Low wages called biggest economic threat

By Les Bayless, in the People's Weekly World,
16 September, 1995

WASHINGTON -- A report released over the Labor Day weekend by the Economic Policy Institute said shrinking wages -- not the federal deficit -- are the chief threat to the nation's economic well-being.

In their study "Profits Up, Wages Down," the Washington-based Economic Policy Institute says increasing corporate profits are a direct result of falling wages. Declining real wages have caused business profits to soar to a 25-year high, according to the report.

"Business profits are up, but the vast majority of Americans continue to work harder for less," the study says. "This high profitability is simply the reflection of the domination of employers in the shaping of wages and working conditions in today's labor market."

Wage increases among both white collar and blue collar workers "have been very weak, and below the rate of inflation, for several years," according to the authors.

Median income for male workers has fallen from $11.98 an hour to $11.24, a decrease of 6 percent, between 1989 and 1995. For male workers without a high school diploma, wages dropped 11 percent.

Women workers also saw decreases, but to a smaller extent, with the median income of women dropping about 1 percent to $8.74 an hour. For unskilled women workers who didn't finish high school, the drop was over 5 percent.

Rudy Oswald, head of the AFL-CIO Department of Economic Research, agrees that falling wages "help explain" the surge in profits "But," he told the World, "corporate greed knows no boundaries. They've shipped jobs overseas, ducked taxes and don't forget that high and rising prices also help boost profits."

In an exclusive interview with the World, Dean Baker, who co-authored the report with Lawrence Mishel, said that Congress isn't getting the message because it's beholden to wealthy business interests.

"How does Congress get elected? They get elected with big money campaigns and the big contributors get what they want," he said.

Baker and Mishel conclude that total workers' wages in 1994 would have been $120billion, or 4 percent, higher had profit rates remained at the 1952-1979 average. Also contributing to the rise in profits is a sharp cut in corporate income paid out as taxes, down from the 1952-1979 average of 44 percent to 31 percent in the 1990s.

Baker said there are three principal political factors underlying the drop in real wages:

He said that "welfare reform" could have a devastating effect on wages for already employed, low-income workers. "Calculations we are doing in California indicate that forcing people on welfare into the work force could mean a cut of $1,000 a year for workers in the lowest income brackets," he said.

Baker favors changes in labor law, an increase in the minimum wage, controls on the Federal Reserve Board, "more restrictive" trade policies and more "public investment" in jobs as partial solutions to wage deterioration and inequality.

The EPI report also exposes the myth that historically high corporate profits are a result of increasing productivity and business investment. It says that investment as a share of the "Gross Domestic Product" averages only 1.5 percent in 1994, a 40-year low, while productivity growth has been at 1970 and 1980 levels.

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