It’s no secret that United Statesians are more ignorant of the world beyond their national borders than the peoples of other countries. That ignorance serves a purpose. How can you keep screaming “We’re Number One” and believing you have it better than the rest of the world if you are in possession of accurate information?
For example, most United Statesians remain blithely unaware that they have among the worst health care outcomes of any advanced capitalist country while paying by far the most money. A Commonwealth Fund report, for example, found that the U.S. “placed last among 16 high-income, industrialized nations when it comes to deaths that could potentially have been prevented by timely access to effective health care.” As one of the few countries on Earth without a national health care system, health care is a commodity for those who can afford it, not a right as it is almost anyplace else.
That was a long introduction to yet more bad news. Not only are wages stagnant and living standards decaying, but working people in the U.S. are working longer hours. A study published in the peer-reviewed journal Socio-Economic Review found that, among 18 European and North American countries, the percentage of employees in the U.S. working at least 50 hours per week is the highest, at about 18 percent for the period 1990 to 2010. The paper, “Extreme work hours in Western Europe and North America: diverging trends since the 1970s” by Anna S. Burger, found that total rising — about 15 percent worked such hours for the period 1970-1989, a time frame in which the U.S. also had the highest rate.
Nonetheless, it is not only in the U.S. that more people are forced to work at least 50 hours per week. The study examined Canada, Switzerland and 15 members of the European Union (including Britain, then a member) and in only one country, France, did the percentage of people working excessive hours decline from 1970-1989 to 1990-2010. France, Sweden and Switzerland had the lowest rates, each less than 5 percent. Canada was second to the U.S. at 17 percent and also showed the largest jump, from about 6 percent in 1970-1989.
Work more or else
European Union law is supposed to prohibit working more than 48 hours per week, but the study by Dr. Burger noted that several countries have adopted opt-out clauses. Working beyond 48 hours, even with the exemptions, requires the employee consent. But given the one-sidedness of working relations, an employee could find it difficult to refuse consent. Dr. Burger wrote:
“[T]he choice whether to work long hours is not entirely, or even mainly, left to the preference of the individual but is guided by policy and collective socio-economic institutions. Contrary to conventional wisdom, the most relevant work time tendencies of the past decades are shaped by liberalizing trends in labour market policies, industrial relations arrangements and labour market structures not only in the Anglo-Saxon world but also on most parts of Continental Europe, rather than by regime-conform developments.” [page 3]
Some of the people working excessive hours are high-paid professionals such as lawyers or investment bankers. But low-wage workers are increasingly forced to work long hours because they can’t survive otherwise.
“At the bottom of the skills scale, an increasing number of workers are becoming labour market outsiders who are in atypical, or precarious, employment or unemployment. … The practice of very long hours is particularly wide-spread among outsiders for two reasons. First, due to a lack of regulatory protection and high replaceability, outsiders are in a vulnerable position vis-à-vis their employers. Not complying with an employer’s request for overtime might result in an outsider’s immediate dismissal and replacement. Secondly, in many cases, outsiders consent to, sometimes even initiate, working very long hours in order for their income to reach subsistence level. In today’s increasingly unequal economies, an ever-larger number of low-skilled workers must compensate for their relatively low hourly pay by allocating more time to work. While this decision is formally voluntary, in substance it is not because the choice is strongly shaped by the restrictive political economy environment.” [page 8]
Working conditions in the EU are deteriorating, but employees in the U.S. have less protection and more meager unemployment benefits. The pressure to work long hours is more intense there than in Europe, and employers often find it more profitable to squeeze extra hours out of employees rather than hire someone to lighten workloads. Another product of the extreme individualist ideology U.S. capitalism fosters.
And although overall working hours have actually declined over the past half-century, the rate of that decline has been far slower in the U.S. than in the European Union. A paper by Robert J. Gordon and Hassan Sayed, “The Industry Anatomy of the Transatlantic Productivity Growth Slowdown,” found that for the period 1950 to 2015, there was a decline of 37 percent in average employee working hours for the 10 largest EU countries (a drop from 2,250 hours to 1,560 hours) as compared to a decline of only 12 percent for U.S. employees (2,020 hours to 1,780 hours). So much for John Maynard Keynes’ famous prediction that we’d be working 15 hours a week in the future.
U.S. working people work 220 hours per year more than do EU workers — that’s five and a half weeks of extra work!
That sobering comparison is no surprise when we make a comparison of mandatory paid days off. Among the 42 countries that are members of the OECD and/or the European Union, there is only one country with zero paid days of vacation or holidays under the law — the United States. Seven countries require workers be guaranteed 25 or more vacation days per year. Another 25 mandate at least 20 days. Each of those countries also mandate anywhere from eight to 15 paid holidays. Among the 42 countries surveyed, 34 legally require 28 or more days, led by Austria and Malta (38 each) and another half-dozen requiring 36. Turkey, with 12 days of mandatory paid time off, is next worst to the zero of the U.S.
Working conditions are not getting better
The pandemic may be making the above conditions worse. Working at home has led to a working day of two and a half hours longer for employees in the United States, Canada and Britain, according to a report by a business technology company, NordVPN Teams. The company, CNN reported, examined data sent via servers to calculate employee working hours. There were “no significant drop of business [virtual private network] usage at lunch time indicating potential short lunch breaks while working remotely.”
Other surveys have reached similar conclusions. A report by the U.S. staffing firm Robert Half said nearly 70 percent of professionals who work remotely because of the pandemic work on the weekends and 45 percent say they regularly work more hours during the week than they did before the pandemic. For front-line workers not able to work at home, stress and mental health difficulties have increased sharply, with problems particularly acute in the U.S. due to its inability to provide coherent responses to Covid-19 and the chaos triggered by extreme right operatives who created the “Tea Party” organizing the anti-science and anti-intellectual spectacles opposing measures designed to combat the Covid-19 pandemic.
Where does all this lead? To health problems and shorter lifespans. A study conducted by researchers at the World Health Organization and the International Labour Organization reported that excessive working hours led to 745,000 deaths from stroke and ischemic heart disease in 2016, a 29 per cent increase from 2000. The study found that, in 2016, “398,000 people died from stroke and 347,000 from heart disease as a result of having worked at least 55 hours a week. Between 2000 and 2016, the number of deaths from heart disease due to working long hours increased by 42%, and from stroke by 19%.”
Austerity and economic dislocation have taken their toll around the world, but the already existing harshness of life in the United States on top of austerity and dislocation takes a particular toll there. Nearly half a million excess deaths occurred in the U.S. from 1999 to 2015 from drug and alcohol poisonings, suicide, and chronic liver diseases and cirrhosis. A paper published in the peer-reviewed scientific journal PNAS found this increase in the death rate was limited to the U.S. among advanced capitalist countries.
We’re perhaps taken in more bad news than we can reasonably digest. It’s understandable to not wish to take in too much bad news at once. For readers with knowledge of the world, none of the statistics presented above make for a surprise. It is thus tempting to ask: Would the particularly toxic brand of nationalism practiced by millions of United Statesians continue as virulently were the above statistics widely known? Sadly, perhaps it would. If we were to summarize the discourse of U.S. nationalists, it would be: “We’re number one! We can kill more foreigners in less time than any other country! USA! USA!” Is being able to cheerlead for the world’s biggest military really worth working so many hours for such dismal results?
Heeding that time-honored advice to never let a crisis go to waste, the world’s industrialists and financiers have taken full advantage of the Covid-19 pandemic to accumulate more wealth. And although you already know that large numbers of people have been thrown out of work and/or are at risk of losing their home, you might not have realized how obscene the increase in inequality has become.
Not surprisingly, given that capitalism is a system with a stranglehold on almost every place on Earth, the rise in inequality is a global phenomenon. Unfortunately, capitalists have usually understood their class interests better than do the world’s working people.
When we discuss the increase in wealth the world’s richest are enjoying, we are talking literally about trillions of dollars.
We’ll start our survey with a report issued by one of the world’s biggest banks, UBS, and Big Four accounting firm PricewaterhouseCoopers. The authors of the report, “Riding the storm: Market turbulence accelerates diverging fortunes,” can hardly contain their enthusiasm at how successful their clients have been during the pandemic. UBS and PwC “have unique insights into” billionaires’ “changing fortunes and needs” and in the report breathlessly extol “a time of exceptional, Schumpeterian creative destruction” by “billionaires [who] live in turbulent but trailblazing times.” As you can already surmise by the tone-deaf writing, the report is intended as a celebration of vast wealth inequality and is written in a style that comes as close to that of Hollywood celebrity publicists as you are likely to find produced by bankers and accountants.
The report says “Some 209 billionaires have publicly committed a total of USD 7.2 billion” in donations, written within a passage told in solemn tones intended to make us gasp in awe at the selflessness of the international bourgeoisie. Yet we soon enough read that the wealth of the world’s billionaires totaled US$10.2 trillion in July 2020. For those of you scoring at home, that $7.2 billion in proposed donations represents 0.07 percent of their wealth. The average working person donates a significantly bigger portion of their income.
In just three months, from April to July 2020, the world’s billionaires added $2.2 trillion to their wealth! Technology billionaires did particularly well during the pandemic, the UBS/PwC report says, due in large part to the surge in technology stock prices. During the first seven months of 2020 alone, technology and health industry billionaires saw their wealth increase by about $150 billion. Yes, never let a crisis go to waste.
The number of the world’s billionaires, the report tells us, is 2,189. To put these numbers in some kind of perspective, there are exactly two countries in the world (the United States and China) that have a bigger gross domestic product than the wealth of those 2,189 billionaires. Or, to put it another way, their wealth is greater than the economic output of Japan, Germany and Britain, the countries with the world’s third, fourth and fifth largest GDPs and which have a combined population of 277 million.
Is there really no money for social programs?
As might be expected, billionaires in the center of the world capitalist system are no laggards among those accumulating wealth at the expense of everyone else. An Institute for Policy Studies study, “U.S. Billionaire Wealth Surges Past $1 Trillion Since Beginning of Pandemic — Total Grows to $4 Trillion,” reports the collective wealth of the 651 billionaires in the United States has increased by over $1 trillion “since roughly the beginning of the COVID-19 pandemic to a total of $4 trillion at market close on Monday, December 7, 2020. Combined, just the top 10 billionaires are now worth more than $1 trillion.” Those gains are more than the $900 billion pandemic relief package that passed Congress this week, a package held up for months by Republicans fretting over the cost.
Wall Street has been amply taken care of in the current economic crisis, as it was in the wake of the 2008 collapse, and industrialists also have had massive amounts of subsidies and tax cuts thrown their way. For working people, crumbs. The Federal Reserve, the U.S. central bank, committed US$5.3 trillion to corporations on its own initiative in the first weeks of the pandemic, and most of the $2.5 trillion offered in last spring’s two congressional stimulus packages (the CARES Act of March 27 and the supplement of April 24) went to big business. (There was nothing unique about that as Britain, the European Union and Canada pushed through similar programs.)
The Institute for Policy Studies report notes that the $1 trillion gain by U.S. billionaires since mid-March is:
More than it would cost to send a stimulus check of $3,000 to every one of the roughly 330 million people in the United States. A family of four would receive $12,000.
Double the two-year estimated budget gap of all state and local governments, which is forecast to be at least $500 billion. By June, state and local governments had already laid off 1.5 million workers and public services—especially education—faced steep budget cuts.
Only slightly less than total federal spending on Medicare ($644 billion in 2019) and Medicaid ($389 billion in fiscal year 2019), which together serve 120 million Americans.
Nearly four times the $267 billion total in stimulus payments made to 159 million people earlier in 2020.
During the same period, about 70 million lost employment, 12 million workers lost their health insurance due to losing their jobs, 26 million did not have enough food to eat just during a two-week period in November and 98,000 businesses closed. The Economic Policy Institute predicts that if federal aid is not forthcoming, as many as 5.3 million public-sector jobs—including those of teachers, public safety employees and health care workers—will be lost by the end of 2021.
An excuse to ramp up privatization in Canada
The pandemic is being used as an opportunity in Canada to advance corporate goals of privatization. Health care workers in Alberta walked off their jobs in a wildcat strike in November to protest Alberta Health Services’ announcement that it would be laying off 11,000 public positions so those jobs could be filled by private contractors. The Canadian news site Rabble reports:
“Alberta leads Canadian provinces and territories in its pursuit of privatization, and its October announcement that it was laying off up to 11,000 hospital workers has led to worker resistance and criticism from the province’s doctors. (One Calgary physician even set up a grassroots political organization against health-care privatization). Affected workers include those working in housekeeping, food services, laundry and laboratories. The Alberta government claims that these roles are not being eliminated, but instead transferred from public positions to ones filled by private contractors. … This past summer, Alberta Bill 30 was also criticized as opening the door to further privatization of health care. The Health Statutes Amendment Act was an omnibus bill that passed at the end of July.”
Alberta legislators also pushed through a bill that weakens rules and requirements for charter schools to operate and allowed for home schooling to go on unsupervised by public school boards. (Charter schools are designed to weaken teachers’ unions and hand schools to corporations for profit, while the supposed improvements in student outcome are mostly mythological.) Not to be outdone, Manitoba’s provincial government seeks to privatize child care, long-term care homes and liquor sales, and intends to cut public service jobs by 25 percent, Rabble reported.
Jobs losses and insecurity around the world
A University College London report, “Financial inequalities widen due to Covid-19,” called by the authors the “UK’s largest study into how adults are feeling about the lockdown,” found that more than two-thirds of Britons surveyed have suffered deteriorating finances. The report said, “Almost half (47%) of those who were finding things ‘very difficult’ financially before lockdown are now reporting things are ‘much worse’, with a further 23% saying things are ‘worse’. This figure has increased significantly from July, when 57% of the same group reported being financially worse off than before the pandemic.” The report quoted an educational leader, Cheryl Lloyd, as summarizing the situation as follows: “This report shows that the financial impact of the Covid-19 crisis is not being felt equally across the UK. This threatens to further widen existing inequalities as the pandemic continues.”
Conditions are no better across the Channel in the European Union, with disparate impacts on jobs widening inequality on the continent. The Brussels think tank Bruegel reports that, across the EU, “8% of workers educated to lower secondary level or below lost their jobs between the last quarter of 2019 and the second quarter of 2020. Over the same period, the number of jobs for workers with university degrees increased by 3%. Jobs for employees with middle-level qualifications declined by 5%. This picture of differences between low-educated and tertiary-educated workers can be seen in all EU countries and the United Kingdom.”
Those at more risk of losing their jobs are also at more risk of contracting Covid-19. “Sectors more exposed to the pandemic, including restaurants, travel, entertainment and personal services have unsurprisingly suffered more,” Bruegel reports. “But the ability to telework has greatly influenced labour market outcomes. About 70% of those who completed university studies are able to work from home, compared to about 15% of those who have not completed secondary school. Two-thirds of professionals and 85% of managers can work from home, in contrast to close to zero for workers in transportation, installation, construction and agriculture.”
And, as would be expected, conditions in the developing world are still worse. India has experienced a 26 percent decline in industrial employment, according to an India Today report. The broadcaster said:
“Ever since India went under a strict lockdown on March 25, millions of the country’s poorest workers were immediately rendered jobless and left without any income. An unresolved migrant crisis is the biggest example of the plight India’s poor are facing at the moment. Even the country’s vast middle class population encountered a sharp loss of income during the pandemic due to a wave of job losses and pay cuts. … A recent report by the Centre For Monitoring Indian Economy (CMIE) indicates that [21 million] salaried jobs were lost in the first five months of the pandemic, indicating that income levels among middle class households have fallen sharply.”
At the same time Indians across the country were undergoing difficulties, Mukesh Ambani, one of the world’s richest persons, saw his wealth increase by $30.5 billion. Another Indian billionaire, Cyrus Poonawala, added $5.6 billion to his wealth this year, India Today reported.
Even capitalists’ spokespeople profess concern
Inequality has become so extreme that even some of the staunchest upholders of the capitalism that creates this inequality profess to be concerned. (Or perhaps they are worried about people rising up to do something about it and thus advocate a little softening, at least for now.) In November, the Brookings Institution was moved to issue a report, “Windfall profits and deadly risks: How the biggest retail companies are compensating essential workers during the Covid-19 pandemic,” that discussed the big increases in profits enjoyed by giant retailers while their workforce sees only crumbs. Brookings reported:
“We find that while top retail companies’ profits have soared during the pandemic, pay for their frontline workers—in most cases—has not. In total, the top retail companies in our analysis earned on average an extra $16.9 billion in profit this year compared to last—a stunning 39% increase—while stock prices are up an average of 33%. And with few exceptions, frontline retail workers have seen little of this windfall. The 13 companies we studied raised pay for their frontline workers by an average of just $1.11 per hour since the pandemic began—a 10% increase on top of wages that are often too low to meet a family’s basic needs. On average, it has been 133 days since the retail workers in our analysis last received any hazard pay.”
For top executives and speculators who hold large numbers of shares, however, the year of the pandemic has been a bonanza. The Brookings report further stated:
“Many of the least generous companies were the most financially successful, posting huge profits. Amazon and Walmart combined earned an extra $10.9 billion in profit compared to last year, an increase of 53% and 45%, respectively. Their workers, on the other hand, have received below-average COVID-19-related compensation: an extra $1,369 ($0.95 per hour) and $900 ($0.63 per hour), respectively, over the eight-plus months of the pandemic—representing just 6% pay bumps for full-time workers that earn starting wages. Meanwhile, Amazon and Walmart’s stock prices are up 65% and 41% since the start of the pandemic, adding more than $70 billion to the wealth of Jeff Bezos, Amazon’s CEO, and $45 billion to the Walton family—the country’s richest family, who own more than half of Walmart’s shares.”
Wal-Mart spent $500 million on new stock buybacks during the third quarter of 2020 while offering no new hazard pay bonuses for its employees, the Brookings report said. Another big chain, Kroger, announced $1.2 billion in new stock buybacks, causing the stock price to rise (which is the intention), at the same time its grocery workers were given no hazard pay for six months while earning an average wage of $10 per hour. Kroger’s profits during the first six months of the pandemic, meanwhile, totaled $2 billion.
Wal-Mart is a company that pays its employees so little that they skip meals and organize food drives; receives so many government subsidies that the public pays about $1 million per store in the United States; and is estimated to avoid $1 billion per year in U.S. taxes through its use of tax loopholes. Meanwhile, the Walton family collects billions of dollars every year from dividends just for being born in the right family.
Amazon is notorious for the brutal inhuman conditions in its distribution centers and for not paying taxes. Amazon’s owner, Jeff Bezos, is one of the world’s richest people yet he organized a nationwide sweepstakes to see what cities or states would give him the biggest subsidies when he announced Amazon would create a second headquarters.
The International Monetary Fund likely isn’t having second thoughts or feeling remorse about its decades of imposing harsh austerity on developing countries, but has weighed in on the rise of inequality — whether from genuine concern or, much more likely, as a public relations gesture. (IMF papers purporting to reconsider neoliberalism are always much less than they appear.) Because lower-income people are less likely to be able to work from home during the pandemic, and thus more likely to have lost their job, the IMF said “the estimated effect from COVID-19 on the income distribution is much larger than that of past pandemics.”
Loss of work and specter of hunger hit developing world hard
Whatever the motivations of the world’s capitalist think tanks and financial institutions may be in discussing global inequality in the wake of the Covid-19 pandemic, there is no question that working people everywhere are suffering. As early as late April, the International Labour Organization issued a report, “As job losses escalate, nearly half of global workforce at risk of losing livelihoods,” predicting that half of the world’s working people are in danger of disaster. The ILO said:
“The continued sharp decline in working hours globally due to the Covid-19 outbreak means that 1.6 billion workers in the informal economy — that is nearly half of the global workforce — stand in immediate danger of having their livelihoods destroyed. … The first month of the crisis is estimated to have resulted in a drop of 60 per cent in the income of informal workers globally. This translates into a drop of 81 per cent in Africa and the Americas, 21.6 per cent in Asia and the Pacific, and 70 per cent in Europe and Central Asia. Without alternative income sources, these workers and their families will have no means to survive.”
Large numbers of the world’s peoples were already in a highly precarious condition. An estimate by John Bellamy Foster and Robert W. McChesney is that there are 2.4 billion people in their prime working ages (25-54) who are unemployed, vulnerably employed or economically inactive, compared to 1.4 billion actively employed. In other words, there are far more people in the “reserve army of labor” who are precariously or not at all employed than those with jobs, and far from all those 1.4 billion who are employed have secure work.
And with loss of livelihood comes the specter of hunger. The United Nations World Food Programme, also in late April, predicted that the pandemic “will double number of people facing food crises unless swift action is taken.” The agency said, “The number of people facing acute food insecurity stands to rise to 265 million in 2020, up by 130 million from the 135 million in 2019, as a result of the economic impact of COVID-19.”
Nor does the developing world have the health care infrastructure necessary to handle the number of people falling sick from Covid-19. The United Nations Development Programme noted that developed countries have 55 hospital beds, more than 30 doctors and 81 nurses for every 10,000 people, but for the same number of people in a less developed country there are seven beds, 2.5 doctors and six nurses.
Pandemic widens education disparities
The lack of infrastructure to provide education is also acute. Because of school closures and the divide in distance learning, an estimated “86 per cent of primary school-age children in low human development countries are currently not getting an education, compared to just 20 per cent in countries with very high human development,” according to the UN Development Programme. “With schools closed, UNDP estimates that effective out of school rates could regress to levels not seen since the 1980s — the largest reversal ever … and threatening the hard work and progress of the past 30 years.”
Similar conclusions were reported by the Institute for Policy Studies’ Inequalilty.org project. In a September report, the project found that just 6 percent of children in eastern and southern Africa have access to the Internet. In Kenya, schools have been closed for six months. And that has further consequences. “One likely impact of Covid-19 is a rise in teen pregnancies, as adolescent girls are left without the safety net that schools provided,” the report said. “This gendered menace deprives young girls of the opportunity to further their education and attain their career goals. It also exposes them and their children to major health risks. According to the World Health Organization, ‘pregnancy and childbirth complications are the leading cause of death among girls aged 15–19 years globally.’ ”
The pandemic has also widened inequality in education in the developed world. VoxEU, which calls itself a provider of commentary by “leading economists,” reports that the disruption to higher education caused by the switch to online classes is much larger for lower-income students because “lower-income students were more likely to have been financially impacted by COVID-19 and were more worried about the direct health risks from the virus.” VoxEU found that “Lower-income students are 50% more likely than their more affluent peers to expect a delayed graduation due to COVID-19, a gap which disappears once accounting for the differential financial burdens or health risks imposed by COVID-19.”
Pandemic places greater burden on women
Concomitant with the various inequality aggravations, it’s no surprise that women are being hit harder than men.
Alison Andrew, a senior research economist at the Institute for Fiscal Studies in London, said: “Mothers are more likely than fathers to have moved out of paid work since the start of lockdown. They have reduced their working hours more than fathers even if they are still working and they experience more interruptions while they work from home than fathers, particularly due to caring for children. Together these factors mean that mothers now are only doing a third of the uninterrupted paid-work hours that fathers are. A risk is that the lockdown leads to a further increase in the gender wage gap.”
The Institute, in its report on British fallout from the pandemic, “Parents, especially mothers, paying heavy price for lockdown,” found the following:
Mothers are 23% more likely than fathers to have lost their jobs (temporarily or permanently) during the current crisis. Of those who were in paid work prior to the lockdown, mothers are 47% more likely than fathers to have permanently lost their job or quit, and they are 14% more likely to have been furloughed. In all, among those working in February 2020, mothers are now 9 percentage points less likely to still be in paid work than fathers.
Mothers who are still doing paid work have reduced their paid working hours substantially and by more than fathers. Prior to the crisis, working mothers did paid work in 6.3 hours of a weekday on average; this has fallen by over one-fifth to 4.9 hours. Working fathers’ hours have also fallen, but by proportionally less, from 8.6 hours before the crisis to 7.2 hours now.
Mothers are also far more likely to be interrupted during paid working hours than fathers. Almost half (47%) of mothers’ hours spent doing paid work are split between that and other activities such as childcare, compared to 30% of fathers’ paid working hours. Where focused work time is important for performance, gender differences in interruptions and multitasking risk further increasing the gender wage gap among parents.
In families where the father has lost his job while the mother kept hers, men and women still split housework and childcare responsibilities fairly equally. In all other types of households, mothers spend substantially more time on domestic responsibilities.
Such disparate impact means women are again falling further behind men in earnings. “Analysis of those that did produce data suggests it will take almost 200 years to close the gap,” says Dr. Wanda Wyporska, the executive director of the Equality Trust. “Undoubtedly women are bearing the brunt of this, as they did in austerity when 86% of cuts fell on women. There is a cumulative effect which consistently pushes progress back.” The general secretary of the British Trades Union Council, Frances O’Grady, said, “[O]nly one in 10 lower earners are able to work from home, and 69% of low earners are women; it is not a panacea. …Working women have led the fight against coronavirus, but millions of them are stuck in low paid and insecure jobs. We need a reckoning on how we value and reward women’s work.”
Then there is the specter of violence from male partners. María Noel Vaeza, United Nations Women Regional Director for the Americas and the Caribbean, in a November report, said:
“While lockdowns and stay-at-home orders may be crucial in limiting and preventing the spread of COVID-19, they also have a devastating impact on women and girls living with the risk of gender-based violence, as many of the factors that trigger or perpetuate violence against women and girls are compounded by preventive confinement measures. Emerging global data has shown an increase in calls to [violence against women and girls] helplines. … Stay-at-home measures are compounding perpetrators’ use of mechanisms of power and control to isolate victims of [violence]. Unemployment, economic instability and stress may lead offenders to feel a loss of that power, which in turn may exacerbate the frequency and severity of their abusive behaviour. At the same time, the crisis is generating additional barriers for women and girls’ access to essential life-saving services such as counselling and justice resources, and legal advice; sexual health and other crucial medical assistance; and the provision of refuge.”
Racial disparities widened by pandemic
No roundup of Covid-19 inequalities would be complete without discussion of racial disparities. The impact of the pandemic’s effect on the economy, because it impacts lower-income working people most severely, has fallen heavily on People of Color. A Center for American Progress report authored by Dania Francis and Christian E. Weller demonstrates the severity of the disparities:
“African Americans have experienced particularly large job losses in a labor market characterized by persistent racism and inequality. … Estimates based on census data show that 54.8 percent of Black workers said that they had lost incomes due to a job loss or cut in hours from late April to early June, compared with 45.8 percent of white workers. The labor market pain has created housing instability for Black families to a much larger degree than was the case for white families. Estimates based on census data show that more than one-third of African Americans who experienced job-related income losses said that they either didn’t pay their mortgage or deferred their mortgage, compared with only 16.9 percent for white families with earnings losses. Among renters, 38.3 percent of Black families with income losses didn’t pay or deferred their rent, compared with 23.1 percent of white families in a similar situation.”
Compounding this financial distress is that, with schools going to remote learning, a lack of resources impacts the education of African-American children. The Center for American Progress report said:
“The lack of reliable internet or an electronic device for remote learning also correlates with fewer hours per week of teaching time. … Unreliable internet access and a lack of consistent access to electronic devices reduces families’ time teaching children by two to three hours among Black families but only by one to two hours among white families. … While the short- and long-term impacts of coronavirus-related school closures and job losses on children’s educational outcomes cannot be measured yet, it is already clear that there are differential effects by race on access to educational resources as a result of the pandemic. In particular, the persistent and large Black-white wealth gap directly and immediately feeds into persistent educational gaps.”
“The pandemic has entrenched extreme inequalities in New York City. Insecurities surrounding employment, health, education and basic safety are affecting many New Yorkers today, but they are disproportionately experienced in communities with the lowest incomes. The sheer rate of COVID-related deaths is more than two times higher in zip codes with very high poverty rates (where 272 out of every 100,000 residents have died) than in zip codes with low poverty rates (125 out of 100,000). New Yorkers with the lowest incomes are feeling the impact of the pandemic on all sides—living in fear of eviction, struggling to put food on the table, and having trouble getting devices to support remote learning for their children.”
For industrialists, financiers and their publicists, the year 2020 might be a time of “exceptional creative destruction,” but for the overwhelming majority of humanity who do the actual work that is converted into the fabulous wealth of those at the top, it’s just plain old destruction. Capitalism as usual.
Telling you that Donald Trump lied, or that the one percent continue to succeed in their incessant class warfare, ranks in the astonishment department with being told the Sun rose in the east this morning. Do we really need more evidence?
Necessary or not, more evidence continues to be delivered. The latest delivery comes courtesy of the Institute on Taxation and Economic Policy, which has found that 60 of the largest corporations in the United States paid no income taxes for 2018 despite earning a composite $79 billion in net income. Worse, these companies actually received $4.3 billion in tax rebates.
Had these companies paid taxes at the newly reduced corporate tax rate of 21 percent, these companies would have paid $16.4 billion in taxes. So we have a difference of more than $20 billion — quite a nice return on their lobbying expenses and donations to the Trump campaign.
Heading the list is none other than Amazon. Run by the world’s richest person and recently extracting billions of dollars in subsidies in a sweepstakes in which cities across the United States competed to give away the most money, Amazon racked up $11 billion in profits last year and not only paid no taxes but received a rebate of $129 million. A total of 26 companies, including Chevron, Delta Air Lines, Duke Energy, General Motors, Molson Coors and Prudential Financial, reported net income of more than $1 billion while paying no taxes.
Occupy Seattle rally at Westlake Park (photo by Joe Mabel)
President Trump claimed that his massive tax cuts for corporations would directly result in the average United States household getting an annual increase of $4,000 in wages. That magical figure came from his own Council of Economic Advisers, which further claimed that the $4,000 was a “conservative” estimate. The Council went on to claim that the average U.S. household might see a raise of $9,000.
The web site FactCheck.org, noting that the Council never said how it arrived at these magical figures, used old-fashioned math to reveal the lack of reality here. The site’s analysis of the purported $9,000 raise concluded: “That would amount to a $1.1 trillion annual income gain from simply reducing a corporate tax burden that is currently only $297 billion.”
Still waiting for that extra $4,000 in your paycheck, aren’t you?
Don’t hold your breath
Wages actually fell two percent, adjusted for inflation, from December 2017 to December 2018, reports the Economic Policy Institute. But it would have been fruitless to wait for the promised largesse. The Communications Workers of America made a gallant effort to get commitments for corporations to pass on the tax savings to their workers, to no avail, the Center For Public Integrity reports:
“Corporations balked at saying tax cuts would lead to higher wages because they didn’t want to be bound to a promise to increase pay, a lobbyist for the companies said. When the White House’s Council of Economic Advisers predicted hat a 20 percent corporate rate would hike average annual household income by $4,000, the Communications Workers of America, a 700,000-member union, asked eight major corporations to pledge to hike worker wages by $4,000 if they got the tax cut. The companies didn’t respond. That ‘shows you the difficulty they have, and not only in messaging but also why people don’t like them,’ said one lobbyist who asked to remain anonymous so as to be able to speak freely.”
The Trump administration, however, has intensified these trends. Worldwide, financiers pocketed an astounding US$1.37 trillion in dividends for 2018, a total that has nearly doubled in less than a decade, and is predicted to be even bigger in 2019. Stock buybacks in the U.S. alone accounted for another $1.1 trillion last year. Putting their chief executive officer colleagues to shame, the top 25 “earners” among hedge-fund managers paid themselves a composite $15.4 billion in 2017, with four of them raking in more than $1 billion each.
In contrast, six percent of the tax cuts given to corporations went to employees in increased wages and in bonuses, while more than half went directly to stock holders.
The costs of poverty
This ever-mounting inequality has real costs. For example, almost 13 million children in the United States (20 percent of the country’s children) live in poverty. The Children’s Defense Fund pulls no punches in assessing the cost of that poverty:
“When we let millions of children grow up poor without basic necessities like food, housing and health care, we deny them equal opportunities to succeed in life and rob our nation of their future contributions. Poverty decreases a child’s chances of graduating from high school and increases her chances of becoming a poor adult. It makes her more likely to suffer illnesses and get caught in the criminal justice system. Beyond its human costs, child poverty has huge economic costs. Our nation loses about $700 billion a year due to lost productivity and increased health and crime costs stemming from child poverty.”
Don’t hold your breath waiting for the Trump administration to address any of these problems. Far from the magic fountains of money pouring into your paycheck and reductions to the federal budget deficit, the country’s accumulated debt is rising fast. The Congressional Budget Office estimates an additional $1.9 trillion will be added to the U.S. government’sbudget deficit over the next 10 years thanks to a drastic decrease in corporate tax payments. For the first six months of fiscal year 2019 (which began with October 2018), corporate tax payments to the federal government declined $11 billion (a fall of 13 percent) compared to a year earlier, according to the Center For Public Integrity.
Bonuses as a share of compensation (graphic by the Economic Policy Institute)
How will this be paid for? Naturally, in cuts to the safety net. The Trump administration’s proposed budget for fiscal year 2020 calls for $845 billion in cuts to Medicare, $1.5 trillion in cuts to Medicaid and $84 billion in cuts to Social Security disability benefits. President Trump, you’ll recall, promised during his election campaign that he would make no cuts to those programs. Then again, what would we expect from a serial liar whose total of false statements since taking office has surpassed 10,000 — and who has a long history of failing to pay contractors who did work for his casinos and other businesses.
As historically weak as the so-called “recovery” from the 2008 economic collapse has been, all history points to the fact that we are now overdue for the next recession. Nor is the little bit of sugar high the U.S. economy received from the Trump tax cuts (in reality, a bump for the owners of capital but not those who work for a living) going to last.
In a CounterPunch commentary, economist Jack Rasmus explains that the rise in U.S. gross domestic product for the first quarter of 2018 was due to corporations building inventories to get ahead of the Trump tariffs and a temporary decline in imports (thus providing an artificial boost to the import-export ratio) stemming from the administration’s trade wars. Household consumption, the driver of the U.S. economy, is actually decreasing, Professor Rasmus said, which does not bode well for the future.
We are losing one of the most one-sided wars in human history.
Jeff Bezos, the world’s richest person, wouldn’t seem to need the money. Nonetheless, huge sums of money will be diverted from social needs to line his pockets — a cost that won’t stop there, as gentrification will be accelerated still more in New York City and the Washington area.
In all, Mr. Bezos scooped up nearly US$3.7 billion worth of subsidies this week. Does someone worth $112 billion and owner of a company that has racked up $7 billion in profits for the first nine months of 2018 really need such largesse? Corporate subsides are hardly unique to Amazon, but this to all appearances represents the most blatant example yet seen.
Incredibly, these astronomical sums of money don’t represent the biggest giveaway offers, even in the “winning” areas’ metropolitan areas. The state of New Jersey, then under the governorship of Chris Christie, offered $7 billion to Amazon to build its second headquarters in Newark, and the state of Maryland offered $8.5 billion to Amazon to build in Montgomery County, which borders Washington on the opposite side of the Potomac River from Arlington, Virginia.
The waterfront location for Amazon’s campus in New York City’s Long Island City neighborhood is just to the north (or to the left) of these high-rise buildings. (photo by Jim Henderson)
Many other locations across the United States offered gigantic subsidies, as Amazon did all it could to initiate a bidding war. But as the two locations chosen (splitting in two the original proposal to create a single “second headquarters”) were picked because of the available workforces and city amenities, were these gargantuan subsidies necessary? It would seem not, making them all the more hideous. One strong clue is that Google is rapidly expanding its presence in New York City without, as far as the public knows, any subsidies.
New York’s governor, Andrew Cuomo, justifies Amazon’s subsidies by claiming that “It costs us nothing,” going so far as to assert that the city and state will get back nine dollars every dollar given away in subsidies. This sounds dubious, to be put it mildly, given that once all the state and city incentives are added up, the cost will be approximately $100,000 per job — a total amounting to all the state and city income taxes that will be paid by all the Amazon employees for the 10-year period of the subsidies, according to an analysis by Josh Barro, a former fellow at the conservative Manhattan Institute.
Writing in New York magazine, Mr. Barro wrote:
“The problem with [Governor Cuomo’s] analysis is it assumes all the economic activity we’re buying with the subsidy package wouldn’t happen without the subsidy package. And that’s not true. Google’s impending expansion in Manhattan — where it will develop a campus nearly as large as the one Amazon plans — shows a mega-tech firm might locate here even if you don’t give it billions of dollars.
Plus, when we do bring Amazon in, it will tend to crowd out other businesses and especially other people that might have located where Amazon is going. New York is crowded — there’s more demand for housing than supply, and the number of top development sites is limited — so the case that subsidized economic development means more net economic activity is much weaker here than it might be in, say, Cleveland.”
A dictated outcome that will facilitate gentrification
A city councilman, Brad Lander, was still more direct in his criticism. At a demonstration the day after Amazon’s announcement, Councilman Lander said, “This is not only an assault on Long Island City [the neighborhood where Amazon will build]. It’s not only an assault on housing affordability. It’s not only an assault on transit capacity. This is an assault on our democracy.” The reason behind that last statement is that the plan to throw $3 billion at the world’s richest man was hatched and negotiated in secret, and will be forced through via a state agency so that local officials will have no say whatsoever.
The exception to that is Mayor Bill de Blasio, who is kicking in $900 million in city tax credits plus allowing Amazon to apply for a program that would enable it receive property tax abatements for up to 25 years. Mayor de Blasio, the Barack Obama of New York City who is far from a progressive although he plays one on television, continues to do his his part to facilitate gentrification as he continues the legacy of his billionaire neoliberal predecessor, financial-industry titan Michael Bloomberg.
The waterfront area where Amazon’s new campus will be built is not virgin land. It is an area of warehouses and other businesses with blue-collar jobs but is located adjacent to a waterfront area that was once industrial but is now full of high-rise luxury housing, most of which has been built in the past decade. Although it is true that manufacturing has long been in decline in waterfront neighborhoods such as Long Island City, it is also inescapable that city policy under snarling Rudy Giuliani, technocrat Michael Bloomberg and duplicitous Bill de Blasio has centered on accelerating gentrification by using zoning changes and developer incentives to force out industrial operations and replace them with million-dollar high-rise condos. Long Island City, and the nearby neighborhoods of Astoria, Greenpoint and Williamsburg (particularly the latter two), are rapidly changing under the tremendous pressures of uncontrolled real estate speculation.
A view of Alexandria, Virginia. (photo by David Fuchs)
Jobs at the existing businesses will be lost in the redevelopment to benefit Amazon, and still more pressure will be placed on the already dwindling stock of affordable housing, adding to the pressure from the mushrooming upscale housing. There will also be more strain on an infrastructure (including a decaying, underfunded subway system) already unable to handle the number of people living and working in these areas. Gentrification doesn’t just happen — it is a process assisted by a local government under the sway of local corporate elites, and is centered on dramatic increases in commercial and residential rents such that the people and culture who are being removed find it increasingly difficult to remain.
To provide a working definition, gentrification is a process whereby an organic culture originating in the imagination, sweat and intellectual ferment of a people living in a particular time and place who are symbolically or actually distinct from a dominant moneyed mono-culture is steadily removed and replaced by corporate money and power, which impose a colorless chain-store conformity. Make no mistake, Amazon’s arrival will not only accelerate gentrification in Long Island City and the nearby waterfront neighborhoods of Greenpoint and Williamsburg, but kickstart gentrification in Queens neighborhoods further from the East River. This will displace not only people but local businesses as New York City becomes ever more a homogenized corporate shopping mall.
Alexandria, Virginia, will surely not escape this fate, either, as the Washington area undergoes it owns process of gentrification. The state government of Virginia and the city of Alexandria are handing out $573 million in subsidies, equivalent to $22,000 per job. That doesn’t include another $223 million in promised transit improvements. Amazon will also be receiving $102 million in subsidies for a new operations center that is projected to employ 5,000 people in Nashville, Tennessee.
The biggest but far from the first Amazon subsidies
Subsidies, unfortunately, are nothing new for Amazon, although never before has it received giveaways of this scale. According to Good Jobs First, Amazon had already received $1.6 billion in subsidies for its warehouses, data centers, film productions and its WholeFoods supermarkets from 146 separate programs. Just in 2018 alone, a total of 17 subsidies from governments in 13 states gave the company at least $237 million.
Amazon’s profits are rapidly rising — not to mention making Mr. Bezos the richest person in the world. The company reported net income of $5.4 billion for 2016 and 2017 before racking up $7 billion in the first three quarters of 2018. As an owner of 80 million shares in Amazon, Mr. Bezos is in no danger of losing his fortune. The harshness of working conditions at Amazon, well documented in numerous reports, means that he gets rich off the sweat of his workers, not only through the massive subsidies showered upon him.
Although it is skilled at the art of taking public money for its private profit, Amazon is far from unique, One good example is Wal-Mart, which greedily gobbles up subsidies while racking up gigantic profits. Wal-Mart is a company that pays it employees so little that they skip meals and organize food drives; receives so many government subsidies that the public pays about $1 million per store in the United States; and is estimated to avoid $1 billion per year in U.S. taxes through its use of tax loopholes.
Protesting Amazon in Long Island City (photo via Local 338 RWDSU/UFCW)
Wal-Mart is a company that has reported net income of $70 billion over the previous five years, and in which three heirs of founder Sam Walton are each among the world’s sixteen richest people, worth a combined $139 billion. The Walton family owns about half of Wal-Mart’s stock, and last year “earned” from collecting dividends alone about $3 billion just for being born. They need not ever lift a finger to haul in these fantastic sums. The Donald Trump/Republican Party tax scam of 2018 that provided windfalls for U.S. corporations has showered still more money on Wal-Mart, which like most of its corporate peers, used the largesse to fatten profits and shower more money on its stockholders. Wal-Mart announced that in its last fiscal year it handed out $14.4 billion to shareholders in dividends and stock repurchases.
None of these appalling results are unique to Wal-Mart or to Amazon. The University of California Berkeley Labor Center calculates that low wages costs United States taxpayers $153 billion per year in public support for working families. Nearly three-quarters of United Statesians receiving public support are members of working families, the Labor Center reports, adding that more than half of combined state and federal spending on public assistance goes to working families.
So much has been written about inequality, stagnant or falling wages, corporate tax dodging and good old-fashioned capitalist class war what new can be said? Capitalism, alas, is working as it is supposed to.
We are supposedly seven years into a “recovery” from the global economic collapse that commenced in 2008. The latest evidence offered to promote this oft-peddled mantra is that U.S. gross domestic product showed a strong uptick for the second quarter of 2018, an annualized rate of 4.1 percent, nearly double that of the first quarter.
Coupled with the ongoing decline in unemployment (although standard unemployment rates greatly underestimate the true rate of employment), orthodox economists, conservative propagandists and apologists for the Trump administration would have us believe happy days are here again.
So why aren’t our wages increasing?
In part, it is because the true unemployment rate is not nearly so low as the “official” unemployment rate used by governments around the world, and thus the ranks of unemployed and underemployed are sufficiently large that there is no upward pressure on wages. Orthodox economists, dedicated as they are to ignoring any evidence that doesn’t match their models designed to “prove” that all manners of capitalist excess are as natural as the tides of the ocean — and thus in practice the professional wing of conservative propagandists — have various excuses for stagnant wages and ever increasing inequality. A favorite among these is an alleged “skills mismatch” — too many unskilled workers and a shortage of skilled workers for the high-tech jobs of today.
Striking fast food workers were joined by university workers, students, janitors, retail workers and airport workers in an April 15 action in Minneapolis. (photo by Fibonacci Blue)
The data tells a different story, however. A 2014 report by the National Employment Law Project found that low-wage jobs were created at a faster pace than higher-paid jobs were lost in the first years to that point. The Project reported this breakdown:
Lower-wage industries ($9.48 per hour to $13.33) constituted 22 percent of the 2008-2010 losses, but 44 percent of jobs gained since then.
Mid-wage industries ($13.73 to $20.00) constituted 37 percent of the 2008-2010 losses, but 26 percent of jobs gained since then.
Higher-wage industries ($20.03 to $32.62) constituted 41 percent of the 2008-2010 losses, but 30 percent of jobs gained since then.
Moreover, an Economic Policy Institute study at the time found that those among the two categories of “some college” and holders of four-year college degrees showed the highest increases in long-term unemployment.
Imbalance in power forces down wages
The situation has not changed significantly since. A July 2018 commentary by the Economic Policy Institute, written by Heidi Shierholz and Elise Gould, notes that wages remain stagnant even though more recently middle- and high-wage jobs are being added at strong proportions than low-wage jobs. This development means that there is now upward pressure on wages, they write.
Yet wages clearly are not rising. How to account for this disparity? Dr. Shierholz and Dr. Gould argue that the increasing power of employers over employees is counteracting that upward pressure to instead depresses wages:
“What is most likely happening is that worker leverage and bargaining power have been so decimated by policy choices—policy choices that have, for example, led to the erosion of union coverage and labor standards like the minimum wage—that for tight labor markets to spark upward wage pressure the economy requires a much lower unemployment rate now than it did in the past.”
If there really were a shortage of skilled workers, the two economists wrote in a separate commentary, there would be faster wage growth because employers would need to offer higher wages to attract the limited pool of candidates. Therefore,
“Since we continue to see anemic average wage growth, not just slow wage growth for select groups of workers, it’s clear that there is not a widespread shortage of the types of workers (i.e., those with the right skills) that employers need.”
Compounding this situation is that the ongoing merger mania means that fewer corporations control the labor market. In other words, there are more industries in which a small number of companies have “monopsony power.” (A single or very limited number of sellers possess a monopoly; a single or very limited number of buyers constitutes a monopsony.) Dr. Shierholz and Dr. Gould explain that monopsony employers are able to pay less. They wrote:
“When firms have monopsony power, they are able to pay workers less than what their work is ‘worth,’ i.e. less than their marginal product. But a key dynamic of monopsony power is that even though monopsonists would like to hire more workers, the low wages they offer mean they can’t attract more workers unless they pay more. That is, it is a normal state of affairs for a firm with monopsony power to wish they could hire more workers at the wages they are offering, but to be unable to attract additional workers because their wages are too low. So when a firm with the power to set wages below a workers’ marginal product complains about not being able to find workers at the wages they are offering, it’s useful to remember that they are choosing to keep wages low in order to increase profits—which remain high as a share of corporate sector income—and could get more workers by simply raising wages. And importantly, when firms with monopsony power complain about not being able to find workers, it is not adequate evidence of a skills shortage.”
The inadequacy of gross domestic product
A look at numbers beyond gross domestic product reveal the true state of the economy. GDP, defined as “the sum of private consumption and investment and government spending (with account taken for foreign trade),” is increasingly seen as an inadequate measure. Even one of the leading voices of British finance capital, The Economist, criticizes GDP as a relic designed to measure economic output during World War II, terming it “A measure created when survival was at stake [that] took little notice of things such as depreciation of assets, or pollution of the environment, let alone finer human accomplishments.”
Similar criticisms have been offered by the International Monetary Fund, certainly no friend of working people. An IMF commentary admitted:
“The limit of GDP as a measure of economic welfare is that it records, largely, monetary transactions at their market prices. This measure does not include, for example, environmental externalities such as pollution or damage to species, since nobody pays a price for them. Nor does it incorporate changes in the value of assets, such as the depletion of resources or loss of biodiversity: GDP does not net these off the flow of transactions during the period it covers.”
Left unsaid by these standard-bearers of the establishment is that GDP pays no attention to inequality. If there is more wealth, but all that wealth is concentrated in a small number of hands while all others suffer declining living standards, then GDP will rise even though working people are worse off. And, as alluded to by The Economist and the IMF, a degradation in the environment could cause a spike in GDP because some corporation will make money from a government contract to clean up the mess (paid for by taxpayers) at the same time that the corporation that caused the mess can offload that cost onto society, and thus enhance its profitability.
A one-time boost to GDP, such as the United States reported for the second quarter of 2018, doesn’t necessarily signify anything. That boost is likely the product of factors that won’t repeat, some observers have already said. A July 27 commentary published by the online financial news service MarketWatch had no trouble debunking the nonsense spewed by Trump administration advisers Kevin Hassett and Larry Kudlow. For example, in countering the claim that the U.S. trade deficit has narrowed because Trump is “standing up for America,” the MarketWatch commentary noted:
“Exports of agricultural products like soybeans shot higher because farmers were racing to beat the imposition of Chinese tariffs. They already fell in June. There’s absolutely no evidence the U.S. is now trading on better terms than previously.”
It’s not only your wages that aren’t keeping up
If a better measure of economic well-being is wages, then there has been no improvement. Adjusted for inflation, the U.S. Bureau of Labor Statistics reports that the country’s average weekly wage was $930.81 for June 2018, a grand total of 47 cents better than June 2017. Considering that the rate of inflation was higher than the microscopic increase in wages over the past year, adjusted for inflation U.S. workers actually saw a slight decline over the past year. So happy days really aren’t here after all. It’s not only you.
This is a continuation of a decades-long pattern. Wages have been stagnant since the 1970s despite strong increases in worker productivity — the average U.S. household earns hundreds of dollars less than it would had wages kept pace with productivity. The same is true for Canadian households.
When adjusted for inflation, Statistics Canada reports that real wage growth for Canadian workers increased less than one percent per year from 2005 to 2015. That’s nothing new. “While Canada has undergone important economic, social and technological changes since the 1970s, the minimum wage and the average hourly wage are essentially unchanged,” Statistics Canada reports. Accounting for inflation, the Canadian minimum wage peaked in 1976 and average hourly earnings peaked in 1977. That is despite a consistent increase in Canadians earning degrees. So a “skills mismatch” would not seem to be a reality there, either.
The gap between labor productivity and median real hourly wages growth, 1986-2013 (percentage points per year)
Those trends are not limited to North America. British wages actually contracted between 2007 and 2015 despite a growing economy. Britain’s GDP is almost 10 percent higher now than at the bottom of the 2008 economic crash, yet wages have declined. Wages have not kept up with productivity across Europe, and in some countries haven’t kept up with inflation, meaning workers have seen de facto wage cuts. The most recent study on this topic, studying the balance between wages and productivity in 11 advanced-capitalist countries from 1986 to 2013, found that wages did not keep pace in eight of them, with the widest lag found in the United States. Germany was second.
Unfortunately these reports, although doing a fine job of quantifying how screwed we are, tend to conclude with pleas for better government policies. Surely there should be. But although positive reforms would be welcome, the problem is that reforms can, and are, taken away when mobilizations fade. The hyper-competitive nature of capitalism, under which our labor is a commodity, can’t be altered; at best through massive effort reforms can be achieved until the next wave of attacks commences. As long we continue to fail to question the world economic system, our conditions will only worsen.
You likely did not need to read the above to know that. But there is nothing wrong with confirmation. The paper’s authors, Andrew Sharpe and James Uguccioni, publishing in the International Productivity Monitor, wrote:
“In eight of the 11 [Organisation for Economic Co-operation and Development] countries examined in this article, median real wage growth since the mid-1980s has not kept pace with labour productivity growth. The size of the growth gap between labour productivity and median real wages differs across countries, but the qualitative pattern is consistent: workers are growing more productive, but those productivity gains are not being matched by growth in the typical worker’s wage.”
The 11 countries studied were Canada, the United States, Norway and eight members of the European Union — Denmark, France, Finland, Germany, Ireland, the Netherlands, Spain and the United Kingdom. Working people in the United States will not be surprised to find that the widest gap between pay and productivity growth occurred there, with Germany in second place. Spain, Norway and Ireland were the three exceptions, although in each the gain in wages over productivity is small.
The opening of the 2003 World Social Forum (photo by Feijaocomarroz from pt)
There is no one single factor accounting for these results, the authors write, looking to mainstream economics for explanation. They offer conventional causes for declining wages:
“The causes of labour’s deteriorating bargaining power are hotly debated. One of the most trumpeted causes is globalization. Proponents argue that capital is far more mobile than labour in an increasingly globalized world, which makes the threat of outsourcing and offshoring far more credible. Due to the threat of offshoring from countries with less strict labour regulations and lower labour costs, workers are increasingly forced to accept lower wages. Some argue that labour’s deteriorating bargaining power is less a matter of globalization and more a matter of technological change which is biased against labour. For example, the OECD [in its 2012 employment outlook] argues that the spread of information and communication technologies have led to major innovation and productivity gains over recent decades, but have also had the effect of replacing workers altogether. The result is an increase in capital’s bargaining power, and a decrease in labour’s — particularly for workers in highly repetitive jobs which naturally lend themselves to automation. Structural and institutional reforms may also have contributed to the reduction of labour’s bargaining power.”
Globalization, yes, but what is behind globalization?
Are these causes some natural phenomenon like the tides in the ocean? Or might there be reasons behind these explanations? To this we will return. But, first, it should be noted this report under-reports the extent that wages are falling behind, which the authors readily acknowledge.
This under-estimation is revealed when the differences between average and median real hourly earnings are reported. This matters because an average is the midpoint between highest and lowest, while median represents the earner at the point where half make more and half make less. When those at the top make more and the rest make the same, the average goes up while the median stays the same; thus examining median income as opposed to average gives a more accurate representation.
The gap between labor productivity and median real hourly wages growth, 1986-2013 (percentage points per year)
Of the 11 countries examined, the authors report that median hourly earnings fell further behind average hourly earnings in 10, with France the exception and there the change was minuscule. This finding represents fresh proof of increasing wage inequality. The biggest increasing in this measure of wage inequality is — surprise! — the United States, followed by Britain. OK, United Statesians or Britons reading these lines won’t be surprised.
The paper’s authors report:
“Empirically, earnings distributions within OECD countries are positively skewed; the mean is greater than the median because the mean is dragged upward by very high earners. … This would imply that the gains from labour productivity are flowing disproportionately to workers who were already high earners relative to the median worker.”
Only the wages of the top one per cent grew faster than productivity growth.
“[R]emoving the top one percent from labour income doubled the rate of decline of labour’s share of income in Canada and the United States. In fact, the removal of the top one percent from total labour income hastened the decline in labour’s share of income in all of the OECD countries they studied except Spain.”
There are plenty more studies where that one comes from. The International Labour Organization, in its 2014/2015 Global Wages Report, similarly found that wages are declining:
“In the group of developed economies, real wages were flat in 2012 and 2013, growing by 0.1 per cent and 0.2 per cent, respectively. In some cases — including Greece, Ireland, Italy, Japan, Spain and the United Kingdom—average real wages in 2013 were below their 2007 level. … Between 1999 and 2013, labour productivity growth in developed economies outstripped real wage growth, and labour’s share of national income – also a reflection of the link between wages and productivity – fell in the largest developed economies.”
Less income and fewer protections for labor
David Ruccio, in a brief post for the Real-World Economics Review Blog, reports that the labor share of income in the United States is the lowest it has ever been since the end of World War II. The tendency throughout the period has been for decline, but the decline has been much steeper since 2001 — labor share of income in the U.S. is 15 percent lower than it was in 2001. Skewing those results is that the share of income going to the top one percent has doubled since the mid-1970s. So the income share of working people has actually worsened more than the overall statistic indicates.
Concurrent with the increasingly precarious state of working people are dwindling labor rights. No country on Earth fully safeguards labor rights, the International Trade Union Confederation found in its 2017 Global Rights Index report. On a scale of one to five, with one representing the countries with the best ratings (merely “irregular violations of rights”) and five representing the worst (“no guarantee of rights”), Britain and the United States received rankings of four. Thus inequality being the most pronounced in those two countries, so fond of finger-wagging at the rest of the world, comes as little surprise.
(graphic by David Ruccio, Real-World Economics Review Blog)
And still less so considering the immense pressure financial capital puts on corporate executives to squeeze ever more out of employees, exemplified by Verizon Communications attacking its workforce to the point of forcing its employees to go on strike despite racking up $45 billion in profits over five years and Wall Street judging even merciless Wal-Mart as insufficiently ruthless in extracting billions of dollars in profits out of its employees.
The reasons behind these trends appear to be somewhat of a mystery to the two authors of “Decomposing the Productivity-Wage Nexus.” They disapprove of the decline in wages they document but seem to believe this is due to some unfortunately poor political decisions. They conclude their paper with these thoughts:
“The lack of inclusive growth we observe in many OECD countries has significant societal implications. There may be less political support for productivity-enhancing policies in the future if the benefits of productivity growth are not shared equitably. The incentives for employees to work hard may diminish if they believe that they are not receiving their ‘fair share’ of the firm’s productivity gains. Finally, the current taxes and transfers system may not be well equipped to offset the growing trend of wage inequality among workers if it was designed assuming labour productivity growth will lead to real wage growth for all workers.”
Writing a letter to your representative might not do the trick
Well, it’s all a misunderstanding then? If only we speak up, and point out the unfairness of this, somebody out there will do something about it. One imagines that members of parliaments and congresses are largely aware of growing inequality. But if political policies are doing what the sponsors of those policies expect them to do, just what should we expect those office holders to do? This sort of class warfare rages on because only one class is waging it, and that class has the means to dominate society through a mass of institutions paid to do their bidding, control of the mass media and ability to buy government and the legislative process.
Does anybody believe that Donald Trump, or Theresa May, or Emmanuel Macron, or Malcolm Turnbull, upon receiving a well-written letter explaining the problem, would then slap their heads to their forehead and exclaim, “I never realized this was happening!” Pigs, elephants and polar bears will all fly long before any such epiphanies. We can add leaders of the past, such as Gerhard Schröder, to the list. It was the former Social Democratic leader, when chancellor, who pushed through his “Agenda 2010” legislation to codify austerity on German workers, which, inter alia, cut business taxes while reducing unemployment pay and pensions. German wages have been suppressed since 2001 in relation to inflation or productivity gains — the prosperity of German manufacturers has come at the expense of German workers.
Globalization, pointed to by the two authors of “Decomposing the Productivity-Wage Nexus” as a culprit, doesn’t happen in a vacuum or because some capitalist somewhere woke up in an ornery mood. Globalization is the response of industrialists and financiers to the rigors of capitalist competition.
Once the limits of Keynesianism were reached in the 1970s, and the growth levels of the mid-20th century could no longer be sustained, capitalists ceased tolerating wage increases. Instead, from their perspective, they needed to force through wage cuts to maintain profit margins. Relocating production to places with lower wages and fewer regulations was the answer.
Mergers, with attendant layoffs, are another response to capitalist competition. Once one capitalist succeeds with such an “innovation,” the others must follow on pain of losing their competitive position. The need to move raw materials and finished products across borders, from the capitalists’ point of view, necessitates the lowering of barriers and borders to trade, and thus the increasing harshness of so-called “free trade” agreements that are promoted by multi-national corporations.
Globalization is not some natural process beyond human control, but rather is the result of capitalist competition — of allowing markets to decide ever more outcomes. When one side has so many more resources and weapons at its disposal, it’s no surprise that class warfare is such a one-sided affair. If we want the world to be otherwise, we’ll have to struggle for it. Everything of human creation can be changed by human effort, including the world’s failing economic system.
Just when it seemed we might be running out of superlatives to demonstrate the monstrous inequality of today’s capitalism, Oxfam has provided the most dramatic example yet: Eight individuals, all men, possess as much wealth as the poorest 50 percent of humanity.
Eight people have as much as 3.7 billion people.
How could this be? Oxfam calculated that 85 people had as much wealth as the poorest half of humanity in 2014, a staggering finding that researchers with the anti-poverty organization discovered through crunching numbers provided by Forbes magazine in its rich list and by the investment bank Credit Suisse in its global wealth distribution report. Oxfam found wealth distribution to be even more unequal than did Credit Suisse, which calculated that the top one percent equaled the bottom 50 percent. Oxfam, in its report, “An Economy for the 99%,” released this month, explains:
“This year we find that the wealth of the bottom 50% of the global population was lower than previously estimated, and it takes just eight individuals to equal their total wealth holdings. Every year, Credit Suisse acquires new and better data sources with which to estimate the global wealth distribution: its latest report shows both that there is more debt in the very poorest group and fewer assets in the 30–50% percentiles of the global population. Last year it was estimated that the cumulative share of wealth of the poorest 50% was 0.7%; this year it is 0.2%.” [page 11]
The “wealth pyramid” as calculated by Credit Suisse. Oxfam’s findings are that even this is an under-estimation of inequality.
Because Oxfam includes among the bottom 50 percent people in the advanced capitalist countries of the Global North who have a net worth of less than zero due to debt, some critics might argue that these people are nonetheless “income-rich” because they have credit available to them and thus distort the inequality outcome. Oxfam, however, says that almost three-quarters of those among the bottom 50 percent live in low-income countries, and excluding those from the North with negative wealth would make little difference in aggregate inequality. That total debt is equal to only 0.4 percent of overall global wealth. The Oxfam report says:
“At the very top, this year’s data finds that collectively the richest eight individuals have a net wealth of $426 bn, which is the same as the net wealth of the bottom half of humanity. … [E]stimates from Credit Suisse find that collectively the poorest 50% of people have less than a quarter of 1% of global net wealth. Nine percent of the people in this group have negative wealth, and most of these people live in richer countries where student debt and other credit facilities are available. But even if we discount the debts of people living in Europe and North America, the total wealth of the bottom 50% is still less than 1%.” [page 10]
Profiting from cheap labor and forced labor
We are accustomed to hearing that chief executive officers in U.S.-based corporations earn hundreds of times more than their average employee, but this dynamic can be found in the developing world as well. No matter where the CEO lives, brutal and relenting exploitation of working people is the motor force of inequality. Oxfam reports:
“The CEO of India’s top information firm earns 416 times the salary of a typical employee in his company. In the 1980s, cocoa farmers received 18% of the value of a chocolate bar — today they get just 6%. In extreme cases, forced labour or slavery can be used to keep corporate costs down. The International Labour Organization estimates that 21 million people are forced labourers, generating an estimated $150 bn in profits each year. The world’s largest garment companies have all been linked to cotton-spinning mills in India, which routinely use the forced labour of girls.” [page 3]
People become sweatshop workers out of desperation; often these are men and women driven off the land their families had farmed for generations. Land, even small plots that provide only subsistence for those who work it, represents wealth taken away when those subsistence farmers are forced into migrating into urban slums. Displacement from global warming is also a factor.
“[M]any people experiencing poverty around the world are seeing an erosion of their main source of wealth — namely land, natural resources and homes — as a consequence of insecure land rights, land grabbing, land fragmentation and erosion, climate change, urban eviction and forced displacement. While total farmland has increased globally, small family farms operate a declining share of this land. Ownership of land among the poorest wealth quintile fell by 7.3% between the 1990s and 2000s. Change in land ownership in developing countries is commonly driven by large-scale acquisitions, which see the transfer of land from small-scale farmers to large investors and the conversion of land from subsistence to commercial use. Up to 59% of land deals cover communal lands claimed by indigenous peoples and small communities, which translates to the potential displacement of millions of people. Yet only 14% of deals have involved a proper process to obtain ‘free prior and informed consent.’ Distribution of land is most unequal in Latin America, where 64% of the total wealth is related to non-financial assets like land and housing and 1% of ‘super farms’ in Latin America now control more productive land than the other 99%.” [page 10]
As entire areas of the world like Latin America have been plundered for the benefit of multi-national corporations based in the Global North, with those benefits flowing to the executives and financiers who control those corporations, it is no surprise that most of the wealth remains concentrated in the advanced capitalist countries. Although steering well clear of so much as a hint of the imperial nature of uneven development, the Credit Suisse report that Oxfam drew upon does note that North America and Europe together account for 65% of total household wealth with only 18% of the world’s adult population.
The sociologist James Petras estimates that the corporations and banks of the North took US$950 billion of wealth out of Latin America for the period 1975 to 2005. Thus it is no surprise that global inequality, when measured by the standard statistical measure of income distribution, the gini coefficient, is greater than inequality in any single country.
More programs on the way to make inequality still worse
Few countries of the Global North are more unequal than the United States, the imperial center of the world capitalist system that seeks to impose its ways and culture on the rest of the world. The new Trump administration is determined to make U.S. inequality even more extreme. Not only through intentions of cutting taxes on the wealthy and corporations, but via many less obvious routes.
For example, the Center on Budget and Policy Priorities reports that the repeal of Barack Obama’s Affordable Care Act, a process already in motion, would result in tax cuts of $2.8 billion per year for the country’s 400 highest-income taxpayers. Special Medicare taxes that fund subsidies for low-income United Statesians to buy insurance under the act are assessed only on those with annual incomes higher than $200,000. Conversely, the loss of tax credits to buy health insurance would lead to a tax increase for about seven million low- and moderate-income families.
Through the end of 2016, the central banks of Britain, the European Union, Japan and the United States have shoveled a colossal total of US$8 trillion (€7.4 trillion) into their “quantitative easing” programs — that is, programs that buy government bonds and other debt in an effort to boost the economy but in reality does little other than fuel stock-market bubbles and, secondarily, real estate bubbles. Vast rebuilding of crumbling infrastructure — a program that would actually put people to work — would have cost less.
Standard economic ideology insists that the real problem is that wages have not fallen enough! Consistent with that, the Federal Reserve released a paper in 2015 claiming that “rigidities” “prevent businesses from reducing wages as much as they would like” during economic downturns.
Oh yes, falling wages instead of stagnant wages will bring happy times! Never mind that productivity has soared over the past four decades, while wages have consistently not kept pace. The average Canadian and U.S. household would earn hundreds of dollars per week more if wages had kept up with rising productivity, while wages in Britain and many other countries are also lagging.
What to do? The Oxfam report, in its conclusions, advocates a switch to a “human economy,” one in which governments are “accountable to the 99%,” businesses would be oriented toward policies that “increase prosperity for all,” and sustainability and equality would be paramount.
“Oxfam firmly believes humanity can do better,” its report concludes. Surely we can do better. But not under capitalism. Does anyone believe that the world’s elites, who profit so enormously and believe they can build a wall high enough to keep the world’s environmental and social problems away, are going to suddenly accept business as usual can no longer go on and willingly give up their enormous privileges?