i have always wondered why the so called recovery seems so weak, the reason now is explained in a elaborate manner in the article below, which i think in all, is due to the corp taking a bigger pie and government unwilling to take more welfare into their hands that they allow such transfer of wealth from the consumer layman to the corporates.
with lower real income, consumers can only borrow to spend or spend less, thus eventually denting corp profits in the future.
this trend will likely have a profound impact on japan as well since their corporations have even less to share with their workers as their balance sheets are in shambles. raising the inflation specter will only hurt the citizens of japan, will not heal the current ills of the jap economy and will lead to further distrust with the politicians in power and later maybe, social unrest.
April 18, 2014, 6:15 a.m. EDT
Why you can’t get a raise — it’s simple
You
deserve it, but you can’t make your boss pay you more
By Rex Nutting,
MarketWatch
MarketWatch
The share of current output that
goes to workers as wages has fallen to a record low of 57%.
WASHINGTON (MarketWatch) —
For 24 million Americans, the biggest economic question is: “Where can I get a
decent job?
For 146 million Americans, the
biggest question is: “How can I get a raise?”
Wages and salaries are stagnant,
failing to keep up with the rising cost of living. And it’s been that way for
years. Median weekly wages of full-time workers, after adjusting for inflation,
are no higher today than they were in 2001, and are just $1 more a week than
they were in 1979.
Why can’t I get a raise? Ask
your boss and he’ll tell you one of three things:
• The company can’t afford it.
• You don’t deserve it.
• You can’t make me.
Takeaways from banks'
first-quarter earnings
As we’ll see, only the third
reason makes sense. Bosses have all the bargaining power when it comes to
wages. As a worker, you’re competing against those 22 million Americans who
want a good job, plus millions — perhaps billions — here and abroad who’d be grateful
to do your job for less.
The company can’t afford it.
Maybe your boss tells you that
he’d like to pay you more, but he just can’t afford it. Extreme global
competition, and onerous regulations and taxes are
eating me alive, he says. The bottom line? I’m paying you all I can.
While it’s true that there are
many businesses that can’t afford to raise wages because they are on the edge
of failure, most businesses are doing quite well.
For corporate businesses,
after-tax profits are at record levels as a share of national income. Since the
recession ended, profits are up 65% to $1.68 trillion last year.
Small businesses aren’t doing
quite so spectacularly, but their income is up 13% and their net worth is up
33% to $8.7 trillion since the recession ended.
And the workers? Even after a big gain in the first quarter, median
wages are down 3% since the recession ended.
At the same time that wages have
been falling, productivity (output per hour) has been steadily rising. Labor is
producing more per hour, but getting paid less.
The share of national income
that goes to labor (including the CEO’s salary and his stock options) has
plunged from about 63% to 57%. The 6% of national income that’s going to
profits instead of wages amounts to nearly $900 billion a year.
He can afford to pay you more.
You don’t deserve it.
You’re working hard, your boss
says, but you aren’t worth any extra pay. Maybe you lack some essential skills
that would make you more productive, or qualify you for a job that’s higher
paying.
Some experts, including some of
the more conservative Federal Reserve presidents, put a lot of emphasis on the
skills gap, not only as a cause of so much unemployment but also as a reason
for stagnant wages.
Economic theory suggests that
workers should be paid what they are worth and no more. And what are they worth?
Theory says it’s the value that each hour of labor provides to the firm, or the
marginal revenue product.
The more skilled a worker is,
the more revenue she brings in, and the more she gets paid. At least, that’s
the theory.
But something strange is happening
in the real world. Companies say they can’t find enough skilled workers to
hire, and they say it’s hard to retain the skilled workers they have.
The obvious solution is for them
to offer a high enough salary to attract the skills they need. That’s just
basic supply-and-demand economics. And, yet, companies are not offering higher
pay for the skills they need. Wages are not rising much for occupations said to
be in short supply.
It could be that higher pay
would exceed the worker’s marginal revenue product, but in that case, the
company didn’t really need the skills, because it couldn’t put them to use profitably.
They needed skilled workers the
same way I need a free pony.
There may be another reason for
companies’ reluctance to pay more for skills: corporate culture. Cost-cutting
has become so engrained in management’s DNA that companies have become afraid
to spend money to make money. Firms lay off skilled teams of workers, even
though they could be redeployed in profitable pursuits. Firms refuse to pay
more for skills, even though it means they are leaving revenue and profits on
the table.
It makes no sense, but that’s
management for you.
You can’t make me.
The real reason you can’t get a
raise is that the boss doesn’t have to give you one. You might be “worth” it,
and the company could “afford” it, but businesses pay only what they have to
and not a penny more.
There are a billion reasons you
can’t get a raise: That’s how many people are willing to do your job for the
same pay.
Globalization is a big factor in
keeping wages down, of course. But you’re also competing against a lot of
people in the U.S.
It wasn’t always this way. In
the 1950s, 1960s and into the 1970s, trade barriers, strong unions and
discrimination gave workers (white male workers, that is) more bargaining power
to get higher pay. It created the middle class.
Ultimately, however, it helped
enable the great inflation of the late 1970s.
The 1980s changed all that.
Wages stagnated, as the U.S.
And, then, in the 1990s,
something strange happened: The Fed consciously decided to let unemployment
fall to 4%. And wages rose for the first time in 20 years, because workers were
no longer competing against millions of desperate job seekers.
Best of all, higher wages didn’t
come at the expense of lower profits or higher inflation.
We’re a long way from 4%
unemployment, especially considering the millions who might join the labor
force if they thought there might be a job for them. Let’s insist that the Fed
let us get there again.
It turns out that, if you want a
raise, the best thing to do is get your neighbor a job.
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