Sunday, September 18, 2011

Welcome To The New America

In an Opinion piece by Harold Meyerson, he quotes Michael Cembalest, chief investment officer of J.P. Morgan Chase, as saying
...the fact that 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 the burdens of health-care costs, environmental compliance and other regulations that are presumably weighing down these large companies.
 This is no surprise.  It has been reported in many places that corporations are doing quite well, thank you.  They are sitting on tons of cash and profits are up.  Good evidence that money and profits do not create jobs, but I digress.

So, why are corporations doing so well despite being overwhelmed with taxes, regulations, uncertainty, unions, health care costs, etc, if you believe republicans, anyway?

Well, again, according to Cembalest,
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, to state this more simply, profits are up because wages are down.
He asserted in the July 11 edition of “Eye on the Market,” the bank’s regular report to its private banking clients, if you are interested in more details.

So why have wages and benefits declined?  Meyerson suggests that "the great majority of American employers no longer have to sit down and hammer out collective bargaining contracts with their workers has contributed to the increase in profits at wages’ expense. And many of those employers want to keep it that way."


"In the real America, union elections have declined 80 percent since 1970, as employers have become adept at delaying and opposing — often by illegally threatening their workers with job loss — their employees’ attempts to unionize. In the America of 2011, there are scarcely any union organizing campaigns. There are fewer union members: Just 7 percent of private-sector employees are unionized, down from 35 percent in the 1950s. And what was the last strike you recall? The strike as a bargaining tool for workers is now the province of professional athletes, the last American employees who have enough clout even to contemplate taking a walk."

Wow!  Athletes!  That's what we have come to.  You have to be a worker making a million dollars a year to be able to go on strike.

 Corporations have neutered the workers.  They are fat and happy.  Now they are poised to take over the government.  Welcome to the New America.


  1. This post is fucking awesome Jerry, it really is.
    Corporations have neutered the workers. Not only that, they have made the entire legislative branch their bitch.

  2. The 1948 Taft-Hartley Act set organized labor on a downward trajectory. Over the years since, migration to Sun Belt states with right-to-work (for less) laws, technology, globalization and offshoring combined to further weaken not only existing unions, but the attractiveness of union membership for many workers. And of course, a union-busting industry has grown up to serve businesses trying to rid themselves of unions or trying to prevent unionization.

    Given all that, it's a wonder we have any private-sector unions left.

    Finally, in a protracted employers' market, unions are usually reluctant to strike. It's just too easy for the company to bring in scabs and keep the scabs.

  3. So do you guys think that the union had nothing to do with the destruction of the Post Office ?

  4. OK, witless. Here is your chance. Please explain to us, with references, how the union has destroyed the Post Office.

  5. Jerry Critter,

    I am grateful for any opportunity to instruct you Progressives in the economics of failure . Now in fairness to the union involved, this is primarily a management failure. Actually that is wrong. Apparently there are four unions involved.

    The real problem is that for too long the Postal Service had no competition. A business in a competitive industry would never have agreed to no layoff clauses. With mail volume down, this is suicidal.

    Wages and benefits for postal workers is $79,000, which is $ 20,000 above comparable private sector workers.

    As the business has been going backwards the unions won ever more expensive pension rights for their retirees. They believe, like fannie and freddie that Uncle Barak will bail them out of their obligations.

    Like SS and Medicare, the postal service has to change to survive. And just like in those cases, you guys will block those changes.

  6. witless,
    I am glad to see that you retracted your statement about the union destroying the post office and recognize the post office's problems as a management problem and not a union problem.