Saturday, June 26, 2004

The Haves and the Have Mores

Title: Fahrenheit 9/11 trailer
Date: June, 2004

A friend sent this in. It is a snippet from the Fahrenheit 9/11 trailer. The president of the United States is talking at what is probably a fund raising dinner. He says:
    This is an impressive crowd. The Haves and the Have Mores. Some people call you "the elite". I call you "my base".
If you simply look at that quote, it says a lot about what is driving the concentration of wealth today.

If the Haves and the Have Mores are the president's base, then of course he is catering to them. The problem is that, for one small group to have more, a large group has to have less. Taken to extremes, as we are seeing today, it means a social and economic split that resembles colonial England - a situation characterized by a small and oppressive aristocracy and a large group of impoverished peasants.

The problem with this approach is that it is of no value. The oppressive nature of the aristocratic approach is, in large part, what caused the birth of America. Americans rejected the aristocracy and instead chose freedom and prosperity for all.

The American economy, and American citizens, would we much better off with a strong democracy made up of prosperous citizens across the board, rather than a large group of impoverished peasants. Both the citizens and the businesses that serve them will do better - the citizens because they are living comfortable lives, and the businesses because of increasing consumer and business spending.

Thursday, June 24, 2004

More evidence of today's concentration of wealth

Title: When do workers get their share?
Source: Economic Policy Institute
Date: May 27, 2004

Need proof that the concentration of wealth is accelerating right now? These three articles show the trend.

1) When do workers get their share?

From the article:
    Despite recent good news on employment growth, the current economic recovery, now approaching its third year, remains the most unbalanced on record in respect to the distribution of income gains between corporate profits and labor compensation. Essentially, rapid gains in productivity have been translating into higher corporate profits without increasing the wage and salary income of American workers.
In other words, all of the money from productivity increases is flowing to executives and shareholders. The article has a very nice graph showing how lopsided things are becoming.

2) Wealth Gap Expands In Connecticut

From the article:
    Per capita income in the state's eight wealthiest towns, all in Fairfield County, increased 31.3 percent in the 10-year period, besting the state average of 11.1 percent.

    The urban poor, meanwhile, saw their per capita income grow only 2.1 percent in the same period.
See also Harvard and the concentration of wealth.

3) Why 1.4 million new jobs haven't ended the jobless recovery

From the article:
    Consider the employment–to-population ratio, a broad gauge that measures the percentage of Americans over the age of 16 who have a job. (Data is available going back to 1948. To see the history, go here and click on the box that reads "Civilian-Employment Population Ratio" and then "retrieve data.") The ratio rose steadily in the 1990s, from 61.4 percent in January 1993 to 64.7 in the spring of 2000. In January 2001, it stood at 64.4 percent, very close to an all-time high. Since then, it has deteriorated steadily, even after the recession ended in November 2001. In May 2004, it stood at 62.2 percent, more than 2 percentage points below the rate of January 2001. Two percent may not sound like much. But we're working with very large numbers. The population is greater than 293 million, as the Census Bureau estimates today. If 64.4 percent of Americans had jobs today, as they did in January 2001, there would be nearly 4.8 million more Americans employed.
The article concludes:
    Something has plainly broken down in the American job creation machine. The supply of new jobs has been nowhere near sufficient to keep up with the supply of new workers—not for the past three years and not for the past 10 months. I don't claim to have a good explanation. Productivity growth, globalization, outsourcing, and widespread excess capacity probably have something to do with it.
Instead of spreading out, in the form of new jobs and higher wages, the wealth is concentrating. See Robotic Freedom for details.

Sunday, June 20, 2004

Harvard and the concentration of wealth

Title: Big Nonprofit Salaries Face Government Scrutiny
Source: The Chronicle of Philanthropy
Date: June 24, 2004

The article demonstrates the problems that the concentration of wealth is causing, including this one:
    At Harvard University, for instance, Terry M. Bennett, a doctor who donated $4-million to the school in 1991, has started a campaign to urge his fellow alumni to stop giving as a way to protest the salaries of investment managers of Harvard's endowment.

    Harvard officials have defended the salaries, which have gone as high as $34-million a year in one case, saying that it would cost the university more overall to have a private investment firm manage its assets. But Dr. Bennett thinks nonprofit groups should not compare themselves with for-profit companies when it comes to pay. 'I thought I was giving to a charity that was being run by the charity-minded,' he says.
It is not just "charity-mindedness." Such a salary in any charitable or non-charitable company is absurd, period.

Think about it this way. According to the 2004 World Almanac, tuition and fees at Harvard run $27,448 per year. With $34 million, 1,238 students could be given full tuition scholarships.

If there is one person at the University making $34 million, it is safe to assume that there are many others at similar salary levels. For example, this article in Investor's Business Daily points out: "The hallowed university last year paid the managers who oversees its endowment, the largest in the country, more than $100 million." $100 million is enough money to pay the full tuition of more that 3,600 students. The article also mentions:
    At The University of Texas, which has the second largest endowment in the country, pay for its lead money manager was about $750,000. Yale, with the third largest endowment, paid its chief investment officer just over $1 million.
Proving conclusively that Harvard's $100 million expenditure is truly insane.

Salaries like these, in both profit and non-profit organizations, are a huge drain on America's economy. Because of these salaries, we all pay higher prices for everything we buy. For example, there are 20,000 students at Harvard. If Harvard took the $100 million it is paying its fund managers, and did nothing else, it could lower every student's tuition by $5,000. $5,000 per student is an immense reduction in price.

Gigantic executive salaries in every major American corporation have that exact same effect on the prices of everything we buy. If we eliminated these salaries, prices would drop significantly throughout the economy. The $5,000 reduction in Harvard tuition is an 18% reduction. Imagine if the prices of everything in the American economy fell by 18% -- it would be like getting an 18% pay increase -- in fact, it would feel more like a 25% pay increase, because you purchase everything with after-tax dollars. What would change in your life if you got a 25% pay increase? That is the effect that the concentration of wealth is having on you, personally.

We, The People need to begin actively fighting against the concentration of wealth everywhere we see it. As mentioned in this post and this post, every single American and every American business will benefit significantly from spreading the wealth out instead of letting it concentrate.

Saturday, June 19, 2004

The GI Bill and the un-concentration of wealth

Title: Happy Birthday, GI Bill
Source: News and Observer
Date: June 16, 2004

The article is a look back at the benefits of the GI Bill. It's point is simple:
    The GI Bill of Rights turns 60 next week. Its impact is often noted but seldom fully appreciated. Revolutions don't produce as much social and economic change as this legislation has. Some economists will tell you the bill's higher education benefits became the building blocks of the modern American middle class.
It notes:
    In 1940, only 5 percent of the adult population had four-year degrees. A college education was too expensive for most Americans. The GI Bill changed all that. It made college possible for every veteran, regardless of economic class, ethnicity or religious background. Today, nearly 25 percent of the adult population has a bachelor's degree, and the GI Bill has a lot to do with that vast societal improvement. As if the education benefits weren't enough, veterans fueled the modern-day housing boom with their low interest, government-backed home loans.
The GI bill spread wealth out to common people, and changed millions of lives for the better. In the process, the American economy benefited from a huge pool of new consumers. What we are seeing today is the opposite -- a massive and accelerating concentration of wealth that is hurting more and more people.

When we start actively reversing the concentration of wealth, everyone in America will benefit. History has shown that many times.

[See also this post on the percentage of non-wealthy people going to college, and this post on robots and college.]

Friday, June 18, 2004

Huge amounts of money flowing to executives

Title: Readers rage over worst CEOs -- their bosses
Source: MSNBC
Date: June 16, 2004

From the article:
    In response to my request for nominations for the worst U.S. chief executives (see “The nation’s worst CEOs” ), I received nearly 1,000 emails -- many seething with resentment and disappointment about the shabby ways many top executives lead their firms, treat workers, handle shareholders and compensate themselves like a royalty class with little regard to business performance.
Some of the stories in the article show just how out of balance things now are, with executives concentrating massive wealth (at the cost of higher prices to consumers and lower wages to employees) for no reason. For example:
  • "The board of Fog Cutter announced in a regulatory filing last week that the company would continue to pay Wiederhorn’s full salary during his 18 months in prison as well as a $2 million “leave of absence” payment that equals the amount he agreed to pay in restitution to victims."

  • "What Joe Nacchio did to the company and stock price under his helm (down 95%) is amazing. I know several people that this has affected. Deaths. Divorce. Engineers that are now janitors. Nacchio was rewarded for his performance with $150 million parting gift."

  • "Burroughs, like many SBC managers who wrote in, complained that they were asked to train and fill in for union employees during a recent strike, but not compensated for the extra work -- and ended up taking pay cuts and health-insurance cuts that were worse than what the union workers received. Meanwhile, workers complained that Whitacre and his management crew voted themselves bigger pay packages."

  • “CEO compensation is the single most important factor in competitiveness of U.S. corporations. It destroys the worker morale as average employees are told their pay, their health care and their pension are too expensive for the company to deal with; yet the executive compensation continues to sky rocket. Last week, G. Richard Wagoner, the CEO at General Motors, complained that ‘Soaring health care costs are crippling the competitiveness of U.S. companies.’ . . . Meanwhile, he received a 2003 compensation package valued at $12.8 million."

  • "One target was Philip Marineau of jeans-maker Levi Strauss & Co., which in March reported a fourth-quarter loss of $245 million after sales dropped for a seventh straight year. The company, which issues debt but not stock, also restated results to cut net income from 2001 through the first half of 2003. A recent filing showed Marineau received about $27 million in compensation over the past three years despite his hand in eroding stakeholder value."
The author labels one section "The ugly side of capitalism" and notes, "[These executives] paint a picture of an ugly side of capitalism, American style; of greed and incompetence on a grand scale; of blatant self-interest at the public trough." I believe that this characterization is unfair to capitalism. The concentration of wealth occuring in America today is not caused by capitalism -- it looks far more like the corruption seen at the highest levels in communist countries of the recent past.

When capitalism is working properly, competition wrings out the greed and corruption we are seeing today. The goal of large corporations is to eliminate competition. Why is Microsoft sitting on $56 billion in cash ($560 per American household!) and crippling innovation in America's software industry? Because Microsoft is in a monopoly position and capitalism is not working in the software industry. Why are drug prices so high? Because drug companies hold monopoly positions in the drugs they sell, and they also have so much money that the have purchased politicians. Instead of looking at the interests of everyday workers and consumers, the U.S. governement has aligned itself with the wealthy and now actively encourages the concentration of wealth.

Thursday, June 17, 2004

The new model - Wages never rise

Title: Minimum-wage issue stirs debate
Source: News and Observer
Date: June 16, 2004

This article discusses the current proposal in congress to raise the minimum wage from $5.15 to $7.00. What is interesting to look at are the arguments being used against this pay increase. For example, from the article:
    Business owners and economists have sounded the alarm -- just as they did the last time lawmakers pushed for a raise. The U.S. Chamber of Commerce, the National Association of Convenience Stores and the National Federation of Independent Business are among organizations lobbying against the measure.
    With a $1.85 raise in the minimum wage, people who today make $7 or $8 an hour may see their pay jump from 50 cents to $1, he said.

    And that, opponents argue, isn't good for businesses, workers or the economy.

    "You can never get something for nothing," said Peter Arcidiacono, an economics professor at Duke University. "Businesses are going to hire less workers, and because they have to pay workers more they will probably also raise prices. A minimum wage is a really blunt instrument for dealing with poverty."
    Arcidiacono's response: Better to have a job that pays $5.60 than no job at all in a society with a weak safety net for the unemployed.
By following this logic, it is impossible to ever give rank and file workers a pay increase. Even as automation creates massive productivity increases, workers never will see the benefit.

Meanwhile, executive pay is rising at an incredible rate, with executives making millions of dollars per year. Just read the posts on executive pay in this blog, like this one (executive receives $78 million severance package) or this one (executive receives $25 million for 2 month's work), or this one (10 top executives at New York City's brokerage and financial firms get $231 million) or this one (executive at Lucent gets $44 million) or... you get the idea.

The point is, when you pay executives millions of dollars, that causes prices to go up and less employees to be hired too. But that is OK. Why, then, is it not OK to raise the pay for rank and file workers as well?

This quote from this article is important:
    Imagine a hypothetical company with 20,100 employees. At the top are 100 executives who pay themselves an average of $4 million per year. The other 20,000 employees make minimum wage -- $5.15 per hour -- for 2,000 hours per year of work.

    Those executive numbers sound top-heavy, but today they are not. Executive pay truly has been rising at a spectacular rate. For example, when Enron collapsed it had about 20,000 employees. According to the book Pipe Dreams by Robert Bryce:

    "Enron filed documents in bankruptcy court that showed total cash payments of $309.8 million to a group of 144 top Enron executives during 2001. In addition, those same executives cashed in stock options worth $311.7 million."

    That's more than $4 million per executive across 144 executives.

    So in our hypothetical company, we have 100 executives making $400 million per year. We have 20,000 employees making about $200 million per year. If we simply cut the average executive pay from $4 million per year to $2 million per year, we can double the pay of rank and file employees in this company.
The point here is extremely simple: The reason why we cannot pay rank and file employees more is because all of the money is being concentrated in wealthy executives and shareholders instead. This is how the concentration of wealth works. It has nothing to do with "supply and demand". It has nothing to do with "the economy". It is a massive transfer of wealth from the poor and middle class to the wealthy.

The Alternative

Here is a different way to look at this, and the correct way: If we pay rank and file workers more, they will have more money to spend in the economy. That will mean lots more dollars flowing into stores, restaurants, car dealerships, airlines, amusement parks, theaters, etc. When consumers buy more, every business benefits, and the economy grows. That growth, in turn, creates more jobs.

The way to let consumers buy more is to increase their wages. Rather than letting wealth concentrate in executives and shareholders, spread it out -- the economy would be much better off for it.

If we were to double the minimum wage, there would be explosive growth in the U.S. economy. And prices do not have to go up at all -- simply cut executive pay in half at the same time. If we did this, the U.S. economy would explode.

Saturday, June 12, 2004

Impossible-to-believe severance payment

Title: Putnam's Lasser Gets $78 Million Goodbye Kiss
Date: June 10, 2004

From the article:
    The mutual fund trading scandal may have cost Lawrence Lasser his job at Putnam Investments, but he's walking away $78 million richer.

    Putnam's parent company, Marsh & McLennan, announced late Thursday it was paying Lasser $78 million in cash to settle an arbitration dispute, stemming from his ouster from the mutual fund company.
Note that Lasser was fired for playing a role in the gigantic mutual fund trading scandal that has unfolded this year. According to this article, ex-CEO Lasser "was forced out amid a widening trading scandal that cost the company $110 million in penalties. Since October, Putnam has lost $63 billion in assets under management."

It is impossible to believe that a person fired for this reason gets any severance payment at all. $78 million is an astounding amount of money -- enough to hire nearly 2,000 people and pay them $40,000 for a year.

See also this post.

Day-care workers strike in New York

NYC day care workers walk out
Source: CNN
Date: June 9. 2004

From the article:
    Child-care workers who look after as many as 50,000 youngsters walked off the job Wednesday in New York's second major strike this week by unions trying to pressure the city for a raise.
    The day care workers, who are employed by centers that serve many poor families and are partially subsidized by the city, have not had a contract in more than four years and have not gotten a raise in 31/2 years.
    The union has rejected a contract similar to one reached by the city and District Council 37, the city's largest union, which would have given them a $1,000 cash payment and a 3 percent raise effective immediately, and a 2 percent raise next year.

    Bloomberg said the city simply cannot afford to offer bigger raises than that.
The first thing to note is that these workers have taken a significant pay cut over the last three and a half years. If you assume that the total inflation rate over those three and a half years was 10 percent, then, by not receiving a pay increase for three and a half years, these workers have taken a 10% pay cut. For someone making $30,000 a year, 10% represents $3,000 per year. A $1,000 payment does not begin to cover the gap, and a 3% increase will not even match inflation in 2004, never mind for the past 3.5 years.

Bloomberg's statement is important, and it is also extremely common: "[We] simply cannot afford to offer bigger raises than that." This is a classic refrain used to concentrate wealth.

Bloomberg knows a great deal about concentrating wealth. For example, this recent article from CBS News notes that:
    Extreme wealth has many advantages, just ask Mayor Bloomberg. He doesn't travel on commercial airliners, only on his company's private jets. And because he can afford more than just luxury, CBS 2 Investigates has learned the mayor's planes will also have very sophisticated, very expensive security systems installed to prevent a terrorist attack.

    It’s the ultimate status symbol for the extremely rich. The 35 million-dollar Falcon long range jet. Billionaire mayor Michael Bloomberg has 3 of them. But apparently luxury isn't enough.
The last several years have been marked by deep tax cuts designed to benefit Mayor Bloomberg and other wealthy people like him. The "lack of money" cited by the mayor is a direct side-effect of these tax cuts, which serve no purpose but to further concentrate wealth. Note that, during the booming 1990s, the economy was growing at an unprecedented rate with these taxes in place. Certainly these taxes were not inhibiting the economy in any way. By eliminating these taxes, those on the bottom end of the scale are seeing significant financial problems.

Note that there is always plenty of money available, whenever and wherever it is needed, to give raises to executives. For example, in North Carolina this week there has been a sudden desire to raise the salaries of university chancellors in the UNC system. They are state employees. According to this article:
    UNC President Molly Broad and chancellors at five campuses could get big raises under a plan to lift salaries to a minimum level compared to executive pay at other universities across the nation.

    If approved by the UNC Board of Governors, the annual salary of leaders at UNC-Chapel Hill and N.C. State University could each rise by more than $40,000 to $304,392. Broad's pay could increase to $359,182 from $300,485.

    The salary levels were recommended Monday by the board's personnel and tenure committee. The group endorsed the idea of paying the 16 UNC system chancellors in the top 75 percent of peer universities across the United States, and then raising the system president's salary accordingly.
The reason we "simply cannot afford" to give raises like these to rank and file workers is because all of the money is funneling to the wealthiest people (through salary increases, tax cuts, etc.) in a massive effort to concentrate wealth.

Friday, June 11, 2004

Hospitals and the concentration of wealth

Title: For-profit hospitals bill bigger
Source: CNN
Date: June 10, 2004

From the article:
    "'Investor-owned hospitals charge outrageous prices for inferior care,' Woolhandler said in a statement.

    'The for-profits skimp on nurses, but spend lavishly on their executives and paper-pushers.'

    Himmelstein pointed to fraud cases involving for-profit health care companies including Columbia/HCA Healthcare Corp. , which was hit by a Medicare scandal in 1997; Tenet Healthcare Corp., which is being investigated for allegedly overbilling Medicare; and HealthSouth , where 15 former executives have pleaded guilty to criminal fraud charges."
    In a commentary published in the journal, Dr. Steffie Woolhandler and Dr. David Himmelstein of Harvard Medical School commented that 13 percent of all U.S. hospitals are for-profit, and said converting them to nonprofit status could have saved $6 billion of the $37 billion spent on care at investor-owned hospitals in 2001.
Where is the $6 billion being wasted today? The answer:
    "The reality is that for-profits face significant economic challenges. The first is they have to generate revenues that will satisfy shareholders," Devereaux said.

    "Second, they have high executive bonuses. Thirdly, they are very top-heavy and have high administrative costs. Also, they have to pay taxes. That is a lot of extra money that they have to come up with," Devereaux added.
And that doesn't count all of the known and unknown fraud, overbilling, etc.

What if you applied this type of analysis to the medical industry as a whole? For example, to drug companies. The top five drug companies in the U.S. pay over $10 billion per year simply in dividends. That's just one piece of the puzzle, and just that one little piece costs us $100 per household in the U.S. Then add to that the shocking executive salaries (Henry A. McKinnell -- just one executive out of tens of thousands in the pharmaceutical industry -- received $28,151,481 in 2003 from Pfizer, for example), the bonuses, the stock grants, the jets, the lavish office buildings, the top-heavy administration costs, the billions spent on advertising, that amazing price gouging (prices in Canada for the same drugs are consistently lower by a factor of 50 percent), etc, etc.

These are the costs of the concentration of wealth. If we were to eliminate these costs across the entire health care industry, the savings would, at a minimum, total $1,000 for every man, woman and child in the U.S.

Drug prices and the concentration of wealth

Title: AARP: Drug prices soaring
Source: USA Today
Date: May 25, 2004

From the article:
    Prices for name-brand medicines most commonly prescribed for seniors have risen at least three times faster than inflation in the last four years, two groups seeking lower prices said Tuesday.

    The multiyear price increases outstrip the discounts that will be available to seniors beginning June 1 with a new Medicare discount card. The Bush administration predicts savings of 15% or more for those who pay up to $30 a year to participate.
    AARP's study of 155 name-brand drugs found an average price increase of 27.6% over four years ending in December, compared with a 10.4% inflation rate. The average annual increase in 2003 for the most widely used drugs was 6.9%, triple the inflation rate of 2.2%.
Here is the simple fact about drug prices. If you are sick, and a drug company has a patented drug that you need to recover from that illness, then you are in an impossible position as a consumer. In an unregulated market like that in the U.S. the drug company can charge anything it likes. This is especially true if it is a fatal or debilitating disease. It is straightforward extortion. The basic equation is, "if you want to live, you will pay us whatever we ask." The vast majority of the proceeds from this form of extortion go to wealthy shareholders and executives. It is an amazingly powerful way to concentrate wealth: Your money or your life.

Wednesday, June 09, 2004

Microsoft and the concentration of wealth

Microsoft's Sacred Cash Cow

From the article:
    Why are Microsoft products so endlessly frustrating to use? Even techno-geeks like me get annoyed by Windows. I’m tired of spending the first 10 minutes of my day rebooting just so I can get to work. Microsoft Outlook 2003, the latest version of the company’s e-mail and calendar software, hangs for me about once a day, requiring me to restart my PC. I also have a problem with Word 2003: Whenever I bullet a line of text, every line in the document gets a bullet. Asking Windows to shut down is more of a request than a command—it might, it might not. And recently, Internet Explorer stopped opening for me.

    I know I’m not alone. If you’re like me, you’ve invested in technology to become more efficient and productive but mutter about the many frustrations of the digital lifestyle. Technology is my hobby as well as my job, so I regularly ponder why software giant Microsoft Corp., which has more than $56 billion in cash, hasn’t solved more of these problems.
The conclusion that the author comes to is this:
    Microsoft’s attempts to diversify into consumer businesses have yet to pay off: 68 percent of its revenue still comes from Windows and Office sales—more than 80 percent if you include the Windows server software used by so many businesses. The company must protect these core products. “The prime directive at Microsoft is to protect Windows and get customers to buy Windows and upgrades to Windows,” says Matt Rosoff, lead analyst at Directions on Microsoft, a Kirkland-based newsletter.

    Microsoft clings to this strategy because it has to. Its stock price relies largely on the continued strength of Windows and the Office suite of applications (Word, Excel, Outlook, PowerPoint, etc.). But Microsoft’s dominance is an aberration in an otherwise competitive technology industry. Windows, Office, and the Internet Explorer Web browser all have greater than 90 percent share of their respective markets. To protect the cash cows, Microsoft must do things that no other software company would be doing right now. It’s a victim of its own success.

    Microsoft hasn’t solved many of the software problems I described earlier in part because of the lack of competition.
In a healthy environment there would be a hundred companies all competing for your business and pushing the industry foward at a blistering pace. Instead, the OS marketplace stagnates because of the concentration of wealth and power in Microsoft. As a result, we are all held back.

See also this post on Microsoft.

Sunday, June 06, 2004

Food vouchers for WIC program

Title: Stores specializing in food vouchers bill for top prices
Source: New York Times
Date: June 6, 2004

From the article:
    The Special Supplemental Nutrition Program for Women, Infants and Children, or WIC, helps feed 7.7 million people each month by providing vouchers for infant formula, juice, eggs, milk, cheese, cereal and dried beans. A growing number of stores now are selling only to WIC families, accepting only WIC vouchers for payment.
This is remarkable -- 7.7 million people receiving food vouchers -- so many poor people that a whole ecosystem of food stores now caters specifically to them.

The article also contains this amazing statistic: "About 47 percent of all babies born in the United States each year participate in the [WIC] program."

47 percent of all babies in the United States are now poor.

Enrolling in the WIC program is not trivial. There are income requirements based on federal poverty guidelines. In addition, according to this page:
    "Applicants must be seen by a health professional such as a physician, nurse, or nutritionist who must determine whether the individual is at nutrition risk. In many cases, this is done in the WIC clinic at no cost to the applicant. However, this information can be obtained from another health professional such as the applicant's physician... At a minimum, the applicant's height and weight must be measured and bloodwork taken to check for anemia."
In other words, the process requires that applicants go see a doctor, and the doctor must sign off that there is a medical reason for granting food vouchers (e.g. - underweight, underheight, anemia, failure to thrive, etc.)

Nearly half of babies in the U.S. have been through that application process and have been found to be in need of supplemental food vouchers.

This data on WIC meshes with data from the National School Lunch Program. Students are eligible for free or reduced-price lunches based on the following criteria:
    Any child at a participating school may purchase a meal through the National School Lunch Program. Children from families with incomes at or below 130 percent of the poverty level are eligible for free meals. Those with incomes between 130 percent and 185 percent of the poverty level are eligible for reduced-price meals, for which students can be charged no more than 40 cents. (For the period July 1, 2003, through June 30, 2004, 130 percent of the poverty level is $23,920 for a family of four; 185 percent is $34,040.)
According to this page: "The National School Lunch Program is a federally assisted meal program operating in more than 99,800 public and non-profit private schools and residential child care institutions. It provides nutritionally balanced, low-cost or free lunches to more than 26 million children each school day."

According to the 2004 World Almanac (page 289), there were 47.2 million students enrolled in elementary and secondary schools in 2000-2001. So 55% of all students in the U.S. have taken the time to apply for, and now receive, free and reduced lunches. Some families would not apply, which means that well over 55% of all families with children in the U.S. are making less than $34,040 as their household income. That is also a remarkable statistic.

These statistics represent the concentration of wealth at work. Executives are making millions of dollars per year. They are receiving patently ridiculous severance packages. Meanwhile, workers in America are making less and less, to the point where more than half of the kids in this country are now receiving food assistance.

Vignettes show how jobs are changing in the U.S. as wealth concentrates

Title: What would help?
Source: News and Observer
Date: June 6, 2004

In the editorial section of the local Sunday paper, the cover story discussed jobs and what we (in this case, the state of North Carolina) can do to create more of them. The story contains three vignettes:
  1. "Phil Rich has a master's degree in physics. Two years ago, he lost his $76,000-a-year job as an engineer with Lite Spec, an optical fiber maker that went out of business.
    Now, at age 54, Rich makes about $15,000 a year selling electronics on commission at Sears.

    "I need to find something that's much more amenable to my lifestyle," he said recently. "But what?"

    In North Carolina, well-paying jobs are disappearing faster than they can be replaced. Rural regions can no longer presume their factory jobs are secure. And in state government, much of the emphasis remains on luring big businesses rather than on helping the smaller companies responsible for creating most new jobs.... The economy has started down a slow path to recovery, but little hope is on the horizon for Phil Rich. And that prompts a question for all those who would attempt to lead the way: What can be done to help Rich and people like him?"

  2. "Darlene Andrews, 39, of Concord heads to work before 7 a.m. for her shift as a stationery department manager at the Concord Wal-Mart. She was laid off from the Pillowtex company and now makes half of what she used to earn. Andrews and her 14-year-old daughter share a 480-square-foot apartment."

  3. "Perhaps somewhere in these answers is a solution for Billy Furr.

    Furr dropped out of school in the 10th grade to work in the local textile mill. Now, at 59, he is struggling through algebra, trying to earn a GED. When he finishes, he hopes to get a job running a cash register at Wal-Mart or mopping the floors in a school.

    Furr was one of about 5,000 North Carolina workers laid off when Pillowtex closed. After 42 years in the plant, working his way up to $13.02 an hour, Furr was out of a job -- with no health insurance, no severance pay and no plan.

    Furr said he has applied at every place he can think of: Wal-Mart, Home Depot, Lowe's, the local school system's maintenance department.

    "You never hear from them," he said. "See, everybody around here's trying to get those jobs. And most of them, you got to have your GED."

    So Furr keeps studying, letting the debts pile up, going without medications and doctor visits if he has to -- trying to survive in a world he never imagined when he quit school for a job putting thread in boxes."
[See this post for more information on Pillowtex - the largest mass layoff in North Carolina history.]

Last week's story on the working poor in Business Week contained these vignettes:
  1. "Katrina Gill, a 36-year-old certified nursing aide, worked in one of the premiere long-term care facilities near Portland, Ore. From 10:30 p.m. to 7 a.m., she was on duty alone, performing three rounds on the dementia ward, where she took care of up to 28 patients a night for $9.32 an hour. She monitored vitals, turned for bedsores, and changed adult diapers. There were the constant vigils over patients like the one who would sneak into other rooms, mistaking female patients for his deceased wife. Worse was the resident she called "the hitter" who once lunged at her, ripping a muscle in her back and laying her flat for four days.

    Last month, Gill quit and took another job for 68 cents an hour more, bringing her salary to $14,400 a year. But like so many health-care workers, she has no health-care benefits from her job. So she and her garage mechanic husband pay $640 monthly for a policy and have racked up $160,000 in medical debts from their youngest son Brandyn's cancer care."

  2. "In New York City, Joseph Schiraldi, 41, guards one of the biggest terrorist targets in the world: the Empire State Building. For eight hours a day, he X-rays packages, checks visitors' IDs, and patrols the concourse. But on $7.50 an hour in the priciest city in the U.S., he's a security officer without security -- no pension, no health care, and no paid sick days, typical for a nonunion guard."

  3. "Bellingham (Wash.) day-care teacher Mandy Smith can't afford child care for her 6-year-old son, Jordan, on her take-home pay of $60 a day. Neither can commercial cleaner Theresa Fabre on her $8.50 an hour job. So her son, Christian, 9, waits for her after school in a crumbling upper Manhattan library where the kids line up five-deep to use one of two computers. The librarian doubles as a de facto babysitter for 40 or so other kids of the working poor."
These stories mesh with this post on kids receiving assistance from WIC and the National School Lunch Program, showing that half of all the kids in the United States are receiving food supplements from the government.

Saturday, June 05, 2004

Even when fired, executives concentrate wealth

Title: Execs cash out at exit door
Source: MSNBC
Date: June 6, 2004

From the article:
    The Courier's annual review of executive compensation found that four of the year's five biggest raises went to executives forced out of their companies. These execs were then handed severance packages worth two to five times their annual salary and bonus in the year prior to their departure.

    Leading the pack was Stanley Pontius, chief executive of First Financial Bancorp. in Hamilton, who received a 420 percent raise that include a $3.4 million severance package -- nearly five times his 2002 salary and bonus. Pontius left the bank last October after what company officials called a disagreement about the company with its directors. Pontius had been the company's president and CEO since 1991.
    Other negotiated deals included a combined $5 million in separation packages for three Cincinnati Bell executives -- CEO Kevin Mooney, CFO Thomas Schilling and General Counsel Jeffrey Smith -- who lost their jobs following the sale of the company's money-losing broadband division. All got roughly two times their 2002 salary and bonus.

    The severance deals for all four executives boosted their 2003 compensation by more than 250 percent.

    "The good old boy's club is still working very well," said Steve Dillenburg, a managing partner at Summit Investment Partners.
    "Termination payments are supposed to protect CEOs from financial hardship when they are terminated. It seems to me that a payment of one year's salary would be sufficient for that," said Paul Hodgson, compensation analyst for the Corporate Library, a Portland, Maine-based group that promotes good corporate governance practices.

    Hodgson analyzed all of the so-called "golden parachute" packages awarded by S&P 500 companies in 2001 and 2002. He found the average payday for CEOs was $16.5 million.
The implication here is that, prior to firing the executives, companies jack up their salaries by a factor of two to five times, and then the severance package pays a multiple of that as well. The good old boy's club certainly is working very well, and it it is consumers like you and me who are paying the bill.

One obvious question prompted by this article is this: Why do consumers need to "protect CEOs from financial hardship" when they get fired or when they resign? Rank and file employees get no such protection, and they have a far greater need. If a CEO's job pays $10 million a year, can't he/she save a little of that for a rainy day? Why give them any severance package at all?

It is insane to suggest that someone making $10 million per year needs a $16 million severance package to protect against financial hardship. Yet this is the norm. That is how the concentration of wealth works.

Thursday, June 03, 2004

The working poor, continued

Title: Working...And Poor - In today's cutthroat job market, the bottom rung is as high as most workers will ever get. But the political will to help them seems a long way off
Source: Business Week
Date: May 31, 2004

From the article:
    Working one's way up from the bottom is getting harder, not easier. And the difficulty may get more severe.
The article contains a number of statistics that define the effects of the concentration of wealth. For example:
    Overall, 63% of U.S. families below the federal poverty line have one or more workers, according to the Census Bureau. They're not just minorities, either; nearly 60% are white. About a fifth of the working poor are foreign-born, mostly from Mexico. And the majority possess high school diplomas and even some college -- which 30 years ago would virtually have assured them a shot at the middle class.
    Today more than 28 million people, about a quarter of the workforce between the ages of 18 and 64, earn less than $9.04 an hour, which translates into a full-time salary of $18,800 a year -- the income that marks the federal poverty line for a family of four.
This quote by Costco's CEO is right on target:
    A 2003 study of 1990s mobility by two economists at the Federal Reserve Bank of Boston found that the chances that poor Americans would stay stuck in their strata had increased vs. the 1970s. Given the economy's strong showing in the '90s, that's a concern. "If current trends persist, a greater and greater share of wealth will keep going into the hands of the few, which will destroy initiative," worries James D. Sinegal, CEO of Costco Wholesale Corp., which offers above-average pay and benefits in the retail sector. "We'll no longer have a motivated working class."
See this post for details on Costco.

Wednesday, June 02, 2004

The working poor and the concentration of wealth

Title: The Working Poor - They are the forgotten ones unemployment numbers don't track
Source: Chicago Tribune
Date: April 25, 2004

From the article:
    The food line begins to form during the sunrise chill, more than two hours before the metal gates to the Care United Methodist Outreach pantry open.

    Hundreds of people like Theresa Ware arrive early because they fear the boxes of food stacked in neat rows will be gone by the time they push their rusty grocery carts to the head of the hours-long line. Ware keeps an eye on her watch because she can't afford to be late for work, not even if the reason is to pick up food.

    "This is a have-to case for us. It's humiliating," said Ware, 49, who makes $7.50 an hour working the afternoon shift at a nursing home. This recent visit was one of two food pantry stops she and her unemployed husband, Rocky, make every month.

    "We shouldn't have to do this," she said.

    Theresa and Rocky Ware toil in the ranks of the working poor, a growing category of millions of Americans who play by the rules of the working world and still can't make ends meet.
    The surge in food demand is fueled by several forces--job losses, expired unemployment benefits, soaring health-care and housing costs, and the inability of many people to find jobs that match the income and benefits of the jobs they lost.

    The Center on Budget and Policy Priorities, a Washington think tank, reported recently that 43 million people are living in low-income working families with children.
    "This is not just a function of unemployment. A larger percentage of Americans are working poor, and the numbers have been growing for nine years," said Robert Forney, CEO of America's Second Harvest. "This could be the low-water mark for the economy, but for a whole lot of Americans--40 million of them--the option of [earning] a living wage and benefits? Forget it."
    Although the national economy shows fitful statistical signs of recovery, the data do not take into account that declining numbers of employers offer health insurance and many new jobs pay the minimum wage, $5.15 an hour.

    Danny Palmer, who lives in the Ohio River village of Cheshire, lost his $20-an-hour welding job and now works at Wal-Mart for $5.95 an hour. Insurance coverage he got as part of a severance package from his former employer runs out next month. He has no health coverage with Wal-Mart.

    Melissa Barringer holds three part-time jobs to augment the income she and her husband, Brian, a laborer, earn to support themselves and their three teenage children. Last year, their combined income was $18,000.
See this post for further details.

The media and the concentration of wealth

Title: Across the great class divide
Source: Columbia Journalism Review
Date: May, 2004

From the article:
    [Journalists] are part of the professional class, reasonably affluent and well educated. By 1996, for example, the last time the American Society of Newspaper Editors conducted a broad survey of the U.S. newsroom, 89 percent of journalists had finished college. Meanwhile, only 27 percent of all Americans have four or more years of college, according to the latest census.
    Just one example: Andrew Tyndall, a media analyst who began measuring the evening newscasts of ABC, CBS, and NBC in 1987, finds that since then coverage of economic issues has steadily skewed away from stories of poverty and toward stories concerning wealth. Thus, the poor have become increasingly invisible. The Catholic Campaign for Human Development, the social justice arm of the U.S. Conference of Catholic Bishops, reported in 2002 that its annual survey of American attitudes toward poverty showed that "the general public substantially underestimates the dimensions of poverty in the United States." Most respondents, it said, "maintained that poverty affects some one million people in this country." The real number is thirty-five million.

Tuesday, June 01, 2004

American Workers heading for Iraq

Title: High contract pay luring US poor
Source: Boston Globe
Date: May 23, 2004

From the article:
    Late on the night of April 9, Sylvia and Allen Petty sat on the front porch of their small rental house in the hill country northwest of Austin and talked about the future. With six daughters, ages 4 months to 14, it was the only time of day they had to themselves, what they called their "midnight dates."

    They had been discussing for a couple weeks the idea of Allen Petty, 31, going to Iraq. Two fellow truck drivers at his company in the adjoining town of Marble Falls had left for jobs driving trucks for KBR, a subsidiary of Houston-based Halliburton Co.

    That day, insurgents in Iraq had attacked a KBR convoy and killed four contract employees. But Allen Petty's $30,000 salary did not stretch far enough. The family had no insurance, no money for movies or new clothes, no savings, no credit, and their car was on loan from Sylvia Petty's father.

    "We really prayed," she recalled. "This is a beautiful town, but we're not making it here. I told him, 'Baby, you have to go.' "

    Allen Petty applied to KBR for a truck-driving job the next day, one of thousands of Americans competing, despite the dangers, for jobs with the contractors working to supply the US military or rebuild the country. After a week of training, he left for Iraq on the first Saturday in May.

    Many of the KBR recruits, like Petty, are working poor. They are willing to dare the hardship of 12- to 14-hour days seven days a week, and the risk of kidnapping or worse, to bring back $80,000 or $100,000 in a year.
As discussed in this post, the $30,000 per year that Allen Petty earns is not enough to live a life. Without many options in the U.S. to improve things, he is willing to leave his family for a year or more, and work "12- to 14-hour days seven days a week" to make the money his family must have to live a life. It sounds like the indentured servitude of early America, doesn't it?

This is where the concentration of wealth has gotten us. Thousands of American workers are putting themselves in harm's way halfway around the world to make enough money to live. Meanwhile, executives make millions of dollars per year.