The Fine Print: How Big Companies Use "Plain English" to Rob You Blind (42 page)

This leads to a larger political comparison. From 1940 through 2009, nearly twice as many jobs were created when a Democrat was in the White House compared to when a Republican was president. Republicans controlled the presidency for more years, thirty-six out of sixty-nine, but just 35.8 percent of the jobs were created on their watch. During the thirty-three years when Democrats were in power, 64.2 percent of the jobs were created. A telling summary? The average number of jobs added per year was twice as high during Democratic administrations as Republican.

Having more workers than jobs—our problem in 2012—tends to push
down wages. At the end of 2011 there were five people seeking work for every job opening. That made for a cruel variation on the game of musical chairs, only in this version four of every five players were left without seats at the economic table. In 2010 about 6 million families had no cash income, only food stamps, Jason deParle of the
New York Times
reported, a number no one has knocked down.

The job destruction caused by our faux free trade policies have so far hit factory workers hardest. What American factory workers make in an hour can be replaced with a week of labor in China, where environmental and occupational safety laws are both minimal and ignored, and independent union organizers are beaten, jailed and sometimes shot.

No wonder every third manufacturing job in America has been eliminated since the North American Free Trade Agreement was adopted in 1994—and adopted in a way that ran counter to constitutional principles. The founding document gives Congress sole authority to regulate foreign trade, but since the Nixon era, a policy known as “fast track” has transferred this power to the White House, which in turn relies on a small group of financiers, multinational companies and their lawyers to craft rules for their benefit.

If Congress had done its duty and undertaken the hard work of creating balanced, thoughtful trade policies, would 5.5 million factory jobs have gone abroad? Would we have allowed knowledge vital to understanding and improving manufacturing processes to be removed from our country?

The reality is that Congress created a host of subtle subsidies for moving jobs, investment and profits offshore, although many members of Congress, because they seldom read the bills they pass, probably even now have little idea what they did. Even if they do, few members understand the administrative regulations that implement these laws.

When companies use accounting and tax tricks to report huge profits in the Cayman Islands, Bermuda and Ireland, even though they have no employees there, they both push down your wages and push up your tax burdens.

The wage push comes from the availability of cheap labor and the free flow of goods into the United States, which in turn adds to pressure to move more jobs offshore to take advantage of cheap labor.

The tax push comes from rules in the fine print that do not just enable moving jobs offshore, but actually subsidize doing so. This movement of jobs narrows the tax base as wages and profits move outside the United States, further weakening the economic base to which taxes are applied.
Companies getting tax deals that let them bring profits home at an 85 percent discount, as Pfizer did, or tax-free, as Merck did, aren’t much concerned about American job losses. If you are an executive who gets to defer paying taxes, or a hedge fund manager who gets both deferral and a super-low 15 percent tax rate, these policies look heaven-sent.

Your tax burdens increase even more when multinational corporations use their untaxed profits offshore as collateral for loans in America. The interest paid in the United States is tax deductible. That means a tax break for the company in the United States. And the long, steady decline in the share of taxes paid by corporations means that you, as an individual taxpayer, must make up for this through taxes, fewer government services or more government borrowing, which is really just a tax, plus interest, on your future income.

FAUX FREE TRADE AND JOBS

In the second decade of this century you can expect more efforts to get corporate tax holidays like the 2004 Jobs Creation Act, which was followed not by the promised 660,000 new jobs, but the destruction of more than 100,000 jobs. Pfizer, Microsoft, Dell and many other multinationals with untaxed profits offshore want another, and much bigger, Jobs Creation Act. If they get it, then expect even more Americans to be fired, which means higher tax and government debt burdens for you, if you are lucky enough to remain employed, because the burden of supporting government will be spread among fewer workers.

The Obama administration, which is closely aligned with the global financier class, wants to expand our existing wealth-destroying faux free trade agreements. His opponent, Mitt Romney, is also a champion of these policies. The political-donor class would not have it any other way.

People without jobs, or those forced to work for less pay, have less money to spend and save. Over time, that means slower economic growth, fewer opportunities and fewer jobs. Smaller manufacturers suffer. Some of them just do not have enough scale to justify the costs of going to China or even Mexico, so they stop investing in their enterprise and watch the family business dwindle because of government policy, not their own shortcomings.

One crucial fact is often left unsaid: our trade with countries where we do not have so-called free trade agreements is growing faster than with countries with which we have such agreements.

The implication is clear: free trade agreements are less about increasing trade than about lowering costs (by replacing American workers with cheap overseas labor) so owners and financiers can harvest a larger share of the economic fruits.

So far most of the lost jobs and lowered wages have come at the expense of factory workers, but that is changing. Thanks to the Internet any job that can be done on a computer can be moved offshore. Engineers, accountants, graphic designers and millions of other workers could see their jobs sent “offshore.” A case in point? The Reuters news agency, for which I now work, fired twenty American and European journalists in 2004 and replaced them with sixty journalists who were paid such low wages in India that the company cut its labor costs by more than $200,000. Reuters said it was about saving money, but that shouldn’t have been the headline. In fact, the job exchange was about preserving fat pay for top executives. If it were about saving money, then firing the four highest-paid Reuters executives and replacing them with a dozen talented managers in Mumbai, paid on the same salary reduction scale as the journalists, would have saved the company $968,000 a year, more than four times as much.

Moving jobs offshore comes with unseen costs. Subtle differences between cultures can lead to confusion and misunderstanding. In the late 1980s at Dow Jones, executives fretted over how much more it cost to have the European edition of the
Wall Street Journal
copyedited in Brussels than in New York. One of those who pointed out the problem of only counting costs was Fred Brock, an American copy editor then working in Brussels. “Great care was taken to ensure that the paper reflected European perspectives and European sensibilities,” Brock noted, because otherwise fewer Europeans would buy the
Journal
. In time the copydesk work was shifted to America and
Journal
sales, as Brock predicted, slumped.

The depth of the job problem in America is often glossed over by politicians referring to new record-setting job numbers. American employment reached a new peak in 2007, for example, when the number of people who earned any wages totaled 155,570,422. In 2008 this figure slipped slightly, by 136,000. Then in 2009 the bottom fell out of the job market. Every thirty-fourth person who earned wages in 2008 went all of 2009 without earning a dollar.

Fewer than 151 million people earned any wages at all in 2009. That’s 4.5 million people—again, one in every thirty-four Americans—who worked in 2008 but found no work during all of 2009. Add in population
growth, and it means that the hands and minds of 6 million Americans were idle for the entire year. What a waste of talent.

The job loss would have been worse but for the stimulus package passed shortly after President Obama was inaugurated in January 2009. The Congressional Budget Office and other nonpartisan experts have shown that the Obama stimulus saved or created between 2 and 4 million jobs. That prevented the Great Recession from morphing into another Great Depression. But because the stimulus was much smaller than the drop in incomes, and 40 percent of it was directed at tax cuts (which by their nature are savings and thus not stimulative), Americans still saw high unemployment.

If Obama becomes a one-term president, historians will note his failure to insist on a bigger stimulus, to spend the money fast and that bussiness tax cuts do nothing for companies that pay little or no tax. Besides, no one hires workers to get a tax cut. Businesses hire more workers when they have customers who want their goods and services, not when someone dangles a tax cut in front of them.

Besides, a stimulus is not a long-term solution, only a short-term means of compensating for a lack of economic activity. Real growth stems from economic policies that encourage investments and require workers of all kinds, from janitors to mathematicians. Policies that favor moving jobs to China and investing capital offshore auger fewer jobs and lower pay for all but the very skilled.

FLAT WAGES EXCEPT AT THE TOP

For all the talk of prosperity in America, the numbers tell another story. Prosperity resides mostly among the top 10 percent or so. A third of workers in 2010 made less than $15,000. Their average pay was just $6,000 each. The numbers are stunning, aren’t they? Let’s look at the details.

Many of those 50 million workers only wanted part-time employment. They included students and homemakers and retirees looking for a little extra money. But also included were millions who put in forty hours a week with no paid vacation and no fringe benefits and whose gross pay never amounted to $300 a week.

Half of those with jobs earned less than $26,364 in 2010. That’s $507 a week. The median wage, in 2010 dollars, fell back to the level of 1999. The trend is worrisome; in 12 years, incomes should rise, not fall. Will the future bring less and less income?

The median wage—half earn more, half less—has been stuck at just about $500 a week since 1998. Since 1990—two decades ago—it’s only gone up 10 percent, or about $48 a week after adjusting for inflation.

The average wage in 2010 was $39,959—or $768 a week. Like the median wage, the average (or mean) has also been stuck at about the same level for a decade, at around $750 a week. Back in 1998 it was $700 a week. And back in 1990 it was about $636 a week.

But let’s look at these numbers together.

From 1990 to 2009 the
median
wage went up 10 percent while the
average
rose almost 19 percent. In 1990 the median wage was 72 percent of the average wage. By 2009 the median wage was down to 67 percent of the average as wages for most workers stagnated or fell, while those at the top rose. The spread between the median and the mean grew over those years, $9,300 to $13,000.

What that tells us is that we need to examine growth moving up the income ladder.

In 2009, three out of four workers made less than $50,000. Nine out of ten made less than $80,000. Only one in sixteen made more than $100,000. Only one of 100 made more than $200,000. So the wage growth is mostly among those making at least $100,000, the top 6 percent or so.

The real growth, in fact, is way, way, way up the ladder for salary and bonuses.

From 1990 to 2009 the number of Americans making more than $1 million in salary, in 2009 dollars, increased at seventy times the size of the overall workforce. Million-dollar-plus jobs grew from fewer than 7,000 to 78,000. That high pay lifted the average, but it also served to distort our view of the average worker’s income because relatively few Americans saw their pay rise much, if at all, in real terms.

These figures come from the most detailed and accurate source of jobs and pay data in the United States, the Medicare tax database. Even if you pay close attention to the official statistics on earnings, you probably have never heard or read the numbers on these pages unless you follow my work at Reuters.com. That’s because no other mainstream news organization, no professional economist who blogs and no citizen journalist has used the Medicare database to analyze what is happening to the earnings of Americans.