When Workers Come Together

[_Kevin Graham]

The meme may misrepresent in that it isn't a direct quotation, but I remember this issue with the Papa Johns CEO back when this was in the news and he defended his business decision to keep pay the same despite his rising corporate profits. So, while not a direct citation, no doubt this is his mentality and it is obviously the mentality of most corporations who refuse to increase pay with increased profits. This isn't guess work, it is an established fact. Instead of letting the employees reap the fruit of their labors, all that extra money gets funneled to the top in the form of bonuses.



Now ask me what happened to make that disparity trend happen...

[_cinepro]

The meme may misrepresent in that it isn't a direct quotation, but I remember this issue with the Papa Johns CEO back when this was in the news and he defended his business decision to keep pay the same despite his rising corporate profits. So, while not a direct citation, no doubt this is his mentality and it is obviously the mentality of most corporations who refuse to increase pay with increased profits. This isn't guess work, it is an established fact. Instead of letting the employees reap the fruit of their labors, all that extra money gets funneled to the top in the form of bonuses.

Do you have some more context for the chart? "Productivity" isn't "profits", after all.

I suspect the inflection point in the chart has a lot to do with computers and automation. So it would raise the question of whether or not a secretary who gets a word processor in 1980 and can now do the work of two secretaries should now make twice as much?

Likewise, if an assembly line installs a welding robot that can do the work of three men, and so the factory fires three out of four welders, the "productivity" of the factory (and that fourth worker) are drastically increased. Should the factory pay that remaining welder 4x as much? What if that cost would make it more economical to buy an additional machine to replace him?

[_Kevin Graham]

What went wrong?

By the mid-1950s, unions in the US had successfully organized approximately one out of every three non-farm workers. This period represented the peak of labor’s power, as the ranks of unionized workers shrank in subsequent decades.

The decline gained speed in the 1980s and 1990s, spurred by a combination of economic and political developments. The opening up of overseas markets increased competition in many highly organized industries. Outsourcing emerged as a popular practice among employers seeking to compete in a radically changed environment. The deregulation of industries not threatened by overseas competition, such as trucking, also placed organized labor at a disadvantage as new nonunion firms gained market edge through lower labor costs.

Simultaneously, US employers developed a set of legal, semi-legal and illegal practices that proved effective at ridding establishments of existing unions and preventing nonunion workers from organizing. Common practices included threatening union sympathizers with dismissal, holding mandatory meetings with workers warning of the dire consequences (real or imagined) of a unionization campaign and hiring permanent replacements for striking workers during labor disputes.

A sharp political turn against labor aided these employer efforts. President Reagan’s public firing of striking air traffic controllers vividly demonstrated to a weakened labor movement that times had changed. Anti-union politicians repeatedly blocked all union-backed efforts to re-balance the playing field, most recently in 2008-2009, with the successful Senate filibuster of the Employee Free Choice Act. EFCA would have made private sector organization efforts somewhat easier. The last major piece of federal legislation aiding unions in their organization efforts passed in 1935.

Why does it matter?

At its peak, the US labor movement stood alongside powerful business leaders and policymakers as key institutions shaping the nation’s economy and polity. Union workers enjoyed healthy union “wage premiums,” or increases in pay resulting directly from working under a union-negotiated contract.

But nonunion workers also benefited from a strong labor presence.

In research by Harvard University’s Bruce Western and myself, we compared nonunion workers in highly organized locales and industries to nonunion workers in segments of the labor market with little union presence. After adjusting for core determinants of wages, such as education levels, we found that nonunion workers in strongly unionized industries and areas enjoyed substantially higher pay. Thus the economic benefits of a powerful labor movement redounded to unorganized workers as well as union members.

Early 20th-century unions – especially craft unions - engaged in a range of sometimes violent discriminatory practices. As a result, in 1935, the year that President Franklin Roosevelt signed the Wagner Act, less than 1% of trade unionists were African American. While the Wagner act extended basic organizing rights to private sector workers, millions of minorities remained unable to enjoy its protections by the actions of unions themselves. But throughout the second half of the 20th Century, many unions shed these racist and xenophobic legacies.

In so doing, they opened up their organizations to African Americans eager to escape explicitly racist policies and practices common to many nonunion workplaces. African Americans soon had the highest organization rates of any racial or ethnic group, peaking at more than 40% for African American men and nearly 25% for African American women in the private sector.

These exceptional organization rates helped narrow racial pay disparities by raising African American wages. Had no union decline occurred from the early 1970s on, black-white wage gaps among women would be between 13% and 30% lower, and black males' weekly wages would be an estimated US$50 higher. Meanwhile, many immigrants and their children, echoing pathways taken by newcomers in generations past, such as the predominantly female, predominantly immigrant population of the International Ladies' Garment Workers' Union (ILGWU), used the labor movement as a springboard into the nation’s middle class.

Unions’ equalizing impact was not limited to the economic realm. A large body of research has found that union membership spurs civic participation among non-elite Americans. Voting, for example, is a practice strongly graded by income and education. More of either and Americans are much more likely to turn out to vote. Unions helped to counteract class-based inequality in political participation, ensuring that elected officials heard the policy desires of millions of non-elite Americans.

[Guest]

And the minimum wage would have to be the worst. You're taking from those who may or may not have it, and giving it to those who may or may not need it,

I've always wondered if the folks with this concern run the same analysis on CEO and upper-management pay.

... all the while reducing opportunities for young and low-skilled workers to gain entry to the workforce (especially minorities),

The first cohort is often touted as not needing a hike in the minimum wage, by the same folks who parrot this claim. See immediately above. The second cohort is dramatically affected by low wages if they are affected by high rates of unemployment to begin with.

... and giving employers a huge incentive to employers to reduce the number of employees they hire (and increasing the rate of automation where possible).

We may be a ways off from robots manning the floors at the local Walmart.

[_Kevin Graham]

Corporate Profits Grow and Wages Slide

After-tax corporate profits in 2013 rose to a record of 10 percent of gross domestic product, while total compensation of employees slipped to a 65-year low. Corporate tax rates — under 20 percent of pretax corporate income in three of the last five years — have not been that low since Herbert Hoover was president. During the Obama administration, profits have taken a higher share of national income than during any administration since 1929.

[_Kevin Graham]

The conclusion of one study:

Those who oppose an increase in the minimum wage often argue that they are looking out for the best interests of low-wage workers. They suggest that even a modest increase in the minimum wage would force businesses to cut their payrolls, reducing employment opportunities for the very workers that this policy is intended to help.

In reality, however, the facts do not support the claim that employers cannot afford higher wages. As this report makes clear, the majority of low-wage workers are actually employed by large corporations. Financial indicators for the nation’s top low-wage employers show that most are in a strong financial position, are earning profits above their pre-recession levels, and are sharing those profits generously with their top executives and shareholders. Taken together, these indicators show that the nation’s top low-wage employers can readily afford to pay for a higher minimum wage for their lowest-paid employees.

So here are the facts. Most of these companies are making profits. None of them are increasing wages. This seems to pretty much solidify my point. If they really believed they were obligated to increase wages as profits soared, then they would have done so. But they don't. There is no honor, sense of loyalty or appreciation for the "little people" who do all the grunt work to make that wealth happen.

[_Kevin Graham]

Meanwhile...

Poor Year Doesn't Stop CEO Bonuses

By most measures, 2008 was a terrible year for home builder Hovnanian Enterprises Inc. Its stock plunged 62%, revenue fell 31% and the company posted a $1.1 billion loss in the fiscal year ended Oct. 31.

Yet Hovnanian's board awarded Chief Executive Ara Hovnanian a bonus of $1.5 million in cash and stock. The reason: Mr. Hovnanian had helped the company stockpile cash, according to Hovnanian's Feb. 4 proxy statement...

Other companies that paid million-dollar-plus bonuses despite weak results include stock-exchange operator NYSE Euronext Inc. and financial-index firm MSCI Inc. NYSE CEO Duncan Niederauer got a $4 million bonus despite a net loss of $738 million and a stock decline of 69%. MSCI CEO Henry Fernandez received a $3 million annual incentive payment even though the company's share price fell 44% and net income declined 16%.

Bonus payments remain an inscrutable part of executive compensation. They're the portion of an executive's pay most closely tied to annual performance. Yet boards have a lot of discretion; some use formulas, others rely on judgment. Payouts may also be tied to goals -- like retaining executives or promoting diversity -- that aren't related to profitability, yielding awards even when earnings sag. In general, bonuses aren't closely tied to stock prices.

Warner Music Group Corp. paid CEO Edgar Bronfman Jr. a $3 million bonus for a fiscal year in which the company had a $56 million loss and its stock fell 25%. In response to a request for comment, Warner said it outperformed peers and rewarded "strong operational performance in a historically challenging industry environment."

Varian Semiconductor Equipment Associates Inc. CEO Gary Dickerson received $1 million in incentive pay despite a 53% stock decline and a 31% drop in net income, which missed the company's profit target. In its proxy statement, Varian said Mr. Dickerson and his executive team topped targets for market share and new business development. The company declined to comment further.

Texas Instruments Inc.'s compensation committee said it cut CEO Richard Templeton's annual bonus 40% from a year earlier in light of a 54% share decline, 28% net income drop and subpar performance relative to peers, according to its March 5 proxy. Mr. Templeton still received a bonus of $1.5 million. "While the decline in markets made it a tough year, it was solid performance," a company spokeswoman said, noting that the company's operating margin was good and its cash position was strong.

Health insurers pay out big bonuses despite 2014 losses

Patricia Hemingway Hall, the head of Health Care Service Corp., which is the Illinois-based parent firm of Blue Cross and Blue Shield of Montana, received a $10.4 million bonus for 2014, on top of her $1.25 million salary, for total compensation of $11.7 million.

The company increased its 2014 revenue from $22.7 billion to $27.7 billion, but had a net loss of $281 million — about $1 billion lower than its 2013 net revenue of $684 million. HCSC includes Blue Cross operations in Illinois, Texas, New Mexico, Oklahoma and Montana. It has 113 million customers in those five states.

In Montana, Blue Cross President Mike Frank’s total compensation for 2014 was $849,000, including a $355,000 bonus and salary of $488,000. Montana Blue Cross spokesman John Doran said Frank’s total compensation package in 2014 was slightly lower than his $870,000 compensation for the previous year.

[_Kevin Graham]

I suspect the inflection point in the chart has a lot to do with computers and automation. So it would raise the question of whether or not a secretary who gets a word processor in 1980 and can now do the work of two secretaries should now make twice as much?

Likewise, if an assembly line installs a welding robot that can do the work of three men, and so the factory fires three out of four welders, the "productivity" of the factory (and that fourth worker) are drastically increased. Should the factory pay that remaining welder 4x as much? What if that cost would make it more economical to buy an additional machine to replace him?

No. Productivity is measured as GDP per hour worked. Your theory suggests that workers haven't necessarily been working harder, and that productivity has increased due to further technology which their companies provide them.

This is the kind of Right Wing thinking I was referring to. It is something Bach would say. As if hiring employees must be understood as some kind of charity, not a necessary component of business. As if workers must be grateful for whatever pay they get, livable wages be damned. And any dramatic increase in productivity is assumed to be employer, not employee related. Because the employers are the real economic heroes.

Well, you can think like that if you choose, but I've already provided the data to prove how dramatic surges in profits have no positive effects on wages. This notion that higher pay is a result of harder work (therefore one's failure to be wealthy is a result of one's unwillingness to work hard) is just a myth conjured up by those in power, who want to keep the peasants at bay. It is typically preached by folks who grew up in a period when one adult driving a bus or delivering milk could make a livable wage and support a family. But nowadays it is normal for both parents to be working, and in some cases multiple jobs out of necessity. But I guess the reason they're not financially independent is because they're not working hard enough.

I've worked for exactly four corporations in my life and I've seen the methods they use to gradually increase work loads of the employees year after year, all the while paying them the same or in some cases, even less. They do it because they can. Workers have no protections here. The only leverage they have is by threatening to quit, but unless they're united as a union, that threat is usually weak. They've lost much of their bargaining power.

Hell, when I came back from Brazil I could see it just from going to a Burger King in the morning and watching the store being opened by one person who does all the cooking and cash handling for the first hour. A lot of these stores don't even use the first drive through window anymore because someone in the company decided they could put more money into the pockets of the shareholders (not to mention the CEO's bonus) by making one of their grunt workers work twice as hard for the same pay.

[_cinepro]

Hell, when I came back from Brazil I could see it just from going to a Burger King in the morning and watching the store being opened by one person who does all the cooking and cash handling for the first hour. A lot of these stores don't even use the first drive through window anymore because someone in the company decided they could put more money into the pockets of the shareholders (not to mention the CEO's bonus) by making one of their grunt workers work twice as hard for the same pay.

I'm still not sure what you think a minimum wage is going to do to help things. You're saying that employers were reducing the number of low-skilled workers and not paying them more (or much more), so now we will increase the cost of those low-skilled workers by more than 50%, and that will make things better?

As a business owner yourself, you can figure it out. If the government came to you and told you that the wages of your employees was going to increase by more than 50% over the next five years, what would you do? Would you do the math, figure out if you had that much profit, and then say "Well, it looks like our profit is going to be reduced by XXXX amount of dollars over the next five years and onward?" And if you didn't have the profit, would you say "Well, it looks like we're going to have to raise prices XXXX amount" and automatically assume that your sales volume would remain the same (because customers are not sensitive to price changes?)

And when it came time to hire new employees at the higher rate, if you saw the quality of applicants rising, and now you were getting people with more education and experience in your field who were interested, would you continue to hire the same caliber of employees as before, or would you take it up a notch?

[_cinepro]

The conclusion of one study:

Instead of looking at a study that argues for a hypothetical outcome based on what employers might do because they have a bunch of profits, why not look at the actual studies that have been done about the actual effects:

The overwhelming majority of empirical studies into the effects of the minimum wage find that it erodes employment. In 2007, David Neumark of the University of California-Irvine and William Wascher of the Federal Reserve surveyed over 100 minimum wage studies published since the early 1990s. They discovered that over two-thirds of them found negative effects on employment, while only about an eighth found positive effects. Worse, those studies that focused on the low-skilled people including youths found particularly bad damage done.

Wascher and Irvine also looked at the quality of the studies. They found 33 studies that were robust to most criticisms, of which 28 found negative employment effects. (Notably, much of the evidence for positive employment effects in the larger sample came from the United Kingdom rather than the United States, and that those studies may have failed to account for complicating factors during the 1980s, when the UK had sector-specific minimum wages. But the more recent evidence from the UK’s introduction of a national minimum wage in 1997 mirrors the American evidence.)

The federal minimum wage was raised in 2007, and again in a couple of steps until 2009. There has been recent research into the effects of that increase. One study, by Aspen Gorry of the University of California-Santa Cruz, focuses on the effect on youth unemployment. He found that minimum wages effect unemployment, especially youth unemployment, “because they interact with a worker’s ability to gain job experience.” While the minimum wage increase pushed the general unemployment rate 0.8 of a percentage point higher over the study period (compounding the misery of the economic downturn), the unemployment rate for 15- to 24-year-olds surged by almost 3 percentage points.

Gorry also looked at youth unemployment in France, where the minimum wage is about $12 per hour, considerably more than America’s, and where the youth unemployment rate has hovered around 24 percent, double the U.S. rate. Gorry finds that the different minimum wage levels account for nearly the entire difference between France’s and America’s youth jobless rates. That means France could find jobs for about half its unemployed youngsters by reducing its minimum wage to American levels.

Such a preponderance of evidence is reflected in official studies. When the Congressional Budget Office earlier this year reviewed the probable effects of a minimum wage increase to $10.10 an hour, it took into account the findings of over 60 studies on the issue. The CBO report suggested that the increase would help lift 900,000 families above the poverty line, as the president touted, but at the cost of killing the jobs of half a million other people.

The minimum wage transfers resources not from the rich to the poor, but among the poor. Some of America’s least well-off workers would get a raise, but many more others would see theirs hours cut, or lose their jobs entirely. Obama’s radio address concluded, “America should forever be a place where your hard work is rewarded.” But those whose jobs are destroyed by a minimum wage increase have neither hard work nor reward.

http://www.washingtonexaminer.com/minim ... le/2555135