By Robert Kuttner | August 19, 2006
WAL-MART is usefully becoming the symbol of an America where tens of
millions of hard- working families cannot make ends meet.
Its wages and health benefits are so dismal that in several states
Wal-Mart displaces worker healthcare costs onto tax-supported Medicaid
for the poor. Wal-Mart batters down wages not just in the United
States, but in Third World countries, where it plays foreign suppliers
against one another to demand the lowest possible wholesale price (and
wage).
The New York Times reported recently that Democratic politicians from
Senator Joseph Lieberman to his winning opponent in the Connecticut
primary, Ned Lamont, are making Wal-Mart their nemesis. This focus is
certainly helpful in spotlighting one mega-employer that is symbol and
substance of an America where the middle-class dream is vanishing, but
the problems go far beyond Wal-Mart.
The America of a generation ago had multiple institutions for enabling
worker incomes to rise with their rising productivity. More industries
were regulated. The federal minimum wage was equal to about half the
average wage; today, it is below one - third. The federal government
actually enforced workers' right to organize a union. Nearly half of US
workers were covered by decent, federally guaranteed pensions, instead
of funny-money worker-savings plans. Wall Street was more tightly
regulated, and corporate executives were not able to grab such an
outlandish share of the total pie. Taxation was progressive, and
ordinary workers paid much lower rates. We did not trade with countries
that had something close to slave labor, like the Chinese factory
system.
Since the mid-1970s, under three Republican presidents and too-
often-feeble Democratic ones, this social compact was blown up. Since
the early 1970s, real incomes for the top 1 percent have doubled, while
earnings for most Americans have stagnated. Middle-class Americans have
stayed even only thanks to a second wage-earner -- an average increase
of more than 500 annual work hours per household. This is a disguised
loss in living standards, cutting into leisure and parenting time, and
incurring child-care and transportation costs.
Politicians may legislate special laws, requiring higher minimum wages
for mega-stores (as Chicago has done) or requiring them to contribute
to health coverage (as Maryland has attempted), but until our political
system addresses the larger problems, even reforming Wal-Mart is a drop
in the bucket.
The system is now essentially rigged so that workers' productivity can
rise, but workers' incomes can't. A study prepared last month for
Democrats on the House Financial Services Committee and released by
Representative Barney Frank of Newton showed that since 2002 annual
productivity growth has averaged more than 3 percent, while real wage
increases have been under half of 1 percent. Corporate profits,
meanwhile, have risen from 8.5 percent to 14.4 percent of national
income.
Whenever wages show signs of rising with productivity, the Federal
Reserve whacks them back down. It shows no such concern about corporate
profits being excessive. Until this month, when the Federal Reserve
announced a ``pause" in rate hikes, our central bank had hiked interest
rates 17 times since June 2004, citing fears of inflation, mainly in
rising labor costs. But note the sleight of hand. If workers' wages are
lagging well behind workers' increased productivity, then rising wages
are not a source of inflation. The rising ``total labor costs" include
pensions and health insurance. Doesn't that benefit workers? In fact,
the increase in recent employer contributions to pension plans is
mainly to make up for the corporate looting of plans during the 1990s.
In the stock market euphoria of that decade, corporations used
outlandish assumptions about future stock market returns to reduce
annual contributions they were supposed to make to pension funds. The
replenishing of fund shortfalls in recent years is not a source of true
worker compensation -- and it can hardly be burdensome given the huge
increase in net corporate profits.
The hike in employer health insurance costs, likewise, is not a true
benefit for workers. It reflects a health system out of control, and
excessive charges and profits by health maintenance organizations and
drug companies. Actual health insurance benefits to workers are being
cut back, and not just by Wal-Mart. Corporations generally are hiking
the employee share of premiums, and plans are increasing deductibles
and copayments.
I hope Wal-Mart does become a poster child for all that's out of whack
with the US economy. But we need to go after a great deal more than
Wal-Mart if politicians are serious about restoring the dream of an
America where people who work hard and play by the rules can aspire to
be middle class.
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Robert Kuttner is co-editor of The American Prospect. His column
appears regularly in the Globe.
© Copyright 2006 Globe Newspaper Company.
