Author: Bonddad

Let’s compare health costs to some other figures.

June 2005 CPI: 0%
June 2005 PPI: 0%
2004 wages after subtracting for inflation: -.31%

So, health costs are growing faster than inflation and wages.  Companies are thinking about asking workers to pay more of their health care costs – at a time when health care costs are already taking a larger percentage of a shrinking pay scale.   As a result if rising health care, companies might slow hiring.

Mr. President: THE SYSTEM IS FUCKING BROKEN.  IT DOES NOT FUCKING WORK ANYMORE.  YOUR SOLUTIONS DON’T FUCKING WORK.

LA TIME LINK

In a previous article, I wrote Dems need to focus on creating high paying jobs in order to build a long-term governing majority.  There were several comments asking how to accomplish this.  This is a very logical question and deserves an answer.  I propose a two-pronged approach.  The first involves prevention of outsourcing and the second is to focus on industries that have strong long-term potential to create high-paying jobs.  
First, why do we need to create jobs?  The unemployment rate is 5%.  The economy is rocking!!!!  Well, that’s not entirely true.  According to the Bureau of Economic Analysis, the US has lost 3.4 million high-paying jobs between 2000-2003 (the last year they have statistics).  Comprising that total are: 100,000 Information and data processing jobs, 200,000 Broadcast and telecommunications jobs, 205,000 Computer System Designer jobs, 2.8 million manufacturing jobs and 121 publishing jobs which include software.  The jobs we are creating are lower-paying jobs, specifically in health care and social assistance (+1,279,000 ), government (+791,000) and food service and drinking establishment jobs (+465,000).  

As a result, real wages aren’t increasing.  According to the Bureau of Labor Statistics, the average earnings increase from 2000-2004 was 3.86%, 3.22%, 3.12%, 1.71% and 2.39% respectively.  However wages have to be compared to inflation to determine the real rate of wage growth.  For the same years, annual inflation was 3.4%, 2.8%, 1.6%, 2.3% and 2.7% respectively.  When inflation is subtracted from wages, overall wage growth becomes .46%, .42%, 1.52%, -.59% and-.31% respectively for 2000-2004.

In other words, good-paying jobs that can support a family are not being generated in the current economy.

Here’s how not to solve the problem.  

First, free trade is here to stay.  There is an economic theory called competitive advantage which essentially states that because some countries perform a certain job better than other countries, the world economy should be structured to permit this to happen.   The reality is this makes sense at the global level.  Some countries do some things better than others; let them do it so all can reap the benefits.  Can trade agreements use fine-tuning?  Sure they can.  But don’t destroy them because in the long run that is not the right approach.

Secondly, It’s easy for the left to fall into the “all corporations are inherently evil” types of arguments when discussing outsourcing.  Don’t.  If you’re truly part of the “reality based community”, you have to accept that corporations are an important part of the world.  Like anything, they are good and bad.  On the good side, they pool physical, investment and intellectual capital to produce something we need or want.  Personally, I like my laptop, CDs, stereo and truck.  I couldn’t build these things on my own and I don’t want to.  On the bad side, they can be treacherous, selfish centers of power that corrupt all involved.  But painting them with broad socialist or communist language will only alienate a majority of voters.  

Here’s how to deal with the problem.

Outsourcing occurs when a company moves some or all of its operations to another country.  There are numerous reasons why a company would do this, but a primary reason is the company does not have to pay employees in another country nearly as much as they pay US employees.  

There is no way to completely eliminate outsourcing.  As the world becomes economically and technologically smaller, it will probably increase.  Simply put, this is the way it is and will continue to be.  What the US should do is find and implement policies that make outsourcing less advantageous while not being so draconian to prevent beneficial domestic economic development from occurring.

Here are some ideas.  These are basic ideas that need fine-tuning (which I encourage you to do in the comments).  Also, add your own.

First, start talking about the issue.  For too long outsourcing has flown below the radar screen.  Talk and write, talk and write.  (Thanks to Lou Dobbs for talking about this for the last few years).

The AFL-CIO has a great proposal.  There are numerous companies that outsource American jobs that also get large government contracts. Take the contracts away.  You don’t want to play in our sandbox?  Fine.  We won’t give you any money.  There will probably have to be gradations based on number of domestic employees etc…, but you get the basic idea.  (Thanks to RenaRF for this link)

The foreign tax code (26 USC section 900) allows US companies who pay foreign taxes on income earned outside the US to deduct those foreign taxes from domestic taxes. (The rules are a bit more complicated, but you get the idea).  I would add a provision along the following lines: If said company outsources US jobs to a country, a certain percentage of that deduction will go away.  I realize this will be difficult to implement, but there has to be a way to make this work.

Create a tax break to allow for the wage differential.  Suppose country A has wages that are 50% of US wages and company X is considering moving some of its jobs to country A.  Give Company X a tax break of say half the difference between the wage differential to keep the jobs in the US.  This will increase Company X’s tax deductions related to US taxes.

Deal with health care expenses.  A majority of our trading partners have health care expenses under control.  Therefore, health care expenses are not part of their labor costs.  By not having health care expenses under control in the US, we are at a serious competitive disadvantage.  For example, suppose Company X is thinking about Country X that has national health insurance.  If company X moves to country A, Company X does not have to include health care expenses in its cost projections for country A.  Compare this to the US, where Company X will have to include health care in their cost projections.  By dealing with health care, the US will make its labor cheaper and more competitive versus our international competitors.

In addition to slowing outsourcing’s pace, it is important to develop industries that are somewhat immune from outsourcing.  While it is impossible to eliminate the outsourcing risk, it is possible to narrow the competition with other countries so companies in a specific industry will have fewer countries to choose from when making location decisions.

Here are some industries the US should develop at all costs: Alternate energy, stem-cell research and applications, US infrastructure (such as a new national power grid), nanotechnology, and aerospace.  This list is by no means exhaustive; I am sure that readers have plenty of their own ideas which they should present in the comments section. Why these industries?  Because they are the industries of tomorrow, not today.  While there are other countries aggressively building infrastructure to appeal to companies in some of these areas, the US can compete with these countries to get some of the pie.  

To develop these industries, we need to develop local alliances between government, financial and industry to create jobs in our communities.  This should occur at the local level because the national party has no interest in creating jobs.  Screw them.  Dems should focus on local political races to advance this agenda – city councils, country commissioners and the like.  

Here is an example.  I live in Houston, Texas.  The Houston medical center is one of the leading medical facilities in the US.  Let’s see…leading medical center plus stem cell research and applications = local jobs.  I think I made a connection.  Try it with your area.  Remember how I mentioned we should avoid hard-left anti-corporate rhetoric?  This is why.  Local governments have to work with businesses to develop strategic areas of job creation.   Imagine if Democrats did this all over the country in their respective locations, concentrating on developing jobs in their cities.

The reality is the phrase “think globally, act locally” should be our motto.  We know the attributes of each of our respective localities.  This knowledge is key. It’s time to put it to use.

Feel free to add you own ideas below.

I am writing a diary on job creation which should be done in the next few days.  I stumbled across these numbers and thought they were important enough to stand alone.  Consider this food for thought.

According to the Bureau of Economic Analysis, the US has lost 3.4 million high-paying jobs between 2000-2003 (the last year they have statistics).  Comprising that total are:

100,000 Information and data processing jobs
200,000 Broadcast and telecommunications jobs,
205,000 Computer System Designer jobs,
2.8 million manufacturing jobs and
121,000 publishing jobs which include software.

Cross-Posted on My Left Wing

There are numerous sexy issues that Democrats could use in 2006.  Republican corruption, Schiavo, Delay, and the Supreme Court come to mind.  There are great political issues.  Standing in the shadow of these issues is the boring and mundane idea of job creation.  This is not sexy.  It’s hard to get excited about it.  However: Make no mistake.  If the Democrats do not make meaningful job creation a top priority in 2006, we will not be able to build a meaningful long-term governing coalition.
Let me explain the importance of job creation with a story.

One of the best movies about music is Hail! Hail! Rock and Roll.  Keith Richards puts together a back-up band for Chick Berry’s 60th birthday.  The director used the movie as a way to tell part of the story of early rock `n roll.  He interviewed Jerry Lee Lewis to add some oral history.  An interviewer asked Lewis about payola, where the record companies would pay DJs to play certain records.  The interviewer asked a question along the lines of “These were great records.  Why did you have to pay to get them played on the radio.”

Lewis: “Everybody wants to be…appreciated.”

While everybody likes the emotional boost from public or private compliment, people respond just as positively to meaningful pay increases.  This is what Lewis was talking about in the above-mentioned quote.  Like it or not, one of the most prominent and best-understood methods of job-place appreciation is to give people meaningful raises.  I guarantee you if my boss gives me a 10% raise, he’s earned some loyalty from me.  It’s that simple.

And therein lies the problem. On the whole, people are not making meaningful gains in wages. According to the Bureau of Labor Statistics, the average earnings increase from 2000-2004 was 3.86%, 3.22%, 3.12%, 1.71% and 2.39% respectively.  However wages have to be compared to inflation to determine the real rate of wage growth.  For the same years, annual inflation was 3.4%, 2.8%, 1.6%, 2.3% and 2.7% respectively. When inflation is subtracted from wages, overall wage growth becomes .46%, .42%, 1.52%, -.59% and-.31% respectively for 2000-2004.

At the same time, people have seen increases faster than inflation in health insurance premiums, gasoline, spending on prescription drugs and tuition payments for college.  These are necessary expenses that are taking a larger and larger percentage of a stagnant pie of weekly earnings.  

This problem is exacerbated by the lack of creation of numerous high-paying jobs.  According to the Bureau of Economic Analysis, the three industries that have had net gains in number of jobs created since 2000 are government employees (+791,000), Health Care and Social Assistance (+1,279,000) and Food Service/Drinking Places (+465,000).  According to the Bureau of Labor Statistics, these are not the highest-paying jobs the US could create.  Food Service and drinking places have an average hourly wage of $7.46/hour.  Health Care has several job categories.  To no ones surprise, doctors and dentists make really good money.  However, their assistants don’t, coming at $16.20/hour.  The BLS does not provide statistics for government workers.  It’s also important to remember these are raw wages, which don’t include deductions for things like health insurance which alone usually comprises 10% of income.  

In short, we’re not making high-paying jobs that provide some economic security.  It’s not enough to simply create jobs.  It’s important to ask what kind of jobs are created to determine if we can do better.  And the answer to that is clearly no.  We can do better.

http://www.bls.gov/ncs/ocs/sp/ncbl0635.pdf
http://www.bea.doc.gov/

Cross-posted at My Left Wing

So, why do I write about economics on Democratic blogs?  Isn’t economics the realm of Republicans?  No.  Republican economists typically lack methodological depth; they look at surface numbers without seriously looking at the components of those numbers.  But there is a deeper reason for this: economics is essential to understanding what is happening and creating and implementing policy.  Economics is the tool that will help the Democrats create a better America if  we use the tools economics provides.  

The Bureau of Labor Statistics has broken down those who make minimum wage in a study title “Characteristics of Minimum Wage Workers.”  Here are some general observations from the study.  

49% of minimum wage workers are over 25 years old. Assuming a job is for extra cash or part-time spending money, I don’t have a problem with a teenager or college student making at or near minimum wage.  .  I think the lessons and skills learned are just as valuable as the actual paycheck.  However, when someone older is making minimum wage, questions such as “is the actually enough money to live on?” arise.  In that case, the answer is usually no.  In addition, that statistics don’t provide any breakdown of what percentage of the under 25 category is in fact a kid making extra money.

Women comprise 68% of the over 25 minimum wage workforce.  This is a very revealing statistic.  I have to wonder, “What percentage of these are single mothers?”  As of yet, I haven’t found anything solid in this area but will keep looking.

61% of minimum wage jobs are part time.  This makes sense.  Some part-time employees fill in the gaps of a manager’s schedule. However, some large employers have used part-time to their financial advantage (see Wal-Mart).  An employer typically does not offer part-time employees certain benefits such as health insurance.  

28% of minimum wage employees have less than a high school diploma, 31% have a high school degree with no college and 32% have a high school degree with some college.  This statistic should come as no surprise.  Higher educational achievement = higher income.   However, given the incredible rise in the college tuition over the last 15-20 years, this statistic leads to the question “How can the Democrats make college more affordable to prevent older workers from working for nothing?”

Now, let’s coordinate this information with Bush’s record of job creation to see if anything interesting turns up.  

The Bureau of Economic Analysis provides statistics though 2003 of the number of jobs created in various industries.  Regrettably, they have not updated their information to 2004.  

First, 59% of minimum wage jobs are in the “Food Preparation and serving related occupations.”  In other words, fast food doesn’t pay that well.  Now, according to the BEA the economy had a net loss of 1.8 million jobs from 2000-2003.  There were only three areas of the economy that experienced job growth: government employees, health care and social assistance and food services and drinking places, which had a net growth of 465,000 jobs.  So, the Bush economy gives the phrase “You want fries with that?” a whole new meaning.

To sum up, we have learned three things: First, too many older people make minimum wage.  Secondly, stay in school.  Third, Bush must be having secret talks with the executives of Yum brands and McDonalds.

BLS Study

DIA -.03%, Spy -.06%, QQQQ +.31%
10-Year Treasury +1/32 to 4.17%
Oil +29 cents to $57.52/bbl
Dollar +.4% versus euro, near unchanged versus yen

The markets ended the week in a meandering mode.  Although the general economic news was very bullish (see below), traders have bid up shares for most of the week, so a lack-luster day shouldn’t be a surprise.  All three markets are a bit over-extended technically, adding another reason why this week’s strong advances didn’t continue.  On the good side, the fact that traders did not take profits going into the weekend indicates there was enough good news to keep them in the market for the time being.  GE announced a 24% increase in profits, and McDonald’s announced earnings growth about analysts’ expectations.

The 10-Year Treasury rose 1/32 to close at 4.17%.  The market sold-off in the morning on the strong economic news (see below).  However, traders came back into the market quickly as they reinterpreted the data.  Although the rise in industrial production was a sign the Fed would keep raising interest rates, the tame inflation news provided a strong counter-balance to the rate increase scenario.

Oil rose 29 cents to close at $57.52/bbl.  Tropical storms have dominated oil trading this week.  Emily — the current storm in the gulf – is no exception.  The Gulf of Mexico area is home to a large percentage of US refineries and oil production, so any production halt caused by the storms would be bullish for the oil market.  Technically, the market is overbought.  This supports a stronger possibility of a further drop rather than a rise next week.  However, technical considerations are based solely on price movements.  Therefore, they should be kept in that perspective.

The dollar rose .4% versus the euro and fell slightly versus the yen.  The solid economic news (see below) was the primary reason for the dollar’s advance versus the euro.  Traders have focused on the growth and interest rate differentials between the two economies for the last few months.  Therefore, any indication of strong US growth should lead to a dollar rally.  Technically, the dollar is overbought versus both currencies.  

“The U.S. Census Bureau announced today that the combined value of distributive trade sales and manufacturers’ shipments for May, adjusted for seasonal and trading-day differences but not for price changes, was estimated at $997.8 billion, down 0.1 percent (±0.2%)* from April, but up 6.9 percent (±0.3%) from May 2004.

Manufacturers’ and trade inventories adjusted for seasonal variations but not for price changes, were estimated at an end-of-month level of $1,299.6 billion, up 0.1 percent (±0.1%)* from April and up 7.0 percent (±2.0%) from May 2004.

The total business inventories/sales ratio based on seasonally adjusted data at the end of May was 1.30. The May 2004 ratio was 1.30.”

Comment:  This indicator measures the total shipments from people who make goods to people who sell goods.  A rise indicates that sellers are more confident about sales over the next few months, whereas a decline indicates a degree of caution.  However, over the last few decades, sellers have become far more savvy about inventory management.  This means they are able stock their shelves faster than previous decades.  As a result, they don’t need to make large orders to fulfill potential sales increases in the coming months.  

The Bureau of Labor Statistics reported: “The Producer Price Index for Finished Goods showed no change in June, seasonally adjusted, the Bureau of Labor Statistics of the U.S. Department of Labor reported today.  This index had fallen 0.6 percent in May and risen 0.6 percent in April.  At the earlier stages of processing, prices received by manufacturers of intermediate goods advanced 0.1 percent in June, following a 0.7-percent decline in the preceding month, while the crude goods index decreased 3.3 percent, after moving down 2.0 percent in May.

Comment:  According to the BLS press release, “The Producer Price Index (PPI) of the Bureau of Labor Statistics (BLS) is a family of indexes that measure the average change over time in the prices received by domestic producers of goods and services.”  The indicator allows economists to gauge the possibility of increased inflation.  If the price of producer’s goods increases, the chances of producers passing those costs over to consumers increases.  This increases the chance of inflation at the consumer level.  Today’s numbers provide further evidence of the goldilocks economy, where growth is strong but there is little inflation.  There were some reports that GM’s and Ford’s heavy discounting were partially responsible.

The Federal Reserve Reported: “Industrial production rose 0.9 percent in June, and at 119.7 percent of its 1997 average, it was 3.9 percent higher than its level in June 2004.  Capacity utilization for total industry rose to 80.0 percent; the rate was 2.2 percentage points above its value in June 2004 but was 1.0 percentage point below its 1972-2004 average.”

Comment:  This is solid economic news and could bode well for the employment picture in the coming months.  Capacity utilization is an annoyingly fancy way of saying “how close are we to operating at full potential?”  Theoretically, the higher the number the less companies can get out of existing capital and the more likely they will have to hire more employees to increase production.

Starting on Monday, Today’s Economic News will be exclusively on www.BOPnews.com and My Left Wing.  Mary Scott and Stirling have asked me to be a frontpage poster on both.  Out of consideration to their generous offers, I feel it is only fair that I give each the rights to certain content.  I will still be posting larger more in-depth material on various blogs as time, space and the importance of the story permit.

http://www.federalreserve.gov/releases/g17/Current/default.htm
http://www.census.gov/mtis/www/current.html
ftp://ftp.bls.gov/pub/news.release/ppi.txt

“There are lies, damn lies and statistics.”   From an analysis perspective, the recent unemployment numbers have been difficult to explain because they do not jibe with the results of the labor participation rate.  With help from an analyst at the Boston Federal Reserve, I will explain below why the current unemployment number is too low, why the labor participation rate is right and why the employment situation is not as good as President Bush and his band of yapping right-wing idiots say it is.
First, let me provide some basic definitions, courtesy of the Bureau of Labor Statistics.

The BLS derives the unemployment rate from a sample of payroll records from all 50 state employment agencies.  People are classified as unemployed if they meet all of the following criteria:  “They had no employment during the reference week; they were available for work at that time; and they made specific efforts to find employment sometime during the 4-week period ending with the reference week.”

The bold-face type makes an important distinction: if someone did not search for work in the last month, the unemployment rate does not count them at all.  

The labor force participation rate is the labor force as a percent of the population.  The BLS takes the total population of the US and figures out what percentage of the total population is the “work” force.  Then, they compute the “labor participation rate” which tells us what percentage of the US workforce is in fact actually working.

The Boston Fed Study uses the labor participation rate as the basis for analysis of the current employment situation.

The Study breaks the workforce down into sex and age group categories – for example, men age 16-17, men age 18 – 19 and so on.  In total they have 14 different groups.  There are 7 for each sex.  In addition, the study breaks down each sex into the following age groups: 16-17, 18-19, 20-24, 25-34, 35-44, 45-55 and 55+.  It might help at this point to either go to the study at the link below or draw out columns of a sheet of paper.

The study looks at each group’s labor participation rate in March 2001 and compares it to each group’s participation rate from November 2004 – February 2005.  March 2001 was the final month before the last recession began.  The percentage from November 2004–February 2005 provides as example of how each group is doing in the current cycle.

Here are the basic results.   men and women over 55+ are the only group that is participating at a higher participation rate in November 2004 – February 2005 compared to March 2001.  All other age groups are participating at a lower rate, particularly women.  This drop in participation is most pronounced in both sexes teenage and early 20s categories.  The report states it thusly:

“What leaps out … is the below-average recovery of participation in the current business cycle to date.  The depth of the shortfall is most pronounced among teens and for women of all ages.”

Here is the report’s kicker.  If all of the groups returned to their usual labor participation rate, the labor force would increase by 1.6 million people. Because these people are not in the workforce, the 5.4% unemployment rate for November 2004 – February 2005 is too low and should be revised upwards by 1.1%.  This would make the unemployment rate at the beginning of the year 6.5%.

So, how do I prove all this statistical mumbo jumbo? Simple.  Economists consider 5% unemployment to be full employment.  This assumes that 5% of people are either looking for work, or quit a job to look for work, or were laid off etc…..  Therefore, at 5% unemployment, we should be getting wage increases because it is harder for businesses to find employees.  However, according to the BLS inflation adjusted wages actually decreased .31% in 2004. If there was a tight supply of labor, this number should have increased.

In short, game, set and match to the Boston Fed’s analysis.

LINK

DIA +.65%, SPY +.25%, QQQQ +.99%
10-year Treasury -1/8 to 4.18%
Oil -$2.21 to $57.80
Dollar +.4%/Yen, near unchanged versus euro

The markets rallied on a string of solid news.  First, retail sales rose 1.7% last month.  This eased concerns that consumers were backing away from the market.  Some of this increase was due to GMs recent sales promotion as auto and auto parts comprise 20% of retail sales.  Secondly, the CPI came in at 0 which eased inflation fears.  The combination of these two items led traders to look for a goldilocks scenario, where the economy grows without inflation.  Finally, corporate earnings have been solid.

The 10-year fell 1/8 to yield 4.18%.  The primary news today was the Treasury’s auction of 9 billion in inflation indexed bonds.  The auction was less than a success, partly as a result of the benign inflation report.  Although there were no numbers for indirect bidders, the ratio of bids to number of bonds was 1.68 which is weak.

Oil fell $2.21 to $57.80.  Traders were pleased by the recent gulf storms movement away from drilling rigs in the gulf.   Gulf capacity is back to full operating potential after last week’s evacuation from the two earlier storms.  Yesterday’s news of an increase in distillate stocks bled over to today’s trading, easing trader’s fears of a heating oil shortage later this year.  Finally, the markets were technically overbought, indicating traders may have used storm Emily’s path change as an excuse to sell.

The dollar rose .4% versus the yen and was near unchanged versus the euro.  The US’ retail sales increase was the primary reason for the dollar’s upward move versus the yen as traders have made the growth differentials between the two economies the primary focus of trading philosophies.  The dollar/euro trade appears to be looking for some direction right now.  The dollar is again approaching technically important levels, but needs a news catalyst to help it break through.

Unions have gotten a bad rap for a variety of reasons.  The organized crime connection was clearly their fault and caused some very negative and well-justified backlash.  Unions also have some pretty antiquated and Byzantine work rules.  However, whenever a corporation whose employees have a union has problems with expenses, the right wing always blames the union for increasing costs.  Democracy is bad for employees but good for Iraqis.
A union is a group of people who use democratic principals to forward their economic interests.  They write by-laws that govern their behavior.  Unions elect leaders to represent its members.  If the leaders are unresponsive to the needs of the represented, then the represented can vote them out.  This looks an awful lot like the democracy Bush wants to create in Iraq.  Yet, for some reason it is bad when US employees organize along democratic principals and good when Iraqis do the same thing.  

Corporations have legal protections – they are enshrined in law.  Each of the 50 states has a corporate statute that creates and enshrines the corporate entity.  Like unions, corporations use democratic values such as voting to protect shareholder rights.  It is an understood and accepted legal fiction that insulates shareholders from liability.  It allows people to pool resources and develop new products and technologies.  Corporations have contributed numerous benefits to society.  DVDs, computers, telephones …. The list is endless.

Unions have also accomplished many good things.  Work rules about the number of hours people can legally work, safe work environments, collective health benefits – these are all fabulous benefits of unions.  

From the Republican perspective, when employees get together and use democratic principals to protect their interests, they are bad.  But, when corporate interests get together and use democratic principals to protect their interests, they are enshrined in law.

In other words, for Republicans employees are not allowed to use democracy to further their interests.

“The wages of typical workers are treading water, growing roughly at the same rate that inflation eats into their buying power. Last week, the Labor Department reported that average wages for production and nonsupervisory workers in the private sector, about 75 percent of the labor force, reached $16.06 an hour in June, just 2.7 percent above the level a year ago.
Yet in terms of the aggregate effect on the total economy, that statistic does not seem to matter much. Workers’ wages may be barely keeping up, but Americans’ average incomes are growing briskly – in part, because of growth in the overall number of jobs, including Mr. Barnes’s extra one. But it also reflects other forms of income, flowing mostly to the more affluent, which are fueling the consumer spending that has provided a crucial pillar of support for economic growth over the last three years.

“You have a lower half of the wage distribution in the United States that has not experienced any income gains for a long time now,” said Barry P. Bosworth, an economist at the liberal-leaning Brookings Institution. “But from a macro perspective this doesn’t have much impact.”

After falling to a trough of 8.5 percent in 2001, corporate profits’ share of national income soared to 12.3 percent in the first quarter of this year, the highest level since the mid-1960’s. The share of income accruing to workers’ compensation, on the other hand, fell from 66.2 percent in 2001 to 63.9 percent in the first quarter of 2005.”

For those of you who are unfamiliar with this statistic, please commit it to memory:

For the last 5 years, their wages have barely grown.  According to the Bureau of Labor Statistics, the average earnings increase from 2000-2004 was 3.86%, 3.22%, 3.12%, 1.71% and 2.39% respectively.  However wages have to be compared to inflation to determine the real rate of wage growth.  For the same years, annual inflation was 3.4%, 2.8%, 1.6%, 2.3% and 2.7% respectively.  When inflation is subtracted from wages, overall wage growth becomes .46%, .42%, 1.52%, -.59% and-.31% respectively for 2000-2004.

At the same time, corporate profits are increasing. In other words, the “trickle-down” effect of supply-side economics is in fact the rich pissing down on the poor.

I should add that I am not a socialist.  I am a free-market advocate until the day I die.  However, I am also for social justice for spiritual, practical and political reasons.  And the reality is the current administration could care less about the working poor.

During the same time, we have seen huge increases in higher-education tuition payments, medical care, medical insurance and increased spending of prescription drugs.

LINK