How About A Little Something For The Effort Corporate America?

Submitted by Lawrence Rafferty, Guest Blogger


No matter which side of the political fence you sit on, it seems undeniable that corporations are reaping large profits at the expense of workers and Americans. In the past, we have discussed the issue of Corporate America paying little or no taxes here on Prof. Turley’s blog.  It seems that the corporate “hits” just keep on coming.  If you thought that Corporations are sitting on large amounts of cash and not using it to expand jobs or wages here in America, a recent study by Northeastern University just confirmed your hunch.

“Between the second quarter of 2009 and the fourth quarter of 2010, real national income in the U.S. increased by $528 billion. Pre-tax corporate profits by themselves had increased by $464 billion while aggregate real wages and salaries rose by only $7 billion or only .1%. Over this six quarter period, corporate profits captured 88% of the growth in real national income while aggregate wages and salaries accounted for only slightly more than 1% of the growth in real national income. …The absence of any positive share of national income growth due to wages and salaries received by American workers during the current economic recovery is historically unprecedented.”  The Jobless and Wageless Recovery   If I understand the figures correctly, corporations have not only refused to create new jobs here in the States, they have also refused to share their profits with their workers.   Should I be surprised that corporations are greedy?  I guess not, but I would think that wages and salaries would have gone up by more than the 1% in the six quarters discussed in the above noted study.

The New York Times discussed this study recently and stated that this lack of income and job growth during a post-recession recovery is unprecedented.  “The study, “The ‘Jobless and Wageless Recovery’ From the Great Recession of 2007-2009,” said it was “unprecedented” for American workers to receive such a tiny share of national income growth during a recovery.  According to the study, between the second quarter of 2009, when the recovery began, and the fourth quarter of 2010, national income rose by $528 billion, with $464 billion of that growth going to pretax corporate profits, while just $7 billion went to aggregate wages and salaries, after accounting for inflation.  The share of income growth going to employee compensation was far lower than in the four other economic recoveries that have occurred over the last three decades, the study found.  ‘ “The lack of any net job growth in the current recovery combined with stagnant real hourly and weekly wages is responsible for this unique, devastating outcome,” wrote the report’s authors, Andrew Sum, Ishwar Khatiwada, Joseph McLaughlin and Sheila Palma.” ‘   New York Times

In light of the fact that we are heading into the July 4th Independence Day holiday, wouldn’t it be appropriate for Corporate America to grant Independence from this recession to its workers by giving them a fair piece of the pie from their profit largess?  Wouldn’t it also be proper for Corporate America to start creating jobs here in America using some of this windfall which would only create more demand for their products and create even more profit?  Am I asking too much from American corporations?  What do you think?

Additional Source:  Think Progress

25 thoughts on “How About A Little Something For The Effort Corporate America?”

  1. BIL:

    ” Overbuilt and unoccupied buildings generate insufficient revenue to pay the bills.”
    In my travels around the state(N.J) where we once had Industrial Parks etc,you see this and it is really sad for you also see where towns sprang up around these buildings and now its like a ghost industrial area.And towns are now talking about sharing services Police ,Fire etc.

  2. 400 individuals control the same amount of wealth as 150,000,000 individuals – why can’t the 150,000,000 march to DC and demand redistribution of the wealth of our labor and productivity?

  3. Big Banks Easing Terms on Loans Deemed as Risks from the NYT

    Two of the nation’s biggest lenders, JPMorgan Chase and Bank of America, are quietly modifying loans for tens of thousands of borrowers who have not asked for help but whom the banks deem to be at special risk.

    Rula Giosmas is one of the beneficiaries. Last year she received a letter from Chase saying it was cutting in half the amount she owed on her condominium.

    Ms. Giosmas, who lives in Miami, was not in default on her $300,000 loan. She did not understand why she would receive this gift — although she wasted no time in taking it.

    About 30% of homeowners are underwater, so if this practice becomes widespread there could be a lot more homes coming on the market as borrowers with forgiveness of principal are now able to sell and get cash. This will lower prices. It’s also likely that the new terms of these loans create more protection for lenders and clean up documentation. Unaided homeowners will resent these gifts as the practice becomes more common.

  4. LK,

    There is also trouble looming in commercial real estate as well. Lots of empty commercial space out there. Overbuilt and unoccupied buildings generate insufficient revenue to pay the bills.

  5. I keep reading that there’s a new bust around the corner- credit cards. I also know that Wall Street has not been restrained regarding risky business, it’s just morphed into another kind f risky business Suppose business is hoarding capital because it anticipates another bust, sooner rather than later, and wants to have a lot of ‘cash on hand’ to move in to expand and consolidate their holdings? I know that if a good sale is coming up I save up my money to take advantage of it 🙂

  6. Corporte profits are high because businesses aren’t investing or hiring due to the uncertain business climate. They are coasting. I’m not sure if this is the hope part or the change part.

    The uncertain business climate is due to all sorts of bad government policy and rhetotic coming from the current administration — businesses still have Obamacare, cap-and-tax and the sunsetting of the Bush tax cuts hanging over their heads. Then there are the possible cataclysms of hyperinflation, debt collapse in the offing. And let’s not forget the little matter of Medicare, Medicaid and SS going bust.

    No, I don’t see this as just another business cycle downturn. It’s like the self-inflicted problems the Roosevelt administartion had during the Great Depression.

  7. I wonder how many folks would have to take out student loans if 1) people were employed, rather than retain profits….2) the military budget is say reallocated just 1 percent….

    Thanks raff….

  8. Legal Plunder Has Many Names

    Now, legal plunder can be committed in an infinite number of ways. Thus we have an infinite number of plans for organizing it: tariffs, protection, benefits, subsidies, encouragements, progressive taxation, public schools, guaranteed jobs, guaranteed profits, minimum wages, a right to relief, a right to the tools of labor, free credit, and so on, and so on. All these plans as a whole — with their common aim of legal plunder — constitute socialism.

    Now, since under this definition socialism is a body of doctrine, what attack can be made against it other than a war of doctrine? If you find this socialistic doctrine to be false, absurd, and evil, then refute it. And the more false, the more absurd, and the more evil it is, the easier it will be to refute. Above all, if you wish to be strong, begin by rooting out every particle of socialism that may have crept into your legislation. This will be no light task. (Frederic Bastiat) “The Law”

  9. Puzzling,
    I stated in the article that jobs should be created with those billions being stashed in the corporate pockets. You may want to take a closer look at the study that I linked in the article. This is an unprecedented slow recovery, but yet corporations are hanging on to billions in cash. With all due respect the comment that corporations are waiting because of uncertainty is all wet. They hang on to the cash so their bottom lines look better and so they can pay themselves huge salaries and continue to send jobs overseas so that they can pay smaller salaries and produce their product for less, while selling it at the same or higher prices.
    A 401k or IRA doesn’t mean anything to someone who is out of work and is living day to day. Many of those long term unemployed are “borrowing” or stealing from their 401K’s, if there is anything left of them.

  10. Rafflaw,

    There’s really no reason for wages to rise at this high level of unemployment, and “real” wages are likely to fall for some time. It doesn’t make sense to pay people more if there are thousands who are qualified – or even overqualified – and locally available to replace them. Add escalating price inflation, rising taxes and level wages together and even people with jobs are going to feel poorer and poorer for many years.

    The scale of this unemployment downturn is not well understood. It’s striking in comparison to any recession going back to WW II. I’ve posted this chart previously, but here’s an updated version that shows current employment levels from peak compared to recessions past. Even 16 months off of the unemployment lows we are still worse off today than the worst levels of any recession since 1948.

    Corporate profits that aren’t immediately reinvested don’t just vanish. As profits accumulate, anyone with a pension plan, 401K, IRA or other retirement savings can be expected to benefit as shareholders of these same firms. This represents the vast majority of working Americans.

    Firms may be accumulating cash now because they are already meeting reduced demand levels in the marketplace, because of economic and regulatory uncertainty, and because they expect the future cost of borrowing to rise substantially. These are all smart bets in my view.

  11. raff,

    Thanks. Absolutely I think there is a political agenda on the part of many corporations. They seek to control the government rather than be controlled by the government as is their proper lot as legal fictions created by state charter. This is because a large part of the CEO community are sociopaths and/or criminals who either think they are above the law (pure ego) or are attempting to avoid responsibility for their crimes. Not paying their fare share of both equitable wages and taxes is just a part of the program to put government under their thumb. It’s the part that causes simultaneous suffering in the people and deprives government of the monies rightfully due and rightfully applied to the common good. It is no secret that part of the neocon agenda is to remove the role of government for and by the people and replace it with a for (their) profit corporate model of providing services quite frankly best left under the aegis of not-for-profit government models. Because at the heart of the matter, they are thieves. And what they seek to steal is our democracy so they can profit by privatization.

  12. And lawyers haven’t been this popular
    Since Robespierre slaughtered half of France…

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  13. Buddha,
    Welcome back. I agree that proper doesn’t compute to CEO’s, but is there any agenda involved as Lotta seems to be suggesting?
    eniobob, thanks for the link. The CEO compensation is an aspect of the income not going to the rank and file, but only part of it.

  14. raff,

    Proper and profitable are often at odds with one another but especially when CEO egos are factored in to the equation.

  15. “The lack of any net job growth in the current recovery combined with stagnant real hourly and weekly wages is responsible for this unique, devastating outcome,” wrote the report’s authors, Andrew Sum, Ishwar Khatiwada, Joseph McLaughlin and Sheila Palma”

    Actually from chart #10 it appears that annualized wages continue to fall not stagnate. It also appears that averaged working hours continue to rise which probably explains it, more hours at the same or minuscule wage increase = a net loss.

    If the disparity in profits and jobs/wages in what should be a period of recovery is unprecedented then obviously it is a deliberate period of stagnation. I attribute that to a purely political agenda on the part of corporations for the same reason the Republicans want the economy to fail- regime change.

    It’s time for the government to accomplish with taxes what the market refuses to accomplish. The fact that the Democrats have approached the budget talks with only a 6-7% rise in revenues demonstrates that they are not at all serious about fixing the economy or the cause of its problems.

  16. We Knew They Got Raises. But This?
    “A preliminary examination of executive pay in 2010, based on data available as of April 1, found that the paychecks for top American executives were growing again, after shrinking during the 2008-9 recession.

    But that study, conducted for The New York Times by Equilar, an executive compensation data firm based in Redwood City, Calif., was just an early snapshot, and there were even more riches to come. Some big companies had not yet disclosed their executive compensation.”

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