BlogEconomic illusions: Economy improving but wages dropping
Economic illusions: Economy improving but wages dropping
The BLS (Bureau of Labor Statistics) and the Obama administration keep pushing out figures that illustrate the economy is improving, unemployment is dropping and that things are getting better. Getting better based on whose perspective; are these people on drugs.
More men and women are working than ever before, yet families can barely make enough to cover their monthly expenses
The cost of education is rising faster than wages
Rents are rising faster than wages
The cost of medical care is rising faster than wages
The cost of food has risen faster than wages over the past seven years.
We could go on, but we will stop there as we listed the most important factors and based on these factors the only common trend we see is that people are working more, for less money. In other words, they work like dogs and yet can barely pay the bills.
There are many factors at play here that are contributing to lower wages, but the prime driver appears to be corporate gluttony. Corporations are using billions of dollars to repurchase shares instead of investing the money in their companies. This technique artificially boosts the earnings per share metric (EPS) and it is done without any hard work. As rates are very low right now, corporations can borrow money for next to nothing and use these funds to buy back their shares and in the process magically boost earnings. This is done without spending money on new equipment or hiring new workers. It is fast, simple and fraudulent but the government is not prosecuting anyone so this trend will continue. We covered this recently in an article titled “share buybacks just another Wall Street Scam”
Then we have other trends as noted by Peter Cappelli, a professor at Wharton School of Business. He states that many retailers base manager’s bonuses on whether they can keep labour costs below a certain level. If these managers blow the budget ceiling they blow their bonuses away too.
As a result of these actions, the percentage of corporate income going to workers has dropped like a rock and is now at the lowest level since 1951. The Economic Policy Institute has stated that the labour’s share of corporate income has cost workers $535 billion annually; put in another way it has cost $3,770 per worker.
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