It made sense. With constant pressure to improve profitability, companies needed to reduce expenses, and labor is a top expense. Having the ability to leverage cheaper skills gives the company flexibility and options in a tough economy.
But it didn’t stop with the call center. In the past few years we have seen more highly skilled jobs moving overseas. Computer programmers, engineers, and accountants are just some of the professionals who have lost their jobs to offshoring. Some employees have even had the unenviable task of having to document their roles in detail, just so their jobs can be eliminated. Worse yet, some employees have had to train the overseas organizations that were taking over their roles, getting the pink slip upon completion.
Jobs in the IT industry appear to be among the most at risk. The Times of India recently reported that IBM was now the country’s second largest employer. In 2007, IBM had 73,000 employees in India, a 43% increase from 2006. The Wall Street Journal estimates that IBM’s workforce in India could be as high as 100,000 today.
Earlier this year, IBM stopped reporting the number of employees by country, making it extremely difficult to know how many jobs are left in the United States. Nevertheless, data as recent as last fall suggests that of IBM’s reported 400,000 workforce at the end of 2009, only 105,000 jobs remained in the United States. It appears that soon – possibly very soon – IBM will employ fewer people in the US than in India.
I finally made the choice to leave because I could not get over how broken the employee systems were. If you had a good manager, you got the care and feeding to allow you to grow as a person and an employee of the company. If you had a long distance relationship with your manager, chances are you suffered because they did not spend the time to figure out who you were and the points of value you brought to the organization along with the improvement opportunities.
Also, the system was severely broken to me. I got a raise when I was rated a 3, (the 3 times I changed jobs and had less than a year in the role, an IBM standard I was told) and no raise when I was a 2 (old system) or 2+ or 1 (new system). It did not line up at all for me and finally that dissatisfaction, along with no direction on career path and what I felt was employee apathy from the management team, I left.
I bring this up to say that while I loved the intellectual environment, the revolving door of resources and the constant switching around of managers (I had 19 in 9 years) led me to look outside and find something I felt would provide a more personal relationship. I consider it a shame as I loved the people I had the opportunity to work with and again, the terrific environment that fostered creativity and intellectual growth.
The question I have concerns the wording. On the summary page they call this a "Mutual Agreement" Separation. It is far from mutual as I had no plans on leaving IBM, but obviously they want me out.
My question is, am I eligible to collect unemployment even though this is supposedly "mutual" and I am taking the Retirement Bridge LOA? Also, does anyone know of a good labor attorney in the Poughkeepsie area as IBM suggests I get a lawyer prior to signing the agreement. Thanks in advance for any help.
In NY, the key to collecting unemployment is to make sure that you make it clear that IBM did NOT contribute to the pension plan since 12/31/2007, and that working during that time did not increase your pension. Receiving the retirement bridge LOA and severance pay will not affect your eligibility for unemployment.
If, for some reason, you are initially denied unemployment benefits, be sure to appeal the decision. Many folks have had this happen and the decision is reversed once they appeal.
I think the reason that the paperwork calls it a "mutual" agreement is because IBM doesn't have to give you any sort of package with severance pay, medical benefits, etc. By accepting the items they are offering, you are agreeing to the offer and the terms and conditions that go with it. You may not be thrilled by it, but you are the one making the choice to take it, so in that respect, it is considered "mutual."
Although I have no personal experience with this firm, I know several people who have used McCabe and Mack in Poughkeepsie and were very satisfied. They have several lawyers who specialize in labor law and should be just fine for looking over the agreement. You can also search for lawyers on the lawyers.com web site. That can help you find a firm that specializes in labor law, but is not as good as a recommendation from someone you know.
The "summary page" that calls this a "mutual agreement" is not included in the package, but a separate "unofficial" page that summarizes and outlines the benefits of my accepting the package. The actual package discusses two kinds of separations: a) Separation Allowance which is 1 week of pay for each six months of service up to a maximum of 26 weeks of pay. b) Minimized Separation Allowance which is 1 week of pay for every year of service up to a maximum of 13 weeks.
The Minimized Separation Allowance is used when management determines an employee's performance is declining towards and unsatisfactory level. The Separation Allowance, I am guessing, is used during resource actions.
I have heard favorable things about McCabe and Mack in the past concerning non-labor issues, so I will call them regarding this situation. Many thanks to you and everyone who has responded. If anyone has any additional opinions, I'd be very happy to hear them as well.
I'm located in Poughkeepsie, currently collecting my IBM pension, and have also been receiving NYS Unemployment Insurance of $430 per week since the first week of May in 2009. I'm expecting to receive a total of 93 weeks of UI the way things stand as of today's date. I was in the very first group of employees that was eligible to collect BOTH their pensions and UI. That's because I was notified I was being RA'ed on March 26, 2009, but retired from IBM on April 30, 2009.
The New York State Department of Labor uses the previous 5 quarters of your work history prior to your actual last day of employment with IBM to determine the amount of your weekly UI benefit. Because IBM was not contributing to anyone's pension during the 5 quarters between 1/1/2008 and 3/31/2009, collecting a pension did not offset any amount of UI the employees RA'ed in March of 2009 were eligible to receive. Since you have worked for IBM for many more than 5 quarters since IBM froze everyone's pension on 1/1/2008, you are definitely eligible to collect both your pension and full UI benefit at the same time.
Good luck to you. I believe you will find life out of IBM to be great!
The law says that they can not fire you for certain specific reasons, such as race, religion, color, sex or national origin. To win your case, you would have to prove that they violated one of these protected categories.
If IBM claimed that they were not giving 2 weeks severance pay rather than 1 week because of performance reasons, you might have a case to sue over. You would need some pretty strong evidence to counter IBM's performance appraisals of you. And you would have to decide if the legal costs are worth the amount of money you are fighting over. That is something a lawyer can help you decide.
Separately, the report estimated that the CEOs of the nation's largest publicly traded companies make an average of 263 times more the typical U.S. production worker. ...
The institute calculated that the 50 CEOs - who together cut 531,363 jobs - averaged $12 million in salary, bonuses, stock options and other perks, 42 percent more than the average compensation for all of the CEOs on the Standard & Poor's 500. The report said 7 out of 10 of these top job-cutters laid off workers even though their companies ended the year profitably.
"I think that really shows a really perverse incentive system in this country," said Sarah Anderson, lead author of the Institute for Policy Studies' 17th Annual Executive Compensation Survey. "You are handsomely rewarded for slashing jobs in the middle of the worst economic crisis in 80 years," she said. ...
So how do they get away with it? Anderson said you have to look at the make-up of many companies' executive boards. She said they're often made up of CEOs and high level executives from other companies "who really don't want to question this ridiculous pay system we have in this country that continues to pay people these absurd amounts of money when they're really not performing well for their company or the overall economy."
Another disconcerting finding of the report: 72 percent of layoff-leading firms announced mass layoffs while delivering positive earnings reports. Anderson explained layoffs are really driven by efforts "to boost short-term profits even higher and also just to continue to have such high CEO pay levels." She said these mass cuts are often bad for business over the long-term because they impact worker morale, which can lead to lower productivity. She said they also result in additional costs related to hiring and training new workers down the road.
Grove has been telling anyone who will listen the last couple years that the American technology sector is in decline and he has proven himself eager to diagnose its ailments. Unlike other tech leaders, these days you won’t hear Grove calling for a bunch of extra H1B Visas or other short-term tactics to buoy the tech sector. Instead, Grove has turned idealist, some would even say, “protectionist.” ...
In a guest column for Bloomberg, Grove recently stated:
“Americans love the idea of the guys in the garage inventing something that changes the world… Startups are a wonderful thing, but they cannot by themselves increase tech employment. Equally important is what comes after that mythical moment of creation in the garage, as technology goes from prototype to mass production. This is the phase where companies scale up. They work out design details, figure out how to make things affordably, build factories, and hire people by the thousands. Scaling is hard work but necessary to make innovation matter. The scaling process is no longer happening in the U.S. And as long as that’s the case, plowing capital into young companies that build their factories elsewhere will continue to yield a bad return in terms of American jobs.”
He pointed out that Apple has 25,000 employees but it outsources its manufacturing to a Foxxconn facility in southern China that employs 250,000 workers to build Apple products. And this 10-to-1 ratio is essentially the same for Dell and other high-tech companies that use Foxconn, a company that now employs 800,000 workers — more than Apple, Dell, HP, Intel, Microsoft, and Sony combined.
The common refrain in the U.S. in recent decades has been to devalue and dismiss manufacturing jobs and hang our hats on the fact that most of the high-end knowledge workers remain in the U.S. for these tech companies, and that those jobs are much more valuable and much less commoditized. Grove challenges that line of thinking, saying:
“Not only did we lose an untold number of jobs, we broke the chain of experience that is so important in technological evolution… abandoning today’s ‘commodity’ manufacturing can lock you out of tomorrow’s emerging industry… Transferring manufacturing and a great deal of engineering out of the country has hindered our ability to bring innovations to scale at home. Without scaling, we don’t just lose jobs — we lose our hold on new technologies. Losing the ability to scale will ultimately damage our capacity to innovate.”
The example that Grove uses to illustrate this is batteries. The U.S. makes a fraction of the Lithion-Ion batteries used to power the world’s computers and electronic devices. The U.S. lost the battery race a couple decades ago when it started shipping the manufacturing processes for consumer electronics to Asia. But now, Lithion-Ion batteries are going to be used to power electronic automobiles and that market could quickly dwarf the electronics industry and the U.S. is out of the game before it even begins. ...
Grove’s solution You can find a lot of people who agree with Grove’s assessment of the state of the American technology industry. However, where the real controversy is over his prescribed remedy. Grove concludes:
“Long term, we need a job-centric economic theory — and job-centric political leadership — to guide our plans and actions… The first task is to rebuild our industrial commons. We should develop a system of financial incentives: Levy an extra tax on the product of offshored labor. (If the result is a trade war, treat it like other wars — fight to win.) Keep that money separate. Deposit it in the coffers of what we might call the Scaling Bank of the U.S. and make these sums available to companies that will scale their American operations. Such a system would be a daily reminder that while pursuing our company goals, all of us in business have a responsibility to maintain the industrial base on which we depend and the society whose adaptability — and stability — we may have taken for granted… If what I’m suggesting sounds protectionist, so be it.”
The problem isn't so much that we're overstating the importance of innovation; it's more about what so many leaders are doing with it. Too many of them are exhorting all of their employees to be more innovative, providing classes and workshops designed to teach everyone how to think outside the box. They're also doing their best to include innovation on a list of core values, emblazoning the word on annual reports and hallway posters, hoping that this will inspire people to come up with new ideas that will revolutionize the long-term strategic and financial prospects of the company.
Even well-intentioned and dedicated employees are bound to respond cynically to these efforts, frustrated by what they see as hypocrisy. They just don't perceive a genuine eagerness among leaders to embrace the new ideas of rank-and-file employees, and they're mostly accurate in that perception. For all the talk about innovation, most executives don't really like the prospect of their people generating new ways to do things, hoping instead that they'll simply do what they're being asked to do in the most enthusiastic, professional way possible. And so it is no surprise when they get pounded for preaching innovation without really valuing it.
Selected reader comments follow:
With the U.S. budget deficit this year running close to the record $413 billion that was set in 2004 and projected to hit a record $486 billion next year, lawmakers are looking to plug holes in the U.S. tax code and generate more revenues. Dorgan in a statement called the report "a shocking indictment of the current tax system." Levin said it made clear that "too many corporations are using tax trickery to send their profits overseas and avoid paying their fair share in the United States."
Bob Edelman, founder of and director of Interns Over 40, a job-listings and employment-search-tips site that launched in July 2009 that now reaches 40,000 monthly visitors ages 45 to 55, paints a broader picture: "With unemployment at near 10% ... the over-40 category [has seen] so many well-established industries demolished, resulting in long-term structural unemployment." Affected workers are literally forced to seek new careers. ...
For those curious in pursuing an internship, large companies like Hewlett Packard, IBM or Morgan Stanley might be more adjusted to the idea of hiring older adults, says Edelman, but small and mid-sized companies have an economic incentive to recruit to unpaid workers regardless of age. While opportunities vary, he can pinpoint one area of growth: "Clearly, in social media and social media marketing there are openings for older interns ... who have experience with marketing."
Now Wal-Mart has taken the class issue to the Supreme Court. It is probably a smart legal move, given the court’s clear tendency to rule in favor of corporations, particularly when big classes or discrimination claims are involved. We hope the court resists the temptation to toss out the case, which would force women to file lawsuits one by one. Wal-Mart’s employment practices deserve a full hearing. ...
If this goes forward it would be the largest employment discrimination lawsuit in American history. Wal-Mart could face more than $1 billion in damages if the case proceeds and the company loses. Wal-Mart is the world’s largest private employer, and as the Ninth Circuit wrote, “mere size does not render a case unmanageable.” The Supreme Court should give the women of Wal-Mart a chance to make their case together.
In contrast to past practices of absorbing higher prices, some companies chose this year to keep their costs the same by passing the entire increase in premiums for family coverage onto their workers, according to a new survey released on Thursday by the Kaiser Family Foundation, a nonprofit research group.
Workers’ share of the cost of a family policy jumped an average of 14 percent, an increase of about $500 a year. The cost of a policy rose just 3 percent, to an average of $13,770. Workers are now paying nearly $4,000 for family coverage, according to the survey, and their costs have increased much faster than those of employers. Since 2005, while wages have increased just 18 percent, workers’ contributions to premiums have jumped 47 percent, almost twice as fast as the rise in the policy’s overall cost.
Workers also increasingly face higher deductibles, forcing them to pay a larger share of their overall medical bills. “The long-term trend is pretty clear,” said Drew E. Altman, the chief executive of the Kaiser foundation, which conducted the survey this year with the Health Research and Educational Trust, a research organization affiliated with the American Hospital Association. “Insurance is getting stingier and less comprehensive.”
"But dependency on government has never been bad for the rich. The pretense of the laissez-faire people is that only the poor are dependent on government, while the rich take care of themselves. This argument manages to ignore all of modern history, which shows a consistent record of laissez-faire for the poor, but enormous government intervention for the rich." From Economic Justice: The American Class System, from the book Declarations of Independence by Howard Zinn.
All three tycoons are the latest incarnation of what the historian Kim Phillips-Fein labeled “Invisible Hands” in her prescient 2009 book of that title: those corporate players who have financed the far right ever since the du Pont brothers spawned the American Liberty League in 1934 to bring down F.D.R. You can draw a straight line from the Liberty League’s crusade against the New Deal “socialism” of Social Security, the Securities and Exchange Commission and child labor laws to the John Birch Society-Barry Goldwater assault on J.F.K. and Medicare to the Koch-Murdoch-backed juggernaut against our “socialist” president.
Only the fat cats change — not their methods and not their pet bugaboos (taxes, corporate regulation, organized labor, and government “handouts” to the poor, unemployed, ill and elderly). Even the sources of their fortunes remain fairly constant. Koch Industries began with oil in the 1930s and now also spews an array of industrial products, from Dixie cups to Lycra, not unlike DuPont’s portfolio of paint and plastics. Sometimes the biological DNA persists as well. The Koch brothers’ father, Fred, was among the select group chosen to serve on the Birch Society’s top governing body. In a recorded 1963 speech that survives in a University of Michigan archive, he can be heard warning of “a takeover” of America in which Communists would “infiltrate the highest offices of government in the U.S. until the president is a Communist, unknown to the rest of us.” That rant could be delivered as is at any Tea Party rally today. ...
When David Koch ran to the right of Reagan as vice president on the 1980 Libertarian ticket (it polled 1 percent), his campaign called for the abolition not just of Social Security, federal regulatory agencies and welfare but also of the F.B.I., the C.I.A., and public schools — in other words, any government enterprise that would either inhibit his business profits or increase his taxes. ...
Tea Partiers may share the Kochs’ detestation of taxes, big government and Obama. But there’s a difference between mainstream conservatism and a fringe agenda that tilts completely toward big business, whether on Wall Street or in the Gulf of Mexico, while dismantling fundamental government safety nets designed to protect the unemployed, public health, workplace safety and the subsistence of the elderly. ...
Yet inexorably the Koch agenda is morphing into the G.O.P. agenda, as articulated by current Republican members of Congress, including the putative next speaker of the House, John Boehner, and Tea Party Senate candidates like Rand Paul, Sharron Angle, and the new kid on the block, Alaska’s anti-Medicaid, anti-unemployment insurance Palin protégé, Joe Miller. Their program opposes a federal deficit, but has no objection to running up trillions in red ink in tax cuts to corporations and the superrich; apologizes to corporate malefactors like BP and derides money put in escrow for oil spill victims as a “slush fund”; opposes the extension of unemployment benefits; and calls for a freeze on federal regulations in an era when abuses in the oil, financial, mining, pharmaceutical and even egg industries (among others) have been outrageous.
The Koch brothers must be laughing all the way to the bank knowing that working Americans are aiding and abetting their selfish interests. And surely Murdoch is snickering at those protesting the “ground zero mosque.” Last week on “Fox and Friends,” the Bush administration flacks Dan Senor and Dana Perino attacked a supposedly terrorism-tainted Saudi prince whose foundation might contribute to the Islamic center. But as “The Daily Show” keeps pointing out, these Fox bloviators never acknowledge that the evil prince they’re bashing, Walid bin Talal, is not only the biggest non-Murdoch shareholder in Fox News’s parent company (he owns 7 percent of News Corporation) and the recipient of Murdoch mammoth investments in Saudi Arabia but also the subject of lionization elsewhere on Fox. ...
When wolves of Murdoch’s ingenuity and the Kochs’ stealth have been at the door of our democracy in the past, Democrats have fought back fiercely. Franklin Roosevelt’s triumphant 1936 re-election campaign pummeled the Liberty League as a Republican ally eager to “squeeze the worker dry in his old age and cast him like an orange rind into the refuse pail.” When John Kennedy’s patriotism was assailed by Birchers calling for impeachment, he gave a major speech denouncing their “crusades of suspicion.” And Obama? So far, sadly, this question answers itself.
Critics of Social Security say the explanation fits because as the U.S. population grows older, the cost of running the entitlement program will outpace revenue coming in. Under current law, dedicated resources are projected to become insufficient to pay full benefits in 2039, the Congressional Budget Office says. ...
President Franklin Roosevelt signed the Social Security Act on Aug. 14, 1935. Since then, it has unquestionably kept millions of people -- most importantly, the elderly and disabled -- from the depths of poverty. Social Security is not a Ponzi scheme. Nor are people milking the program to live the high life. How many people could live richly off $1,000 a month, which is the current average monthly benefit for all beneficiaries? ...
Social Security has some major funding issues, but it's not a con. It is a social insurance program that was never intended to be any individual's personal savings or investment account. This remarkable social safety net is the cost we bear as a civilized society.
Sheesh – like it was expletive-filled emails that crashed our economy, not Wall Street banksters gaming the system!
Meanwhile, Goldman's pious moralists have already plotted an end run around new regulatory reforms that Congress passed in July. One of the most important reforms was a ban on what's called "proprietary trading," a convoluted form of casino gambling by bankers that led to Wall Street's meltdown and America's ongoing economic catastrophe. Goldman has simply had these proprietary traders change hats, moving them into its "asset management" division, which does not come under the new regulation. So – Hocus-Pocus! – The reckless gamblers slip through a definitional loophole and keep playing the same old game. This slick perversion of the law will be hugely profitable for the bank, and hugely risky for our economy.
But at least we can take comfort in the fact that no profane emails were exchanged by Goldman's ethically-impaired bankers as they conspired to put themselves above the law. And they wonder why the phrase "Wall Street Banker" is now an expletive in our country.
Hastert, Armey, Gephardt, Dole, and Lott are among a cadre of 73 former members of congress who've been working in recent months to weaken or kill new regulations to rein in the gouging and reckless gambling of the big financial firms. They are not the only former public servants who're now using their insider knowledge and personal connections in Washington to serve the bankers. For example, at least 66 staffers for the House or Senate banking committees have moved from Capitol Hill to the K-Street lobbying corridor, and another 82 staffers for members of those committees also are now lobbyists for the finance industry. Adding even more firepower to this special-interest army of influence peddlers are 42 former officials from the treasury department.
In an effort to slow down this shameless cashing-in on public service, the watchdog group, Public Citizen, contacted 47 current lawmakers who are retiring this year. The group asked them to pledge not to take a lobbying job for two years with any corporation that had lobbied them. Not a single one took the pledge. To see who the 47 are, and to get behind stricter lobbying rules, contact Public Citizen at www.citizen.org/revolvingdoor.
Yet the economic and political thievery continues, as the White House, Congress, both parties, the courts, the media, much of academia, and other national institutions that shape our public policies reflexively shy away from any structural change. Instead, the first instinct of these entities is to soothe the fevered brow of corporate power by insisting that corporate primacy be the starting point of any "reform." Thus, when Washington began its widely ballyhooed effort last year to reform our health-care system, step number one was to announce publicly that the monopolistic, bureaucratic insurance behemoths that cost us so much and deliver so little would retain their controlling position in the structure. Likewise, Wall Street barons who crashed America's financial system were allowed to oversee the system's remake--and (Big Surprise!) the same top-heavy structure and shaky practices that caused the crash are being kept in place.
In other words, the foxes who ate the chickens keep being put in charge of designing the new hen house--so nothing really changes.
This is more than frustrating, it's infuriating --and it's debilitating for our democracy. As a fellow said to me about the lack of real changes in national policy during the Clinton presidency, "I don't mind losing when we lose, but I hate losing when we win." Why does this keep happening to us, and who's doing it? It's not merely a matter of too many fickle and pusillanimous politicians--they're the on-stage actors in this drama, but not the producers, not the ones behind the scenes plotting to thwart the people's democratic will. Who, specifically, are these plotters, and how do they impose their narrow agenda of self-interest over the public interest?
These crucial questions for our democratic republic are the focus of this Lowdown, and they'll be a recurring topic in future issues. After all, to achieve genuine grassroots power, we have to know the full dimensions of the plutocratic powers we're up against. Most Americans are totally unaware of these interests, which have attained a dangerous reach by quietly embedding themselves (and their self-centered worldview) much more deeply in our society's governing institutions than they want us to realize. So let's take a peek at them, beginning with a look at the intricate web of power woven by a huge corporation you've probably never heard of, even though your consumer dollars are financing its right-wing political agenda. Read more...
One thing I do know is this: In a far stricter tax environment, my grandfather still managed to accumulate and pass on ample funds to make three subsequent generations very comfortable indeed. And as an inheritor I am here to tell you, the estate tax is not as much of a bogeyman as you've been led to believe.
The truth in numbers Let's start with the facts:
To those who believe the estate tax is unfair, I say that there is no tax more fair than this one. I recently signed the Call to Preserve the Estate Tax organized by United for a Fair Economy because the estate tax is an expression of our deepest American values: that we live in a meritocracy, not an aristocracy; that every generation is a fresh start; and that we choose to build a society in which wealth and opportunity do not accrue to people simply for being born wealthy. ...
Here at home, I have watched the gap between rich and poor driven to historic highs by a tax policy that has exacerbated our deficit and eviscerated our basic capacity to provide schooling, emergency services, and clean water and air for one and all. The estate tax is the cornerstone of a progressive system that leaves wealthy heirs with ample funds while providing the government with the resources it needs to build an environment for the common good. By preserving it, we not only restore billions in revenue to the national treasury — we also restore our most cherished collective ideals as a nation. "Tax me" may be the least popular sentence in America, but it's what I am asking, and I hope that our leaders are listening.
Treasury Secretary Timothy Geithner has long made it clear his financial repair plan was based on allowing large banks to "earn" their way back to health. By creating conditions where banks could make easy profits, Geithner and top officials at the Federal Reserve hoped to limit the amount of money taxpayers would have to directly inject into the banks. This was never the best strategy for fixing the financial sector, but it wasn't outright predation, either. But now the Treasury Department is making explicit that it was—and remains—willing to let those so-called "earnings" come directly at the expense of people hit hardest by the recession: struggling borrowers trying to stay in their homes.
This crisis began decades ago when a new wave of technology — things like satellite communications, container ships, computers and eventually the Internet — made it cheaper for American employers to use low-wage labor abroad or labor-replacing software here at home than to continue paying the typical worker a middle-class wage. Even though the American economy kept growing, hourly wages flattened. The median male worker earns less today, adjusted for inflation, than he did 30 years ago. ...
Where have all the economic gains gone? Mostly to the top. The economists Emmanuel Saez and Thomas Piketty examined tax returns from 1913 to 2008. They discovered an interesting pattern. In the late 1970s, the richest 1 percent of American families took in about 9 percent of the nation’s total income; by 2007, the top 1 percent took in 23.5 percent of total income. It’s no coincidence that the last time income was this concentrated was in 1928. I do not mean to suggest that such astonishing consolidations of income at the top directly cause sharp economic declines. The connection is more subtle.
The rich spend a much smaller proportion of their incomes than the rest of us. So when they get a disproportionate share of total income, the economy is robbed of the demand it needs to keep growing and creating jobs.
What’s more, the rich don’t necessarily invest their earnings and savings in the American economy; they send them anywhere around the globe where they’ll summon the highest returns — sometimes that’s here, but often it’s the Cayman Islands, China or elsewhere. The rich also put their money into assets most likely to attract other big investors (commodities, stocks, dot-coms or real estate), which can become wildly inflated as a result. ...
In the decades after World War II, legislation like the G.I. Bill, a vast expansion of public higher education and civil rights and voting rights laws further reduced economic inequality. Much of this was paid for with a 70 percent to 90 percent marginal income tax on the highest incomes. And as America’s middle class shared more of the economy’s gains, it was able to buy more of the goods and services the economy could provide. The result: rapid growth and more jobs. Great Depression and its aftermath demonstrate that there is only one way back to full recovery: through more widely shared prosperity. In the 1930s, the American economy was completely restructured. New Deal measures — Social Security, a 40-hour work week with time-and-a-half overtime, unemployment insurance, the right to form unions and bargain collectively, the minimum wage — leveled the playing field. ...
What else could be done to raise wages and thereby spur the economy? We might consider, for example, extending the earned income tax credit all the way up through the middle class, and paying for it with a tax on carbon. Or exempting the first $20,000 of income from payroll taxes and paying for it with a payroll tax on incomes over $250,000. ...
Policies that generate more widely shared prosperity lead to stronger and more sustainable economic growth — and that’s good for everyone. The rich are better off with a smaller percentage of a fast-growing economy than a larger share of an economy that’s barely moving. That’s the Labor Day lesson we learned decades ago; until we remember it again, we’ll be stuck in the Great Recession.
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