Good points brought up here. Thanks.
Just a hunch, but I'm guessing the decline in wages as a share of GDP is
closely correlated with the decline in labor union participation and
effectiveness over the same time period, beginning with the union-busting Reagan
administration. Does anyone doubt that is why Republicans have been so intent
on emasculating unions?Thanks for the letter, Roland.
One minor correction, my letter said that labor share of GDP has dropped into
the mid 50% range, which is not quite the same as the 50% range as was
Thank you for your informative letter Roland.However, I doubt this
is the result of a conspiracy (which would mean a global scale). Rather, it is
simply business chasing low wage production anywhere around the world they can
find it, and the laws on our books that make doing so even more beneficial.Adam Smith did warn against employer collusion, but he also said laws
pertaining to business should generally favor the workers. We were
an Adam Smith nation early on and for much of the past century, but over the
last 40 years or so we have become an Ayn Rand nation.
I agree with everything but the final line, "on a global scale."Not true. Here are many countries who still fight for their middle-class
and aren't just handing everything over to the 1 percent.Australia, Canada, and many European countries still maintain policies that
protect their working classes. It's just unfortunate that the United States
has sold it's working class out. The long term effects are devastating.
Is the decline in wages the fault of the employer or is it the fault of
government? Those who advocate "sharing" the wealth must surely know
that when taxes increase, businesses fail for lack of capital. There are many
millionaires who have little or no cash.I have a customer whose
business is valued at more than $4 million - on paper. The actual value, if he
were to sell off equipment and the building would be somewhere near $100,000.
That would be his "reward" for providing jobs to hundreds of people for
over forty years.Every business owner that I know sacrificed to
scrape together money to start a business. Everyone of them borrowed against
their own home to pay employees during lean times. Not one of them has a
retirement account outside of Social Security even though they all paid in
millions to Social Security as their portion of their employees Social Security
"donation".Too many people, who have been paid a wage, think
that they are also entitled to profit sharing. Would they share the
"losses" with their employers?
Thanks Roland, for providing imperial evidence of the facts rather than just
stating your opinion. And Curmudgeon makes an excellent point about the decline
in union membership. It also interesting to note the date of 1980 as the
beginning of the decline. Think about the events in our country during that
As usual, Roland is right. The consequence of this shift isn't just that
more Americans are struggling to make ends meet, but that the consumer classes
don't have enough disposable income to buy all the products that the big
corporations need to sell to stay in business and provide jobs for American
workers. It's a vicious circle that does not have an up-side. So, despite
denial on the Right, the supply-side ethic we've been following since
Reagan is not just hammering the middle and lower classes; it is creating
economic conditions in which the upper class will also soon start a rather rapid
decline.The answer is not redistribution through progressive
taxation, though that is important. The answer is to give workers a share of
ownership, so that they share directly in the wealth they create.
@Mike Richards"Is the decline in wages the fault of the employer or is
it the fault of government? Those who advocate "sharing" the wealth must
surely know that when taxes increase, businesses fail for lack of capital. There
are many millionaires who have little or no cash."If wealth
inequality isn't changing or changing only a little you could say
gov't. However it's increasing rapidly.
"...when taxes increase, businesses fail...".During FDR
taxes were as high as 90%.Reagan dropped the rate to 28%.Taxes have dropped from 90% to 28%.The only thing disappearing as
a result of Reagan supply side economics is the middle class.
How about the income disparity between private sector and public employees? What
about the cities (and soon to be States) that are bankrupt because of public
employee pensions e.g. Detroit, Mi and Stockton, CA? I noticed Mr Kayser
didn't mention standards of living now compared to the 1980's or
earlier. Like how even our poorest families have smartphones, cars, microwaves,
cable television etc etc. But if income inequality is something you lose
sleep worrying about then you can always buy stock in a public corporation e.g.
Walmart, Zions Bank, Ford, McDonalds etc. Then you can go to shareholder
meetings and voice your concerns. It is a free country (allegedly).
Adam Smith?What does he know about free markets anyway?
@Mike Richards. I agree with you to a certain point. My friend works
for a trucking company. He makes $75k a year. The owner of the company makes
$75k a year. During the height of the recession they needed to hire a
receptionist and could of easily found one for $8 an hour. His boss told my
friend to pay them $16 an hour. The owner provides matching 401k and
healthcare. He just installed a gym at the shop and put 25k worth of workout
equipment in it. He bought season tickets to the Jazz and lets the employees use
them. I could go on but the point is, this trucking company is a
small business. It is growing and thriving and I think it is because the owner
values his employees. He could easily cut everybody's pay and make more
money for himself.If more company's valued their employees
there wouldn't be any talk about redistribution or the %1. If more
company's valued their employees this economy would be thriving.
Well, let's see... the decline in wages started about the time illegal
immigration got in full swing... about the time that Reagan gave amnesty to
millions of illegals in 1986. My guess would be that US wage decline as a
percentage of GDP has its origins in cheap labor (legal and otherwise) coming
into this country.And why was illegals allowed to pour in? Lack of
government enforcement of immigration laws. And that would include
Administrations from Reagan to the present, Barack Hussein Obama and his
right-hand law enforcement guy, Eric Holder.I think the author of
the article is blaming the wrong cause.
Very good article. It should also be noted that the tax revenue rate has not
changed in that same period of time, suggesting that the lost margin for labor
must be an increase in the profits of companies and corporations. Nevertheless
you have people like Bob Bennett who opine that you need more wealth or profits
before one we consider minimum wage or any higher taxes on the wealthy. We need
republicans to look more objectively at our history and at the facts in order to
solve the sagging middle class problem.
@ wrzIf repubs are so anti-illegal immigration then why don't
they propose throwing employers who employ illegally and thumb their noses at
our laws, into prison? Why do they only propose deporting illegals (which is
impossible anyway. But it gives the "impression" that they're tough
on immigration. More smoke and mirrors).If we deport all the
illegals today then they'll be back tomorrow. But if we "deport"
all the illegal employees to prison today then illegal immigration will be a
thing of the past tomorrow.wrz, if you really care about illegal
immigration then why not tackle it at it's origin, employers who have
bought off repubs and love cheap labor?
Re: Mike Richards "Every business owner that I know sacrificed to scrape
together money to start a business." Very true, but it is still true that
the percentage of GDP going to capital is increasing, and the percentage going
to labor is decreasing. This, alas, fits Marx's model quite nicely. If
capitalism can't fix this, it is done for.
Mike Richards,There are plenty of businesses (even small ones) where
the sacrifice and scraping was done a generation or two ago. Those running it
now never sacrificed a thing. So that argument is only partly true.Every business is worth more as an operating entity than in a fire sale of
assets. Even selling the whole business, the market value has little to do with
the book value.True that employees do not fully share the losses.
But they are definitely at risk when a business loses money. I know many who
lost jobs at the tail end of a career and could never find appropriate
employment (age discrimination). They certainly bore some risk for their
The Real Maverick:"If repubs are so anti-illegal immigration then why
don't they propose throwing employers who employ illegally and thumb their
noses at our laws, into prison?"That's Eric Holder's
job... and Reno's, Ashcroft's, Gonzales's, etc., etc.Besides, Repubs and Demos alike are scared spit-less that they'll lose
substantial Hispanic votes should the do anything untoward the illegals."Why do they only propose deporting illegals (which is impossible
anyway. But it gives the 'impression' that they're tough on
immigration. More smoke and mirrors)."Well, Romney proposed that
illegals deport themselves through enforcement of E-Verify... and look what it
got him."If we deport all the illegals today then they'll
be back tomorrow."I guess we should let 'em stay but
don't give 'em any benefits, like SS or any kind of welfare. And for
sure don't let them vote... enforce voter ID."wrz, if you
really care about illegal immigration then why not tackle it at it's
origin, employers who have bought off repubs and love cheap labor?"Repubs love cheap labor and Demos love the Hispanic vote.
Mike Richards -- Government doesn't need to be involved.That's WHY we had Unions back then.FYI -- When
Unions [by the people] are busted, Government [by the people] is the
course of last resort.
Facts are facts but how you interpt them is an opinion. Business is returning
less to their workers and paying less in taxes than ever before. Corporations are the new kings. More often than not, you hear politicans on
the stump for business vs. labor or citizens.
What Roland is saying may be right, but what is the cause? Could it be that
part of the problem is due to the government regulations are pushing higher
paying manufacturing jobs out of the US? How do we know that the problem
isn't due to government printing money and salaries have not been able to
keep up with inflation?The problem with Roland's assesment is
that he might as well be blaming the lower buying power on Man made Global
Warming. That is about as viable explaination as anything he has said.
RedShirt,Record corporate profits, CEO pay now 400 times more than
average worker, top 1% seeing increase in wealth while the % of the GDP is going
down for everyone else. Gee golly Redshirt your right it could be global
What we are dealing with here is the national income component of GDPNational Income = Wages + Rental Income + Interest Income + Business
Profit.As an example, if National Income is constant, and wages to
labor go down, that means that one or more of the other components have gone up,
and that component is Business Profit.This is a direct result of
Reaganomics, where huge business profits are supposed to trickle down as wages
and enrich everybody, but obviously that does not happen, since wages have gone
down as a percentage of GDP since the 1980’s.And what was the
decade of the Reagan administration? The 1980's.Reaganomics
OBVIOUSLY does NOT work.It’s time to raise taxes for the
highest earners back to Pre-Reagan levels.Let's do what works
for a change.BTW, for those of you who think government should
"stay out of it," think again.Believe it or not, the
responsibility of government is to govern responsibly. We just have to make sure
we have the right kind of government, and not one dominated by unthinking
ideologues, like the government that decreed the Middle Class should get
trickled on by the rich.
To "Fred44" it is as just as credible as anything Roland said. Why not,
we blame everything else on Global Warming, so why not blame the difference in
pay on global warming.What does it matter how much CEOs are getting
paid? Did you know that in the 1950's an NBA player earned only $6000/yr
and often had to hold down a second job to make ends meet. Why has their salary
inflated 91,666% in a little over 60 years. That is a lot faster than the rate
of inflation, and they are doing the same thing now that they were doing in the
1950s.Explain why a basketball player in the NBA was only worth
$6000/yr in the 1950's and is now worth $5.5 million? The ball is still
bounced and put into a hoop.FYI, that idea of CEOs being paid 400
times the average worker is only true if you look at 350 compaines on the
S&P 500, not if you look at all CEOs of all businesses. The average CEO
salary is $71,000/yr, with a total compensation package of $370,000/yr, less
than 8 times the average worker.
RedShirtCalTech"Could it be that part of the problem is due to the
government regulations are pushing higher paying manufacturing jobs out of the
US?"Yes, that's one aspect of the problem. The other
aspect is the vast number of immigrants (illegal and otherwise) that have
ballooned our workforce resulting in stagnant wages and vast unemployment
numbers in the American wok force. Both of these situations (exportation of jobs
and importation of cheap labor) has the net effect of pushing wages down.And yet another aspect is advances in technology which does a number on
the availability of jobs.GaryO:This is a direct result of
Reaganomics, where huge business profits are supposed to trickle down as wages
and enrich everybody..."Wages won't trickle down if
there's a glut of workers. What CEO will raise wages if he has hundreds of
applicants for a couple of jobs in the business?
wrz -"Wages won't trickle down if there's a glut of
workers. What CEO will raise wages if he has hundreds of applicants for a couple
of jobs in the business?"EXACTLY.As I said,
Reaganomics DOES not work now, and it has NEVER worked in the over thirty years
it has been in effect.Labor's steadily diminishing share of
the GDP since Reagan drastically lowered taxes for high earners is direct
evidence of that.
RedShirt,If you want me to say basketball players deserve what they
are currently getting paid, you are talking to the wrong guy. What does it
matter what the CEO gets paid? It is a symptom of the wealth redistribution
that has taken place since the 1980's. Why do those on the right continue
to defend the 1% destroying the economy by sending jobs to third world countries
and pulling money out of the American economy and sitting it on the sideline.
The facts are in the 1980's Corporations were given by the
government all kinds of economic advantages with the belief that most of the
extra money they made would flow downward. Was it a foolhearty idea to think
that the wealthy would reinvest in America, obviously. It's now time for a
change in government philosophy. If you invest in America your taxes stay low.
If you invest in communist China you get taxed heavily. You still have a
choice. Simple solution.
GaryO:"As I said, Reaganomics [trickle-down] DOES not work now, and it
has NEVER worked in the over thirty years it has been in effect."There's no such thing as trickle-up. It's either trickle-down or
trickle-less."Labor's steadily diminishing share of the GDP
since Reagan drastically lowered taxes for high earners is direct evidence of
that."If you could include unemployed 'wages' paid to
unemployed Americans in the computation perhaps the results would be more
impressive.Fred44:"Why do those on the right continue to
defend the 1% destroying the economy by sending jobs to third world
countries...?"You mean like a certain newspaper (who shall
remain nameless) who exported jobs re home-delivery issues? "The
facts are in the 1980's Corporations were given by the government all kinds
of economic advantages with the belief that most of the extra money they made
would flow downward."The money did flow downward... to the
stockholders. If you'd like to get some of the action, become a
RedShirtCalTechPasedena, CAYou NBA basketball millionaire
analogy is just plain wrong.People pay to see the NBA basketball player
play basketball.If what you say is true, a more realistic
analogy would be...The NBA Basketball Player is paid minimum wage,
and the NBA Basketball Team OWNER gets all the proftis.But
that isn't what's happening.The Team owners are rich, AND
the players are rich as well. WHY?Because, guess
what -- The NBA players are UNIONIZED.That's why!
To "Fred44" but paying a player $5.5 million vs $6,000 is the same as
CEO pay. The studies that show the great disparities in pay between the CEO and
the average worker only look at a subset of corporations that are very large.
Lets use some logic. If the average CEO compensation package (salary,
healthcare, bonuses, equity, and stock) total $370,000, that means that the
majority of CEOs make much less than the $1 million. Now, for the ones that
make over a $1 million, aren't they similar to the NBA players in that
there are few with the skills and knowledge to competently lead large
corporations with tens of thousands of employees?The system you are
advocating has failed every time it has been tried. Look at Russia, China,
Cuba, North Korea, Bolivia, and Venezuela. Socialism failed them every time.
They have had to adopt capitalism to grow economically.To "LDS
Liberal" and corporations hire CEOs to direct the company so that it at
least stays in business, and hopefully will prove to be profitable. Plus how
can the Union be responsible for for salaries are negociated by each
Redshirt,I did not realize I was advocating socialism? Did I say
that somewhere? I do not advocate trickle down economics that has proven to be
a failure. I have never advocated socialism. I do advocate government
involvement in the economy as a protection for individuals, corporations and the
country. Economic policy should be set to help all not just the wealthy.Oh and your basketball example really doesn't wash because you
include all CEO's not just those of the big companies, but you only include
NBA basketball players (equivalent to CEO's of the top companies) not
players who play in the D-League and other minor leagues. If you want to make a
comparison lets compare NBA player salaries to owner salary for running a team.
Often times the player (laborer) makes more than the owner.
Right from the Deseret News,under the Money Tab: "Last year was the fourth
straight that CEO compensation rose following a decline during the Great
Recession. The median CEO pay package climbed more than 50 percent over that
stretch. A chief executive now makes about 257 times the average worker's
salary, up sharply from 181 times in 2009." The Median Pay for a CEO
crossed 10 million dollars a year. The CEO pay climbed from 101
times to 257 times the amount the average worker makes in the last five years.
It is no wonder everything has to be outsourced to third world countries. That
kind of growth in CEO pay is unsustainable even at minimum wage salaries. We
need to be paying worker less than a dollar an hour to keep this gravy train
To "Fred44" the statistics showing the huge disparities between the
average worker and the CEOs that you quote and find most places do not look at
all CEOs. They typically look at a small group of the S&P500 companies or
just look at the top paid CEOs.According to the BLS, the average CEO
salary is $178,400/yr. Their total compensation with bonuses is on average
aroun $370,000/yr. The average US salary is about $50,000. That means the
average CEO is only making 7.4 times the average worker. The disparity
isn't so much when you look at the average and not the super stars.But I am confused. You say that you have never advocated for socialism,
but then you say that you want government involved in the economy. When
government is involved in the economy, that is socialism. It is the more mild
form of socialism that is more commonly referred to as Fascism (government
controling privately held businesses).
Hey Wrz -“There's no such thing as trickle-up. It's
either trickle-down or trickle-less.”Wrong .Reagan’s supply side economics (aka voodoo economics, aka trickle down
economics) was supposed to jump start the economy by lowering taxes for the
rich, thereby allowing them to invest in businesses and employ the masses. It
failed miserably.After it took effect, the economy slowed down for
a solid year. But then directly because of the plummeting price of world oil
(which fell to 1/3 the price it had been during the Carter administration) the
economy rebounded. Reagan took the credit, and the simple-minded news media
declared Reaganomics successful, although it clearly was and is NOT.Where supply side economics reduced taxes for the highest earners, demand
side economics would have dropped taxes for everybody except the rich. This
works because the middle class spend the money and it goes back into the
economy, while the rich tend to hoard.This is what Clinton did. You
do remember that pre-GW robust economy and four consecutive budget surpluses,
don’t you? GW went back to Reaganomics, which clearly does NOT work.
To "GaryO" actually the Reagan economic policies were very successful.
His policies worked during his term, and kept things going for an additional 12
years beyond his term as president. The funny thing is that Reagans policies
were very similar to JFK's policies.Read "Do tax cuts help
only the rich? No, tax cuts help the economy" in the DN."A
Brief Review of the Success of Tax Cuts" By John R. Hendrickson"John F. Kennedy on taxes" on WND.Those articles are
written by Economists who also know something about history.Apparently when you get into the history with experts, the idea of supply side
Redshirt –“To "GaryO" actually the Reagan
economic policies were very successful.”WRONG.Cheap energy was successful in stimulating the economy during Reagan’s
time in office, not Reagan’s policies.Reagan’s policies
are STILL in effect. Reaganomics has ruled the country throughout GW’s and
Obama’s time in office. Where are the JOBS?
To "GaryO" that is your opinion. Where is your evidence? I have
supplied multiple articles written by Economics experts explaining how
Reagan's policies worked and got the economy going. Give us the some
verifiable sources that support your claims.The policies that Reagan
put into effect have been nullified over the past 26 years. Regulations have
been added, taxes levied, loopholes widened.The jobs are not around
because of Progressive/Liberal policies that punish businesses and discourages
investment in businesses. We are repeating FDR's policies that kept the US
in a depression for 7 years longer than anywhere else. Until government backs
off, you won't see much job growth.