Corporatations not Spreading the Love?

February 2, 2008 – 9:59 am

I’m all for Corporate Profits.  When the system works, profit translates into shareholder gain, asset growth and increased earnings.  That creates higher tax revenue back into this place we call America, competitive strength against foreign competitors and hopefully increased rewards and pay to employees.  This, in turn should benefit the folks that work there, and their families plus have the added benefit of offering multiple windfalls to the communities the company operates out of.    

Problem:    Like no time in history Corporate Profit distribution to employees and workers are at a shocking low.  I recently came across the above graph.  It represents an average of the last eight economic growth cycles and it compares the current one to those.  It’s very telling. The red bars (left) above represent this current recovery and what amount of profits corporations have made, how they have compensated labor and what the private wage and salary income was as result of those profits.  The blue bar next to the red represents the averages of the last eight recoveries.  The assumption would be that the averages set an example or a standard of normalcy.  The graph clearly shows that while corporate profits are up 62.2% compared to an average of only13.9% for the last eight recoveries, the labor and private wage and salary income has actually dropped sharply.  This is extraordinary, in that while corporate profits are at incredible unprecedented highs, the worker is not reaping even a portion of the normal and historical benefits.    Add inflation, the cost of health care, fuel cost, and the drop in the purchasing power of the dollar, tand his is, without doubt, oppressing the working middle class.

Who’s to Blame?   There are several to blame.  One, the current outsourcing of jobs and illegal immigration has allowed corporations to hire cheaper labor and thwart efforts by labor in the U.S. to negotiate higher and well deserved increases in wages.  Secondly, the political climate has been strongly tilted toward protecting corporate profits and management earnings while deliberately slighting the working folks.  Further, pension overhauls (which let companies off the hook of honoring their promises to labor), a low minimum wage not raised in a very long time and labor management/efficiency measures that are less favorable to workers have all contributed to this aberration.  Also, it must be said that workers (employees) are also part of the problem by allowing themselves to be held hostage to jobs many times out of fear of losing insurance, benefits and  perceived security (notice, “perceived”).  It’s a tough position to be in, but it’s time they took a stand.

Solution:  Demand government raise the minimum wage (this has been done), lobby for better rights and pay for workers, hold senior executives responsible for improperly rewarding and paying themselves while simultaneously holding back on pay to employees and shareholders.  Employees should have the audacity to move or change jobs if they don’t like the pay.  With profits like these, it will help everyone if there is a little more distribution to workers and shareholders alike.  Unfortunately, companies are hanging on to cash like never before and many times stashing it offshore. Their income taxes have been lowered; which gives them less reason to expend on payroll, research, general expenses and even capital investments.  All that turns down general outlays.  Add to that the consolidation of companies in buyouts and a reemergence of monopoly like behemoths that are back in style and you’ve got a lack of synergy in the money flow out of corporations.  Until Americans ask for better, you can bet corporate leaders will take what they can get.

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