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writing for godot

State of the Wage Slave Union

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Written by Lorian Eades   
Tuesday, 05 May 2015 06:26
Recently I’ve been wondering how to get folks to understand the current relationship between companies and employees. Most will agree that companies exploit their work force but almost no one can grasp the magnitude of that exploitation. While many folks like the righteous indignation portrayed by the likes of Elizabeth Warren or Bernie Sanders, most people have no clue about how to go about measuring the level of corporate abuse of their workforce and so the discussion often becomes one of “it ain’t fair” and “I don’t like it” and “companies suck” and “CEOs cheat". All valid emotional responses, but not very helpful in shedding light on the real problem.

So here is a brief look at the reality of wage slavery in the US today.

We have good numbers (profits and employee costs) for the companies that comprise the Dow 30 index. In case you don’t know what kind of companies these are, you can see the list here: https://finance.yahoo.com/q/cp?s=%5EDJI+Components . You will probably notice that you directly or indirectly do business with almost every one the these companies - an ironic wage slave reinvestment program...

During the last 5 years (2009 - 20014) these companies increased employee compensation by 6.4%. During the same period, these companies increased their net profits by 42.6%. Most importantly, these companies increased their profit per employee by 34.4%. You can see a chart of this at the bottom of this article and the original report is here http://finance.yahoo.com/news/as-dow-30-firms-do-more-with-less--their-financial-bounty-goes-to-investors-161616134.html.


Currently, each and every employee of the Dow 30 firms generates net profits of $48,887 per year - about $24 per employee per hour.

Of course, this profit is net of all tax liabilities, all benefit costs, all corporate investments, all corporate debt service and depreciation costs, all general business expenses and all executive compensation.

Current median household income is $53,891. If we compare those company profits to median household income, the return on an employee is 90% of a household’s income.

But wait…

59% of households have 2 full time workers and household income is pre tax while corporate profits are net tax. Net income for an individual working stiff should actually be quite a bit lower than the median household income.

Perhaps a more accurate comparison would be to an individual’s average income. Some of these numbers are a bit confounded by a large number of part time employees and some include various sources of retirement income.

According to Wiki, the median income for everyone over 18 is $24,062.
For every one who actually worked (about 155 million citizens), the median income was $28,567.
We can also compare the Social Security Administration Average wage to the amount of profit a company receives. As of 2014, the SSA reports average wages of $44,888.16.
Actual payroll numbers are available from the BLS (http://www.bls.gov/news.release/ecec.t10.htm)
For goods producing industries:
Total cost per employee/hour: $36.34

Wages: $24.06
Benefits: $12.27

For service industries:
Total cost per employee/hour: $29.07

Wages: $20.58
Benefits: $8.50


So…

By every measure, companies are receiving very large returns on their labor costs.

In the most extreme comparison ($24,062), companies received a 203% return on employee wages.

Using the SSA number ($44,888), companies received a 109% return on employee wages.

Using the BLS hourly payroll numbers which are by far the most favorable from a corporate perspective, goods producing employees generate a 66% return on total payroll and benefits while service producing employees generate an 81% return on total payroll and benefits. Given these numbers, how could anyone question the growth in service sector jobs and the decline in manufacturing? Any business man who was willing to forgo an additional 15% increase in profits per dollar of wages to create a manufacturing job would be an absolute fool.

Just to put this into some type of historical perspective, according to a discussion of slavery in The Economist, the average annual return on a slave in 1860 was 13% (see http://www.economist.com/blogs/freeexchange/2013/09/economic-history-2). A worker in the US today generates between 5 and 15 times more profit than a slave.

Now we are all told to join the ownership economy and share in the rewards of this great economy. Invest in some stocks, bonds, housing…and become rich. The best estimates of average returns in these investments is 7% annually before inflation. Maybe 5% net annual return and subject to capital gains taxes.

Perhaps we should learn from our overlords and simply start service sector businesses, hire some folks we can exploit and reap many times the returns available in the investing casino economy. It seems that is is always much better to take from workers than to actually create something of value.
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