Opinion: When Companies Supersize, Paychecks of Workers Shrink

From today’s New York Times:

Anyone with a cellphone should have paid attention to the big merger news on April 29: T-Mobile and Sprint announced their intention to tie the knot after years of speculation. If it goes through, it will leave the country with just three major wireless carriers instead of four.

Less noticed, on the same day, about a dozen other corporate marriages were announced worldwide, worth a combined $120 billion. So far this year, $1.7 trillion worth of deals have been declared globally, higher than the pre-financial-crisis record set in 2007. This year’s big-dollar mergers in the United States range from Cigna’s purchase of Express Scripts, oil refiner Marathon Petroleum buying rival Andeavor, and Dr Pepper Snapple cozying up to Keurig Green Mountain. That’s in addition to AT&T’s play for Time Warner in 2016, CVS’s offer for Aetna, and Amazon swallowing up Whole Foods.

All this activity means fewer companies, which means less competition. For consumers, that can raise prices if the merged companies face less pressure to keep things cheap. That’s the main test these deals have to pass: whether regulators, including the Justice Department and Federal Trade Commission, think consumers will fare worse.

That narrow focus on consumer prices hides another, potentially more dangerous side effect. A growing body of evidence has found that as mergers thin the ranks of businesses, workers have fewer options when they look for jobs. That reduces their bargaining power and, in turn, is part of why wages have stagnated.

Read the complete article here.

A Better Deal for American Workers

From today’s New York Times by Sen. Chuck Schumer (D-NY):

Americans are clamoring for bold changes to our politics and our economy. They feel, rightfully, that both systems are rigged against them, and they made that clear in last year’s election. American families deserve a better deal so that this country works for everyone again, not just the elites and special interests. Today, Democrats will start presenting that better deal to the American people.

There used to be a basic bargain in this country that if you worked hard and played by the rules, you could own a home, afford a car, put your kids through college and take a modest vacation every year while putting enough away for a comfortable retirement. In the second half of the 20th century, millions of Americans achieved this solid middle-class lifestyle. I should know — I grew up in that America.

But things have changed.

Today’s working Americans and the young are justified in having greater doubts about the future than any generation since the Depression. Americans believe they’re getting a raw deal from both the economic and political systems in our country. And they are right. The wealthiest special interests can spend an unlimited, undisclosed amount of money to influence elections and protect their special deals in Washington. As a result, our system favors short-term gains for shareholders instead of long-term benefits for workers.

And for far too long, government has gone along, tilting the economic playing field in favor of the wealthy and powerful while putting new burdens on the backs of hard-working Americans.

Democrats have too often hesitated from taking on those misguided policies directly and unflinchingly — so much so that many Americans don’t know what we stand for. Not after today. Democrats will show the country that we’re the party on the side of working people — and that we stand for three simple things.

First, we’re going to increase people’s pay. Second, we’re going to reduce their everyday expenses. And third, we’re going to provide workers with the tools they need for the 21st-century economy.

Over the next several months, Democrats will lay out a series of policies that, if enacted, will make these three things a reality. We’ve already proposed creating jobs with a $1 trillion infrastructure plan; increasing workers’ incomes by lifting the minimum wage to $15; and lowering household costs by providing paid family and sick leave.

Read the entire op-ed here.

A New Report Argues Inequality Is Causing Slower Growth. Here’s Why It Matters.

From today’s NYT blog “The Upshot” by Neil Irwin:

Is income inequality holding back the United States economy? A new report argues that it is, that an unequal distribution in incomes is making it harder for the nation to recover from the recession and achieve the kind of growth that was commonplace in decades past.

The report is interesting not because it offers some novel analytical approach or crunches previously unknown data. Rather, it has to do with who produced it, which says a lot about how the discussion over inequality is evolving.

Economists at Standard & Poor’s Ratings Services are the authors of the straightforwardly titled “How Increasing Inequality is Dampening U.S. Economic Growth, and Possible Ways to Change the Tide.” The fact that S&P, an apolitical organization that aims to produce reliable research for bond investors and others, is raising alarms about the risks that emerge from income inequality is a small but important sign of how a debate that has been largely confined to the academic world and left-of-center political circles is becoming more mainstream.

Read the entire article here.

What Obama Left Out of His “Inequality Speech”: Regulation

By THOMAS O. MCGARITY, From the “Great Divide” Blog, New York Times Onine

AUSTIN, Tex. — President Obama’s speech on inequality last Wednesday was important in several respects. He identified the threat to economic stability, social cohesion and democratic legitimacy posed by soaring inequality of income and wealth. He put to rest the myths that inequality is mostly a problem afflicting poor minorities, that expanding the economy and reducing inequality are conflicting goals, and that the government cannot do much about the matter.

Mr. Obama also outlined several principles to expand opportunity: strengthening economic productivity and competitiveness; improving education, from prekindergarten to college access to vocational training; empowering workers through collective bargaining and antidiscrimination laws and a higher minimum wage; targeting aid at the communities hardest hit by economic change and the Great Recession; and repairing the social safety net.

But there’s a crucial dimension the president left out: the revival, since the mid-1970s, of the laissez-faire ideology that prevailed in the Gilded Age, roughly the 1870s through the 1910s. It’s no coincidence that this laissez-faire revival — an all-out assault on government regulation — has unfolded over the very period in which inequality has soared to levels not seen since the Gilded Age.

History tells us that in periods when protective governmental institutions are weak, irresponsible companies tend to abuse their economic freedom in ways that harm ordinary workers and consumers. The victims are often less affluent citizens who lack the power either to protect themselves from harm or to hold companies accountable in the courts. We are in such a period today.

Read the full article here.

Highlights from Obama’s speech in Kansas on equality and fairness

On the growth of inequality in America:  “But for most Americans, the basic bargain that made this country great has eroded.  Long before the recession hit, hard work stopped paying off for too many people.  Fewer and fewer of the folks who contributed to the success of our economy actually benefited from that success.  Those at the very top grew wealthier from their incomes and investments than ever before.  But everyone else struggled with costs that were growing and paychecks that weren’t – and too many families found themselves racking up more and more debt just to keep up.”

On the need for rebuilding the middle-class:  “But this isn’t just another political debate.  This is the defining issue of our time.  This is a make or break moment for the middle class, and all those who are fighting to get into the middle class.  At stake is whether this will be a country where working people can earn enough to raise a family, build a modest savings, own a home, and secure their retirement.”

On President Teddy Roosevelt’s call for economic and social justice in America:  “In 1910, Teddy Roosevelt came here, to Osawatomie, and laid out his vision for what he called a New Nationalism.  “Our country,” he said, “…means nothing unless it means the triumph of a real democracy…of an economic system under which each man shall be guaranteed the opportunity to show the best that there is in him.”

For this, Roosevelt was called a radical, a socialist, even a communist.  But today, we are a richer nation and a stronger democracy because of what he fought for in his last campaign:  an eight hour work day and a minimum wage for women; insurance for the unemployed, the elderly, and those with disabilities; political reform and a progressive income tax.”

On protecting and renewing American workers:  “And if you’re someone whose job can be done cheaper by a computer or someone in another country, you don’t have a lot of leverage with your employer when it comes to asking for better wages and benefits – especially since fewer Americans today are part of a union.”

On the lies of Republican economics:  “Now, just as there was in Teddy Roosevelt’s time, there’s been a certain crowd in Washington for the last few decades who respond to this economic challenge with the same old tune.  “The market will take care of everything,” they tell us.  If only we cut more regulations and cut more taxes – especially for the wealthy – our economy will grow stronger.  Sure, there will be winners and losers.  But if the winners do really well, jobs and prosperity will eventually trickle down to everyone else.  And even if prosperity doesn’t trickle down, they argue, that’s the price of liberty.

It’s a simple theory – one that speaks to our rugged individualism and healthy skepticism of too much government.  It fits well on a bumper sticker.  Here’s the problem:  It doesn’t work.  It’s never worked.  It didn’t work when it was tried in the decade before the Great Depression.  It’s not what led to the incredible post-war boom of the 50s and 60s.  And it didn’t work when we tried it during the last decade.

Look at the statistics.  In the last few decades, the average income of the top one percent has gone up by more than 250%, to $1.2 million per year.  For the top one hundredth of one percent, the average income is now $27 million per year.  The typical CEO who used to earn about 30 times more than his or her workers now earns 110 times more.  And yet, over the last decade, the incomes of most Americans have actually fallen by about six percent.

It’s heartbreaking enough that there are millions of working families in this country who are now forced to take their children to food banks for a decent meal.  But the idea that those children might not have a chance to climb out of that situation and back into the middle class, no matter how hard they work?  That’s inexcusable.  It’s wrong.  It flies in the face of everything we stand for.

But in the long term, we have to rethink our tax system more fundamentally.  We have to ask ourselves:  Do we want to make the investments we need in things like education, and research, and high-tech manufacturing?  Or do we want to keep in place the tax breaks for the wealthiest Americans in our country?  Because we can’t afford to do both.  That’s not politics.  That’s just math.”