productivity

Well I am back from my summer break and what do I find? This depressing news in the New York Times: Real Wages Fail to Match a Rise in Productivity

Wages, as a percentage of the economy, have reached a lowpoint of 45.3% and have given back all the gains of the late 1990’s. Part of the reason is that benefits such as health care costs, which are considered part of total compensation, have risen so quickly that employers have diverted cash that could have been used for wage increases into paying for them. So workers get a “pay raise” even if the cash they take home doesn’t rise. This draining away of cash is just another effect of America’s failed health care system. Runaway inflation in health care costs is strangling the potential for wage increases. This leaves workers with less for other things, and more to the point it means that they fall progressively further behind inflation.

Grim though this is, it is not the whole story: productivity has growen strongly, but the benefit of that improvement has gone almost entirely to stockholders, not to workers. This is unusual. One of the key drivers of wage gains has traditionally been an increase in productivity. Now, it appears, corporate owners are keeping the benefit for themselves and are not passing it along. They are not even sharing it a little. The share of the economy taken up as profits is at its highest for forty years, which is not surprising in a Republican era, but which is still a little eye popping when the rhetoric of the Republicans is considered. After all they are constantly beating the drum for cuts in corporate and dividend taxes so as to encourage investment. Surely a record share of the economic pie is enough of an incentive to invest already? Plus the benefits of this record share of wealth held by profits eventually flows to the Republican contituency: the wealthy who hold the vast majority of the stock of American companies.

It is statistics like these that can be depressing. The plutocracy has regained control of America and the heyday of the middle class is over for now. Look at these numbers in the context of the massive divide in the distribution of income and wealth. The success of the Republican agenda to destroy the middle class is ever more evident.

Remember that the American middle class is a phenomenon of the post war years. The distribution of income that was radically altered and tilted away from the rich by the New Deal, and the prolonged post-war boom when America had no serious economic competition were the two pillars of the expansion of the midddle class. Then came complacency and a post-war generation that did not realize the value of the social programs that underwrote their position. That generation saw social programs as a cost, as a burden, rather than as an insurance. They bought into the apparent, and surface, dynamism of the “market knows best” mantra spewed out by the Republicans. They bought into tax cuts for the rich. They bought into gutting programs for the poor. They really thought they could defy economics 101 that teaches that without government intervention the rich will always dominate and work to exclude the masses. They also forgot that the middle class is part of the masses, a privileged part perhaps, but inexorably a part. When the plutocracy wants to squeeze more wealth for itself it cannot turn to the poor: there is nothing there to squeeze. No. The people to squeeze are the middle class.

Numbers like these wage figures show just how successful the plutrocrats have been.

Like a boiled frog the middle class just keeps on voting for Republican economics unaware that it is killing itself. Maybe that will change. Maybe not.