If you work in the U.S., you don’t know how bad you have it

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.

The U.S. also has one of the highest rates of inequality as measured by the Gini coefficient; among the countries of Europe only Bulgaria has worse inequality. The United States has the widest gap between pay and productivity gains among advanced capitalist countries and U.S. corporations haul in gigantic sums of money, sometimes millions of dollars per employee, but pay their employees minuscule percentages of their haul. Declining lifespans in the U.S. are considered a “silver lining” in corporate boardrooms because pension costs are lower. And thus it comes as no surprise that the Covid-19 pandemic has widened inequality still further, with the world’s industrialists and financiers adding literally trillions of dollars to their accumulated wealth during 2020.

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.

^{(Author: CIPHR Connect)}

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?

Big corporations pay no income tax, unlike you

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.”

This sort of class warfare is not new — wages around the world have fallen far below productivity gains over the past three decades, pay inequality has reached gigantic proportions and corporations have showered speculators with so much money that in some recent years the total of money paid to them in dividends and stock buybacks exceeded net income.

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’s budget 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.

If the economy is so good, why are wages flat?

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.

Hiding the real number of unemployed

Your government believes that exhausting your unemployment benefits is a cause for celebration — because you are no longer unemployed!

Huh? Well, there is a slight of hand here. Only working people who are receiving unemployment benefits are counted as “unemployed” in official statistics issued by countries around the world. Thus the actual unemployment rates are much higher than the “official” rates, generally about twice as high. Most governments make it difficult to find the actual rate, and the corporate media does its part by reporting the official rate as if that includes everybody.

Then there is the matter of how much of a given national population is actually engaged in paid employment, another useful number difficult to discover. Finally, we can consider wages, both how fast they might be rising as compared to inflation and whether they are increasing in concert with increases in productivity.

To cut to the chase, things ain’t so hot. But you already knew that, didn’t you?

The Blue Mountains from the lookout in Blackheath, Australia (photo by Gemm347)

Let’s start our global survey with the United States, where, contrary to expectations, the real unemployment figure is easier to discover than most other places. Perhaps the Trump régime hasn’t gotten around to suppressing it, busy as it is hiding scientific evidence about global warming, pollution and other inconvenient facts. The official U.S. unemployment rate for May was reported as 3.8 percent, the lowest it has been in several years, and less than half of what it was during the post-2008 economic collapse. Predictably, the Trump administration was quick to take credit, although the trend of falling employment has carried on for eight years now.

Nonetheless, you might have noticed that happy days aren’t exactly here again. The real U.S. unemployment figure — all who are counted as unemployed in the “official” rate, plus discouraged workers, the total of those employed part time but not able to secure full-time work and all persons marginally attached to the labor force (those who wish to work but have given up) — is 7.6 percent. (This is the “U-6” rate.) That total, too, is less than half of its 2010 peak and is the lowest in several years. But this still doesn’t mean the number of people actually working is increasing.

Fewer people at work and they are making less

A better indication of how many people have found work is the “civilian labor force participation rate.” By this measure, which includes all people age 16 or older who are not in prison or a mental institution, only 62.7 percent of the potential U.S. workforce was actually in the workforce in May, and that was slightly lower than the previous month. This is just about equal to the lowest this statistic has been since the breakdown of Keynesianism in the 1970s, and down significantly from the peak of 67.3 percent in May 2000. You have to go back to the mid-1970s to find a time when U.S. labor participation was lower. This number was consistently lower in the 1950s and 1960s, but in those days one income was sufficient to support a family. Now everybody works and still can’t make ends meet.

And that brings us to the topic of wages. After reaching a peak of 52 percent in 1969, the percentage of the U.S. gross domestic product going to wages has fallen to 43 percent, according to research by the St. Louis branch of the Federal Reserve. The amount of GDP going to wages during the past five years has been the lowest it has been since 1929, according to a New York Times report. And within the inequality of wages that don’t keep up with inflation or productivity gains, the worse-off are doing worse.

The Economic Policy Institute noted, “From 2000 to 2017, wage growth was strongest for the highest-wage workers, continuing the trend in rising wage inequality over the last four decades.” The strongest wage growth was for those in the top 10 percent of earnings, which skewed the results sufficiently that the median wage increase for 2017 was a paltry 0.2 percent, the EPI reports. Inflation may have been low, but it wasn’t as low as that — the typical U.S. worker thus suffered a de facto wage decrease last year.

What this sobering news tells us is that good-paying jobs are hard to come by. An EPI researcher, Elise Gould, wrote:

“Slow wage growth tells us that employers continue to hold the cards, and don’t have to offer higher wages to attract workers. In other words, workers have very little leverage to bid up their wages. Slow wage growth is evidence that employers and workers both know there are still workers waiting in the wings ready to take a job, even if they aren’t actively looking for one.”

The true unemployment rates in Canada and Europe

We find similar patterns elsewhere. In Canada, the official unemployment rate held at 5.8 percent in April, the lowest it has been since 1976, although there was a slight decrease in the number of people working in March, mainly due to job losses in wholesale and retail trade and construction. What is the actual unemployment rate? According to Statistics Canada’s R8 figure, it is 8.6 percent. The R8 counts counts people in part-time work, including those wanting full-time work, as “full-time equivalents,” thus underestimating the number of under-employed.

At the end of 2012, the R8 figure was 9.4 percent, but an analysis published by The Globe and Mail analyzing unemployment estimated the true unemployment rate for that year to be 14.2 percent. If the current statistical miscalculation is proportionate, then the true Canadian unemployment rate currently must be north of 13 percent. “[T]he narrow scope of the Canadian measure significantly understates labour underutilization,” the Globe and Mail analysis concludes.

Similar to its southern neighbor, Canada’s labor force participation rate has steadily declined, falling to 65.4 percent in April 2018 from a high of 67.7 percent in 2003.

Mount Meager volcanic complex, British Columbia (photo by Dave Steers)

The most recent official unemployment figure in Britain is 4.2 percent. The true figure is rather higher. How much higher is difficult to determine, but a September 2012 report by Sheffield Hallam University found that the total number of unemployed in Britain was more than 3.4 million in April of that year although the Labour Force Survey, from which official unemployment statistics are derived, reported only 2.5 million. So if we assume a similar ratio, then the true rate of unemployment across the United Kingdom is about 5.7 percent.

The European Union reported an official unemployment rate of 7.1 percent (with Greece having the highest total at 20.8 percent). The EU’s Eurostat service doesn’t provide an equivalent of a U.S. U-6 or a Canadian R8, but does separately provide totals for under-employed part-time workers and “potential additional labour force”; adding these two would effectively double the true EU rate of unemployed and so the actual figure must be about 14 percent.

Australia’s official seasonally adjusted unemployment rate is 5.6 percent, according to the country’s Bureau of Statistics. The statistic that would provide a more realistic measure, the “extended labour force under-utilisation” figure, seems to be well hidden. The most recent figure that could be found was for February 2017, when the rate was given as 15.4 percent. As the “official” unemployment rate at the time was 5.8 percent, it is reasonable to conclude that the real Australian unemployment rate is currently above 15 percent.

Mirroring the pattern in North America, global employment is on the decline. The International Labour Organization estimated the world labor force participation rate as 61.9 percent for 2017, a steadily decline from the 65.7 percent estimated for 1990.

Stagnant wages despite productivity growth around the world

Concomitant with the high numbers of people worldwide who don’t have proper employment is the stagnation of wages. Across North America and Europe, productivity is rising much faster than wages. A 2017 study found that across those regions median real wage growth since the mid-1980s has not kept pace with labor productivity growth.

Not surprisingly, the United States had the largest gap between wages and productivity. Germany was second in this category, perhaps not surprising, either, because German workers have suffered a long period of wage cuts (adjusted for inflation) since the Social Democratic Party codified austerity by instituting Gerhard Schröder’s “Agenda 2010” legislation. Despite this disparity, the U.S. Federal Reserve issued a report in 2015 declaring the problem of economic weakness is due to wages not falling enough. Yes, the Fed believes your wages are too high.

The lag of wages as compared to rising productivity is an ongoing global phenomenon. A separate statistical analysis from earlier this decade also demonstrated this pattern for working people in Canada, the United States, Britain, France, Germany, Italy and Japan. Workers in both Canada and the United States take home hundreds of dollars less per week than they would if wages had kept up with productivity gains.

In an era of runaway corporate globalization, there is ever more precarity. On a global scale, having regular employment is actually unusual. Using International Labour Organization figures as a starting point, John Bellamy Foster and Robert McChesney calculate that the “global reserve army of labor” — workers who are underemployed, unemployed or “vulnerably employed” (including informal workers) — totals 2.4 billion. In contrast, the world’s wage workers total 1.4 billion. Writing in their book The Endless Crisis: How Monopoly-Finance Capital Produces Stagnation and Upheaval from the USA to China, they write:

“It is the existence of a reserve army that in its maximum extent is more than 70 percent larger than the active labor army that serves to restrain wages globally, and particularly in poorer countries. Indeed, most of this reserve army is located in the underdeveloped countries of the world, though its growth can be seen today in the rich countries as well.” [page 145]

Having conquered virtually every corner of the globe and with nowhere left to expand into nor new markets to take, capitalists will continue to cut costs — in the first place, wages and benefits — in their ceaseless scrambles to sustain their accustomed profits. There is no reform that can permanently alter this relentless internal logic of capitalism. Although she was premature, Rosa Luxemburg’s forecast of socialism or barbarism draws nearer.

You are working harder and getting paid less

The bad news: Your wages are declining. The worse news: Surveys documenting falling wage actually under-estimate how much your wages are declining.

A recent entrant to this labor literature, a research paper titled “Decomposing the Productivity-Wage Nexus in Selected OECD Countries, 1986-2013,” studied 11 advanced-capitalist countries and found that in eight of them median wages have not kept pace with growth in labor productivity. To put the preceding sentence in clear language: You are producing more and getting paid less.

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.

Austerity never ends: Economists say wages are too high

No, you can’t really make this stuff up: Orthodox economists continue to tell us that the reason for ongoing economic stagnation is that wages and unemployment benefits are too high. Yes, that’s right. You haven’t suffered enough.

Given that orthodox economics (or “neoclassical” or Chicago School, if you prefer alternate labels) exists as a propaganda tool to justify all manner of capitalist excesses and inequality, it’s not actually surprising that such snake oil continues to be peddled with a straight face. Never mind the years of stagnant wages, the decades of wages trailing productivity ever further, housing costs rising far more sharply than inflation, and the increased use of debt just to stay afloat.

(Photo by Gargolla)

If you would just work for less, all would be well. The basic reason for that belief is an admission that, in a capitalist economy, wages are a commodity. (That really means human beings are commodities, but we can only expect so much truth here.) This underlying belief is succinctly summarized by this commentary offered by the conservative Library of Economics and Liberty:

“Unemployment is just a labor surplus; since wages are the price of labor, the fundamental cause of unemployment has to be excessive wages.”

But capitalism is supposed to be a perfect system, always moving toward equilibrium, according to capitalist dogma. So there should be no unemployment. There obviously is, so what’s the culprit? You’ve likely already guessed — it’s the government’s fault. The self-proclaimed capitalist tool, Forbes magazine, claims that wages aren’t increasing because “pent-up wage cuts didn’t happen” following the 2008 global economic meltdown and so poor downtrodden corporations have no choice but to keep wages from rising to make up for those cuts that should have been imposed. If only government policies wouldn’t interfere with the magic of the market, all would be well, Forbes asserts:

“To summarize, government regulation and policy are very much linked to the enduring presence of wage stickiness and slow wage growth since the Great Recession.”

There’s ideology, and then there’s the real world

You can even win a Nobel Prize for these beliefs. The Nobel Prize for economics isn’t actually a Nobel Prize (officially, it is an add-on called the “The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel”), but, still, it’s widely considered one and it’s the highest honor an economist can receive. It almost invariably goes to a conservative economist who upholds orthodox ideology. One recent recipient is Thomas Sargent. Although he formally received his prize for other work, Dr. Sargent is known for writings in which he argues that unemployment benefits are too generous, and if such benefits were reduced, there would be “incentive” for people to go back to work.

Here in the real world, there are many more candidates than jobs that pay a living wage, and unemployment benefits are insufficient to live on. Depending on the state, unemployment benefits amount to 30 to 50 percent of lost wages in the United States — hardly enough to live comfortably on, and it’s cut off after 26 weeks. British benefits are capped at £73.10, and it can be less if you have savings you have yet to tap. Nobody is living large on that amount.

Continental European unemployment coverage is better, and, interestingly, some of the countries with the highest levels of benefits, such as Denmark, Norway and Finland, have among the lowest unemployment rates, although those benefits have eroded in recent years. Nonetheless, social safety nets in general lead to unemployment, Dr. Sargent believes. In an interview with Swedish Television, he said workers ought to be prepared for having low unemployment compensation in order to get the right incentives to search for jobs.

“Sargent, with Swedish economist Lars Ljungqvist, found that high, long-lasting unemployment benefits in Europe have caused many European workers who lost their jobs to stay unemployed for years and, thereby, erode their human capital. This makes them less employable in the long run. The fact that the U.S. government extended unemployment benefits in many U.S. states to 99 weeks, said Sargent in the 2010 interview … ‘fills me with dread.’ ”

Those extended terms of unemployment have since been rescinded, so he can hopefully now sleep at night. Related to supposedly overly generous social safety nets, is the idea that working people stubbornly refuse to accept wage cuts. This is not entirely true, as the effects of the North American Free Trade Agreement demonstrate. NAFTA has caused a persistent decline in wages for displaced workers and manufacturers routinely threaten to shut down and/or move their facilities in response to unionization drives since NAFTA came into force. But, remember, we’re dealing with ideology here, not practical reality. Two years ago, the San Francisco branch of the Federal Reserve issued a report that blamed ongoing economic weakness on wages not falling enough. The paper claimed:

“One explanation for this pattern is the hesitancy of employers to reduce wages and the reluctance of workers to accept wage cuts, even during recessions, a behavior known as downward nominal wage rigidity.”

Cutting wages won’t be a panacea

Falling wages might provide a short-term boost to corporate profits, but the reduced purchasing power of working people would soon cause people to buy less. That is disastrous in advanced capitalist countries, where consumer spending generally accounts for anywhere from 60 to 70 percent of gross domestic product.

Lars Syll, a heterodox economist and self-described critic of market fundamentalism writing on the Real-World Economics Review Blog, put this plainly:

“The aggregate effects of wage cuts would, as shown by Keynes, be catastrophical. They would start a cumulative spiral of lower prices that would make the real debts of individuals and firms increase since the nominal debts wouldn’t be affected by the general price and wage decrease. In an economy that more and more has come to rest on increased debt and borrowing this would be the entrance-gate to a debt deflation crises with decreasing investments and higher unemployment. In short, it would make depression knock on the door.”

A food line in Toronto in 1931; falling wages didn’t work out during the Great Depression.

Falling wages were a reality during the Great Depression, but that didn’t help matters. By 1933 in the United States, manufacturing wages fell 34 percent and unemployment rose to about 25 percent. The Canadian economy contracted by more than 40 percent and unemployment reached 30 percent in 1933. Collapses in wages did not bring better times; only the massive government spending to wage World War II put an end to the Depression.

Moreover, already existing low wages come at a high cost. A 2015 study by the researchers at the University of California Berkeley Center for Labor Research and Education found that public benefits given to people who have jobs but can’t live on their meager wages cost the public more than $150 billion annually in the United States — more than half of total public-assistance spending by federal and state governments. Wal-Mart alone costs taxpayers an estimated $6 billion per year subsidizing the retailer’s low pay and paltry benefits at the same time it pays out similar amounts in dividends, half of which go to the Walton family.

Working harder for less

As all of you doing the jobs of two or three people at your place of employment have undoubtedly noticed, more work is not being rewarded with more pay. The average U.S. household earns about $18,000 less than it would had wages kept pace with productivity gains, and the average Canadian household is short at least $10,000 per year because of pay lagging productivity gains. Workers across Europe, including in Britain, Germany and Spain, have also seen pay lag productivity.

The upward flow of money not only causes more inequality but further concentrates power in the hands of plutocrats. As David Ruccio summarized in a separate Real-World Economics Review Blog post:

“If you put the two trends together—increased individual income inequality and increased corporate savings—what we’re witnessing then is increasing private control over the social surplus. Wealthy individuals and large corporations are able to capture and decide on their own what to do with the surplus, with all the social ramifications associated with their decisions to invest where and when they want—or not to invest, and thus to accumulate cash, repay debt, and repurchase their own equity shares.

And proposals to decrease tax rates for wealthy individuals and corporations will only increase that private control.”

And that is the context to keep in mind when one reads fairy tales such as this from the far right Mises Institute:

“Ending poverty and giving people additional income are praiseworthy goals, but there are no free lunches in this world. And trying to force prosperity through a minimum wage simply creates a whole host of negative and unintended consequences especially for those who are the most vulnerable.”

The value of the minimum wage in the U.S. is about two-thirds of what it was when it reached its inflation-adjusted peak in 1968. The Canadian minimum wage is worth about a dollar less than its peak in 1976. Australia’s minimum wage is well below what it was worth in 1985.

Even in these bare bottom-line terms, a higher minimum wage is hardly a “free lunch.” It is still less so when we realize that jobs don’t come from the great benevolence of bosses nor are profits conjured out of thin air by the genius of capitalists. Employers generate profits by paying employees much less than the value of what they produce. Increased exploitation through work speedups, increased workloads and benefits reductions mean that capitalists are taking a bigger share of the value of what you produce.

And here we come to the real meaning of “freedom” that capitalists and their publicists so love to extol. “Freedom” for industrialists and financiers is freedom to rule over, control and exploit others; “justice” is the unfettered ability to enjoy this freedom, a justice reflected in legal structures. Working people are “free” to compete in a race to the bottom set up by capitalists. The world’s central banks have printed and spent $8 trillion (€7.4 trillion) to buy bonds, mostly those issued by their own governments. Imagine what that spending could have done if that money had been given to people or used for productive social spending instead of a free lunch for financial speculators.

Eight people own as much as half the world

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?