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Tuesday, 05 March 2013 10:35

Wall Street Soars with Wealth as Wages Stagnate, Jobs Remain in a Slump

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MARK KARLIN, EDITOR OF BUZZFLASH AT TRUTHOUT      money890 Stiffing the Working Class

A recent New York Times (NYT) business article confirms a commentary that BuzzFlash wrote, "A Tale of Two Economies: Skyrocketing Stock Market for the Rich, Devaluation of Work for the Rest," in September of 2012

The March 4 NYT headline lays it out bluntly: "Recovery in U.S. Is Lifting Profits, but Not Adding Jobs." But it's really worse. It's not just that the nation is at a relative plateau of joblessness. Even those who are employed are finding that their wages are not growing relative to the explosion in corporate profits.

The grim figures in terms of the working class speak for themselves in the NYT story:

As a percentage of national income, corporate profits stood at 14.2 percent in the third quarter of 2012, the largest share at any time since 1950, while the portion of income that went to employees was 61.7 percent, near its lowest point since 1966. In recent years, the shift has accelerated during the slow recovery that followed the financial crisis and ensuing recession of 2008 and 2009, said Dean Maki, chief United States economist at Barclays.

Corporate earnings have risen at an annualized rate of 20.1 percent since the end of 2008, he said, but disposable income inched ahead by 1.4 percent annually over the same period, after adjusting for inflation.

As BuzzFlash at Truthout noted in "A Tale of Two Economies" last autumn:

However, what is more important than the unemployment rate is the overall degradation of work and wage stagnation and decline under the current corporate and business climate that devalues labor.  Since around 1990, the working class has been paid less on an inflation-adjusted basis while accumulating more debt.   So even if one has a job in the labor force, if you are among the lower 99% the odds are that you have been feeling economic stress and anxiety for some time….

This is the primary story of economic distress in the United States at this time: the devaluation of those who are paid by the hour….

After all, we have two economies – and one of them you barely hear about as billionaires whine about the threat of higher taxes on their wealth.  The second economy, the economy of the privileged, is booming.  The other day the stock market reached near record highs.  

A September 6th [2012] Bloomberg story states it quite clearly: "The $1.9 trillion restored to U.S. equity prices in 2012 has pushed the Standard & Poor’s 500 Index within 10 percent of a record, more than 7 percentage points closer than any country among the world’s biggest stock markets."

The rich are making out like bandits in the booming Wall Street economy that is based on profits squeezed out of firing workers, lowering net wages (adjusted for inflation), and outsourcing jobs to exploited labor overseas.  There is no crisis in the top 1%; there is only increasing wealth.   In that second economy, the financial returns are rising like a high tide.  The rich are not living in a recession; they are living in a gilded-age-bubble of increased profits and assets.

If it is true that the richest 400 people in the US own more wealth than the bottom 185 million, that imbalance is increasing, not decreasing.

That is the story of the tale of two economies….

The New York Times, which is more often than not a puff piece for Wall Street, appears to have arrived at the conclusion BuzzFlash at Truthout did, only about six months later.  Indeed, the March 2013 NYT article begins with these observations:

With the Dow Jones industrial average flirting with a record high, the split between American workers and the companies that employ them is widening and could worsen in the next few months as federal budget cuts take hold.

That gulf helps explain why stock markets are thriving even as the economy is barely growing and unemployment remains stubbornly high.

With millions still out of work, companies face little pressure to raise salaries, while productivity gains allow them to increase sales without adding workers….

The result has been a golden age for corporate profits, especially among multinational giants that are also benefiting from faster growth in emerging economies like China and India.

These factors, along with the Federal Reserve’s efforts to keep interest rates ultralow and encourage investors to put more money into riskier assets, prompted traders to send the Dow past 14,000 to within 75 points of a record high last week.

In this case, BuzzFlash at Truthout would have preferred to have been wrong about its conclusions months back.  After all, it is not pleasant or reassuring to see "the paper of record" confirming that the workers of America are financially suffering and have been for years.

It's just that the New York Times has finally gotten around to noticing the tale of the two economies – and the harsh economic impact on those who are not living the good life amidst champagne and caviar.  As the stock market soars, those who labor for a living are left further and further behind.

(Photo: Muffet)