Hey Americans — you deserve a lot better ($) than this

Economic Policy Institute (Click for study -- Commentary mine)
Economic Policy Institute (Click for study — Commentary mine)

Housing market expert and chart lover Logan Mohtashami has a clever way of making big points with little facts. So here’s one he tapped onto my Facebook page recently.

IBM 431K workers 200 Billion market cap 
Facebook 7,335 workers 200 Billion market cap

You follow?  That’s efficiency in action.  It’s possible to make enormous fortunes now with very small workforces.  Of course, IBM was once a feisty startup too. But you can’t imagine a day where Facebook has 430,000 workers, can you?  This change during the digital age is permanent.  More money, fewer jobs.

But those are good jobs, right?  Folks who work at Facebook tend to like it, and they’re paid pretty well, so no argument there.  Numbers like those should start your brain spinning, however.  If capital like that isn’t being used to create jobs, where is it going? And what about all the jobs that “efficient” companies like Facebook are not creating?

Click to learn about The Restless Project
Click to learn about The Restless Project

The effect shows up in the chart atop this story. It’s two years old, but on the chance you’ve never seen it, I want you to take a good long look at it.  It means this: Americans are working harder and more efficiently than ever, but aren’t enjoying in the fruits of their work. Wages and productivity are supposed to move together, in relative lock-step.  Apparently, they got a secret divorce in the 1970s, which coincides neatly with the arrival of income inequality.  You are working harder for the same amount.  Companies are keeping the difference.  Wages are stagnant, and companies (and a few of their owners) are making enormous sums without sharing.  Mohtashami estimates that if the traditional link between productivity and income had not been broken, the median income in American would be more like $90,000 than $53,000. And I wouldn’t be writing The Restless Project.

A quick review of capitalism basics. Our system of  economics is based on a fairly crazy idea: If you are standing still, you are falling behind. Ever hear a company bragging about a flat quarter?  “Made $2 billion last year, and $2 billion this year!  Great! That’s plenty of money!”  No, you don’t. Because people take for granted the notion that things have to improve, sales have to rise, companies are either growing or dying.  Accepting this brutal truth, you must see the problem immediately: What happens when you can’t grow any more? What happens when everyone is already drinking Coke or owns a laptop? (We wrote a lot about the problem of plateaus in The Plateau Effect.) Aren’t we all just going to drive each other mad?

Nope.  Because “productivity.” Capitalism’s secret weapon is innovation. New technology. Efficiencies.  Assembly lines.  Automation. Specialization.  You’d think there’s no better way to deploy tax cabs in New York City, and then Uber invents a clever algorithm to more effectively deploy resources. Capitalism wins!  Or, at least,  the End Times are postponed yet again.  Folks figure we can do this or a very long time.

As you can see, we all have a stake in increased productivity.  If you are a clever worker and master your craft, you figure out how to do a days’ job in a little less than a day so you can leave early once in a while and go to your kids’ Christmas pageant at school.  And your company certainly can’t grow unless you figure out how to make a few more widgets this year than last year.

There is certainly no law that requires firms to share additional widget profits with workers.  It’s a good habit, though, for obvious reasons.  People get pretty creative when you give them the right incentives. (Punishments and threats, however, aren’t nearly as effective, despite what that maniacal Management 101 professor might have told you).

That brings us to the 1970s, 80s and 90s. As shareholder value became the new God in America, worker leverage disappeared, and campaign finance laws cleared the way for corporate domination of elections, firms became emboldened to get away with anything they could.  They started converting goods to services with obscured monthly price-tags. They started inventing $40 fines for tiny transgressions, and turned punishing bank account holders into a $35 billion annual business. (Think about that for a moment). So naturally, they also stopped sharing the benefits of productivity gains with workers.

You are working harder for less. Well, the same. You are a flat quarter, a flat decade, a flat quarter century. You are not getting ahead . You are falling behind while a few people are getting very, very far ahead.  Facebook is good to its workers, but the incredible efficiency of using money to make more money in our time means workers are simply another cost center ripe for more cuts.

You will find folks who find flaws with the chart above.  Go ahead and read The Heritage Foundation criticism, for example.  Its argument, which you will read from many pro-corporate quarters, boils down to this: the chart doesn’t include benefits, which cost companies a lot of money, and should count as added wages.  OK, anyone who thinks workers have better (health) benefits today than 10, 20, or 30 years ago, please raise your hands.  I find it offensive that firms cry poverty with paying $5,000-$20,000 for  a long-term employee’s family health care when that firm is getting away with paying $40,000-$50,000 less than it should in wages.   Heritage also takes issue with the way inflation is calculated. Me too.  None of these charts do a good job of accounting for new expenses like student loans, which barely measured as an expense a generation ago and now dominate the monthly budget of 20 and 30 somethings.

So while we continue to argue about who’s to blame for the increased anxiety level of Americans across the wide spectrum of the vanishing middle class, please keep this in mind: Don’t be a sucker. Unless you have won America’s lottery and have one of those great Facebook jobs, you are almost certainly underpaid.   And until we figure out that we are all in this together, our financial lives are going to hang separately.

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About Bob Sullivan 1638 Articles
BOB SULLIVAN is a veteran journalist and the author of four books, including the 2008 New York Times Best-Seller, Gotcha Capitalism, and the 2010 New York Times Best Seller, Stop Getting Ripped Off! His latest, The Plateau Effect, was published in 2013, and as a paperback, called Getting Unstuck in 2014. He has won the Society of Professional Journalists prestigious Public Service award, a Peabody award, and The Consumer Federation of America Betty Furness award, and been given Consumer Action’s Consumer Excellence Award.

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