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Sherry Linkon

By Sherry Linkon
Co-Director, Center for Working-Class Studies, Youngstown State University

As the economic crisis deals another blow to American manufacturing, I’ve been wondering about something my brother-in-law asked me last fall:  the good working-class jobs seem to be disappearing, so what will become of the working class?

It’s a good question, and the answer is pretty discouraging.   Between the mid-1940s and the early 1970s, strong contracts negotiated by industrial unions, national policies such as the GI Bill and National Highway Act, and several decades of growth by American industries created what many thought would be the permanent reality: working-class jobs that could fund middle-class lives.  Three decades later, some still equate the “working class” with blue-collar industrial workers, and we still believe that working people deserve a chance to achieve the American dream.  Even as unions have accepted reduced wages and benefits and retirees have struggled to survive when the promises of earlier contracts are abandoned, we still see manufacturing jobs as good jobs.  Globalization and technology have allowed manufacturers to make more – products and money – with fewer workers, or at least with fewer workers here.  But even as reality shifts, we can’t let go of the ideal of the good manufacturing job.

All of that is coming to an end, leaving the working class with two options.  The one we hear about most is education.  That college is the path out of the working class has become received wisdom.  And yes, many of the occupations that are projected to grow over the next two decades require college degrees.   While attending college can mean piling up debt and offers no guarantees, education will help some working-class people find their way to new middle-class jobs.

But college isn’t an option for everyone, and about two-thirds of jobs do not require a college degree.  Indeed, some of the fastest-growing occupations require little training.  Manicurists, skin care specialists, fitness instructors, and preschool teachers need only a certificate or license.  Other growing fields require even less.  On-the-job training is all that’s necessary for security personnel at casinos, janitors, or home health and personal aides.

At first glance, then, it would seem that today’s displaced workers have reason to be hopeful for the future.  23 of the 30 jobs projected to produce the largest job growth over the next decade don’t require a college degree, and many don’t even require special training.  Who needs factories?  Beauty salons, medical offices, and casinos will provide the working-class jobs of the future.

But there’s a catch.  The pay is lousy.  The average annual salary for a beginning steelworker (assuming that such a position exists) is $35,590.  After five years, that steelworker would bring in over $50,000.  The starting salary for a manicurist is $21,280, and it tops out at about $32,000.  For home health and personal aides, the #2 and #3 fastest growing jobs, the salary hovers around $20,000 a year.

It’s not news that the American economy is shifting away from manufacturing and towards service.  Nor would anyone be surprised to hear that while service jobs are sometimes safer, cleaner, and less physically-taxing than working in a steel mill, they don’t pay as well.  But let’s think about what this means for the future of the working class and the future of America.

If nothing else, this will clear up all that confusion about who is working class.   As the majority of working-class jobs become low-wage jobs, we won’t have to worry about how to determine the social class of a high-school graduate working on an assembly line but earning over $50,000 a year.  Income, education, and social position will line up neatly, as they did before the 1940s.

But it also means saying goodbye to the American dream.  Home ownership and saving for a child’s college education are beyond reach if your salary hovers around the Federal poverty rate of about $22,000 for a family of four.  True, some families have multiple wage earners, and many working-class families will be able to earn about $45,000 annually – a good $15,000 below the suggested national livable wage.  And many households struggle to survive on one low income.  As the working-class moves into these low-income jobs, the ranks of the working poor will grow, and the proportion of the working class who are comfortable and financially secure will shrink.

Some will suggest that the working class deserves its economic difficulties.  Want a decent life?  Go to college.  Too “lazy” or can’t afford to go to college?  Tough.  So much for the idea of valuing hard work, much less our moral and social obligation to ensure that anyone working full-time deserves a living wage.

Yet having a large proportion of the population living on the economic edge increases demand for governmental and charitable support, creates a cycle of poverty that’s difficult to escape, and undermines the broader social fabric of American society.

I don’t have a solution beyond the obvious: raise wages.  The only way to get there is to recognize the emerging reality: even if many more people attend college, we will still have a large and growing, hard-working, low-paid working class.  All the discussion about education as the key to stabilizing the economy ignores the real future of the working class.

This article was first printed on the Center for Working-Class Studies blog.

Leo W. Gerard

By Leo W. Gerard

International President

Are you feeling depressed, dogged by daily bad news about the effects of reckless, unregulated Wall Street speculators sinking the economy? Well, U.S. Treasury Secretary Hank Paulson has decided to take this opportunity to kick you while you’re down. And use your money to do it.

Paulson cheated American taxpayers with his initial expenditure from that $700 billion Wall Street bailout fund – the $125 billion he gave to nine financial institutions.

That’s right. He paid twice what the securities were worth. That means he gave the CEOs and stockholders of these firms a $62.5 billion gift. From taxpayers.

Now Paulson is no rube. He’s a former Goldman Sachs CEO, who has surrounded himself with former Goldman Sachs executives for advice.

Oh, and by the way, one of the nine firms that received this gift from American taxpayers is Goldman Sachs.

You can find the financial analysis of Paulson’s deal here, on the USW web site.

I’ve written Paulson to demand an explanation for his profligate ways with taxpayer dollars. I’m copying it here to encourage you to write him as well. We need to stop him from spending the rest of the money as if he were still a Wall Street speculator.

October 28, 2008

Henry M. Paulson, Jr.

Secretary of the Treasury

1500 Pennsylvania Avenue, NW

Washington, D.C. 20220

Dear Secretary Paulson,

While I am sure that you face no shortage of advice regarding the crisis that continues to engulf the world’s capital markets, I did want to share with you some questions and concerns regarding your decision to invest $125 billion of the taxpayers’ money into nine financial institutions, including the securities firm which until recently you headed, Goldman Sachs.

While the media was filled with the usual breathless “behind-the-scenes” reports of your “High Noon” bargaining, what seems to have escaped their notice was your decision, on behalf of the taxpayers, to pay roughly twice as much as you needed to for the securities that you purchased.

To me, at least, this is far more important than whether you gave the assembled CEOs two hours, two weeks or two minutes to sign up; whether, as the New York Times helpfully tells us, you have seen “Butch Cassidy and the Sundance Kid”; whether you have worked long hours in the last few months; or what brand of cell phone you use.

While Wells Fargo Chairman Kovacevich, who was forced to get by on only $300 million over the past ten years, may or may not have actually pretended to resist the deal, if he had in fact turned you down, he should have been fired, given the extraordinary deal he was being offered.

I have enclosed with this letter a copy of the analysis that we prepared which values the investment of the taxpayers’ money in Goldman Sachs at only 50% of what was actually paid. Perhaps one of your former colleagues at Goldman could take a minute away from their busy day shorting mortgages to see if we are correct.

Mr. Secretary, this analysis is not rocket science. Just twenty days before Goldman announced that it would “accept” Treasury’s investment, Warren Buffett invested $5 billion into Goldman Sachs and acquired the very same type of security – preferred stock – with the very same form of “upside” – warrants to purchase common stock. For some reason, however, per dollar invested, Mr. Buffett received at least seven and perhaps up to fourteen times more warrants than Treasury did and his warrants have more favorable terms. In addition, Mr. Buffett’s preferred stock has a higher dividend rate and can only be bought away from him at a premium, while Treasury’s investment of taxpayers’ money pays a lower dividend and can be repurchased at par.

Now I know that you have a lot on your plate, but I am sure that someone at Treasury saw the terms of Buffett’s investment. In fact, my suspicion is that you studied it pretty closely and knew exactly what you were doing. The 50-50 deal – 50% invested and 50% as a gift – is quite consistent with the Republican version of the “spread-the-wealth-around” philosophy that seems so much in vogue.

If the result of our analysis is applied to the deals that you made at the other eight institutions – which on average most would view as being less well positioned than Goldman and therefore requiring an even greater rate of return – you paid $125 billion for securities for which a disinterested party would have paid $62.5 billion. This means that you gifted the other $62.5 billion to the shareholders of these nine institutions.

This is no different than if you paid me $10,000 for a car for which no one else would pay more than $5,000. You bought it for $5,000 and gifted me the other $5,000. In my world such gifts are rarely offered to working people.

It’s hard to list all of the ways in which this is disturbing, but let me note just a few:

• If this deal is the model for how you intend to spend the whole $700 billion that you got from the Congress, then it would appear that you intend to reward the institutions that have driven our nation, and it now appears the whole world, into its most serious economic crisis in 75 years with a gift of $350 billion from the American taxpayers, who have watched 760,000 of their jobs disappear over just the past nine months.

• The recipients of the first wave of gift-giving include Goldman Sachs. It has been widely reported that you have surrounded yourself with former Goldman employees as well as individuals from other Wall Street firms. Yet it has never been revealed whether in fact you and they have fully divested yourselves of your Wall Street holdings. Doesn’t it seem just a wee-bit of a conflict of interest for those setting the price of the investment to be either so directly linked to the firms receiving the investments or, even worse, direct beneficiaries of the decision to overpay with taxpayer money?

• Your investments do nothing to deal with the causes of the current crisis. Now that even Chairman Greenspan has discovered a “flaw” in his theories, wouldn’t it make sense to have some reason to believe that the recipients of this government largesse won’t just take the money and do it all again? Perhaps there is some reason I do not understand that you have seemingly handed this chicken coop back to the very same foxes who have been pillaging it for the last two decades?

• It has been reported in the media that these firms have no intention of using this money for its intended purpose. Don’t we deserve a commitment that the money will in fact be used for either loans to the companies which are groaning under the weight of the credit crisis and being forced to shed tens of thousands of more jobs or to help the millions of Americans struggling with their troubled mortgages? Does it really seem too much to demand that we get a commitment that our gifts to these firms be used to help revive the economy that they have driven into the ditch?

• Your terms also undercut the more stringent restrictions that the Brits imposed, thus making it clear that not only are you fronting for American wastrels, but European ones as well.

Now I do not doubt for a minute that the irresponsible and fraudulent actions of Wall Street have indeed put the world financial system and now the real economy at grave risk. And I also do not doubt that the literally hundreds of billions of dollars of undeserved bonuses ($38 billion in 2007 alone), reckless speculating and dividends to shareholders have left many of these institutions woefully under-capitalized and in need of new equity dollars. Where I get a little lost is why you think that the system or the American taxpayer is better off if the government gets half as much for its investment as Mr. Buffett did.

Let’s agree that America’s nine largest banks need $125 billion of new money and let’s further agree that no one else, not even Warren Buffett, has that kind of money lying around. That still does not explain why our $125 billion should buy us securities worth half of what we paid for them. Nor does it explain why the nearly $25 billion per year that the firms pay out in dividends to their shareholders should continue. At current levels, dividends to shareholders will distribute all of our money that you invested in just five years.

Secretary Paulson, out in the real economy, the unbridled pursuit of greed that you and your friends on Wall Street have celebrated as a national religion has taken a terrible toll on ordinary Americans. Jobs with stagnant real wages have now given way to massive lay-offs, home foreclosures and real suffering.

Out in the real economy, we need to once and for all bury the philosophy that worships only business, free markets, deregulation and free trade, and replace it with an economic program that restores the balance of power between workers and business, rebuilds the middle class and curbs corporate excesses.

Out in the real economy, we need our government to invest in creating sustainable shared prosperity – not play Santa Claus to the scoundrels who have laid waste to the American Dream.

I eagerly await your response.

Sincerely,

Leo W. Gerard

International President

By Leo W. Gerard
International President

Public service
The Democratic Party paid homage at its convention Monday night to a Kennedy scion whose family values demand public service and who believed it was his duty as a senator to speak for the voiceless, not champion the causes of the already powerful.
The film clip played for the delegates showed Ted Kennedy, who is fighting for his life after being diagnosed with a brain tumor, on a sailboat, explaining his favorite pastime and his relationship with the sea.
This son of wealth could have done nothing more with his life than sail. But he descended from a family that gave so much to this country – a son in World War II, two more to assassination – that he was compelled to perform for all of their names.
His service has always been to the basic values of the Democratic Party, that the American Dream should be for everyone, not just a few, not just the privileged, not just the Kennedys. And he has anointed Barack Obama as the successor to that legacy.
Kennedy’s philosophy stands in stark contrast to Reagan-Bush-McCain values. Those Republicans worship the almighty dollar, the amassing of large quantities of dollars, and the claim that sufficient coins will trickle out of the pockets and down the legs of the wealthy to sustain the poor.

Reverse trickle

In fact, however, over the past 30 years, Republicans have put in place government programs that reverse the trickle process. So the way it actually works is that the tax dollars of the many trickle up to make the wealthy wealthier. Just one example: Corporations shortchange their pension plans to make the companies appear more profitable, so the CEOs gets large stock options. When the pensions failed, the workers got less and the taxpayers provided the funds through the Pension Benefit Guarantee Corporation. But the CEOs laughed all the way to the bank.
Lobbyists, paid by corporations and aided by Republicans with their “trickle down” philosophy, have established untold numbers of schemes like this in law to benefit the rich at the expense of the many.
They’ve been so successful that income disparity in this country has widened to the point that the 300,000 wealthiest make more money than the other 150 million wage earners put together. Remember, Republicans even opposed an increase in the minimum wage – the first in nearly a decade – from $5.15 an hour to a measly $7.25 an hour.
There’s no doubt the Kennedys are wealthy. But they’re Democrats. They don’t believe in trickle down. Here’s what Ted Kennedy said Monday night, “This is a season of hope. . .of justice and prosperity for the many, not just for the few.”
He mentioned the decline in health insurance coverage, a problem he has long struggled to resolve. “This is the cause of my life,” he told the delegates. Gridlock must be broken, he said, so every American can have decent quality healthcare as a fundamental right, not a privilege.

Medicare vote

This from a man who left his hospital bed in Massachusetts in July to travel to Washington, D. C. to break a stalemate on stalled Medicare legislation. An earlier balloting had fallen one vote short of passage of the bill to prevent a scheduled 10.6 percent cut to physicians who treat Medicare patients.
Obama was at Kennedy’s side when he entered the Senate for the first time since his brain surgery on June 2.
Taking a different path, McCain did not bother to show up for the vote on the legislation crucial to senior citizens.
A scion as well, McCain is the son and grandson of admirals. He had much to live up to, and after a less-than-distinguished stint at the Naval Academy, served with honor in Vietnam.
Afterward, he returned to the states, where, he concedes to philandering, cheating on a wife who’d cared for their children while he’d been held captive for nearly five years and who, herself, had been terribly injured in a car accident.
While in Hawaii, and still married, John McCain, the “family values” political party’s presumptive nominee, met Cindy Lou Hensley, the beer distribution heiress 17 years his junior who is now his second wife.
Today, John McCain’s wealth equals a Kennedy’s. The McCain-Hensley fortune is estimated at $100 million.

Ferragamo flash

And he likes to flash it. He’s been wearing $520 Ferragamo loafers on the campaign trail – even to a supermarket where he talked about the tough economy — the failing economy brought on this country by eight years of the Bush Administration.
Cindy Lou bought him a private jet to help him get around Arizona when campaigning there because it’s such a big state, and she didn’t want him to have to drive, like a normal person, or anything.
And then there are the McCain homes. None in foreclosure, by the way. Seven in all. Too many for John to count apparently. When asked just how many houses he owned, he hesitated, then told a reporter he’d have an aide count them up and get back with those weighty statistics.
That sort of absentminded elitist air would be one thing, but the real distinction is his philosophy. He believes the rich, like him, should stay rich. And too bad for the middle class, which is supporting that wealth.
This guy espouses Bush’s tax cuts for the rich. He wants to make permanent those tax cuts that the wealthy didn’t ask for and don’t even need –  tax cuts that have significantly worsened the national debt, thus weakening the economy and confidence in Wall Street.
At the same time, John McCain plans to create a new tax – on your middle class health care benefits – if you’re one of those lucky enough to still have them.
Tax cuts for the rich. New taxes for the middle class.
This is not a Kennedy. This is definitely not a man who works, as Caroline Kennedy said at the convention of her uncle, Ted Kennedy, to champion the cause of those left out, the poor, the elderly, those without education.
John McCain is no Ted Kennedy. And because of what he believes, John McCain is not someone the middle class can afford to elect president.