamed.”

    And he answered that he could not tell whence it was. And Don John said “And I will not tell ye, by what authority I do these things.”

    And the man returned to the field and picked up his plow, yeah, and gave his ass a whipping and it was as if a silence descended upon the multitude and they weepeth not nor did they converse amongst themselves.

    -The Gospel According to Mammon, VII, ix – xiv

  18. rickstersherpa

    The median income for an American Household as of 2006 was $50,233. See Wikipedia article on “Medium Household Income.” The health care bill, imperfect as it is, seeks to adjust this some of the disparity that has arisen between the upper 1% and the rest of us. Currently, half of American households have less than this level of income. My very good, Federal Employees Health Benefit Plan group plan, where I pay in 26 bi-weekly installments $138 and the Government pays $414, a total of $552. Together that is an annual preminium of $14,352. And of course there is no test for pre-existing condition and the Office of Personnel Management forces providers to compete to enter the Government Exchange. Now, the Republican arguement, as stated by Congressman John Shadegg, and by former majority leader Dick Armey, is that we should eliminate employer provided insurance, individuals should purchase insurance on their own, insurance companies can deny coverage for pre-existing condtions. In that world, how are those making less than half the medium income should buy insurance? I don’t think that those making $50,000 or less have an extra $15,000 lying around each year (and of course term “preexisting condition” would give great latitude to insurance companies to cancel coverage if claims are filed). So essentially, they are saying: Get rich before you get sick; if you get sick before get rich, than pretend you are in the 19th century and either get well on your own or die quickly.

    I think Ian has correctly surmised the attitude of the current ruling class.

  19. Mickey, Akron, Ohio

    As John Bougearel stated:

    “… in attempting to connect a few dots along the lines of Naomi Klein’s Shock Therapy, how much of this shift can be attributed to the Friedmanites out of the Chicago School of Economics, that graduated and went to take on key economic posts in gov’ts around the world, the IMF and World bank…

    Friedman was no fan of Keynesian economics, and was a big proponent of so-called “free markets,” globalization, and allowing foreign companies to come in and buy up the assets of state-owned companies for pennies.”

    A succinct summary of the past 30-odd years of supply-side, neoliberal, trickle down economics which played out differently in western countries due to the unique sociopolitical factors in each. Naomi Klein’s book, Disaster Capitalism, is a good read, especially when she links the demise of the Soviet Union with the subsequent emasculation of labor movements in the West. That it happened was not coincidental. LABOR is the only force capable of opposing CAPITAL. Eliminate the jobs – manufacturing – that make organized resistance possible and the problem goes away…

    As Yves’ article indicates, however, not all boats were lifted. But that’s exactly what these policies were designed to do. It was NOT the failure of supply-side economic policies, but rather, their SUCCESS that resulted in the growing inequality in the United States and the world-at-large. But can the ruling elites – Democrats and Republicans alike – admit that they knowingly promoted policies that fleeced the average American? Class warfare from above is REFORM in the form of deregulation.

    So long as we accept/promote the argument that these economic policies failed it remains for a tweak here and another there to set things right and the race to the bottom will resume. Growing inequality is the direct result of supply-side economics. Only when this glossy, much promised veneer is ripped off and exposed will the consequences – class formation – be acknowledged as fact. For those who lament the ‘politics of envy’ or overt manifestations of class warfare from their chateaux in the Hamptons, let us remind them that the effect of supply-side ecomomics over the past 30 years has been the creation of this working class – if not the proletariat. And it’s nothing to celebrate! But to deny the cause-and-effect linkage is ahistorical, if not disingenuous.

  20. Greg

    While I’d agree that widening income and wealth disparities are leading to serious social problems, I’m not sure this post addresses why this phenomenon plagues some advanced economies more than others. Disparities are growing within the public sector as well as the private – so worker hatred in big business doesn’t provide a convincing explanation for me.

    Real, perceived, and often artificial barriers to entry, typically government blessed, probably account for most income inequalities. Want to join that upper 1%? Get the educational credential, accreditation, rating, license, ancestry and/or “experience” that puts you in a high demand position with the supply of applicants limited by an artificial barrier. Health care and education may require the most obvious barriers, but they are pervasive throughout societies with income disparities. In my experience, higher-level job requirements are being written much more narrowly in the US than they were a generation ago – even by seemingly well-meaning people. I often wonder if the over-reliance on barriers is a misguided effort to quantify or mechanize the hiring process – by those who fear or distrust the “fairness” of the judgments rendered by responsible parties.

    1. Mickey, Akron, Ohio

      Mort,

      Thanks for the site. Downloaded Mr. Goldsmith’s testimony and read it twice. Fifteen years on and he nailed it indeed!

      Ironically, it was this same gentleman who tried to takeover Goodyear Tire and Rubber Co here in Akron. Oh, how he was villified!

  21. tgmac

    Some very enlightening posts here. The issue is, as always, complex. The factors are diverse – technology, off-shoring, changing attitudes, notions of fairness and dececeny, and even the dreaded factor of human resource/personnel departments.

    The technological aspect interested me most, and on two different levels. On one level, I believe the whole issue of whose even an owner is beginning to get clouded. For example, here in Ireland, we used to have a large number of privately owned shops in every town. Villages has at least two or three fairly well stocked privately owned shops. In the village I used to live in, this is down to one shop and it is supplied by a national distributor. The owner is really just the owner of the land and building. They have to buy over 90% of their stock from the national distributor, and technology, via computers and the web, obliges them to follow the distributor’s opening hours and annual schedule. (They are monitored daily as to hours and sales.) They are closed one day a year – Christmas. They have to be open from 7 a.m. to 9 p.m. The owners do this because the national distributor can deliver bulk priced goods to them, but you have to ask if they are really the owners of the business in the old fashioned sense. It’s fairly common these days for such owners to experience marital and other problem. Very commmon.

    As for the cities, the national distributors and the multinationals just wiped the landscape clear of what Americans call mom and pop shops. Being or becoming a business owner is much harder these days due to vertical integration of the big concerns abetted by tehcnology.

    On a second level, someone mentioned the material based political economic models of capitalism and socialism. Well, the labour cohort hasn’t disappeard, it has just shifted and actually grown in numbers. The market forces of Capitalism have grown rapidly in such countries as China, India, Philipines, Russia and so on. It must be said market forces are rising the standard of living, relative to previous models, of many workers in these countries (one can argue the toss about Russia). However, while working conidtions might not be ideal, these countries are using the most up to date machinery. For example, if China can not produce the most modern machinery, it has a willing seller in Japan. The appliance of human labour to these machines has created immense wealth for China’s owners. Sorry about this – this indicates that Marx’s theory of socially necessary labour utilised in the creation of goods is a requsite for wealth creation.

    In all, if you’re an owner with a certain critical mass in the West or the East, times have never been better. Some labour, that commonly regarded as belonging to the knowledge economy in Europe, will do ok. One just has to wonder how much of non-knowledge labour can be ignored and for how long.

  22. Michael Henry

    Do you have a source for the graph? I mean, it’s interesting and I don’t necessarily disbelieve it, but where is the source and underlying data?

    1. Yves Smith Post author

      Michael,

      That version came from FDL, and didn’t provide sources. However, I have seen charts of that type, showing the yawning gap between productivity growth and wage growth, at a number of econoblogs. It’s legit and the general conclusion is not controversial.

  23. i on the ball patriot

    “Do businesses hate their workers?”

    Its an Orwellian question with ‘businesses and workers’ being as abstract and open to interpretation as ‘free markets and capitalism’. A more concise question might be, “Do the exploiters hate those that assist them exploit?”

    All businesses exploit. All exploitation is based on alliances. If the alliances are truly harmonious, and voluntary on the part of both parties, there will be no ill will or hate. But of course the alliances are not at all harmonious in scamerica.

    In scamerica, all of these alliances have an element of force applied to the assistant in the exploitation (the worker). They get the shit end of the stick forced upon them through aggregate generational corruption. The exploiters — through deception — have purchased and corrupted the now blatant scam ‘rule of law’ and so tilted the playing field in their favor that those who assist them in their exploitation are also being exploited. Its really a simple dynamic to understand.

    And yes, there is an element of elite disdain and superiority, on the part of anyone who exploits, for the victim of its exploitation. It is an unwarranted arrogance.

    Deception is the strongest political force on the planet.

  24. Benf

    I run a business in NYC. We prospected many of the white-shoe, establishment law firms here in NYC for standard corporate legal work + employment contracts, but ended up using a smaller firm. The reason was not a financial one; in meeting after meeting with corporate partners the firms told me they were on “my side” and not the “employees’ side.” They really wanted to make that point clear. I thought this was a ridiculous thing to say and also anathema to the type of internal culture critical to success. Yves post all but confirms my hunches at the time: smashing workers is common among even some of the oldest business firms in the world, the ones that work with these firms, and the very ones that have an opportunity to change their employees lives.

    To this day, I can’t attest to where this attitude comes from, but it was pervasive(4 BigLaw firms). I also got a sense of union hatred. Is this the attitude of the modern establishment? If it is, it’s perplexing considering the success of new establishment companies like Google, Apple, and others. Successful businesses heavily dependent on human talent(even a few big hedge funds like Third Point) try to foster a sincere “we’re all in this together” attitude.

    As a new business owner, you are in the business of developing people as well as profit, and the two mandates are inextricably linked. But that’s true only because you are mentally focused on creating a stable organization. If you work for an established firm, especially one that is REALLY established and culturally stagnant(reluctant to embrace new ideas), or are TBTF, self-interest takes over organizational considerations. The firm becomes a playground for an individual. Lining up personal and firm incentives is difficult in these institutions; even the banks can’t seem to embrace deferred compensation methods that actually and realistically corresponds to a firm’s long-term health. The banks don’t need to because their long-term health is back-stopped by the taxpayers. And why would they need to anyway when the individuals at the top can be filthy rich at the expense of the firm.

    American business has a management problem. It is a problem because these firms die; they DO NOT thrive in the long-term. Is it a problem for executives at the top who scuttle investment for personal enrichment? No. But in the long-term, the firms health will suffer as will society’s. Banks are a good example, but in the real economy, the best example of this is the oil industry. Executives paid out huge amounts of compensation to their executives instead of reinvesting those hundreds of millions of dollars on equipment, production improvements, oil sourcing, and more. The “oil glut,” manifested in the high price of oil, is partially a function of the lack of investment these companies are making in production capacity. The world is awash in oil, but many U.S. oil companies don’t have the means to extract this oil, because the money was distributed to executives in the form of enormous pay packages.

  25. christian

    Whenever I hear this BS about ‘the high cost of labor’ I always point out that Germany is the world’s leading exporter and somehow I don’t think that their workers’ wages are all that lousy. I wish the news media would pick up on that a bit more!

  26. Francois T

    Preventing workers to get a fair shake in the wealth of this country has become such a pervasive mindset, that Joe Biden himself couldn’t help feeling compelled to exhibit his Seriousness credentials to a select group of high powered (read, close to the elites) economists:

    http://www.huffingtonpost.com/2009/11/05/biden-people-have-beenst_n_347023.html

    by stating the worst piece of NewSpeak seen in a while:

    “”If the economy is growing but middle-class and low-income families are falling behind, then prosperity must be accruing at the very top of the scale” the vice president said at one point. “Quite simply put, the middle class families weren’t sharing and haven’t been sharing in the wealth they helped create.”

    But Biden insisted that the administration is not interested in redistributing wealth. [And pray tell why not Mr. Vice-President?]

    “We aren’t talking about income redistribution,” he said. “We are talking about a fighting chance to make a decent income…”

    No shit? Well, if your administration is not interested in the least to give a elbowed nudge to the money class nor the corporations, tell me how people are going to be able to get decent income? By the Grace of the Almighty? A sudden surge in morality among corporate elites?

    Change I can’t believe in anymore.

Comments are closed.