Tuesday, July 17, 2007

The rich get richer and auto negotiations

The following is excerpted from Mortimer Zuckerman article that first appeared in U.S. News and World Report, June 11, 2007.

President Bush and his advisers who continue to be puzzled that working and middle class folks are dissatisfied with the economy should read it. Oh I forgot, he doesn't read magazines and newspapers!

That's too bad. Because this article neatly sums up how our winner take all economy is leaving more and more people behind!

The New York Times reports that the United Automobile Workers Union is starting negotiations with GM, Ford and Chrylser (or whatever it is called these days!).

Because of the number of layoffs, there are now more retirees in the Big Three than there are active workers. This means that healthcare and pension benefits will be a major focus of these upcoming talks.

The high cost of healthcare (more expensive in the US than in any other country) is born by the employer in our privatized system. It increases their cost of production, $1500 per vehicle for GM. It creates a significant competitive disadvantage.

The Big Three's would benefit if the federal government assumed these costs. But auto executives have not joined the growing reform coalition for universal healthcare.

That's because the men who run Ford, GM and Chrylser are country club guys. And country club guys support their class brethren.

They remain silent about healthcare reform while their companies tetter on the verge of bankruptcy, But they won't be silent in negotiations. When its working class men and women sitting across the table, they will shout loudly that they need concessions from their current employees and retirees. Class solidarity at the top and, as Doug Fraser, former UAW president said in 1978, one sided class war against labor at the bottom!

The negotiations focusing on legacy costs (a euphemism for benefits deferred) will raise the economic anxiety level of the nation's working people. Wall Street, on the other hand, will recline, cigar in one hand, martini in the other, as the Dow climbs past 14,000!

Uneasy in the Middle

By Mortimer B. Zuckerman

"The American middle class is worried-and with reason.

Middle-class workers have long been the foundation of American society. In recent decades, they have seemed more prosperously buoyant than ever, living in bigger houses with a panoply of utilities, gadgets, and entertainment systems.

So why the angst?

The roots are primarily economic. Even in these boom times, anxiety levels rival those of the early Reagan recession years. In particular, people have great and growing fear about losing their jobs. And we are at one of the rare points in our history when Americans have stopped dreaming of a better life for their children. Now the hope is negative: that their children won't be forced into a lower standard of living. Americans used to feel sure each generation would do better than the last˜but someone has run away with the ladder.

Now the middle class lives with the same uncertainties that dog the poor. So close do many feel to the economic margin that they fear they're but one illness or one job loss away from catastrophe.The paranoia is not idle. In the 1970s, a family had a roughly 7 percent chance of its income dropping by half or more. Today the odds are 17 percent. Almost two thirds of workers believe that it is harder to earn a decent living now than it was 20 or 30 years ago, according to the Pew Research Center.

Workers with fewer years of formal education feel it most, as earnings of the college educated have about doubled compared with high school graduates. Yet the public education system, once the great equalizer, is perceived to be deteriorating, even as it has become dramatically harder to finance a college education.


The economy as a whole is performing well, but most people are not sharing in it. In 2005, the average income of those in the "bottom" 90 percent of the economy dipped from the year before. That's just one broad indicator of the problems confronting many of the groups within that 90 percent˜no college education, single parent, minority.

Meanwhile, at the top end of the economic spectrum, the gains have been spectacular. Just look at CEO pay, for example, which has risen in the past decade at triple the rate of the median worker's pay.What is clear is that our richest 10 percent have gained the most. That top slice now receives 44 percent of pretax income, the highest since the 1920s and 1930s, and up from 32 percent between 1945 and 1980. The richest 1 percent has done even better, with pretax income growing from 8 percent of national income in 1980 to 17 percent in 2005. Another way to look at it is that the richest 1 percent of Americans took in 21.8 percent of all recorded income in 2005˜double their share in 1980.

This means that the 300,000 Americans at the top made almost as much money as the 150 million Americans at the bottom. Along with sluggish median earnings, these 150 million are having to meet rising healthcare costs no longer funded by government and employers.

Even Americans who went to college are now experiencing the kind of income instability high school dropouts faced in the 1970s. And many fewer can count on the fixed-benefit plans provided by larger firms: Fewer than about a third provide such benefits today, compared with 80 percent 30 years ago. Millions of people are now on their own to ride the economic roller coaster...."

This story appears in the June 11, 2007 print edition of US News & World Report.]

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