Thursday, July 21, 2011

Organized Labor's Best Argument - "The American Worker Is Getting Hosed"

"The American worker is underpaid."

That's it? That's all?

That is all it is going to take to organize a lot of employees if unions can get the message right, if only because there are compelling economics to support it.

The argument they can make, and probably will, was the subject of a Washington Post Opinion piece entitled, "Corporate America's Chokehold on Wages," by Harold Meyerson, executive editor of The American Prospect, a liberal magazine based in Washington. See:

The economics are these - numbers not taken from some liberal think tank but from Michael Cembalest, the chief investment officer of J.P. Morgan Chase. In “Eye on the Market,” a report forwarded to its private banking clients, he concludes that “US labor compensation is now at a 50-year low relative to both company sales and US GDP.”

Specifically, "profit margins (the share of a company’s revenue that goes to profits) of the Standard & Poor’s 500 companies are at their highest levels since the mid-1960s, despite escalated health-care costs, environmental compliance and other regulations about which corporate American often complains."

He studied the rise in profit margins “from peak to peak” — that is, from their high point in 2000, just before the dot-com bust, to their high point in 2007, just before the financial crisis. In those seven years, profit margins rose from just under 11 percent of the S&P 500’s revenue to just over 12 percent. (Today, they’re near 13 percent.)

Why the increase? “There are a lot of moving parts in the margin equation,” Cembalest writes, but “reductions in wages and benefits explain the majority of the net improvement in margins.” This decline in wages and benefits, Cembalest calculates, is responsible for about 75 percent of the increase in our major corporations’ profit margins.

Or, according to the editorial, "to state this more simply, profits are up because wages are down. That’s not the only reason profits are up — innovation and offshoring factor in as well — but among the reasons, it’s a doozy."

Indeed it is a doozy and as inflation begins to take hold of the American worker at his dinner table, the American employee will reach for help anywhere he can get it.



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