By Dave Johnson
Fellow, Campaign for America's Future
You may have seen the charts showing how working people’s wages stopped going up along with productivity gains:
This means the gains went … somewhere else. See if you can guess who got them? (Hint: it’s the 1%; this is one driver of the terrible income and wealth inequality.) This breakoff of wages from productivity growth is partly (largely?) the result of trade agreements that pit Americans against exploited workers in non-democracies. This weakened the bargaining power of unions, moved factories and industries out of the country, devastated entire regions of our country — and gave the giant multinational corporations, Wall Street and the billionaires the leverage they needed…
Economist Dean Baker describes one effect of this in Minimum Wage: Who Decided Workers Should Fall Behind?
“If the minimum wage had risen in step with productivity growth [since 1968], it would be over $16.50 an hour today. That is higher than the hourly wages earned by 40 percent of men and half of women.”
Baker is referring to this CEPR study: The Minimum Wage and Economic Growth.
40% Of Americans Now Make Less Than 1968 Minimum Wage
Read what Baker wrote again. The minimum wage would be $16.50 an hour — $33,000 a year — if it had kept up with the growth of productivity since 1968. To put the effect of this a different way, 40% of Americans now make less than the 1968 minimum wage, had the minimum wage kept pace with productivity gains.
To put this even another way, the average American’s living standard would be much, much higher today if wages had not decoupled from productivity gains – with the gains all going to the 1% instead of being shared by We, the People. If wages had kept pace we wouldn’t feel the terrible squeeze that everyone in the middle class is feeling. (Never mind what has happened to those below the middle class.)
This is one more way to understand the effect of income and wealth inequality on each of us. The 1%/99% thing is real. When you hear that the 6 Walmart heirs have more wealth than 1/3 (or more) of all Americans combined, it is real. When you hear that the people on the Forbes list of the 400 wealthiest Americans have more wealth than half of all Americans combined, it is real.
And the effects on the rest of us are real.
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This seems like a good time to drag out the old post, Nine Pictures Of The Extreme Income/Wealth Gap, which puts pictures on what this kind of wealth means. (This post, by the way, first explained that 400 people have as much wealth as half of all Americans combined. Michael Moore picked that up and talked about it in Madison, Wisc., and it rippled out from there.)
Here is another relevant post: Tax Cuts Are Theft, explaining how cutting taxes on the rich siphons off public wealth.
And of course this one: Reagan Revolution Home To Roost — In Charts.
Here are some posts on the trade deficit:
Fix The Trade Deficit, Fix The Economy.,
Yet another report is out showing how the trade deficit is costing us millions of jobs and hurting our economy. This report has specific numbers: between 2.2 million and 4.7 million U.S. jobs, between 1 percent and 2.1 percent of the unemployment rate and a gross domestic product increase of between 1.4 percent and 3.1 percent.
These are real numbers that were carefully calculated. This is a real problem that is hurting people, hurting small and mid-sized companies, hurting communities, hurting our tax base and hurting our ability to make a living in the future. And there are real solutions available to fix the problem.
Does Trade Deficit Drive Inequality?:
Job Fear From Trade Deficit Is What Happened To Jobs And The Middle Class,
The middle class is disappearing. Our economy is “hollowing out” because the money goes to the top and the people fall to the bottom. This is because we allow American companies to close factories here and open them there, shipping the same goods back here to sell in the same stores, costing jobs, companies, industries and our economy. This makes us afraid for our own jobs and afraid to make waves. By helping a few at the top get fabulously rich, China has essentially recruited our own businesses leaders to fight against our own government – and us.
Trade Deficit – One Root Of Many Problems,
You buy things till your wallet is empty. So you raid the savings account to buy more stuff. Then you get a loan, and buy more stuff. Another loan, another, you keep buying stuff… Finally you’re selling off the tools you had used to make a living. That’s where the country is now because of the huge imbalance in our trade relationships. We buy more from them than they buy from us and we have let this go on and on and on. This is the deficit we should be worried about.
The Root
Pick a national problem, and the odds are that our trade imbalance is aggravating it. Our trade deficits literally suck money out of the country. When looking up the numbers I had to double check, our annual trade deficits are so huge. In the chart below that first line under the dates represents $100 billion. Look at what happened in the late 90s, when we opened the China floodgates. (Click to enlarge):
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This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. Sign up here for the CAF daily summary.
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Johnson also is a fellow at the Commonwealth Institute and a Senior Fellow at the Institute for the Renewal of the California Dream.
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Follow Dave Johnson on Twitter: www.twitter.com/dcjohnson.
Posted February 21, 2013 at 3:00 pm, in Allied Approaches, From Campaign for America's Future
February 22nd, 2013 at 10:52 am
If unskilled US labor costs are now 25-50 times as expensive as unskilled labor costs available in the Philippines or Sri Lanka, and then if STEM educated skilled US labor is three or four times as expensive as the skilled US labor by the STEM educated citizens in the developed Asian countries, then the import tax duties would have to be several hundred percent in order to make US labor competitive again.
When foreign electrical energy, taxes, environmental compliance cost are also only a small percentage of the US costs for the same items, then US businesses cannot afford to employ US citizens or even operate in the USA, except to retail foreign manufactured products to US consumers!
That means that the US working man has to compete with the wages paid in Sri Lanka which might be 2-4% of US labor costs according to the Department of Labor website at:
ftp://ftp.bls.gov/pub/special.requests/ForeignLabor/ichccpwsuppt01.txt
Yes, that is what being competetive means!
If the $1.00 of foreign labor and $1.00 of cloth to make that $10 shirt ($5.00 wholesale after distribution) that you and I bought at Wal-Mart were made with US labor then that might cause that shirt to cost ($4.00 / 4% +$1material = $101.00) $101.00 wholesale and $140.00 retail if US labor was used to make that shirt.
This methodology and economic analysis principal is true of most other products.
February 22nd, 2013 at 10:54 am
You should blame President Clinton when he signed NAFTA into law.
NAFTA was signed into law by President Bill Clinton on December 8, 1993 long after his 1992 election and he began to enforce that treaty on January 1, 1994, and that was the first of many treaties created by many subsequent the “FREE TRADE” legislation actions with THIRD WORLD nations!
Why did he sign it into law?
He did not have to!
Without Bill Clinton signing NAFTA into law, many US jobs for US citizens would have stayed in the USA.
President George Bush and most all of the elected Republican and Democratic US Congressmen and Senators were also in favor of NAFTA, so I guess the US workers were just sold out for lower cost consumer products.
If the USA still had the US jobs that the Free Trade Agreements (+GATT MFN for China) with various third world nations economically required that US businesses relocate to those jobs to those foreign nations, then the US “middle class” citizens would be in much better economic shape!
February 22nd, 2013 at 10:55 am
I believe that the US Congress needs to create legislation to repeal President Clinton’s NAFTA, GATT, WTO, “Most Favored Nation” (MFN) trade status with China, Financial Services Modernization Act of 1999, H-1b visas, and all of his other similar laws that economically required US businesses to relocate US jobs to foreign nations.
I believe that the US Congress needs to repeal George W. Bush’s 14 additional “Free Trade Agreements” (with Jordan, Morocco, and other young democracies of Central America).
I believe that the US Congress should also repeal all of President Obama’s multiple new “Free Trade Agreements” with Vietnam, Brunei, Singapore, Malaysia, New Zealand, Australia, Chile and Peru plus several other Asian and South American nations.
February 22nd, 2013 at 10:58 am
President Obama knows how to export US jobs to foreign nations.
That might be why he created all of his new free trade agreements.
All of the “Free Trade Agreement” legislation created by the US Congress in the last 20 years financially caused union and non-union US jobs for the blue collar working citizens of the USA to relocate to foreign nations.
Why then did our elected presidents and congressmen create all of these “Free Trade Legislation” laws?
Were our elected presidents and congressmen ignorant, stupid, dishonest, or some combination of these factors?
How do you think that all of these “Free Trade Agreements” were created?
February 22nd, 2013 at 11:01 am
Do you think that maybe the foreign product manufacturers that export consumer products to the USA might have paid professional US lobbyists to spend hundreds of thousands of US dollars on wine, food, women, song, vacations, cash, sexual services, corporate jobs for the (otherwise unemployable) children/wives/girlfriends of enough of the US senators and US congressmen (and their congressional aides who actually control the members of congress) plus campaign contributions to influence/entice (bribe) enough of our Republican and Democratic US Presidents, Congressmen and Senators for the past 20 years to create all of that “Free Trade Agreement” legislation that allowed, caused, and economically required our businesses to take advantage of the lower labor costs, lower electrical energy costs, lower business taxes, lower payroll taxes to pay for health care costs, lower unemployment insurance costs, lower environmental manufacturing costs and other anti-business costs that are not required in various foreign countries with fewer anti-business laws than are/were applicable to businesses in the USA?
February 22nd, 2013 at 11:03 am
How do you think that US Government environmental damage liability limits, Free Trade Agreements, Most Favored Nation designations, pharmaceutical liability limits, product liability limits, tax exemption loopholes, agricultural subsidies, and/or any other laws benefiting only a few people (or a few foreign nations) were created by our elected US congress and US senate, and then enforced by our elected presidents and their bureaucratic administrators?
How do you think that US Government contracts, guaranteed (Solyndra type) loans, grants, and/or any other laws giving tax money to only a few people (campaign contributors) were created by our elected US Presidents, US congressmen, US senators, and their bureaucratic administrators?
February 22nd, 2013 at 11:06 am
The US manufacturers that used to hire millions of US citizens to make things in the USA for US consumers cannot overcome those obstacles that the US government created with the “Free Trade Agreements” without relocating their manufacturing operations to a foreign nation, and taking their jobs with them.
US manufacturing businesses must take advantage of all of the US “Free Trade Agreements” that were created by recent US presidents Clinton, Bush, and Obama, in the last 20 years, that economically requires US Businesses to offshore US jobs and/or import foreign made products (including parts and sub-assemblies for assembly in the USA) in order to meet the US consumer’s demand for the absolutely lowest possible price for each product.
February 22nd, 2013 at 11:14 am
It is not the foreign manufacturer’s fault that this economic condition exists.
US citizens are at fault for electing legislators and presidents of both political parties that created all of the “Free Trade Agreement” legislation caused relocation of most of our US industries and those related US jobs to overseas locations which caused unemployment of all of their US employees in order to evade compliance with the various environmental, free trade, union work rules, and other economic laws that our US congressmen of both political parties created and our past presidents approved and administered over the past few decades.
February 22nd, 2013 at 11:16 am
Union Leaders should beware that President Obama is now proposing that the United States and 10 Pacific Rim nations form a gigantic Pacific Free Trade Agreement that will further cause more US jobs to relocate to foreign nations just like every other FTA that the US government has created did in the past.