Millions for the boss, cuts for you

More is never enough. By now we really don’t need yet another statement of inequality, but here goes anyway: The average ratio of chief executive pay to employee pay has reached 335-to-1 in the United States.

And some of the highest paid CEOs were at the companies that stash the most money in overseas tax havens. Among the giant corporations that comprise the Standard & Poor’s 500, the 25 at the companies with the most unrepatriated profits hauled in 79 percent more than other S&P 500 chief executive officers, reports the AFL-CIO union federation’s Paywatch 2016 report. Just 10 corporations — Apple, Pfizer, Microsoft, General Electric, IBM, Merck, Cisco Systems, Johnson & Johnson, Exxon Mobil, and Hewlett-Packard successor HP Inc.  — are believed to be holding about $948 billion in accounts outside the reach of tax authorities.

Being at the top of the corporate pyramid certainly pays — the average S&P 500 chief executive officer hauled in $12.4 million in 2015, while the average non-supervisory worker earned $36,875. That average worker would have to work 335 hours to earn what the CEO makes in one hour. For a worker earning the federal minimum wage, the pay ratio is 819-to-1.

CEO-to-worker ratioThe Paywatch 2016 report illustrated this stark inequality with the example of Mondelez International Inc., where Chief Executive Officer Irene Rosenfeld earned close to $20 million last year, or 534 times the average worker’s pay. At the same time, Mondelez asked workers at a Nabisco cookie and cracker plant in Chicago to take a permanent 60 percent cut in wages and benefits, or their jobs would be moved to Mexico. As nobody could agree to such conditions, hundreds of people were laid off. Ms. Rosenfeld, incidentally, received a $7 million raise for her troubles, likely comparable to the combined pay of the laid-off workers.

Lest we fret that Mondelez may be undergoing tough times, please don’t lose any sleep — the company reported net income of $7.3 billion in 2015 and $15 billion for the past five years. Nor should sleep be lost worrying about Mondelez’s tax “burden” as it paid all of $49 million in U.S. taxes in 2015. That’s a tax rate of less than one percent.

That company is not unique, of course. Workers at Verizon Communications Inc. have been on strike since April 13 as Verizon seeks to move call-center jobs overseas, outsource instillation work to low-wage, non-unionized contractors, and reduce benefits. Verizon wants to stick it to its workers despite racking up $45 billion in net income over the past five years, at the same time paid no taxes and has stashed $1.3 billion in offshore accounts.

Avoiding taxes has become an art form for U.S. corporations, especially those who operate as multi-nationals. Dodging taxes is simply another “capitalist innovation,” and so common that a single small building in the Cayman Islands (where the corporate tax rate is zero percent) is the registered address for almost 19,000 corporations. Tax dodging also means higher pay for top executives — yet another corporate subsidy.

tax burden chartThis goes beyond simple unfairness, although corporate tax collection in the U.S. has declined drastically, falling from about one-third of U.S. government tax receipts in the 1950s to 10 percent in 2015; it was as low as 6.6 percent in 2009. Nor is it simply that less taxes collected reduces the ability of governments to effectively provide an adequate social safety net. Higher taxes actually lead to more jobs. Countries that provide more subsidies toward services that are complementary to work — such as child care, elder care and transportation — have higher workforce participation rates. Yes, contrary to orthodox economics, higher rates of taxation lead to more employment.

Let’s not reduce all this to simply greed. The relentless competition endemic to capitalism mandates that corporations engage in an endless race to the bottom. “Grow or die” is an inescapable mandate — if you don’t grow, your competitor will and put you out of business.

That’s a war that working people can never win. Class warfare rages hotter than ever, but there is only one class that is waging it.

10 comments on “Millions for the boss, cuts for you

  1. Well, we won’t do anything ‘concrete’ about this and at this late date, I don’t know what can be done. But I wonder is anyone paying attention to what this is all leading up to? Between outsourcing jobs that paid benefits to other countries and firing workers and replacing them with kiosks which is what Wendy’s and McDonald’s and other fast food chains are proposing and with the shrinking corporate tax base due to offshore tax havens, what is going to be the end result of all of this? Anybody figured it out yet? When you do, you will wring your hands, gnash your teeth and whine some more.

    And don’t even get me started on what is going on with the retail market and how we hear daily that Sears and Kmart, JC Penney and Kohl’s and Macy’s and the list is endless, are on life support. It seems, no one is buying apparel. I guess they’re all at the thrift store/consignment shop. So, we’re having to try and find a store that will fit in with our new ‘frugal’ lifestyle, eh? And with rents skyrocketing since landlords know how many people have lost their homes over the last decade or so, well, there goes movie night, forget about Disney World. And yet, the news of the day is that the stock market is so extremely bullish, it’s unreal. And have you been to the grocery store lately? The claim was that the low gas prices would affect the price of groceries and send costs spiraling down. I never saw hide nor hair of this and ‘crude oil’ as of this minute is back up to 49.65 and Whole Foods just opened its new ‘cheaper’ grocery stores today.

    As usual, Wall Street’s magic of smoke and mirrors continues while Main Street heads into Whole Foods new ‘cheaper’ grocery store today and will pick up next year’s school clothes for the kiddies at the thrift/consignment store. Let the good times roll!

    Great post SD! But, we’re good, until we’re not!

  2. I find it interesting how many “mainstream” economists are warning that unequal societies don’t grow – that the global economy can only continue its downward spiral so long as inequality continues to worsen. It’s almost like the people in power are intent on destroying the global economy, as well as the biosphere and civilization itself. It looks like the massive popular mobilization will stop TPP and TTIP – let’s hope this will wake people up and inspire them to stay organized.

    • I suppose the captains of industry aren’t so much intent on destroying everything as being indifferent to it, or they calculate they’ll be gone by the time the chickens come home to roost.

      I agree mobilizations have a good chance to stopping the Trans-Pacific and Transatlantic partnerships. Doing so would be a wonderful victory for working people, and we sure could use some victories. We’ll also need to stop the Trade In Services Agreement and then roll back existing “free trade” agreements.

  3. Great article. I can sense the tipping point\critical mass coming.i can only hope that the coming reconstruction is from the bottom up and does not include capitalism or adversarial economics. Mom always taught us to share and that has always been best in conserving and economics. Sharing is to be frugal since that is the only way for everyone to be equal with limited rsources. However, in a world of abundance as we often see today, sharing is still virtually non-existent. This leads me to wonder how crushing the payback will be. Days of rage are coming.

  4. I support all this though, it’s a good way to start a socialist revolution 🙂 Let the capitalists “dig their own graves”

  5. Tom Herzog says:

    As usual, Mr. Dolack sees to the essence of the issue; it’s not “a few bad apples” ruining the barrel of wholesomeness. It’s not, “lets reform this here or there and maybe, just maybe in five or ten years things will get incrementally better” e.g. lets with great beneficence raise the minimum wage to the remarkably wonderfully sum of $15; rather, it’s the whole, rotten, ungodly system of capitalism (always rotten but made into pure evil in it’s current, deregulated, neoliberal version, that needs to be, not “changed” or ” modified”, or ” regulated” but rather ended, overthrown), thrown out and while we’re at it take all the moral cretiens who rise to the top of such a wicked system, indict them, try them and punish them as appropriate.

    Why do Americans keep buying the pig slop sold to them as a bill-of-goods that capitalism is wonderful, we just have a few “kinks” to work out of the system; in the meantime folks, just keep buying the shit we sell you, keep voting for any one of the many wonderful candidates for public office who cant WAIT to represent YOUR interests, and, most of all keep your damn mouth shut, don’t complain and go live on the street if you have to; we think it’s in YOUR interest to do so. And we the capitalists run the country and tell you what YOUR interests are.

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