The Progressive Ensign

insights and analytics to build an economy that works for all

Category: Corporate Reform

Workers Struggling Under Credit Card Debt

Photo: finder.com.au

While consumers did pay down their credit card debt by $40 billion during the first quarter of 2018, they still owe a giant $1.021 trillion in revolving debt.  Credit card debt is at the second highest level since 2008, during the Great Recession.  Consumers piled on another $91.6 billion by the end of 2017, at a run rate of 104 % of the average over the past 10 years.

Sources: Marketwatch, WalletHub – 6/13/18

Adding to consumer woes are interest rates that are rising, adding to the servicing costs of credit card, auto loan, and student loan debts. Below the chart shows debt servicing costs as a percentage of disposable income, while mortgage debt servicing is declining consumer servicing costs are rising.

Sources: Federal Reserve, National Bureau of Economic Research, The Wall Street Journal, The Daily Shot – 6/13/18

Finally, non-supervisory worker’s wages are stuck at 2.5% and when inflation is taken into account are largely flat. As consumers continue to try and maintain their standard of living, they are taking on more revolving debt which is costing more for them to pay. This financial squeeze is sustainable as long as jobs are abundant as they seem to be now, but if the economy turns down and layoffs happen it will be hard times for workers.  A survey published today in the Wall Street Journal blog – The Daily Shot showed executives plan layoffs as the first approach to deal with tightened financial conditions and slow sales.

 Next Steps:

 Workers need to receive a living wage that is not stagnant as wages have been for the past 10 years since the recession. Over 14 % of all workers have not received a raise in the last year versus 11% prior to the recession. Stock buy backs need to end and those funds invested in raising worker wages, increasing productivity and providing job training and development.  Corporations stash over 40 % of their profits in overseas tax sheltered accounts – all those funds need to come back to the US with companies paying their fair share of taxes. Corporations are the beneficiaries of job training and education, and should pick up more responsibility in terms of taxes for apprenticeship programs on par with those in Germany to provide US workers with the advanced skills needed to obtain a good paying job and create a dual track besides college. Today, there are more job openings than candidates available to fill those jobs, we need to invest developing worker’s job skills to close the gap.

14 % of Workers Have Not Received Wage Increases In the Last Year

 

Photo: theaustintimes.com

While CEOs at the top 100 corporations received a 5 %  raise in average compensation  of  $15.7 million last year,  14 % of all workers have received no raises at all, higher than before the Great Recession. The recovery has not come for many workers.

Sources: San Francisco Federal Reserve, National Bureau of Economic Research, Haver Analytics, Marketwatch – 5/29/18

Prior to the 2008 recession there were 11 % of all workers not receiving raises, still too high but much lower when considering the size in millions of the US workforce. After the recession companies were slow to give all workers raises as the rate rose to almost 17 % without raises.  Then, over time more workers are receiving raises as the economy recovered for the top 20 % in income. Still, 14 % is still too high.  The Federal Reserve economists note that the no raise rate would have to drop to 12.5 % or so for enough wage pressure to cause a move from the present stagnant 2.5 % to increase to 3 % and cause wage push inflation.  The fact the number of employees not receiving wages is actually going up is a concern that wage raises may actually fall or stay the same.

Next Steps:

We continue to see the extreme inequity of executives and professionals continuing to receive raises, for many twice the 2 % inflation rate versus workers. The reality is that employees just do not have the same wage power that they used to. We have previously discussed the combination of factors that contribute to extreme lack of wage power for workers including: lack of union representation, automation, fewer corporations due to mergers reducing the number of jobs,  low wage H1-B visas being approved,  using profits for stocky buybacks instead of investment in productivity increases, Internet recruiting nationwide and worldwide for some positions, and the shift to outsourcing jobs and the gig economy.

We recommend the following actions be taken by Congress and Corporate Leaders:

  1. Place Workers on Boards– as Germany has so effectively setup, engaging management with required representation of workers on Boards.
  2. End Outsourcing– corporations would pay 50 % tax on each job moved overseas making the move costly, encouraging corporations to move jobs to low cost or inland areas of the US, or innovation economic zones (special tax geographies) and to invest in worker training to receive training tax credits.
  3. End Low Cost H1-B Visas– the practice of importing inexpensive labor to drive down wages in US markets would be ended.
  4. Offer Lower Taxes on Repatriated Funds– only if the profits from overseas are invested in productivity actions, increasing wages of workers (not executives), reducing costs or innovation. Stock buybacks or dividends would be prohibited.
  5. End Stock buybacks– these funds are totally wasted, mislead investors on earnings reports and only serve to increase compensation for executives and shareholders. These funds are better allocated to increase worker wages or increase productivity so workers can receive higher wage increases.
  6. Breakup Oligopolies– breakup market concentrations in key sectors: information technology, banks and financial services, health insurers, airlines, hospitals and clinics, entertainment, media and distribution and others as deemed in the public interest.
  7. Balance Job Market Process– require companies over 100 employees to offer information on their website for contacts, phone numbers, job listings with identified contacts, and to let the candidate know the status of his consideration, and candidate introductions held monthly for F2F communication.
  8. Balance Worker and Executive Pay– tax corporations 25 % surcharge on any corporate income where any executive makes greater than 150 % than any the average worker wage – this would force executives to share their income with workers while not increasing costs. End federal tax deductions on corporate income taxes for executive stock compensation above $1 million. End golden parachute packages by taxing 50 % of every dollar received above $1 million. Severance packages for workers would have to be in proportion to the highest executive package ie, executive receives 10x of monthly salary a worker would receive 10x of his/her monthly salary.
  9. Fund Worker Training and Increase Wages – for each robot employed, the corporation would be required to offer training, skills development for the displaced worker to find a comparable job within the company or outside. Where automation software or technology is deployed 10 % of the realized cost benefit would be used to raise the wages of all workers in the company.

Activists Push Environmental Corporate Reform at McDonalds

 

Image: thepeoplesconvention.org

We believe corporate behavior will most likely only change when shareholders demand change through corporate reform.  While some farsighted companies are moving to all sustainable materials for their packaged goods McDonalds has been slow to make it happen.

McDonalds says it is willing to move to eliminate plastic straws by 2025 – seven years from now.  That timeframe is just too late.  There are plastic straw substitutes like biodegradables are available now made from starch, corn or bamboo. The giant restaurateur has been dragging on making shift.  Plastic in our oceans is a huge problem, destroying habitat for ocean creatures and fouling their food sources multiplying each year by 8 million metric tons.

Source: The Ocean Conservancy – 5/24/18

We applaud the plastic straw proposal by SumOfUs, corporate reform activists, obtaining 450,000 signatures to qualify for a shareholder vote.

Corporate decision making must continue to be monitored, and when a decision is making our planet more uninhabitable it must be changed to make our life here sustainable.  The reality is that those profits are not going to matter in a planet where our environment is destroying the world we live in placing people world-wide in jeopardy of shortened life spans.

Unfortunately, today the plastic straw proposal only received 8 % of shareholder votes.  The vote of major shareholders and institutions against the proposal shows there is still work to be done to in corporate reform.   We are pleased to see major institutions, like Blackrock, where CEO Larry Fink has demanded that companies they invest in get more engaged in environmental issues and ‘how’ they make money not just make money. When CEOs at major companies see that it is in their interest to move the paradigm of environmental protection ahead then we will know that they are listening to us, the people, rather than Wall Street. Corporations and the wealthy control Congress so we need to go directly to Corporate Nation States to bring about real change.

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