Home » Economy » 1% Plus $15: The Math of Poetic Justice

1% Plus $15: The Math of Poetic Justice

by John Rubino on January 23, 2014 · 17 comments

Way back when, as a staff writer for a state business magazine, I used to do an annual feature on the state’s highest-paid executives. In compiling that list, I noticed that CEOs had come up with a very sweet scam: Their boards’ executive compensation committees would hire a consultant to figure out how to set CEO pay. The consultant would survey other similar companies and calculate an average. And then the compensation committee would tack on an extra 10% to account for the fact that their CEO was extraordinary.

This bump would raise the overall average, allowing the next CEO in line to make even more, and so on, until the gap between pay at the top and pay on the factory floor became a chasm. Meanwhile, a lot of the “performance” these companies were celebrating was the result of laying off local workers and moving factories overseas. I remember thinking at the time that once a left-wing version of Rush Limbaugh came along he or she would have a field day with these corporate mediocrities making tens of millions of dollars while their workers languished.

That didn’t happen, and the CEO pay scam was augmented in recent years by the modern monetary system’s practice of giving newly created currency directly to big banks, which give it to their richest clients to use before the added supply makes everyone else’s savings less valuable. So the gap between rich and poor has continued to widen to the point that:

The world’s 85 richest people have the same wealth as the 3.5 billion poorest

And the most outrageous wealth concentration is taking place right here in the US:

Wealth disparity 2014

But as the super-rich use their control of the banking/government nexus to vacuum up ever-greater amounts of other people’s money, they seem to be overlooking the fact that for a market-based democracy to function, the rest of us have to have a stake in the game. Take away the possibility of moving up to the next rung on the ladder and workers lose interest in voting for the system’s continuance. Instead, they start using the machinery of government to take resources away from the corporate/political class that no longer seems to care about them. In much of the world this happens via riots, revolutions and other physical manifestations of mass rage. In the US, you get the $15 minimum wage:

Minimum wage fight erupts: Landmark $15/hr. wage sparks legal showdown

Following a county judge’s ruling dramatically narrowing the scope of an airport town’s landmark $15 wage law, labor groups plan to take their case to the Washington state Supreme Court.

“The legal issue in front of the court will be whether the airport is a legal island immune from decisions from the voters – in this case Seatac – to bring back good jobs to our community,” Service Employees International Union Local 6 president Sergio Salinas told reporters at a New Year’s Eve press conference. “The larger issue is about multinational corporations making huge profits at our publicly owned entities and airports, when thousands of people doing the hard work these days don’t make enough to feed their families.” Salinas cited the profits of plaintiff Alaska Airlines; in October, Alaska Air Group CEO Brad Tilden celebrated “our best quarter ever” and “Alaska’s 18th consecutive quarterly profit,” according to the local News Tribune. Alaska Airlines did not immediately respond to a morning inquiry.

Massive Black Friday strike and arrests planned, as workers defy Wal-Mart

Defying the nation’s top employer and a business model that defines the new U.S. economy, Wal-Mart employees and allies will try to oust shopping headlines with strike stories, and throw a retail giant off its heels on what should be its happiest day of the year. By day’s end, organizers expect 1,500 total protests in cities ranging from Los Angeles, Calif., to Wasilla, Alaska, including arrests in nine cities: Seacaucus, New Jersey; Alexandria, Virginia; Dallas; Minneapolis; Chicago; Seattle; and Ontario, San Leandro, and Sacramento, California.

“Like my mom always said, ‘You see something that’s not right, it’s your turn to fix it,” said 45-year-old Chicago Wal-Mart employee Myron Byrd, who plans to be arrested in his first act of civil disobedience today. “And you can’t do it by yourself — you have to do it with others.” Byrd said he was driven to action by “high school”-level pay and workplace disrespect, and inspired by the courage of fellow workers and his mother’s civil rights legacy. “I’m sacrificing myself, along with others, to do this,” he told me, “to show Wal-Mart that hey, I’m not afraid, they not afraid, we not afraid.” In an e-mail to reporters, Wal-Mart spokesperson David Tovar said that “planned arrests” were “just another way to make these orchestrated events seem newsworthy,” and that “these aren’t real protests by real Walmart associates.”

Wal-Mart’s first 50 years were free of Black Friday strikes – indeed, free of any coordinated walkouts in the United States. Then, 14 months ago, a wave of Wal-Mart supply chain strikes that started with crawfish-peeling guest workers and subcontracted warehouse workers spread to include the corporation’s retail employees, first in Southern California and then in cities across the country. Strikers were members of OUR Walmart, a fledgling non-union workers group that first announced itself in 2011; it draws funding, staffing and direction from the United Food & Commercial Workers union.

Poetic Justice
This movement will almost certainly spread, for a variety of reasons including:

• All those college graduates tending bar and driving cabs and waiting on fat people at Wal-Mart and McDonald’s are concluding that they have little to lose by demanding a bigger slice of the pie. It’s not like their current life is so great or their prospects so bright that they can’t afford to mess it up.

• The numbers have become really easy to grasp. 1% and $15 comprise the kind of simple mental construct around which political movements tend to coalesce.

• It’s morally justified. Today’s economy is not capitalism and the people running it are not capitalists. They’re actually committing crimes against the economic/political philosophy that they claim to espouse. The current US model has more in common with feudalism than with the free market, and it will end the way feudalism did, with peasants expropriating the wealth of their former masters.

• It will be an incredibly messy process with all kinds of unintended consequences. One big one is the evaporation of millions of today’s low-wage jobs as companies replace suddenly-more-expensive workers with robots that tend bar, flip burgers and wait tables. For example: Meet “Smart Restaurant”: The Minimum-Wage-Crushing, Burger-Flipping Robot

 

  • http://7thpillar.wordpress.com/ 7th Pillar

    Bravo!

    As an Anarchist, I’m all about Free Markets and Liberty, but Crony so-called Capitalism is Fascism In Drag as far as I’m concerned.

    The Boot-Strap Expat
    http://7thpillar.wordpress.com/

    • Kirk Matranga

      It’s not even in drag, it’s just pure Fascism, but the Propaganda Departments in the media and public school wouldn’t admit it, even if they knew anything about Fascism besides Mussolini. Look at the back of a U.S. dime, which was designed in the Roosevelt Administration of the 1930’s, that is a Fasces. WWII was one bunch of Fascists (us) fighting another bunch of Fascists!!!

  • oldbellevue

    John:
    Good article and I’m gratified you took the position you did. Somewhere along the line though, the spending public has to become involved, by boycotting those companies that totally automate their operations and eliminate the jobs involved. If you enjoy eating out and like to be served by a good waitress or waiter, why would you go to a place where you order everything at a kiosk or tablet on the table? Why not simply support those establishments that still believe the people working there make the place what it is!

  • ditkofan

    The 15.00 minimum wage isn’t going to help very many people. It is well documented that raising the minimum wage creates more un-employment among young and low skill workers. If raising the minimum wage is such a great idea, why not raise it to $100 per hour and make everybody rich? You already know why; companies can’t afford to pay workers more than their labor is worth, even if the government says they have to.

    When faced with government mandated labor costs that exceed the worth of the actual labor being performed, companies will just quit hiring new workers or outsource the job to another country. It was liberal politicians supporting the demands for higher wages for unionized automotive workers that turned Detroit from a rich, industrialized superpower into the junkyard ghetto it is today. Raise the minimum wage high enough and we can do to the entire country what the politicians and unions did to Detroit and many other once vibrant American industries.

    Mr. Rubino is correct about the evils of the government / banking nexus. That problem needs to be solved but it should be solved by returning America to a free enterprise economy. That means lower taxes, less government regulation and abolishing the welfare state. I don’t know how to do that easily or quickly but I do know we can’t do it with higher minimum wages, more labor unions and more government interference in the economy.

    Lewis Forro
    Virginia Beach, VA

    Lewis Forro
    Virginia Beach, VA

    • PaperIsPoverty

      $15/hour is in the ballpark of what the minimum wage was before we went off the gold standard, if you properly adjust for the inflation since then. In fact I’m sure that using John Williams’ inflation numbers, the circa 1971 wage would be worth more than $15 today. It is not an unreasonable value like your $100/hour example, and should be feasible for most companies.

      Also, the welfare state has grown in part because wages haven’t kept up with inflation. The government shells out $243 billion per year in various forms of assistance to low-wage workers such as fast food employees (http://bit.ly/1c8zeNk). In effect, taxpayers are making up the difference between what the workers are paid and what the livable wage is. Taking out the portion of that $243 billion which is borrowed, we’re paying close to $200 billion a year so that McDonald’s and Wal-Mart don’t have to pay a higher wage. This means less disposable income, less consumer spending, and less business at the same companies that underpay their workers. In short, not having an inflation-adjusted minimum wage is also bad for the economy.

      • ditkofan

        We are in a lousy, crumbling economy now and it is going to get much worse over the next several years. Do you think that McDonalds and Wal-Mart are going to hire more entry level workers if they have to pay them 15.00 instead of the current 7.25? Of course not. More likely, they would start laying off their current workers and closing some of their stores instead because they can’t afford the increased labor costs. I’m not sure what the free market wage is for a low skill worker at Wal-Mart but I’m sure the government doesn’t know either. Only the free market knows but as Mr. Rubino said, America is no longer the land of free markets.

        The whole idea of a “minimum wage” is a socialist-liberal idea that like all liberal economic ideas, has hurt more people than it ever helped. The liberals since Woodrow Wilson and Franklin D. Roosevelt have believed government bureaucrats know more than the free market. They believe government bureaucrats are smart enough to set worker and manager salaries, regulate private companies and generally supervise and guide a huge complex national economy to create their idea of a utopian welfare state. Of course the liberals have to be in charge of the government of this perfect state to wisely herd the rest of us along the correct path. With President Obama in the White House, the Left has come close to this dream than ever before. I hope it isn’t to late for us to come to our senses and reverse course.

        As I said before, returning America to a small government, free enterprise economy is the only chance we have to restore real economic growth. Government experiments with a higher minimum wage isn’t going to get us there.

        • PaperIsPoverty

          No matter what their actual finances are, large corporations will always threaten to shutter stores and lay off workers when the subject of a higher minimum wage comes up. It might be a real concern and it might not. It certainly looks like Wal-Mart could pay its employees considerably more without difficulty. And again, $15/hour is similar to what companies used to pay 40 years ago, and that was without the past 40 years’ worth of productivity gains.

          More to the point — speaking figuratively — it’s this or the guillotine. Wealth disparity of this magnitude will end one way or the other.

        • Perplexed

          This administration has done just about everything short of Nationalization to kill business and job creation in the US. What a Marxist!

          • PaperIsPoverty

            Maybe they’re out to kill small business, but they sure as heck aren’t bothering the corporations. It’s crony capitalism all the way.

  • tom

    You’re a good man, John. The corruption in America starts with congress and the CEO suites. They bribe the politicians through lobbyist contributions to campaigns. Bad policy like shipping the jobs to Asia is really stupid but these guys are a cheap date. Look at Hillary Clinton. Accepts $450k from Goldman Sachs for two speeches. Payment (bribery) in advance and nobody says a word – it’s how America now functions. I bought your new book. Our situation is hopeless and collapse of some sort is a certainty. I bought my gold at $330.

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  • PaperIsPoverty

    Just ran across an article on minimum wage vs. living wage (http://cnnmon.ie/LHoTxk). Quote:

    “For instance, in places with fewer than 250,000 people, Glasmeier found that the living wage would be between $12 and $15 per hour. In cities with 250,000 to 1 million residents, it’s $17, and in cities with more than one million residents, it’s $20 per hour.”

    Taxpayers make up the difference between workers’ pay and what’s needed to survive, via various forms of social welfare. So the minimum wage debate boils down to this: Do we want corporations to pony up some of this shortfall, or are we happy to keep leaving it all to the taxpayers and the welfare state?

  • Perplexed

    The minimum wage was never a living wage. One had to work multiple jobs till they gained skills which demanded a better salary.

    The reason all this talk today of a living wage is because the economy stinks and all the jobs lost in 2008 were replaced by part time minimum wage jobs.

  • Dan

    When democracy comes to the work place, then, and only then, capitalism will survive. The example is the union movements in the 30’s that brought prosperity for the middle class from 1945 to the end of the movement in the 80’s. Of course it was a politcal movement by the right against unons (middle class) by Reagan that kick it off.

    Who were the ones saying the GM and Chrysler should just close up? It was the right and they were saying it was those terrible unions, who by the way made $32 an hour, including wages and benefits, and that unions destroy the economy. However, in Germany at the time their workers wages were $64 an hour, including wages and benefits, and their auto plants weren’t shutting down. Well if unions were so terrible why wasn’t it true for the German auto industry?

    It’s because the Germans don’t have capitalist media and right wing constantly attacking the union because union members serve on the corporate boards and contribute to the input of their corporations in making them more efficient to the point that they out produced us in 2012. I might add I’m not a union member and never have been in one but I do know history and can critically think for myself and know that WSDEs, worker self directed enterprises are growing because the corporate style system is a failure for the working class.

    Therefore WSDEs can provide alternatives to corporations and provide competition in the business environment we now see ourselves in. You have to ask yourself why would the corporations not want the competition if they believe in free markets? The answer to that is the share holders, the one percent who own most of the shares.

    • CBDenver

      The unions in places like Germany and Japan function differently than those in the US. The unions in those countries recognize that the companies they work for must survive in order for the union members to prosper. Therefore they don’t make unreasonable demands and are willing to make more concessions during negotiations. In contrast the unions in the US have a completely adversarial relationship with management and are not willing to budge an inch in their demands. Just take a look at Hostess bakery, the union wouldn’t budge and the company went belly up. There is plenty of blame to go around for the terrible economic situation in America.

      • Dan

        You aren’t telling the whole story of the union problem at Hostess. If the union members were included in the negotiations in the board of directors than the economic decisions would be shared, as they are in Germany. That’s my point. That’s why WSDEs are going to grow and corporate style capitalism will dwindle in time, or the whole system will fail as it did, and does, over and over. Monopolies destroy capitalism just like unregulated banks do…….

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