Just how bad is it for American wage-earners? This bad:
Today, the share of the nation’s income going to wages, which for decades was more than 50 percent, is at a record low of 43 percent, while the share of the nation’s income going to corporate profits is at a record high. The economic lives of Americans today paint a picture of mass downward mobility. According to a National Employment Law Project study in 2012, low-wage jobs (paying less than $13.83 an hour) made up 21 percent of the jobs lost during the recession but more than half of the jobs created since the recession ended. Middle-income jobs (paying between $13.84 and $21.13 hourly) made up three-fifths of the jobs lost during the recession but just 22 percent of the jobs created since.
In 2013, America’s three largest private-sector employers are all low-wage retailers: Wal-Mart, Yum! Brands (which owns Taco Bell, Pizza Hut, and Kentucky Fried Chicken) and McDonald’s. In 1960, the three largest employers were high-wage unionized manufacturers or utilities: General Motors, AT&T, and Ford.
Harold Meyerson blames the death of unions:
The collapse of workers’ power to bargain helps explain one of the primary paradoxes of the current American economy: why productivity gains are not passed on to employees. “The average U.S. factory worker is responsible today for more than $180,000 of annual output, triple the $60,000 in 1972,” University of Michigan economist Mark Perry has written. “We’re able to produce twice as much manufacturing output today as in the 1970s, with about seven million fewer workers.” In many industries, the increase in productivity has exceeded Perry’s estimates. “Thirty years ago, it took ten hours per worker to produce one ton of steel,” said U.S. Steel CEO John Surma in 2011. “Today, it takes two hours.”
In conventional economic theory, those productivity increases should have resulted in sizable pay increases for workers. Where conventional economic theory flounders is its failure to factor in the power of management and stockholders and the weakness of labor.
The above scene is from The Queen of Versailles, a remarkable documentary that Ezra called “perhaps the single best film on the Great Recession”:
Midway through the movie, there’s a scene that might stand as the single most complete vignette on the mechanics of the financial crisis and the subsequent slow recovery. It’s almost Christmas and David Siegel, CEO of Westgate Resorts, the largest time-share company in the world, is hosting a party. The party is in his huge mansion. But it’s not in his hugest mansion — the 90,000 square foot, still under-construction “Versailles” [seen above] — which is, at that moment, falling into foreclosure because Siegel can’t keep up on the payments.
Siegel, slumped in a ratty armchair, is regaling some friends with a tale that is, simultaneously, a sob-story about the desperate state of his finances and an extended boast about his skill at financial engineering. As Siegel tells it, he owes the bank $18.5 million, and he can’t pay. But the bank won’t write down the loan. So Siegel tapped a third-party to approach the bank about buying the loan, which they were able to do, for a mere $3.5 million. And then Siegel bought his $18.5 million loan back from the third-party at barely more than a sixth of its original value. This, he says, is why the financial system — and the economy — are in the toilet.
It’s all there: The conspicuous consumption, the mania for ever-more real estate fueled by every-cheaper loans, the complicated financial engineering that made so many rich and then made their companies so poor, Wall Street’s destructive unwillingness to write down the principal on loans, and the way that, even during the depths of the recession, the rich were able to play by different rules — rules that helped them emerge from the downturn with more money than ever.
And on the other side of the spectrum?
Jackie Siegel [seen above], a beauty queen from a small town in New York, has reconnected with a high school friend. The friend didn’t move to the big city and marry a billionaire whose business relied on cheap money. But she got hit by the financial crisis nevertheless: her house is now in foreclosure. And it’s her real house, the one she actually lives in.
The bank says she needs $1,800, and Jackie sends her $5,000. But in a late-night call some time later, she confesses that she lost the house anyway. The bank, she says, wasn’t willing to reverse the foreclosure process even though she’d been able to come up with the money. There’ll be no buying her loan back at a cut-rate price.