Reverse Offshoring? Or Yet More Evidence of Corporate America's Squeeze on Workers?
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What does this all mean? At the risk of oversimplifying some complex dynamics, it means we're getting an answer to the question of how far working Americans can be squeezed before we reach a point where domestic demand can no longer sustain our middle class.
Consumer spending typically accounts for around 70 percent of our economic activity. The simple, common-sense truth that seems so elusive in Washington is that demand , rather than giving rich people tax cuts, is what creates jobs. And although we have seen a rebound in consumer demand since the depths of the recession, we are still well below the trend-line of where we should be, compared to past recessions.
In 2007, the Center for Budget and Policy priorities noted that just “51.6 percent of total national income went to wages and salaries in 2006,” a “lower share than in any of the 77 previous years for which these data are available.” And in 2009-2010, labor costs – the value of wages and benefits – saw their steepest decline since 1962-'63. According to the latest data, wages and salaries have now dropped to just 49.8 percent of our income.
And while corporate profits are at a (nominal) all-time high, that doesn't mean they're being pocketed by Americans to pour back into the domestic economy – anyone, anywhere in the world can buy shares in U.S. multinationals.
Sadly, as I noted in April, the squeeze continues apace. According to research conducted by the National Employment Law Project (NELP), the recovery “has been disproportionately driven by industries that pay median wages below $15.00 an hour.” Three out of four jobs the economy added last year were in the bottom 40 percent of the wage scale, while only one in 20 were in the top 40 percent.
In March, House Republicans laid out a perverse plan to lower working Americans' wages, supposedly in a bid to get employers to hire more of them ( PDF). They called for “decreasing the number and compensation of government workers,” which they said would spur job creation because “a smaller government workforce increases the available supply of educated, skilled workers for private firms, thus lowering labor costs.”
“Labor costs,” of course mean “wages and benefits” – Americans' paychecks and health care. We're in a deep hole, and our elites appear quite happy to blithely keep digging.
Ultimately, it's good news that people in erstwhile developing countries like India are getting higher wages and seeing the growth of a domestic middle class. But people in rich countries need jobs too, and the only way we can remain a wealthy country is to stop the upward redistribution of wealth achieved by union-busting, outsourcing – both domestically and overseas – and distortions of the tax code.
Consumers need to have money in their pockets if we're to maintain decent-paying jobs. While profits are easily sent anywhere, the jobs will always follow the consumers with money in their pockets.
Joshua Holland is an editor and senior writer at AlterNet. He is the author of The 15 Biggest Lies About the Economy (and Everything else the Right Doesn't Want You to Know About Taxes, Jobs and Corporate America) . Drop him an email or follow him on Twitter .