How Middle Class America Lost Its Shirt (Part 1 of 2)
Posted: Sunday, September 05, 2010
by e
Dhammabucha Rocksprings Meditation
Since consumer spending accounts for two thirds of our Gross National Product, if Mr. and Ms. Consumer doesn't get going again soon, America's standard of living will plummet. But can the consumer get going again? That's the fundamental question.
After inflation, the "median income" person earns less today than he or she earned in 1980, thanks in part for Reagan's tax cuts for his wealthy friends which he paid for by bankrupting the budget and the Social Security Trust fund. As a result, the consumer has had to play catch up which they did by sending the moms into the work force. The number of moms working outside the home doubled in thirty years. But that wasn't enough to keep the middle class's head above water.
And finally we ended up using our home equity as an ATM machne, refinancing every time we needed that new SUV. But that didn't last long before the housing market's house of cards collapsed.
And now we have no more options. No plan B. We are stuck in the muck.
How did this all come about?
Why should a company pay more for labor than it has to? Why pay an American $20.00 an hour plus benies when they can produce the same product overseas for $1.00 an hour - and no benies?
Why should a company hire more workers when computers and technology has effectively replaced them? (Geico has no insurance agents in small towns - or big towns!)
Let's face facts, prices have been skyrocketing, (health care, education, food, etc.) and wages plummeting. And as a result, the consumer's buying power is becoming non existent. Therefore, the old economic cycle of bust/boom is no longer valid. It is bust/ bust from here on out for the average American.
But not for the wealthy, who have been making out like bandits for the last thirty years. They are the ones who have taken the excess profits derived from stupidly low tax rates, shipping jobs overseas, and increased technology. And instead of reinvesting in the American worker has instead gambled the money on Wall Street, becoming not only rich, but super rich while the middle class dissolved into a puddle of unpayable debt.
Another troubling fact is that wealthy people, proportionately, don't consume like middle class people consume. Plus, the wealthy don‘t support America. They go where the money is because they can never get enough, and subsequently create the bubbles that completely devastate middle class lives.
The top one percent of Americans received two thirds of the gain in national income between 2002 and 2006, as Wall Street went wild and the rich became super rich. That left one third of the national income for the rest of us 99% to fight over. The last time this kind of extreme inequity of income occurred was in 1928.
"A technology is invented, it spreads, a thousand flowers bloom, and then someone finds a way to own it, locking out others," Wired Magazine editor-in-chief Chris Anderson writes. "It happens every time."
This is called capitalism, and capitalism works like this: Stockholders come first, customers second - and workers don't count at all (except as a burdensome expense).
As a matter of fact, Silicon Valley is notorious about leaving go of experienced engineers and hiring college graduates. Why? Because they can pay new hires at a fraction of the cost of experienced engineers that they can easily fire. I wonder if the new graduates have taken any notice of the thousands of unemployed experienced engineers around, or have taken any courses regarding their expected longevity with any corporation these days?
And the highest paid CEOs are the ones who have cut payrolls the most. Cut out the working man and woman - make big bonuses. Simple math.
Therefore, corporations and even small businesses will compensate workers only as much as they are grudgingly forced to pay within a competitive labor market, and in a competitive labor market that is now global, the average hourly wage is about $1.00 per hour, with no benefits other than the benefit of having a job.
The top one percent make enormous profit off of capital, not labor. And when they make that profit, none of it is ever plowed back into labor or benefits, which is us. Labor is a drag on bottom lines, and bottom lines are everything. If the bottom line falters, stockholders abandon ship and the corporation, or small business, goes under. Therefore, it is a balancing act for big business to produce a service or product (labor), sell it (to customers) and make a profit (for stockholders).
Labor is easy to acquire. There is little competitiveness regarding labor. Quit your job and a hundred will line up for it with many willing to work for lower wages and no benefits. Why in the world would big business go out of their way to pay more than they have to for labor? That would be a waste of money and create furrows on the brows of stockholders.
Of course, with a disgruntled labor force, especially in retail but applicable to all categories, there will be a subconscious, and sometimes even purposeful extension of the disgruntlement to the customer. This happened to Home Depot a few years ago and enabled Lowe's to make serious inroads into Home Depot's dominance in the home improvement market. Home depot Employees were overworked and underpaid, and they took it out on their shoppers with lousy customer service.
This is a good example of how bottom liners can entirely miss the most important cog in their business - the employee. When an employee thinks they are not getting a fair shake, they don't quit, they don't get mad - they get even! If it's retail, they will dis the customer. If it's production, they will dis the product. If it's marketing and sales they can torpedo the company in many ingenious ways.
Knowing this, big business will clamp down on any employee that exhibits negative attitudes toward customers, production, or marketing and sales. In other words, labor unions, or even fair labor practices, will go by the boards "in the name of competitiveness" (but really greed by business owners) and workers will find themselves in a time warp back in the days of worker abuse.
With stockholder coming first, workers will be expendable. Firings will be more frequent and less documented. "You're fired. Sue me!" Will be the phrase of the day, just as it is presently with undocumented workers.
Health care will become increasingly expensive to the employee because by shifting health care costs to the employees, bottom line profits are increased. If senior employees quit because their health care rates double, that's considered a good thing because then the company can hire neubies for low starting wages and again increase bottom line profits.
Why respect employees at all when their attitudes can be controlled ruthlessly, their pay kept low, their benefits reduced, and in general disrespected and treated no differently than impersonal, troublesome, but necessary cogs in the big business machine?
This is what we have now, and it seems to be working for the wealthy and big business who are successfully touting government as "bad" and big business as "good." And anyone not agreeing with them unpatriotic.
Well, wake up America! Middle class wages have not improved since the Godfather of big business, Ronald Reagan, set policies in effect that lined the pockets of the wealthy and decimated the poor and middle classes.
This brought about high levels of credit extension by the middle class in an attempt to keep their heads above water, and necessitated both spouses working many hours leaving kids at home to fend for themselves. The social ramifications of all of this, as well as the angst and stress that middle America now feels, is a direct result of Reagan policies - a disdain for the working man and woman.
As an example of these policies; when the wealthy class and big business stockholders wanted more and more, Reagan incentivised investments of plants and equipment overseas because the bottom line would be better and the wealthy would get richer. As far as the working man and woman, they didn't enter into the equation. They were invisible.
(Be sure and read Part 2, coming soon, for a possible solution to this mess)
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More commentsYeah e, if we can keep republicans out of office there may be help for the working class.I'll do what I can! Nothng about Republicans per se, just their behavior for the past 50 years! Thanks David.
Looking forward to part 2 to see the possible solutions to this horrible mess.GraceThanks Grace. Hint, hint: Look at 1939 to 1942, how everyone dissed FDR for his government spending and wanted to enact spending restraints, which made things worse. Then what happened when the government was forced to spend 30 trillion (present day values) on WW II. Did the world end? No, the common man and woman went to work. But we don't need a war, just more government spending, not less. If we tighten down now, as the wealthy conservatives suggest, we will go into a deflation free-fall.Best......e
waiting for part 2.Linda DNext day or two Linda. Thanks.
Why should a company pay more for work? Why pay U.S. $ 20.00 per hour when they can produce the same product overseas for $ 1.00 an hour. Interesting question which, even hidden answer. Until America to pay $ 20.00 an hour, against income $ 15.00 an hour, any solution must remain perception. Americans spent $ 20.00, while having an income of $ 15, rest is funded by credit card. The Americans have been spending billions to support war in Iraq and Afghanistan by the funding from credit card, which generated business good for the rich asssets company , no use of American or any country consumers.America attemptd rich people of world to create large Comany directly or market shares through tax havens. For example, the other day, the Ministry of Finance of Switzerland has confirmed that more than $ 0.75 trillion illegal money from India pass through their bank UBS. Most Comany or their assests in America are actually owned by a wealthy person many people and companies in Asia and Africa. The person in the rich world to believe in the religion of wealth and nothing else. If these people were not loyal to their country, how America expected to be loyal to them.Soltions lies in understanding why and how this money has come in America? And what assests was generated by it. And what assests generated by America by investing two billion dollars in the wars in Iraq and Afghanistan.I was looking for why India is progressing towards the west. Becasuse laws of India are always in favor of consumers and workers. Rich Company in India are not allowed abnormal profit, and most vital industry facing audit costs. Rich Company may not terminate or dismiss an employee at will. How many people in India are always happy with $ 1 per day. Simply, they have adapted the way of life there in $ 0.7 per day. Amaging people in India are offering 30% saving, while the Americans were unable to adapt to the lifestyle of $ 20.America has many sources, if people learn to live without credit and arrogance of the government to stop war and stop depending on illegal money from rich countries, there is still a place in the world honouableCouldn't have said it better, G. S. If I was a young man with a family, I would certainly move to India right now. That is where the future is for the next fifty years. Plus India is the spiritual chakra of the world. America certainly isn't! I would like to check with some Americans now living in India to see how they like it. Might look into that. Thailand is nice as well. Asia will boom, and hopefully do it right. The only problem is when America tries to get its mojo back and starts the next war. That could be a disaster. Look for my upcoming article about the signs of World War III.Also, why pay $15,000 in health insurance premiums and risk the company dropping you if you get sick, when you can pay cash in India and get the most complicated procedure for probably less than $15,000? Things aren't making sense in America any longer.
It's been happening in South Africa as well, E. I think one good result is that more people are becoming aware of how much of themselves they've given away, and are being forced out of their comfort zones into thinking of creative ways to sustain themselves. The silent revolution :)
Thank you so much Jennifer. In an upcoming article, I will address the whispers of war and how humanity has reached this point in culture many times just to descend back into tribal and religious mentality and fight amongst each other.Best.....e
It's always the rich (and in many cases the poor- through alms) who make out like bandits, and it's always the middle class who pay the price. Until there is a societal (and cultural) revolution, this (or some variation) will continue. Nice job, sir.Thanks again Mike. I Really appreciate your input because you are awake!
And you're right; the only way, it seems, to make it in America anymore is to be either very wealthy of very poor!
You know, maybe the revolution you mention is already happening in many people's minds, I know it is in yours, and many of my friends here at SearchWarp. It is powerful, and someday cannot help but manifest in ways quite different from the manifestations we are witnessing now, which can only be described and utter and complete ignorance of reality. Keep the faith Bro! But also keep an eye out for my upcoming article about the Whispers of War, where we are headed if things don't turn around soon.
Best.....e
I thought of Gilda Radner- "It's always something!" I don't know how you crowd all this into your head E...........LOL- Love Ya- Always- EllaActually, it goes right through. I'm an air head! Thanks again Ella. I can sure count on you!Metta......e
Eddie, I think that you and I should write a book together. Some of the things that I've written dovetail exactly with your writings even though we seem to come from exactly opposite ends of the social spectrum ( I live in suburbia, you live in the outback ). It doesn't matter, for some reason we think alike. We have to save the middle class. Nice article.BobI'm with you Bob!Best.....e
Can't wait to hear the possible solutions and something positive about it all!Just posting it now! Thank you.
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