Study: Productivity up.. Workers pay, hirings down.

[SirNitram]

Link

The treatment of workers by American corporations has been worse — far more treacherous — than most of the population realizes. There was no need for so many men and women to be forced out of their jobs in the downturn known as the great recession.

Many of those workers were cashiered for no reason other than outright greed by corporate managers. And that cruel, irresponsible, shortsighted policy has resulted in widespread human suffering and is doing great harm to the economy.

“I’ve never seen anything like this,” said Andrew Sum, an economics professor and director of the Center for Labor Market Studies at Northeastern University in Boston. “Not only did they throw all these people off the payrolls, they also cut back on the hours of the people who stayed on the job.”

As Professor Sum studied the data coming in from the recession, he realized that the carnage that occurred in the workplace was out of proportion to the economic hit that corporations were taking. While no one questions the severity of the downturn — the worst of the entire post-World War II period — the economic data show that workers to a great extent were shamefully exploited.

The recession officially started in December 2007. From the fourth quarter of 2007 to the fourth quarter of 2009, real aggregate output in the U.S., as measured by the gross domestic product, fell by about 2.5 percent. But employers cut their payrolls by 6 percent.

In many cases, bosses told panicked workers who were still on the job that they had to take pay cuts or cuts in hours, or both. And raises were out of the question. The staggering job losses and stagnant wages are central reasons why any real recovery has been so difficult.

“They threw out far more workers and hours than they lost output,” said Professor Sum. “Here’s what happened: At the end of the fourth quarter in 2008, you see corporate profits begin to really take off, and they grow by the time you get to the first quarter of 2010 by $572 billion. And over that same time period, wage and salary payments go down by $122 billion.”

That kind of disconnect, said Mr. Sum, had never been seen before in all the decades since World War II.

In short, the corporations are making out like bandits. Now they’re sitting on mountains of cash and they still are not interested in hiring to any significant degree, or strengthening workers’ paychecks.

Productivity tells the story. Increases in the productivity of American workers are supposed to go hand in hand with improvements in their standard of living. That’s how capitalism is supposed to work. That’s how the economic pie expands, and we’re all supposed to have a fair share of that expansion.

Corporations have now said the hell with that. Economists believe the nation may have emerged, technically, from the recession early in the summer of 2009. As Professor Sum writes in a new study for the labor market center, this period of economic recovery “has seen the most lopsided gains in corporate profits relative to real wages and salaries in our history.”

Worker productivity has increased dramatically, but the workers themselves have seen no gains from their increased production. It has all gone to corporate profits. This is unprecedented in the postwar years, and it is wrong.

Having taken everything for themselves, the corporations are so awash in cash they don’t know what to do with it all. Citing a recent article from Bloomberg BusinessWeek, Professor Sum noted that in July cash at the nation’s nonfinancial corporations stood at $1.84 trillion, a 27 percent increase over early 2007. Moody’s has pointed out that as a percent of total company assets, cash has reached a level not seen in the past half-century.

Executives are delighted with this ill-gotten bonanza. Charles D. McLane Jr. is the chief financial officer of Alcoa, which recently experienced a turnaround in profits and a 22 percent increase in revenue. As The Times reported this week, Mr. McLane assured investors that his company was in no hurry to bring back 37,000 workers who were let go since 2008. The plan is to minimize rehires wherever possible, he said, adding, “We’re not only holding head-count levels, but are also driving restructuring this quarter that will result in further reductions.”

There can be no robust recovery as long as corporations are intent on keeping idle workers sidelined and squeezing the pay of those on the job.

It doesn’t have to be this way. Germany and Japan, because of a combination of government and corporate policies, suffered far less worker dislocation in the recession than the U.S. Until we begin to value our workers, and understand the critical importance of employment to a thriving economy, we will continue to see our standards of living decline.

AN interesting glimpse into the real players of employment and unemployment, and how the situation is changing.

[ShadowDragon8685]

The crux of this situation, then, seems to be that corporations have decided to forsake everything in pursuit of massive cash deposits. They're pissing in the face of the American public and calling it rain.

Instead of trickle-down, we have tinkle-down/flood-up economics... >_<

There doesn't seem to be any workable solution. Congress is too well-bought to enact regulation, the regulators aren't interested in regulating, and a staggeringly huge portion of the American public is quite happy to receive the thin stream of yellow with open mouth and beg for more.

[CaptainChewbacca]

Dude...

Way to overwork a metaphor Shadow. I feel really creeped out now.

[ShadowDragon8685]

Dude...

Way to overwork a metaphor Shadow. I feel really creeped out now.

May I sig this?


Anyway, it's a frustrating thing. The assholes with money have the legislature more or less bought and paid for thanks to the way modern campaigning is conducted. The regulatory agencies who should be enforcing the rules don't seem to give a rat squeezing, and a frighteningly large segment of the population is more than happy to shriek in favor of the businesses that are choking them, decrying any attempts to improve their lot as evil socialism.

And I don't see any way to fix things. Even if the legislature could be reminded that their power is that of the people, not the plutocracy, even if the regulatory agencies could be swept clean and firebrands who won't take shit from no company suit installed with a mandate to take no prisoners, these companies in question would just pack up shop and piss off.

[CaptainChewbacca]

Feel free to sig it. I am hopeful that while most of corporate America is hiding behind walls of inactivity a few companies will start to take risks and tap into the markets that are waiting to be expanded. Once real growth starts happening, you'll see hirings go back up.

[ShadowDragon8685]

Feel free to sig it. I am hopeful that while most of corporate America is hiding behind walls of inactivity a few companies will start to take risks and tap into the markets that are waiting to be expanded. Once real growth starts happening, you'll see hirings go back up.

Isn't the problem that they've figured out that the American public is the stone you can squeeze blood out of? They fire vast swathes of the work force, drive even more of them unemployed or into chronic underemployment, tell everyone else they're lucky to be employed at all, and the remaining employees bust hump and work harder to fill in the gap at their normal wages just so it doesn't become them up for the chop next. They're having growth, and getting away with vastly overworking an insufficient number of people.

Basically, they've slashed and burnt their employee pool, and scared the rest into emergency mode. It can't last, but companies never take a long view on anything. They're the ultimate exercise in short-sightedness.

[PainRack]

So..... who will buy American goods? Hell, who will buy Chinese/German/British goods? Or are we going to rely on the Chinese to buy up everything..... this when their own industry is producing so much stuff that they're relying on world markets to soak up the excess?

[Norseman]

Feel free to sig it. I am hopeful that while most of corporate America is hiding behind walls of inactivity a few companies will start to take risks and tap into the markets that are waiting to be expanded. Once real growth starts happening, you'll see hirings go back up.

What markets waiting to be expanded?

[Patrick Degan]

I am hopeful that while most of corporate America is hiding behind walls of inactivity a few companies will start to take risks and tap into the markets that are waiting to be expanded. Once real growth starts happening, you'll see hirings go back up.

They don't have to. For as long as large corporations have obscenely huge cash reserves and profits continue to expand untied to actual employment, there is absolutely no incentive to change the present business model.

[Norseman]

I am hopeful that while most of corporate America is hiding behind walls of inactivity a few companies will start to take risks and tap into the markets that are waiting to be expanded. Once real growth starts happening, you'll see hirings go back up.

They don't have to. For as long as large corporations have obscenely huge cash reserves and profits continue to expand untied to actual employment, there is absolutely no incentive to change the present business model.

If America was a normal country there'd be one very good reason to change.

[MKSheppard]

This is nothign new. I posted something very similar about 2.5 weeks ago.

Link

I've also read elsewhere that basically with a multinational corporation with offices in both the US and EU; when cutbacks (read firings) need to be made; the American side of the business gets it in the neck first; since it's so much harder to fire someone in Europe.

One take that I've seen put forth is that due to the drying up of credit and the bills being passed recently by Congress (HCR, FinReform etc) -- the US labor market is becoming more like that of Europe's, where hires are made as infrequently as possible.

[Stark]

Except hiring is 'infrequent' in Europe (and the rest of the Western world) because of worker's rights and industrial relations, not because of a lack of credit.

The OP shouldn't surprise anyone; corps are playing it safer in the wake of a catastrophe. It'd be foolish to hire a shitload of guys if it really IS going to continue to get worse.

[General Zod]

Except hiring is 'infrequent' in Europe (and the rest of the Western world) because of worker's rights and industrial relations, not because of a lack of credit.

The OP shouldn't surprise anyone; corps are playing it safer in the wake of a catastrophe. It'd be foolish to hire a shitload of guys if it really IS going to continue to get worse.

Not to mention, when you're not sure if you'll still have a job in the near future you're almost certainly going to work harder to keep it if you value having your job, regardless of the benefits.

[Big Phil]

Has anyone conducted a similar study of small businesses? Is this trend of laying off more workers than necessary, while simultaneously cutting benefits and wages economy-wide, or is it just something that large corporations are doing? And are small businesses also seeing similarly obscene revenues, or are they just squeaking by?

[Stravo]

A little detail about the stimulus that some people may not be aware of is one I discovered while reading an article in the NY Times IIRC last week they made mention of how the economy was slowing down especially in regard to hirings and one factor may be that business owners took advantage of one of the programs available that made the purchasing of efficiency raising machines much easier and cheaper - so instead of encouraging people to be hired the stimulus actually encouraged factory owners and others to buy machines in place of employees. Nice.

[Kanastrous]

Do you suggest an ethical obligation on small employers' part to avoid mechanization where it can make them more competitive, so as to make more jobs available whether it's good for their business, or not?

[Stravo]

Do you suggest an ethical obligation on small employers' part to avoid mechanization where it can make them more competitive, so as to make more jobs available whether it's good for their business, or not?

I do not expect our government to subsidize mechanization at a time of record unemployment.

[Simon_Jester]

Do you suggest an ethical obligation on small employers' part to avoid mechanization where it can make them more competitive, so as to make more jobs available whether it's good for their business, or not?

In times of economic disaster, I for one suggest an obligation on the government's part to subsidize employment, not mechanization. If people take money the government gave them in hopes of kick-starting employment and instead use it for mechanization, they are misusing the funds. At which point you can make a case for betrayal of the public trust.

[General Zod]

Do you suggest an ethical obligation on small employers' part to avoid mechanization where it can make them more competitive, so as to make more jobs available whether it's good for their business, or not?

I do not expect our government to subsidize mechanization at a time of record unemployment.

That seems like partly a misstep on the government's part, for not putting stricter stipulations on how the funds can be used.

[Kanastrous]

Agreed to all of the above.

[J]

Has anyone conducted a similar study of small businesses? Is this trend of laying off more workers than necessary, while simultaneously cutting benefits and wages economy-wide, or is it just something that large corporations are doing? And are small businesses also seeing similarly obscene revenues, or are they just squeaking by?

Small business isn't doing well. There's various surveys of small businesses and all of them are ugly. I'll link & excerpt from the latest Gallup survey.

http://www.gallup.com/poll/141692/Wells ... Business#1

The sharp deterioration in small-business owners' economic perceptions and expectations in July is fully consistent with Gallup's tracking of a steady decline in consumer confidence over the past three months. So is the weaker-than-expected growth of the U.S. economy during the second quarter, as well as the general expectation of a further slowing of the economy during the second half of 2010.

The Wells Fargo/Gallup Small Business Index seems to be something of a precursor of future economy activity. It peaked at the end of 2006; matched that peak once more in June 2007; consistently declined thereafter as the recession deepened, before bottoming out in mid-2009; and finally, improved modestly until its July 2010 decline.

Small-business owners are the embodiment of America's entrepreneurial and optimistic spirit. As a result, their increasing concerns about their companies' future operating environment do not bode well for the economy in the months ahead. Nor do small-business owners' intentions to reduce capital spending and hiring: 17% of owners plan to increase capital spending in the next 12 months -- down significantly from 23% in April -- and 13% expect jobs at their companies to increase, while 15% expect them to decrease over the year ahead.

Big-firm earnings and global growth may drive profits on Wall Street, but small business is the major source of U.S. job creation. And most small-business owners are unlikely to hire as long as they are becoming increasingly uncertain about the revenues and cash flows of their companies in the months ahead.

[GrandMasterTerwynn]

Has anyone conducted a similar study of small businesses? Is this trend of laying off more workers than necessary, while simultaneously cutting benefits and wages economy-wide, or is it just something that large corporations are doing? And are small businesses also seeing similarly obscene revenues, or are they just squeaking by?

Small business isn't doing well. There's various surveys of small businesses and all of them are ugly. I'll link & excerpt from the latest Gallup survey.

http://www.gallup.com/poll/141692/Wells ... Business#1

So, in short, could one say that corporate America is using this as an opportunity to increase their bottom line, extract more from their employees for less, and squeeze out competing small businesses? It's like the 1800s all over again, complete with expanding rich-poor gaps, mass destitution, and robber-barons.

[Alphawolf55]

So wait they're able to get the same job done with less people and they're evil for not hiring more? Why? I mean yeah they're assholes for lowering the pay of the workers who stayed but when has it been considered evil or unethical to not hire new workers when they aren't needed?

[Serafina]

So wait they're able to get the same job done with less people and they're evil for not hiring more? Why? I mean yeah they're assholes for lowering the pay of the workers who stayed but when has it been considered evil or unethical to not hire new workers when they aren't needed?

Because property should include responsibility. In the end, you owe your success to society - without it, you could not have your company. And that alone should make you responsible for the well-being of society to a degree.

That has nothing to do with communism (tough it has with socialism). But if a company does not care about anything but money, it is simply immoral.

[ShadowDragon8685]

So wait they're able to get the same job done with less people and they're evil for not hiring more? Why? I mean yeah they're assholes for lowering the pay of the workers who stayed but when has it been considered evil or unethical to not hire new workers when they aren't needed?

Because property should include responsibility. In the end, you owe your success to society - without it, you could not have your company. And that alone should make you responsible for the well-being of society to a degree.

That has nothing to do with communism (tough it has with socialism). But if a company does not care about anything but money, it is simply immoral.

Not to mention short-sighted. People get desperate enough, their lot gets bad enough, they want to work badly enough and nobody will hire them, well...

Around then is where notions like "take the factory from the guys who own it and run it by us, for us" start to look good, not that there's that much left of a manufacturing sector in America. It's also when notions like "stand the rich up against a wall" start to look good, too.