Rising Tide, Sinking Boats

Jordan Barab at Firedoglake uses a scene from the 1991 movie "Grand Canyon" to make his point about productivity and wages, and how an increase in the one doesn't necessarily mean an increase in the other.

...the Census Department released a report today showing that In 2005, 46.6 million people were without health insurance coverage, up from 45.3 million people in 2004, and 37.0 million people were in poverty, about the same as in 2004, but up from 31.6 million in 2000. Who could have imagined, but it turns out that a rising tide does not raise all boats, what’s good for General Motors (or Wal-Mart) is not good for America, and that even if you feed and nurture the goose that lays the golden egg, you may not be able to enjoy any of the benefits of those eggs. Because even though workers have been working harder, producing more and increasing productivity, they haven’t been reaping the rewards:

The median hourly wage for American workers has declined 2 percent since 2003, after factoring in inflation. The drop has been especially notable, economists say, because productivity — the amount that an average worker produces in an hour and the basic wellspring of a nation’s living standards — has risen steadily over the same period. As a result, wages and salaries now make up the lowest share of the nation’s gross domestic product since the government began recording the data in 1947, while corporate profits have climbed to their highest share since the 1960’s. UBS, the investment bank, recently described the current period as “the golden era of profitability.”

Why, the authors ask, is “the golden era of profitability” bypassing most of us? Which brings me back to my "Grand Canyon" scene.

Economists offer various reasons for the stagnation of wages. Although the economy continues to add jobs, global trade, immigration, layoffs and technology — as well as the insecurity caused by them — appear to have eroded workers’ bargaining power. Trade unions are much weaker than they once were, while the buying power of the minimum wage is at a 50-year low. And health care is far more expensive than it was a decade ago, causing companies to spend more on benefits at the expense of wages. Together, these forces have caused a growing share of the economy to go to companies instead of workers’ paychecks.

Read the rest.