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Class war USA

February 10, 2006 | Pages 6 and 7

ALAN MAASS reports on why Corporate America is making record profits--and why U.S. workers face an increasingly difficult struggle to make ends meet.

EVEN WAL-Mart's corporate mouthpieces were taken by surprise. When a new store opened up just south of Chicago, the aggressively nonunion and notoriously cheap retail giant had 325 positions to fill. More than 25,000 people applied.

"In our typical hiring process, you're pretty successful if you have 3,000 applicants," said a company official. "They were really crowing about 11,000 in Oakland, Calif., last year. So to get 25,000-plus applications and counting, I think is astonishing."

The long lines to apply for a Wal-Mart job--where the average wage for a cashier is $7.93 an hour, and less than half of the company's 1.3 million U.S. employees have health insurance--are the real symbol of the U.S. economy today.

"Our economy is healthy and vigorous," George Bush claimed in his State of the Union speech. For the bank accounts of the rich and powerful maybe. But the majority of people in the U.S. are falling further behind.

According to Jared Bernstein of the Economic Policy Institute (EPI), the last several years have seen an "unprecedented gap between the pace of overall economic progress and the returns to working people."

The statistics show that workers are being hit squarely in their wallets. According to the Bureau of Labor Statistics, the median hourly wage dropped by 1.3 percent during 2005, after accounting for inflation. Those at the bottom of the ladder suffered the most--real hourly wages at the 10th percentile on the income scale (where 10 percent of workers make less and 90 percent make more) fell by 1.9 percent.

Most households are poorer today than at the beginning of the decade. Median household income (adjusted for inflation) fell every year between 1999 and 2004, ending up almost 4 percent lower. Individual states in the industrial Midwest have suffered depression-like declines. In Michigan, real household income dropped by 18 percent between 1999 and 2004.

The consequences are grim, especially for the most vulnerable in society. The number of people living in poverty has increased by 5.4 million since 2000. The U.S. poverty rate is up from 11.3 percent in 2000 to 12.7 percent in 2004--the child poverty rate is similarly up from 16.2 percent in 2000 to 17.8 percent in 2004.

The number of Americans without health insurance has climbed by 6 million since 2000--the result of companies cutting back on providing health coverage for workers. As of last year, only 60 percent of companies provided health care for their employees, down from 69 percent five years before.

Workers are making up the shortfall by going deeper than ever into debt. Even after adjusting for inflation, the debt of U.S. households is up by a whopping 35.7 percent over the last four years. Mortgage and consumer debt is significantly higher than total after-tax household income, and the percentage of income going toward paying off these debts is now at an all-time high of more than one in every eight dollars.

Bush and the Republicans point to employment growth as a positive sign for the economy as a whole, but a closer look at the jobs picture tells a different story.

For example, the Bureau of Labor Statistics reported last week that private-sector employment increased by 194,000 in January--a seemingly solid performance, if lower than economists expected.

But only 7,000 of those net new jobs were in manufacturing, where wages and benefits are still the best. The big increases were in construction (a gain of 46,000) and especially services (a gain of 135,000), the lowest-wage sector of the economy.

This has been true throughout the Bush years. Roughly one in every six jobs in manufacturing has disappeared since 2001--a net decline of 2.8 million. The well-publicized mass layoffs of union workers in the auto industry, for example, aren't the exception in industrial America--they're the rule. The difference has been made up by employment growth in the service sector.

In fact, the overall net growth in private-sector employment--a net increase of 2 million between 2001 and the projection for the end of 2006--is almost entirely accounted for by the increased military budget, which the EPI estimates will create 1.5 million private-sector jobs.

Even setting aside the question of what kinds of jobs are being created, the net increases are extremely weak compared to past economic periods. For example, last year's total of 2 million new jobs represents an overall gain of 1.5 percent, less than half the increase at a similar point during the recovery of the 1990s--which itself was known as the "jobless" recovery because employment was so slow to increase.

If all these statistics confirm why a majority of people believe, according to a January Gallup poll, that the U.S. economy is getting worse, it isn't hard to see who might think things are looking up.

Simply put, the money that's disappearing from working people's paychecks is showing up on the bottom lines in Corporate America.

During this recovery, increases in corporate income have been radically skewed toward profits. According to an analysis by the EPI, in five previous recoveries, the share of corporate income growth going to profits was 25 percent--still a hefty sum--while three-quarters of the growth went to compensation. In this recovery, however, 59 percent of increased income went to profits, compared to 41 percent for compensation.

Top executives have gratefully accepted big pay increases--average CEO compensation went up almost 25 percent in two years, climbing from an already obscene $7.8 million in 2002 to $9.6 million in 2004.

Overall, control of those profits is becoming even more concentrated in the hands of the super-rich. According to an analysis by the Congressional Budget Office, the richest 1 percent of U.S. households--with annual incomes ranging from $237,000 into the billions--owned 57.5 percent of corporate wealth as of 2003. That percentage of ownership has grown by half since 1991--while the share of corporate wealth for every group below the top 1 percent fell.

The already enormous gap between rich and poor in America has become a Grand Canyon. In every part of their lives, U.S. workers are having a harder time making ends meet--while the fantastic wealth of a tiny few grows even more obscene.

Wal-Mart's plea for the working poor

ONE CORPORATE announcement late last year cast a spotlight on the scale of the crisis for working America--because it was so absurd.

Wal-Mart, the king of low-wage employers, declared that it was urging Congress to pass a law increasing the minimum wage--and "other legislation that can help working families," CEO Lee Scott said in a speech.

"We can see firsthand at Wal-Mart how many of our customers are struggling to get by," Scott continued, apparently with a straight face. "Our customers simply don't have the money to buy basic necessities between paychecks."

Tracy Sefl of the union-backed Wal-Mart Watch pointed out that Scott's new position on the minimum wage hasn't led him to fire "lobbyists such as Lee Culpepper, who oppose raising the minimum wage." "[W]hen a comment on raising the minimum wage is dashed off and it flies in the face of Wal-Mart's own corporate stance, that's laughable," Sefl told CNN.

Wal-Mart certainly doesn't do much to keep its own employees from struggling to get by. The most common job at Wal-Mart--sales associate--pays an average of $8.23 an hour, and the average workweek is around 30 hours. Over 52 weeks, that adds up to an annual income of $12,839--which is almost exactly the same as the official poverty line for a two-person family.

And as long as they can be kept at less than 34 hours a week, Wal-Mart employees are classified as part-time--which delays their access to benefits like health insurance.

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