2013 - The year of fat profits

More than two-thirds of Americans live from paycheck to paycheck.  Most shares of stock are owned by the very wealthy. The richest 1 percent of Americans owns 35 percent of the value of American-owned shares. The richest 10 percent owns over 80 percent. So in the bull market of 2013, America’s rich hit the jackpot. . Since it’s owned mostly by the wealthy, a rise in stock prices simply reflects a transfer of wealth from some of the rich (who cashed in their shares too early) to others of the rich (who bought shares early enough and held on to them long enough to reap the big gains).

2013 was a banner year for profits (they grew over 18 percent). Where did those profits come from? American corporations didn’t make most of their money from increased sales. They made their big bucks mostly by reducing their costs — especially their biggest single cost: wages. Corporate earnings now represent the largest share of the gross domestic product — and wages the smallest share of GDP — than at any time since records have been kept.

They push wages down because most workers no longer have any bargaining power when it comes to determining pay. The continuing high rate of unemployment — including a record number of long-term jobless, and a large number who have given up looking for work altogether — has allowed employers to set the terms. Unions have been decimated. In the 1950s, over a third of private-sector workers were members of labor unions. Now, fewer than 7 percent are unionized.

According to the official wage statistics for 2012, forty percent of the US work force earned less than $20,000, fifty-three percent earned less than $30,000, and seventy-three percent earned less than $50,000. The median wage or salary was $27,519. The amounts are in current dollars and they are compensation amounts subject to state and federal income taxes and to Social Security and Medicare payroll taxes. In other words, the take home pay is less. To put these incomes into some perspective, the poverty threshold for a family of four in 2013 was $23,550.  Slightly more than one percent of Americans make more than $200,000 annually and less than four-tenths of one percent make $1,000,000 or more annually.

Since the December 2007 downturn, Americans have used up their coping mechanisms. Homes have been refinanced. IRAs raided. Savings drawn down. Grown children, now adults, are back home with parents. The falling labor force participation rate signals that the economy can no longer provide jobs for the workforce.

Will 2014 be the year workers realize that capitalism must be overthrown?