I call your attention to Steven Greenhouse’s new book, The Big Squeeze: Tough Times for the American Worker. It gets at one of the most profound trends and issues facing America, cloaked by our relative affluence, the money many Baby Boomers are getting from parents who earned it in the old America, and the ignorant distraction machine that is the corporate media.
He’s written several pieces for Talking Points Memo. You can read them here and here. Below is a taste:
To tell the truth, when I began researching my book, The Big Squeeze, Tough Times for the American Worker,
I wasn’t planning a separate chapter on the nation’s young workers–by
that I mean, workers under age 35, and especially young Americans who
have recently entered the workforce. But as I proceeded with my
research, I was surprised and chagrined to learn how tough things have
grown for young workers–and that was before the current economic
downturn. As a result, I added a chapter, "Starting Out Means a Steeper
Climb."
One especially dismaying study found that men in their thirties have
a median income 12 percent lower, after factoring in inflation, than
their fathers’ generation did when they were in their thirties. That
study, sponsored by the Pew Charitable Trusts, said, "There has been no
progress at all for the younger generation . . . . The up-escalator
that has historically ensured that each generation would do better than
the last may not be working very well."
The causes for this shift are many, including the rise of China and India, and the end of American industrial dominance after World War II. Some of our own laziness and sense of entitlement hurt — as does the huge misallocation of resources into suburbia. But much of the change comes from decades of conservative government that underfunded education, gutted worker rights and pensions, provided incentives to destroy the real economy it had taken 100 years to build and the job security and ladders up it provided. CEOs get huge paychecks while workers lose their jobs. From misbegotten trade deals and deregulation, to lax anti-trust and aggressive anti-union policies, much of this is a storm sewed in Washington.
That also means much can be fixed at the policy levels. See my posts on real economic reform, here and here.
Mr. Talton is spot-on here. I offer the following collateral considerations for what they’re worth:
(1) Educational opportunities are, arguably, wonderful ways to improve one’s mind, become a better-rounded person, and perhaps even to become more thoughtful, responsible citizens. They may offer (or lead to) greater understanding of the world and greater satisfaction from one’s participation in it.
However, the way our economy currently (and for the foreseeable future) operates, only about 25 percent of available jobs require or significantly benefit from a college degree — roughly the same number of college graduates out there.
The vast majority of jobs are low-level, service related jobs. That this is so isn’t terribly surprising since for every rocket scientist, systems analyst, doctor, or lawyer out there, there must necessarily be far more barbers, grocery stockers, cashiers, waiters, waitresses and busboys, counter clerks, ticket takers, manicurists, hotel staff, and so forth. Just drive down any typical, major metropolitan street and see what kinds of businesses exist and what the majority of positions at each consist of (hint: not management or technical).
So, in order to guarantee quality of life (if by this one means the ability to purchase the creature comforts which, for one’s self and family, make life palatable), one needs to guarantee not access to higher education, but access to work that pays a living wage. Here, living wage must refer to something approximating the median regional income for a household of corresponding size.
The only way to accomplish this, that I can think of offhand, is to institute a minimum income for fulltime workers, to be funded by means of federal taxes (income and capital gains) which take from the highest tiers first, and redistribute it to the lowest tiers first.
This has the advantage of avoiding schemes which soak the middle class, while managing to insure that some significant portion of the nation’s economic treasures go to those who, in their modest but indispensable positions as the cogs and grease of the economy, provide much of the labor necessary to produce it.
Another way this might be accomplished, at first, is to do away with payroll taxes for lower and middle class workers by transfering the tax burden to those earning an income significantly greater, and at the same time expanding the income base of such taxes to include not merely wage-based income but income from all sources.
(Sales taxes are another onerous form of regressive tax which hit the wallets of the poor far deeper than those of the rich, but insofar as states and municipalities determine such taxes the political channels involved in their elimination are different.)
The result is a completely different way of administering income taxes, as well as a completely different (entirely more direct) way of using much of them.
Essentially the idea is to eliminate taxation altogether for those whose incomes fall below a given cut-off point associated with the “wealthy”, and to tax heaviest starting at the top, with decreasing taxation down to the cut-off point.
In the process, all taxes except personal income taxes are to be eliminated: however, “income” is to be redefined to include all income from all sources; and it is this comprehensive new measure of “personal income” which forms the tax base. All exceptions and loopholes should be eliminated, though modifications based on local cost of living and size of household should be factored in. (True tax simplification!)
I suggest also that by changing (in this way) who pays taxes, the economy would benefit as well, since a greater portion of the nation’s wealth would be used for consumerism and would therefore stimulate the growth of business in response. That is, in order to have business growth, you must have increased demand for products and services; and when more money is in the hands of those who will spend it rather than speculate with it to increase their abstract wealth on paper, increased demand is the result.
If the idea of eliminating corporate income taxes seems mistaken, consider that, in order to benefit from corporate revenue, owners must take their slice of it in some fashion or other, and that even increased capital gains from stock sales would contribute to their “total personal revenue” to be taxed. Also consider the fact that taxes on corporate earnings might conceivably dampen economic activity, whereas taxes on total personal income (starting from the top and decreasing down to a cut-off point at which no taxes are levied) would be arguably less likely to do so.
(2) Even beefed-up unions may find it difficult to compete with non-unionized (or weakly unionized) laborers in countries with lower standards of living to begin with. That is, faced with the threat of closing U.S. operations and moving these to (say) China, or Vietnam, or Mexico, even strong domestic unions may face problems.
So again, the problem is insuring that displaced workers: (a) have jobs available to them, and (b) are paid living wages from those jobs.
What makes moving operations to other countries so attractive to business owners is the fact that they are able to cut labor costs without cutting their own incomes. That it so say, their own incomes are derived as a share of profits and from the value of their company’s stock (which generally increases in value as profit margins are increased by means of decreased labor costs).
The fact that displaced workers may now purchase certain (imported) products more cheaply as the result of their replacement with foreign labor earning starvation wages, should not fool anyone into believing that displaced workers benefit from such a trade-off, on balance. The reason is very simple: employers save a certain amount of labor costs by moving operations out of country, while passing a certain amount of cost savings to U.S. consumers (including displaced workers). The difference between these constitutes the increase in company profits.
Systemically speaking, if companies passed on ALL labor cost savings to consumers in the form of decreased product prices, the companies would not be able to increase their profit margins by relocating, since what they gained in labor-cost savings would be exactly counterbalanced by what they lost in decreased total sales revenues.
But of course, companies do not go through the major headaches of moving their operations to a foreign country with language barriers, less dependable infrastructures, and other potential and actual problems and inconveniences, simply so that they can maintain a profit margin identical to the one which existed prior to relocation. This means that their labor-cost savings (in the form of lower wages, lower or non-existent benefits and pensions, etc.) must of necessity be greater than the price savings passed on to consumers (including displaced workers).
This in turn means that workers are, on balance, losing ground — as Mr. Talton suggests. Since the economy isn’t shrinking, however, it also suggests that the spending power lost by these displaced workers must be gained by other participants in the U.S. economy. Naturally, these others are the owners and stockholders who benefit from such relocations when the companies they own see increased profit margins — without their personally suffering decreased incomes.
So, such relocations are actually a form of highly regressive redistribution of income from the working and middle classes to the upper classes. This shows up in what we call increased “concentration of income and wealth”.