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Friday, July 15, 2005

Yes, It's Still the Economy Stupid!

I know, I know. I've harped on this so many times. But, as Karl Rove and other Republicans have proved, if you say it often enough, people will believe it. Of course, what they keep repeating, on message to the end, is usually a pack of lies.

But what if you used their same tactic, only what you kept repeating often enough was actually the truth? What if you stayed on message with rigorous discipline, as they do, only you told only truth and spoke it without rancor or viciousness? If you did that, could you win an election, improve economic and political conditions, change the world for the better, and make a real difference?

I don't know, but I suspect it's worth a try. So, I'm going to resolutely stay on message, even if it means repeating myself, about the things I think matter.

Here's another article on the appalling gap between worker productivity, which is very high, and workers' wages, which are stagnant. The author, Jonathan Tasini, on yesterday's Tom Paine website, discusses the inverse link between productivity and salaries.

He mentions that among the reasons for the large disparity is that many corporate CEOs have been taking obscenely high salaries, bonuses, severance packages and retirement benefits that have left their companies profit-challenged despite the high productivity and high revenues. In other words, the elite few at the top are draining the rewards of labor and siphoning it all off to themselves at the expense of the those who actually earned it for them.

However, that's only part of the equation. I still maintain that they can only do this because the laborer's productivity is now working against him or her. The more efficient each worker is, the less employees a company needs. Worker productivity, plus automation, has shrunk the demand for additional workers. Another factor that has reduced the demand for more workers in the marketplace is outsourcing. Corporations can get their products produced much cheaper in China and India than they can here because of the much lower standard of living in those countries. American workers simply can't compete with the Chinese and Indians.

Indeed, with the housing boom (or bubble), it's just not possible to work for the kind of wages they pay in the Far East and keep a decent roof over your family's head, let alone put food on the table. An Indian computer programmer who works for half of what an American would make, would still be living in palatial splendor in Bangalore, whereas over here, he'd be eking out a living in squalor. Stuff costs more here, especially housing.

Some have slyly pointed out that CEOs also cost less over there, so perhaps these overpriced corporate executives should have their jobs outsourced too. That would actually save investors a bundle.

Anyway, the major factor driving wages lower is the combination of productivity and outsourcing because both of those conditions lead to a lower demand for American workers. If one worker can work 12 hours a day and produce 30 widgets and you can import 40 more sub widgets from China, you just don't need to hire anybody to produce more widgets. And what is fueling the stagnant wages is an even more stagnant job market. It's the old law of Supply and Demand. There is an over-supply of unneeded workers and little demand for them.

One thing that could correct it is to go back to stricter overtime rules. Make companies adhere to an 8 hour day and make it more costly for workers to do overtime by ensuring that they are paid a fair wage for it. And start penalizing companies that outsource by taxing them for it. When they try to bring their goods back into the country, treat them like foreign corporations and impose duties and tariffs on the goods.

We use tax incentives and tax breaks all the time to encourage behaviors that we think are beneficial. What can be more beneficial to our economy, in the long run, than encouraging companies to stay here and share the wealth by paying a decent wage and providing good jobs right at home?

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