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Posts Tagged ‘inequality

Fast-Food Strikes: The latest iteration of class war

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Last week fast-food workers walked off the job in over a hundred cities across the country to demonstrate against exploitation and wage slavery in fast-food corporations. Thousands of participants organised to demand a $15 an hour living wage. The tide of indignation is rising. From Walmart to Caterpillar, from Macy’s to the top six fast-food chains public outrage over naked worker exploitation is mounting. Inequality in the United States has reached fever pitch.

I’ve collated data from a series of articles and public policy reports published over the last several months to paint a picture of a nation haunted by the spectre of a growing class divide.

According to the Social Security Administration nearly 40 percent of all workers in the country made less than $20,000 last year. This doesn’t include figures on benefits such as health insurance or pensions. That’s below the federal poverty threshold for a family of four and close to the line for a family of three. On average, these workers earned just $17,459.55.

The New York Times reported on The Economic Policy Institutes findings that the bottom 20 percent of American workers by income — 28 million workers — earn less than $9.89 an hour; “That translates to $20,570 a year for a full-time employee”. Between 2006 and 2012 these workers saw their income fall by 5 percent. The report also found that wages for workers at the 50th percentile — their median pay is $16.30 an hour — have also dipped, falling 3.4 percent, while pay for the top 10 percent rose 3 percent.

A glaring disconnect between the nation’s top corporate executives and their wage earning employees couldn’t be starker. While workers wages have flatlined, executive pay jumped 16 percent last year alone. Citing Equilar, an executive compensation analysis firm, The Times reported that top executives were raking in, on average, $15.1 Million.

The pay gap between CEOs and their employees working in Fast-Food is particularly staggering. Speaking on Democracy Now, Sarah Anderson, author of the new report “Fast Food CEOs Rake in Taxpayer-Subsidised Pay“, gives an inside peak into how the top six fast-food corporations are taking advantage of a perverse tax loophole, one that rewards fast-food CEOs for underpaying employees. The way this “loophole” works is that it allows companies to deduct unlimited amounts from their corporate income taxes to pay their executives. The stipulation that makes this a loophole rather than broad day light robbery is that the deductions only apply to performance pay – things like stock-options, and related bonuses that come out of the cauldron of financial wizardry. Through this corporate handout fast-food executives are able to obfuscate the real costs of production.

Anderson’s study reveals that over the past two years, the CEOs of the top six publicly held fast food chains – YUM Brands (KFC, Taco Bell, Pizza Hut), McDonalds, Wendy’s, Burger King, Dunkin Brands and Dominos – “pocketed more than $183 million in fully deductible ‘performance pay,’ lowering their companies’ IRS bills by an estimated $64 million.”

In syllogistic form it looks something like this: If companies pay their executives more, then they pay less in federal taxes. Companies pay their executives butt-loads more. Therefore tax-payers get reamed. Mind your P’s and Q’s!

Not only is this low-ball business model denying fast-food employees a living wage and affronting their dignity by setting their human value so low that affording basics like food, water, clothing and shelter is impossible without government support, a second-job or illicit income, this business model is externalising its labor expenses. One study conducted by University of California Berkeley found that more than half of frontline fast-food workers depend on at least one public assistance program costing tax-payers a whopping $7 billion annually. What it comes down to is that fast-food company profits are being mystified. The real costs of labor, distorted by government handouts fatter than fast-food itself, is hiding the hidden reality of tax-payer-subsidized profits. Regular costs of doing business are being transformed into plain profits that ascend directly to the top. While Wendy, Colonel Sanders, the Burger King and Ronald McDonald stiff their employees and pocket the spoils millions of Americans are paying them to do it.

The coals of antagonism are smoldering. The wages of working people have levelled down below the costs of their subsistence. At the same time executive pay has soared. Last weeks organised protests against mass exploitation didn’t pit industrial workers against a class of industrial elites. The economy of mass consumption swallowed that of mass production. What last weeks’ calls for dignity and fair living wages express, however, is a new iteration of class struggle. America stands divided and unequal. The spectre of class war is present. “We’ll be back”, protesters chanted as they exited a McDonalds in Times Square.

Written by yourinquirerprofoundly

December 9, 2013 at 2:05 pm

Discourse of Inequity

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The dominant discourse throughout this election has been cast in terms of class without acknowling the economic and social conditions that divide them. Romney depicts an apathetic and jealous underclass undermining the ingenuity of wealthy, innovative job creators whose success hinges on operating in unrestrained free markets. Obama’s appeal to middle and lower income voters plays into the us versus them binary by emphasizing the role executives and a wayward finance industry have played in making American tax payers foot the bill for greed and excess. But this discourse detracts from the hard economic reality confronting America and ignores the history of the destructive forces of capitalism. A national discussion on tax policy and jobs has silenced a more meaningful discussion about the role of markets in society and inequality in America. The increasing concentration of wealth at the top, the continual hollowing out of the middle class, and growing poverty at the bottom is a consequence of the institutionalization of market inequalities. Yet neither Obama nor Romney have dared to examine the corrosive effects of entrenched inequalities that perpetuate a widening gap between wealthy and poor.

Joseph Stieglitz points out in his latest book The Price of Inequality that “market inequalities stem from – ineffective enforcement of competition laws, inadequate financial regulation, deficiency in corporate governance laws, and “corporate welfare” — large subsidies to corporations funded by taxpayers. Economic and financial organizations like the International Monetary Fund, Organization for Economic Cooperation and Development along with top research universities and policy institutes have released alarming reports demonstrating the connection between economic inequality and lackluster economic growth.

In last years report the IMF noted that 1 percent earns about one-sixth of all income and the top 10 percent about half. In the same report the IMF cautioned United States policy makers: “Some dismiss inequality and focus instead on overall growth — arguing, in effect, that a rising tide lifts all boats. When a handful of yachts become ocean liners while the rest remain lowly canoes, something is seriously amiss.” The massive wave of financial deregulation that began during Reagan’s first term continued unabated into the Bush II years. Since financial regulations and the regulatory agencies that enforce them have lost their ability to oversee abuses and rectify the adverse effects of business activity society is without protection from the turbulence of markets. Republican leaders have stated the “government shouldn’t pick winners and losers” because government interference creates market distortions weakening economic productivity. But markets do not exist in vacuums. Markets, “free markets” depend on government polices or the lack thereof.

The relationship between society and the market is defined by policy. During America’s first Gilded Age railroad magnates like Cornelius Vanderbilt, finance titans like John Pierpont Morgan and industrial tycoons like Andrew Carnegie dominated America’s economy consolidating business ventures until they monopolized their respective industries. The income gap between wealthy employers and their employees were staggering. It was not until after Theodore Roosevelt took office in 1901 and his “trustbusting” measures were enacted that the disparity between rich and poor began to shrink. Banking regulations, competition laws and expanded rights for labor organizations gave workers who constituted the lower and middle economic brackets a greater share of the wealth generated by markets. Government policies were implemented to limit market inequalities that favored the wealthy and reduced the domination of goverment by business elites. The greater part of society benefitted from these new policies. America’s economy grew throughout the Progressive Era and into the 1920’s thanks to sound policies and market forces that increased demand for American manufactured goods at home and abroad. This growth proved ephemeral when regulations were loosened, overinvestment popped economic bubbles, international trade brokedown and consumption was cut.

Economists still debate whether the Great Depression was primarily a failure of the free market system or the failure of the US government to regulate interest rates, curtail bank failures or properly control the money supply. Multiple factors are always at play. But the financial collapse of 2007 shares striking similarities in its causes to the Great Depression. Americans overinvestment in homes believed to continuously rise in value spawned the housing bubble that precipitated the financial meltdown. International trading of toxic assets contaminated banks across the world crippling economies. Job losses followed as profits declined. Debt collectors came knocking. Homes went into foreclosure. These violent market forces all contributed to the great reccession that tore apart the fabric of society.

The striking similarities between the Great Depression and todays Great Recession haven’t even surfaced as secondary talking points during this election. How can a discourse that centers on the ailing economy, although only its symptoms be so isolated from history? Dismissing the importance history plays is a strategic maneuver by both parties that allow them to satisfy their campaign funders and private interests who influence their agendas. Veering away from historical examples on the campaign trail about how government can step in to protect society from the disintegrating forces of unregulated business or impose laws that terminate the absolute advantage monopolists and oligarchs have over the people assures the business elites who now dominate government that the scaffolding for their private empires will remain unshaken.

Corporate loopholes, off-shore tax havens, competition stifling subsidies and impunity for the most flagrant violators of financial law are just a few examples of institutionalized inequalities. Policies that incentivize and reward business activities that harm the economy exist because business pays to write the policies that serve its bottom line. This runs contrary to a free market where businesses that deliver the beat goods and services at the most affordable price reap rewards.

In 2008 four of Obama’s top twenty campaign donors were too big too fail financial giants. Goldman Sachs, JP Morgan Chase, Citi Group and Morgan Stanley collectively contributed $3 million to Obama’s campaign. Those companies received a remarkable return on their investment when billions in TARP funds were disbursed to them a year later. Romney profited immensely as chief executive of BAIN, a company he alleges creates jobs. BAIN like all venture capital firms profits not by creating jobs but rather by restructuring work forces. Laying off workers, reducing their wages, shipping their jobs overeas and slashing their benefits are routine measures that increase the profitability of companies BAIN restructures. Why companies like BAIN and JP Morgan Chase are lavishly rewarded for dislocating workers and losing billions in risky overleveraged investments speaks to the nature of America’s “free market economy.”

Society has been subordinated by the market. The policies that have led to this have been consolidated over the last 30 years. Tax loopholes, off-shore tax free havens, corporate welfare, inadequate, financial regulation not only amount to a faltering US economy but a grossly unequal society. Disparities in wealth are less visible in Americans’ everyday lives today than they were a century ago. Poor people in America fare better than the poor by material standards in many less developed nations. They have televisions, air conditioners and cars. But appearances aren’t always what they seem. Judging how well off a country is by material standards or “living standards” fails to ask the question what are we as a society are living for. If we are living to optimize profits and realize enormous growth in a country where the market subverts society leaving people homeless, needy of medical assistance they cannot afford, hungry and fearful then the national discourse that has dominated this election need not change. However, if Americans refuse to be raw material for the molding and assert that society cannot be reduced to growth based economic assessments questions about what makes the fabric of American society stronger may help us understand what we as a country are living for.

Written by yourinquirerprofoundly

November 2, 2012 at 4:19 pm