Tag:

Unions

Lousy Job? It’s Your Fault!

by Gregory N. Heires June 27, 2014

written by Gregory N. Heires

By GREGORY N. HEIRES

Technological change and inadequate education are often cited as the principal causes of our wage crisis.

This argument, in a certain sense, blames workers for their plight. They are unwilling to invest sufficiently in their education, and they lack the necessary skills for complex jobs in the Information Age.

Similarly, conservatives charge that the unemployed leach off the taxpayers, content to get by on generous unemployment benefits and to allow unskilled immigrants to do the low-wage work that they should be doing.

Blame the individual. It’s a very American concept. As the title of a song from the musical “Into the Woods” by Stephen Sondheim puts it: “Your Fault.”

Another argument is that we can’t do much about the wage decline.

Americans simply can’t compete with the low-wage workers of China and developing countries. This presumes a certain inevitability about our falling standard of living. So, let’s just give in.

But how true is this? Can we put a brake on our declining and stagnating wages?

Rising Inequality is No Accident

A recent study by the Economic Policy Institute, “Raising America’s Pay: Why It’s Our Central Economic Policy Challenge,” suggests that the economic squeeze on the middle class and the poor isn’t an accident. Largely it’s the result of a shift of greater economic and political power to the wealthy. Public policies account for much of our rising inequality and the wage crisis. And therefore public policies can address most of the problem.

“The causes of stagnant wages for the vast majority and unequal wage growth are, in our view, related to intentional policy decisions,” write the authors of the report, EPI President Lawrence Mishel and economists Josh Bivens, Elise Gould and Heidi Shierholz. “The connecting principle among them is that nearly every policy change had the completely predictable effect of reducing the bargaining power of typical workers (individually and collectively), and boosting the bargaining position of capital owners and corporate managers.”

The EPI report identifies several policies at the root of falling and stagnating wages, including:

(1) the dramatic drop in the top rate of taxes since the late 1970s: This has increased the pretax income share of the top 1 percent, and it has slowed the income growth of everyone else.

(2) skyrocketing corporate pay: In 1993, corporate tax law was changed to allow corporations to deduct only the first $1 million of executive salaries from corporate income taxes. But pay above the $1 million threshold could continue to be deducted as long as it was “performance based,” allowing corporations to boost executive compensation through stock options and profit-related bonuses.

(3) economic globalization: Trade agreements have protected corporate profits but done little to protect domestic wages.

(4) macroeconomic policy: The Federal Reserve Bank has focused on keeping inflation, rather than unemployment, low.

(5) regulatory policy: Financial deregulation has led the financial sector to double its size compared to the rest of the economy. The financial sector is overrepresented in the 1 percent. And,

(6) labor market policy and business practices: The decline in the minimum wage explains about two-thirds of the wage gap between low- and middle-wage workers. And weakened unions account for a fifth to a third of the rise of wage inequality from the 1970s to the late 2000s.

The Decline of Workers’ Share of Productivity

Progressive public policy must address the divergence between productivity growth and worker compensation.

From 1979 and 2013, productivity grew eight times faster than the typical worker’s compensation, according to the report. During that period, productivity went up 64.9 percent while the compensation of production and non-supervisory workers grew a mere 8.2 percent.

“Much of this productivity growth accrued to those with the very highest wages,” the EPI report says. “The top 1 percent of earners saw cumulative gains in annual wages of 153.6 percent between 1979 and 2012—far in excess of economy-wide production.” Between 1979 and 2007, the wages of the top 1 percent of earners increased by 156.2 percent—nearly 10 times as fast as the bottom 90 percent of the work force.

What steps should we take to restore share prosperity in the United States? We could simply begin by changing the policies cited by the EPI report.

Strengthening unions, boosting the federal minimum wage, supporting full employment, maintaining the competitive value of the U.S. dollar, adopting fair trade policies that protect workers, and implementing fairer taxes would significantly help reduce inequality.

Immigration reform would raise wages by bringing undocumented workers into the formal economy, where labor standards are higher than in the shadow economy.

Protecting government programs–Social Security, Medicare, Medicaid and unemployment benefits—must be a key priority. Public policies that aim to address inequality and our threatened standard of living should also include steps to restore pensions, resolve the foreclosure crisis and relieve the debt burden of college graduates. Creating good jobs and greater economic equality are the foundation of a shared prosperity.

“Inequality fueled by a broad wage stagnation is by far the most important determinant of the slowdown in living standards growth over the past generation, and it has been enormously costly for the broad middleclass,” the EPI report says.

Inequality is now at Great Depression levels and only seems to be getting worse. If we don’t support a progressive change in our public policies, how long will it take for our society to reach a boiling point?

June 27, 2014 0 comment

Economics Income Inequality Labor Issues Politics

How Outsourcing Whacks the Middle Class

by Gregory N. Heires June 9, 2014

written by Gregory N. Heires

By GREGORY N. HEIRES

In his best-selling book “Capital in the 21^st Century,” French economist Thomas Piketty identifies privatization as one of the causes of global inequality.

Indeed, the sell-off of public assets in the former Soviet Bloc, Europe and Latin America has lined the pockets of the wealthy as the wages of workers have stagnated and dropped.

In the United States, privatization is also exacerbating the gap between the 1 percent and the rest of us. But privatization in the United States refers more to the contracting out of public services than to the sale of public assets.

A report by In the Public Interest released on June 3 takes a critical look at privatization in the United States. It describes how outsourcing by state and local governments is causing the erosion of the middle class.

“Race to the Bottom: How Outsourcing Public Services Rewards Corporations and Punishes the Middle Class” examines case studies from across the country that show how contracting out public services in effect forces taxpayers to contribute to income inequality and the lowering of the quality of services in their own communities.

“Unfortunately, when these services are outsourced to private companies, the subsequent contracted positions offer lower wages, reduced benefits and little or no retirement security,” the report says.

“Too many times, these positions turn into poverty-level jobs because companies pay workers low wages and provide little or no benefits in an effort to reduce their own operating costs. These jobs that provide vital public services and are paid for with taxpayer dollars, yet the men and women working for contractors are provided with wages that do not allow them to support their families.”

Proponents claim they want to save taxpayer dollars by doling out public services to contractors and non-profits. But the evidence of savings isn’t conclusive; in reality, privatization is about shrinking the role of government in our society.

Most states and local governments do not track how many contractors they employ. But a lot is at stake with privatization.

State and local governments award an estimated $1.5 trillion in contracts every year, which means millions of jobs are created through state and local contracting, according to the report by In the Public Interest, a Washington, D.C.-based resource center on privatization and responsible contracting. Experts estimate that there are three times as many contracted employees as federal civil servants.

Destroying a Pathway to the Middle Class

Too often, though, the contracts go to union-free employers who pay lower wages and provide fewer benefits than public-sector employers. This elimination of public-sector jobs is destroying the pathway to the middle class that government has historically provided to women and minorities.

In New Orleans, Carol Sanders worked as a cook in the public school system for 28 years until cafeteria services were outsourced to the facility management company Aramark in 2010.

Sanders decided to take a job with the contractor even though that meant her pay would be cut from $28 an hour to $9 an hour and her hours would be reduced from full-time to 20 hours per week. She lost her medical care, because she couldn’t afford the plan offered by her new employer, and she needed to rely on $200 a month in nutritional assistance to get by. Then, two years later, Aramark laid her off.

Destroying Good Jobs

Besides looking at the impact of contracting out on school cafeteria workers, “Race to the Bottom” examines how it has hurt the livelihood of waste and recycling workers, correctional officers, custodial workers, transit employees, and health-care support staff. In virtually all instances, the contracting out of those public-service jobs has resulted in lower wages and reduced benefits. For example:

•The Metro School Board in Nashville, Tenn., outsourced the work of nearly 700 custodial and grounds keeping jobs to GCA Services Group in 2010. As a result, the compensation (wages and benefits) of those jobs fell by 32 percent.

• In 2009, Milwaukee County contracted out the work of nearly 90 housekeepers responsible for cleaning public buildings.

The county housekeepers earned between $13.95 and $15.75 an hour. They also received paid vacation, health care and dental care. Contracted housekeepers are paid $8 an hour without benefits.

Services sometimes also suffer.

For instance, compared with publicly-run prisons, private prisons have fewer correctional officers, a higher turnover rate and more escapes and drug use, according to a report by the Federal Bureau of Prisons. Several studies show that the rate of inmate recidivism is higher in privately run prisons.

In the Public Interest recommends that state and local governments adopt policies to put the brakes on the race to the bottom resulting from contracting out. These includes:

• requiring governments to do cost-benefit analysis studies before pursuing contracting

• forcing contractors to pay their workers a living wage and provide them with decent benefits

• making the contracting process more transparent to keep track of contracts and to study the impact of contracting on the wages and benefits of employees, and

• requiring governments to study the economic and social impact of contracting proposals before doling out the work.

“By implementing these policies, state and local governments can rebuild those ladders to the middle class that have eroded over the years,” the report concludes. “Instead of engaging in a race to the bottom, cities and states can ensure that taxpayer dollars used to pay people to perform public work result in solid family-supported jobs.”

June 9, 2014 0 comment

Books Economics Labor Issues News Politics Safety Net

Book Review: When Government Helped

by Gregory N. Heires May 8, 2014

written by Gregory N. Heires

By GREGORY N. HEIRES

The New Deal era beginning in the 1930s set up the government structure we enjoy today. But ever since, conservatives have waged a protected war on “Big Government.”

The assault on government deepened with the presidency of Ronald Reagan, and more recently deficit phobia greatly hindered the Obama administration’s policy response to the Great Recession. The Republican campaign to destroy Obamacare is not so much about health care as chipping away at the size of government.

“When Government Helped: Learning from the Successes and Failures of the New Deal” (Oxford University Press: 2013), edited by Sheila D. Collins and Gertrude Schaffner Goldberg, examines how President Franklin D. Roosevelt’s government policies established our welfare state and helped the United States recover from the Great Depression. Collins is a professor emerita of political science from Williams Paterson University and an executive committee member of the National Jobs for All Coalition. Goldberg is a professor emerita of social policy from Adelphi University and chair of the national Jobs for All Coalition.

Lessons from the New Deal

Drawing lessons from the New Deal, the book’s contributors also study the accomplishments and shortfalls of the Obama administration in dealing with the Great Recession. They argue that more activist government is needed today as the country continues to face a long-term jobs crisis, economic malaise and growing inequity.

The depth of the crisis that the country faced during the Great Depression was, of course, greater than what it confronted when the financial implosion occurred in 2008. Still, the contrasting policy responses of FDR and Obama speak to the changing American attitudes about the role of government in our society.

When FDR came to office in 1933, unemployment was 25 percent, the Stock Market had crashed, the banking system had collapsed, thousands of businesses had failed, homeless Americans lived in shanties known as “Hoovervilles,” and bread lines were common in major cities, as Collins notes.

The economic crisis of the 2000s is widely viewed as the country’s worst since the Great Depression. But when Obama became president in January 2009, unemployment, while high at 7.9 percent, was only a third of that of the Great Depression. The Bush administration’s $700 billion bailout of the banks and subsequent action by the Federal Reserve Bank stabilized the banking system, arguably preventing the 2008 financial meltdown from morphing into a depression.

The triumph of conservatism since the 1970s significantly constrained Obama’s policy options, though his centrist ideology and ineffective political skills also limited the reforms he sought. About 40 percent of the Obama stimulus package consisted of tax cuts. Assistance for homeowners who were victims of corrupt mortgage practices was lacking while banks were given access to billions of credit from the Fed. For ordinary Americans, the blow of the economic downturn was weakened by New Deal reforms like unemployment insurance and food stamps, as well as by Medicare and Medicaid.

Economic assistance to the states initially helped prevent widespread layoffs in the public sector, but hundreds of thousands of public employees eventually lost their jobs as states and municipalities coped with falling tax revenue. The Obama administration provided funds for several hundred thousand jobs, but most of those were in “shovel-ready” projects already in the works.

By contrast, FDR helped millions of unemployed and underemployed Americans through federal jobs programs like the Civilian Conservation Corps, the Federal Emergency Relief Act, the Public Works Administration and the Tennessee Valley Authority. The administration’s projects included reforestation, dams, a public banking system, building and loan associations, rural electrification, and infrastructure development (tunnels, roads, bridges, highways, sewer systems, highways, waterworks, low-income housing and college dormitories).

FDR’s government activism was influenced deeply by the social unrest and dissent in the country in the 1930s. His economic reforms and the establishment of the modern welfare state saved U.S. capitalism. Ultimately, it was the Keynesian full-employment and government spending policy of World War II that turned the economy around.

The support for FDR’s strong government intervention would be out of sync with today’s political climate. The Right, especially tea baggers, relentlessly attacks Obama, accusing him of being a “socialist,” and deep-pocketed Republicans like the Koch brothers are out to cripple government. As Goldberg points out in a chapter on popular movements and the New Deal, FDR faced pressure from Communist-backed groups, the unemployment workers movement, jobless veterans, organized labor, African-American workers, southern tenant farmers, the elderly and levelers, such as Sen. Huey Long and Father Charles E. Coughlin, who pushed for a more equal distribution of wealth. This pressure helped create the political climate for the creation of Security and the passage of the Wagner Act and the National Labor Relations Act. Progressives have largely given Obama a pass despite his centrist policies.

Within the administration itself, FDR was influenced by a progressive “Brain Trust,” appointees and advisors like Labor Secretary Francis Perkins, Harry Hopkins, Harold Ickes, Henry Wallace and Henry Morgenthau Jr., with backgrounds in social work and progressive politics. Many of Obama’s team, in contrast, were Clinton era appointees with Wall Street ties and shaped by what Goldberg describes as a “deregulatory and anti-government ethos” that contributed to the 2008 financial meltdown.

FDR responded to the needs of workers by supporting legislation that strengthened collective bargaining rights and policies that contributed to a more vibrant labor movement, according to contributor Richard McIntyre. But, McIntyre also argues that the New Deal labor system has limited the ability of unions to push for radical change and “made labor vulnerable to the politics of class fragmentation pursued by the New Right.”

Over 50 years, labor’s ties to the Democratic Party have failed to produce a legislation to promote representation in the workplace. Unions are virtually nonexistent in the private sector, and they are under siege in the public sector, where about a third of workers enjoy collective bargaining rights. Obama, while promoting an increase in the federal minimum wage, pay equity and a more labor-friendly National Labor Relations Board, betrayed the labor movement by not using his political muscle to push the Employee Free Choice Act (which would have made it easier for workers to join unions) through the Democratic-controlled House of Representatives and Senate during his first term.

Obstacles and Hope

The path to progressive change that would lead to good jobs and improve the lot of the poor and middle class in our country faces great obstacles: globalization, an anti-government ideology, disappearing unions, deindustrialization, the pension crisis, deficit hysteria, as well as rising inequality and the resulting weakening of our democratic institutions.

But, as the contributors to “When Government Helped” argue, the record of the New Deal offers a framework for change. FDR’s unfulfilled “Economic Bill of Rights,” for instance, speaks to our current needs. It called for the right to a job at a livable wage, as well as the right to adequate health care, housing, old age security and quality education.

Today’s progressive movement is promoting a number of reforms that reflect the spirit of the New Deal: a Robin Hood tax, an expansion of social services, an improvement in unemployment insurance, the reduction of the military budget to free up funds for domestic spending, green policies and infrastructure development. But without a rethinking of the role of government in our society, these proposals will likely remain illusory.

May 8, 2014 0 comment

Labor Issues News Politics

Three sentenced for $100 million fraud in botched automated payroll project in New York City

by Gregory N. Heires April 30, 2014

written by Gregory N. Heires

By GREGORY N. HEIRES

The conviction of three consultants charged in a $100 million fraudulent scheme involving a project to modernize the payroll system in New York City offers yet another lesson of the perils of contracting out.

On Monday, the three defendants each received sentences of 20 years in prison for their role in implementing the automated payroll system known as CityTime, whose cost mushroomed from an initial budget of $63 million to more than $700 million over more than 10 years.

“It’s a classic tale of greed and corruption,” U.S. District Judge George Daniels said. “It’s the largest city corruption scandal in decades. It is unparalleled in its amounts.”

The corrupt contractors lined their pockets with millions of dollars as they accepted kickbacks, funneled huge sums into shell companies, deposited stolen money into overseas accounts, inflated bills and maintained a bloated payroll with excessively paid and even fired employees.

The defendants include Gerald Denault, 52, who was the project manager of the prime contractor, Science Applications International Corp. SAIC is a Fortune 500 company that generates more than 90 percent of its business through government contracts. Under an agreement with the federal prosecutor in 2012, SAIC paid the city $466 million for the CityTime fraud.

Also sentenced were Mark Mazer, 50, a former consultant of the city’s Office of Payroll Administration, and his uncle, Dmitry Aronshtein, 53, who worked for a subcontractor.

The CityTime scandal was a major embarrassment to former Mayor Michael R. Bloomberg, who promised to bring a business ethos and the latest technological know-how to New York City.

During his 12 years in office, the portion of the city’s budget devoted to contracting increased by about a third to more than $10 billion.

From the start, CityTime encountered opposition from unionized workers, who, concerned about privacy, objected to the new payroll system’s use of hand scanners for clocking in.

Daily News reporter Juan Gonzalez broke open the scandal with a series of articles about CityTime that included revelations about cost overruns and excessive payments to computer consultants who earned as much as $400,000 a year, easily four times the pay of city information technology workers.

The municipal union District Council 37 ran a series of white papers that called attention to wasteful spending on contracting out, including the CityTime debacle and another project to upgrade the city’s emergency communications system. The original cost of the 911 upgrade overseen by Hewlett Packard was $380 million, and it skyrocketed to $666 million by 2011.

“Politicians have given out contracts like candy,” said Lillian Roberts, executive director of District Council 37, which represents tens of thousands of municipal employees in New York City. More than a year ago, Bloomberg and former New York City Comptroller John C. Liu agreed to assign the CityTime work to computer workers represented by DC 37.

Roberts said the CityTime scheme—perhaps the greatest municipal theft in the city’s history– pointed to the need for greater oversight of contracting out, which she blamed for vast waste of tax dollars, the loss of civil service jobs and the siphoning off of funds for social services. Recently, the new comptroller, Scott Stringer, announced steps to monitor contracting out more closely.

Kickbacks and Money Laundering

Between 2003 and 2010, the city paid SAIC more than $628 million. SAIC used over $464 million of those funds to pay a subcontractor, Technodyne to hire IT personnel.

The principals of Technodyne LLC, Reddy and Padma Allen, who face charges of wire fraud and money laundering, fled to India, according to the United States Attorney’s Office of the Southern District of New York. Denault, the former CityTime project manager, was charged with receiving $5 million in kickbacks from Technodyne and its principals.

Denault received a $5 kickback from Reddy Allen and Padma Allen for every hour Technodyne billed the city for labor, according to the prosecutor.

Mazer received kickbacks by channeling $65 million to a subcontractor controlled by Aronshtein and $23 million to another subcontractor controlled by Victor Natanzon, who earlier pled guilty along with four other defendants.

On the day of the sentencing, Manhattan U.S. Attorney Preet Bharara said in a statement, “These defendants are being justly punished—through lengthy sentences and forfeiture of over $40 million in cash and property—for orchestrating one of the largest and most brazen frauds ever committed against the city. This Office’s CityTime prosecutions have held accountable culpable individuals, as well as SAIC, the contractor at the center of the scheme, and through penalties and restitution of over $55 million, has made the City economically whole.”

An Invitation to Waste and Corruption

After sentencing the defendants and sending them away to prison, Judge Daniels criticized the procurement process in New York City.

“The city’s contracting process has created an atmosphere that lacks adequate and effective oversight,” he said. “It is an invitation for not just waste, but corruption and fraud.”

Last year, on his weekly radio program, Bloomberg remarkably said the city in a sense is “lucky” that the fraud happened.

“The whole system cost us something like only $100 million, and it should have been many times that,” he said, as quoted by gothamist.com. “We were lucky because of the fraud… In the end it turned out that because of the recovery that we save a lot of money. And it certainly works.”

April 30, 2014 0 comment

Economics Income Inequality Labor Issues Taxes

Contracting Out Public Services Worsens Inequality and Lowers Wages

by Gregory N. Heires April 14, 2014

written by Gregory N. Heires

By GREGORY N. HEIRES

Contracting out public services—which aims to help state and local governments save tax dollars—often has a harmful effect on the community, including worsening inequality and lowering wages.

A recent study, “The Decision to Contract Out: Understanding the Full Economic and Social Impacts,” finds that the savings of outsourcing varies widely and often diminish over time. The study, by Daphne T. Greenwood of the Colorado Center for Policy Studies at the University of Colorado at Colorado Springs, concludes that contracting out undermines our democratic principals by leading to corruption and less control over public funds.

“While reducing costs is most often the motive for outsourcing, a growing body of research documents that savings are minimal, on average,” the report says. “It is also not unusual for total costs to be greater when performed by private contracting firms than they were in-house.”

Studies show that contracting out typically leads to short-term savings of 5 to 10 percent. Over time, the savings often diminish because of a lack of competition and other factors.

Governments cite insufficient savings 52 percent of the time when they explain their decision to abandon contracts. In 61 percent of cases, governments cancel contracts because of inadequate services.

The Economic and Social Costs of Contracting Out

The savings of contracting out are usually achieved by lowering the wages and benefits of workers. That occurs at a great cost for the community, including:

• a decline in retail sales

• a worsening of the wage disparity between men and women, and between blacks and whites

• a reduction middle-class jobs and

• an increase in the dependency public services.

The push for contracting out began decades ago. The Reason Foundation, a libertarian think tank, was one of the earliest proponents of shifting public assets and spending to the private sector.

States and municipalities picked up the practice in the late 1970s and the 1980s.

Municipalities contact out an estimated 35 percent of services. The federal government has doubled the amount it spends on contracts since 2000, with most of the spending on services.

While contractors reduce costs by paying front-line workers less, their administrative costs are typically higher than in the public sector, where managers often earn less. But the managers of private companies tend to spend less in the community, leading to a siphoning off of profits and taxes elsewhere.

“More money usually flows out of the local economy,” the report says. “That means less spending, especially in retail and dining establishments.”

In many instances, contractors pay their workers so little that they must rely on public assistance for housing, food and medical care. In California, for instance, school cafeteria workers employed by contractors receive an average of $1,743 in public benefits each year.

The report describes a number of indirect effects of outsourcing on government, the economy and the workforce.

Historically, the public sector has provided a ladder into the middle class for women and minorities. They are disproportionately hit by the contracting out of public-sector work.

“Women of all races, along with African-American males, sought out public employment for more equal treatment than they often found in the private sector,” the study says. “Outsourcing public jobs often lowers wages, takes away benefits and reduces opportunities for advancement up the job ladder—and disproportionately affects the groups who have struggled most to get a foothold in the labor market and the middle class. Maintaining ladders of opportunity is an important part of the promise of America that public decisions can help to maintain.”

Private sector companies have spent decades attacking unions, cutting back on health-care benefits and eliminating pensions. Now contracting out has become a weapon for eliminating “good jobs”–jobs with decent pay and benefits–in the pubic sector. Indeed, city officials in Colorado Springs described escaping long-term pension obligations as one of the reasons for contracting out there.

Comprehensive information about the workplace safety and health record of state and local contractors is not available, but substantial documentation exists on the record of federal contractors.

A recent U.S. Senate inquiry found that nearly 30 percent of the top violators of federal wage and health laws were federal contractors. The violations resulted in the deaths of 42 workers between 2007 and 2012.

One instance involved a worker who died after being sucked into an industrial dryer at a Cintas Corp. facility in Tulsa. The worker got caught in the dryer while he tried to untangle stuck clothes; he was spun around inside the dryer for 20 minutes at 300 degrees. Cintas had $3.4 million in federal contracts in 2012.

Weakening Accountability

Decades ago, the civil service system was established to combat nepotism, cronyism and corruption. Contracting out undermines civil service by funneling tax dollars to the private sector, where there is less transparency and accountability of tax dollars.

“In addition to having rights to privacy that collide with traditional expectations of transparency and accountability, private providers are generally not subject to conflict-of-interest laws, nepotism statues or ordinances, ethics codes or whistleblower protection for their employees, or restrictions on political involvement,” the study says.

Three examples of these problems:

• When Chicago considered contracting out its parking meter service for 75 years at a possible cost of $2 billion, it held three days of evaluation without public discussion.

• Denver awarded a company a contract to run a parkway for 99 years. The contract allows the company to object to mass transit projects and new and improved roads even though the life spans of streets are 45 years.

• The online posting of a contract for a Texas charter school contained blacked-out paragraphs in 100 of its 393 pages, according to a New York Times article cited by the study.

“The evidence for public control just keeps on piling up,” said Donald Cohen, executive director of In The Public Interest, a resource center on privatization and responsible contracting, commenting on the University of Colorado report. “What we need now at every level of government are policies that reflect what the evidence makes clear and that helps us prevent economic and social harm to our communities.”

April 14, 2014 0 comment

Economics Income Inequality Labor Issues News

Wage Theft at McDonald’s

by Gregory N. Heires March 17, 2014

written by Gregory N. Heires

By GREGORY N. HEIRES

The fast-food business model is based on wage theft.

That’s the thrust of seven lawsuits that hit McDonald’s in three states last week.

Employees are cheated out of overtime.

They are forced to clock out when a computer monitoring program determines that profits are at risk because not enough customers showing up.

And the exploited workers’ pay falls below the minimum wage because they are forced to pick up the tab for cleaning their uniforms.

The lawsuits seek class-action status, which means thousands of workers could be covered.

An Escalation of the Fast-Food Workers’ Campaign

Filed in New York, Michigan and California, the legal suits mark a new stage in the campaign of fast-food workers to boost their salary to $15 an hour and win the right to unionize without retaliation.

They launched their mobilization with a one-day strike in New York City in November 2012. That was followed by nationwide work stoppages in 100 cities this past December.

The lawsuits strike at the heart of the business model of McDonald’s and the fast-food industry. McDonald’s maintains that it is not liable for workplace abuses because its franchises are independent businesses and the direct employers of the workers. But the lawsuits contend that McDonald’s is a joint employer and shares the liability of franchises for illegal employment practices. About 90 percent of McDonald’s restaurants are franchises.

“We’ve uncovered several unlawful schemes, but they all share a common purpose—to drive labor costs down by stealing wages from McDonald’s workers,” said Michael Rubin, an attorney who represents California workers, where four lawsuits were filed. Attorneys, organizers and workers announced the lawsuits during a conference call and news releases on March 13.

“Our wages are already at rock bottom,” said Sharnell Grandberry, a McDonald’s workers in Detroit, in a news release on the two Michigan lawsuits quoted by The New York Times. “It is time for McDonald’s stop skirting the law to pad profits. We need to get paid for the hours we work.”

The Rip-off Schemes

The lawsuits describe employer schemes to underpay their workers:

• In New York, workers allege that they are not reimbursed for the cost of washing their uniforms, as required by law. Because they are paid at such a low hourly rate, the loss is enough to drive down their actual pay below the minimum wage, which violates federal labor law.

“With $28 billion in revenue in 2013 alone, McDonald’s can certainly afford to provide its minimum-wage workers with this money to clean their uniforms, as required by law, instead of making them pay for the privilege of wearing McDonald’s advertising,” Jim Rief, the attorney who represents the New York workers, said in a statement.

• In California, workers report that restaurants have a computer system provided by McDonald’s that allows managers to monitor a “labor number” that shows how much a store is spending on workers compared with how much money is coming in from customers. When the labor number gets too high, employers temporarily pull workers off the job.

Besides getting ripped off because of the computer system, California workers allege that they are cheated out of pay because they don’t receive proper overtime compensation and employers alter pay records.

• In Michigan, workers are told to report to work at a certain time. But they then may remain idle—and unpaid—if not enough customers show up.

The claims in the lawsuits are violations of the federal Fair Labor Standards Act. The act establishes the minimum wage and it determines the standards for overtime pay, record keeping and other employment practices.

A McDonald’s spokesperson said the company would investigate the allegations.

Poverty Wages

Fast-food workers are typically paid $9 an hour, which amounts to $18,500 a year, according to CNN. That is $4,500 below what the U.S. Census Bureau’s considers the poverty income threshold for a family of four–$23,000.

The University of California, Berkeley’s Labor Center and the University of Illinois released a report in October that found that half of the families of fast-food workers rely on public assistance at an annual cost of $7 billion to taxpayers.

In 2012, seven publicly owned fast-food companies earned $7.4 billion in profits, according to a report by the University of California at Berkeley’s Labor Center and the University of Illinois. That year, McDonald’s awarded their top executives $53 million in salaries and distributed $7.7 billion to shareholders, according to another report by the National Employment Law Project.

March 17, 2014 0 comment

Economics Labor Issues News Politics Safety Net Taxes

Corporate Fat Cats Become the Nation’s Richest “Government Employees” by Leaching Off Taxpayers

by Gregory N. Heires March 10, 2014

written by Gregory N. Heires

By GREGORY N. HEIRES

Budget hawks squawk about bloated bureaucracies and excessively paid public employees to justify their calls for slashing government services.

In recent years, their drumbeat about government waste has contributed to a political climate that has allowed for layoffs of hundreds of thousands of public employees and the imposition of salary freezes and paltry pay raises, as well as reductions of pension, health-care and other benefits.

But public employees like sewage treatment workers, teachers and social workers are far from being fat cats. Arguably, the most compensated “government” employees are actually the corporate bosses and administrators who line their pockets with taxpayer dollars for shoddy contracted-out work.

“Exposed: America’s Highest Paid Government Workers,” a report by the Center for Media and Democracy (CMD), shows how just six of those corporate chieftains have earned $100 million in recent years. But their track record for delivering services is often abysmal.

While the Center for Media and Democracy’s report focuses on only a few contractors, its message is more far-reaching, suggesting that government would generally be better off keeping work in house.

Indeed, two years ago, POGO, the Project on Government Oversight, took a look at federal contracting, which mushroomed from over $200 billion in fiscal year 2000 to more than $530 billion in fiscal year 2011.

POGO’s report, “Bad Business: Billions of Taxpayer Dollars Wasted on Hiring Contractors,” found that contractors cost 83 percent more than federal employees. The study showed that federal government employees were less expensive than contractors in 33 of the 35 occupational classifications reviewed by POGO.

In one of the greatest municipal government scandals in U.S. history, former New York City Mayor Michael R. Bloomberg’s contracted-out CityTime project, which automated the city’s payroll system, resulted in the theft and waste of hundreds of millions of dollars and the indictment more than 10 consultants. Besides helping to expose CityTime, a project on contracting out and revenue by District Council 37, which represents municipal employees, has documented how New York City’s annual $10 billion in procurement spending is marred by waste, corruption and union busting.

Poor Services and Excessive Costs

“Given these astronomical salaries, and evidence of higher prices, poor service, and at times outright malfeasance, taxpayers have every right to be concerned about how their outsourced dollars are spent,” said Lisa Graves, executive director of the Center for Media and Democracy, when the watchdog group released its report in February.

The top executives—described as the most highly compensated government employees in their fields—are:

• George Zoley, the country’s highest paid “corrections officer.” Zoley is the CEO of the private prison firm GEO Group. Between 2008 and 2012, his compensation was $22 million.

The Center for Media and Democracy estimates that GEO Group makes 86 percent of its revenue from taxpayers. Its contracts include clauses that require governments to keep prisons full or pay for empty beds. GEO Group has faced hundreds of lawsuits over prisoner deaths, assaults, and excessive force.

• David Steiner, the country’s highest paid “sanitation worker,” is president and CEO of Waste Management. He earned $45 million in compensation from 2006 to 2012. Government contracts account for 50 percent of Waste Management’s revenue, according to Goldman Sachs.

• Ron Packard, head of K12 Inc., is the country’s highest paid “teacher.” Between 2009 and 2013, he earned $19 million. He enjoyed that compensation even though only 12 percent of K12 Inc. cyber schools met state standards in 2010-2011, compared to 52 percent of public schools. CMD estimates that 86 percent of K12 Inc.’s revenue comes from taxpayer dollars.

• Jeffry Sterba, the country’s highest paid “water worker,” is president and CEO of American Water Works Co. During his three years as the company’s top executive, he has earned $8.3 million. American Water is the largest for-profit provider of water and wastewater treatment services in the country. CMD estimates that 89 percent of its revenue comes from taxpayers.

• Richard Montoni, the country’s highest paid “caseworker,” is CEO of Maximus, which provides Medicaid and government-funded welfare services for the poor. Between 2008 and 2012, Montoni enjoyed a compensation of $16 million. Wisconsin charged Maximus with improper billing in 2013. In 2007, Maximus paid the U.S. Justice Dept. $30 million after a government investigation uncovered widespread overbilling.

• Nicholas Moore, managing director and CEO of the Australian infrastructure firm Macquarie, is the country’s highest paid “road worker.” He made $8.8 million in compensation in fiscal year 2013. He has promoted the privatization of public services as a member of the American Legislative Exchange Council, which helps conservative politicians to craft legislation to privatize and reduce government services and undermine the power of public- employee unions. Macquarie has long-term contracts to run Chicago’s Skyway, Indiana’s Toll Road and the Dulles Greenway in Virginia.

Public Investment, Private Profit

These instances of privatization and contracting outstanding are disturbing for a number of reasons beyond the fact that corporate executives are profiting handsomely from taxpayer dollars.

Privatization allows companies to profit from government investments in infrastructure—roads, information technology and sewage treatment plants—without bearing the risk of making their own capital investment. Consultants often have far higher salaries than civil servants.

The takeover of government services by private companies is a form of union busting that typically replaces workers who have decent benefits with lower-paid and non-union front-line workers. And contracting out often leads to a lack of accountability, creating conditions that allow for theft and inefficiencies.

Research by Paul C. Light, a professor at New York University, shows that the total cost of federal contract employees is twice that of civil servants. The cost of military contractors is three times higher.

If only the politicians who determine how taxpayer dollars are spent would listen to credible analysts like Light instead of budget hawks whose agenda is to whack away at government services.

March 10, 2014 0 comment

Culture Income Inequality Labor Issues News Politics Taxes Unemployment

Queens Public Library Head Under Fire for Perks and Pay Worthy of a Corporate Fat Cat

by Gregory N. Heires February 17, 2014

written by Gregory N. Heires

By GREGORY N. HEIRES

The head of the Queens Public Library in New York City—which has one of the largest circulations in the world—faces criticism for his excessive compensation package.

Patrons, politicians and the library’s front-line unionized workers are outraged over revelations about the high pay and perks of President and CEO Thomas Galante.

Galante is paid about $400,000, and he is under attack for spending $140,000 for office renovations, including a private second-story outside lounge at the central library where he enjoys smoking cigars, while repairs of damage from Hurricane Sandy more than a year ago continue.

The revelations are a public relations disaster for the library system.

Queens Public Library has downsized its staff and struggled with budget reductions for years, screaming poverty while appealing to patrons to pressure politicians to restore cut funds.

Betrayed Workers

Each year, members of Local 1321 Queens Library Guild faithfully participate in a vigorous budget fight-back campaign as they face the trauma of possibly losing their livelihood and deal with less resources to serve patrons. Their union is pushing for legislation that would guarantee steady funding for the library by linking municipal budget support to a percentage of the city’s property tax base. But with public disclosure about management fat, the workers now feel betrayed.

“We worry about our jobs and the cuts every year,” said a librarian, who requested anonymity. “How are we supposed to go to the public for support when information like this comes out?”

Galante found himself hit with stinging criticism in February after an expose by Daily News columnist Juan Gonzalez sparked a City Council hearing and led New York City Comptroller Scott Stringer to announce his plan to audit the library system.

New York State Sen. Tony Avella demanded Galante’s resignation after Gonzalez reported in a subsequent article that the tone-deaf library head earned $287,000 over 22 months as a consultant for a Long Island school district, according to an audit by New York State Comptroller Thomas DiNapoli. At the City Council hearing, Galante waffled when questioned about outside income.

“We are deeply disturbed by this excessive spending and compensation,” said John Hyslop, president of Local 1321 Queens Library Guild , a local in the municipal employees union District Council 37, an affiliate of the American Federation of State, County and Municipal Employees. “This has done a tremendous damage to the reputation of the library.”

A clerical worker said staffers were long aware of Galante’s high pay and perks before the news reports–and that knowledge tempered their outrage somewhat. What angers workers, she said, is that the controversy has hurt the library’s reputation. Disillusioned by their frozen pay and the constantly worry about funding, employees are anxious to be treated fairly and want the system to be funded properly, she said.

New York City has three public library systems. The other two are Brooklyn Public Library and New York Public Library, which serves Manhattan, the Bronx and Staten Island.

Layoffs and Contracting-Out

Over the past five years, Galante reduced the library staff by nearly 130 positions—and that included 44 layoffs.

In addition, Galante contracted out custodian jobs; cut the pay of many workers by imposing a new work schedule that reduced their nighttime differential; employed new well-paid administrators, and handed out big pay raises to managers.

Meanwhile, branch libraries have dealt with frozen book budgets, and Local 1321 members have gone four years without a raise.

Local 1321 has responded to the controversy by stepping up its on-going fight-back campaign. The local is demanding:

·an end to the contracting out of custodian services,

· the rehiring hiring of let-go employees,

· additional staffing, and

· greater support for library services.

Hyslop created an on-line petition addressed to New York City Mayor Bill de Blasio and Queens Borough President Melinda Katz on Move.On.org that asks Queens Library to hire additional full-time staff, including the 44 laid-off Local 1321 members and new custodians and librarians.

The petition, which is at http://petitions.moveon.org/sign/queens-library-needs?source=c.emcop&r_by=999542, also calls for Queens Public Library to cancel its contract with the Busy Bee, which employs the contracted custodians.

Responding to Galante’s appearance at the Feb. 5 City Council hearing, Hyslop also wrote the Queens City Council delegation to express the union local’s concerns.

A Low-Wage, Anti-Union Employment Model

At the City Council hearing, Galante testified that in-house custodians are paid $35 an hour, though their hourly pay, including benefits, actually ranges from $21.17 to $26.25. By using contracted custodians—who don’t receive benefits and are paid between $14.95 to $15.75—the local says the library is embracing the low-wage, anti-union employment model that is eroding the living standards of workers throughout the country.

In his letter to the Queens delegation, Hyslop noted that he received a letter from a donor who decided to stop contributing to the library after reading about Galante’s public relations debacle. Hyslop criticized the library’s plan to waste money on an administrative office that will eliminate space now used by the public.

Gonzalez’s expose detailed Galante’s generous compensation package and his questionable spending of library funds.

Galante drives a $37,000 luxury Nissan 370Z provided by the library. His salary jumped to $391,594 after he received a $12,000 raise. The 250-square-foot rooftop deck attached to his office– which includes two dozen evergreens and wrought-iron furniture–cost $27,000. He also spent $110,000 for two new executive conference rooms.

The reports on management fat by themselves are an embarrassment. But Galante also faces criticism because he made the expenditures before completing the renovations of branch libraries devastated by Hurricane Sandy.

At the City Council hearing, Galante justified his salary, saying it was comparable to what the heads of non-profit organizations earn. Gonzalez pointed out that Galante earns more than the mayor ($225,000), the schools chancellor ($220,000) and the MTA chair ($350,000).

At the hearing, Public Advocate Letitia James said Galante’s salary should be similar to those of the library heads of the Chicago and Los Angeles library systems. They earn around $200,000.

City Council member Elizabeth Crowley said Galante’s salary should be in line with that of city commissioners.

“It seems that your management is getting compensated more and more, but I don’t think that’s fair to the taxpayers,” she said. “Your compensation package is way too large. You make twice as much as the mayor.”

Galante also cited the pressure of his children’s college expenses as a justification for his salary. That outraged City Council members and library staffers. They, of course, also cope with college tuition and mortgages or rents—but they earn lower salaries.

City Council Majority Leader Jimmy Van Bramer, who chairs the Cultural Affairs, Libraries & International Intergroup Relations Committee and used to work at Queens Public Library, pressed Galante to agree to stop contracting out custodian work.

Galante said that he would like to keep the work in-house, but he would only agree to do that when the library’s fiscal health stabilizes. The in-house custodian staff has dropped from 72 to 105, according to Galante.

Taxpayers Deserve Better

When he announced his audit of Queens Public Library, Comptroller Stringer said it would examine executive pay, capital improvements and the use of city tax dollars. The library keeps its private funds and public monies in separate funding streams, according to Galante.

“Taxpayers deserve to know that public money is spent appropriately,” Stringer said on WCBS 880. His office will also audit the city’s two other library systems.

“My auditors will assess whether the spending practices of our library systems follow rules and business practices that ensure that taxpayer money goes to where it’s supposed to go. We want our libraries to maximize the value of the public funds they receive.”

Stung by the disclosure of his management excesses and a backlash to hurtful remarks about custodians, Galante felt compelled to issue a public apology to library employees.

“I want to apologize for comments that I made recently that were insensitive,” he said.

“I am deeply appreciative and proud of the work done by the hard-working employees of Queens Library at all levels of the organization and especially our custodial team who keep our libraries safe, clean and running smoothly day after day. They do a great job serving thousands of people every day.”

February 17, 2014 0 comment

AFL-CIO Economics Income Inequality Labor Issues News Politics

Public-Employee Unions Targeted in Right-wing Case before the Supreme Court

by Gregory N. Heires February 3, 2014

written by Gregory N. Heires

By GREGORY N. HEIRES

A case before the U.S. Supreme Court threatens to cripple the power of public-employee unions and lower the living standard of the workers they represent.

The anti-union National Right to Work Legal Defense Foundation is behind the legal case, arguing that unionized home-care workers in Illinois should not be obligated to pay dues for collective bargaining services.

The court heard arguments from both sides in the case, Harris v. Quinn, on Jan. 21. A decision is expected in June.

The AFL-CIO, the American Federation of State, County and Municipal Employees, the Service Employees International Union, and the White House are supporting Illinois in the case.

“The Supreme Court’s willingness to take up this case despite the fact that two lower courts very forcefully rejected the arguments being made is a cause for grave concern,” AFSCME Roberta Lynch, deputy director of AFSCME Council 31 in Illinois. “Obviously the labor movement in the public sector would be profoundly damaged if it is required to represent employees who are not required to contribute anything toward that representation.”

The origin of the case dates from Illinois’ 2003 decision to classify home-care workers as state employees for collective bargaining purposes since they are paid with Medicaid dollars administered by the state. Pamela Harris, a home-care worker, agreed to be the lead plaintiff in the lawsuit bankrolled by the National Right to Work Legal Defense Foundation.

The lawsuit, which was turned down by two courts before reaching the Supreme Court, challenges the precedent established in Abood v. Detroit Board of Education, which affirmed the right of public employee unions to collect a “fair-share fee,” or dues from members.

Federal law allows workers to be reimbursed for the portion of their dues devoted to politics. The “fair share” rule buttresses the unions’ contention that workers who seek to avoid paying dues are “free loaders” who want to shirk their responsibility to pay for services.

In the lower courts, the foundation argued that mandatory union dues violate workers’ free-speech rights guaranteed under the 1^st Amendment. The foundation raised the stakes in the case when it reached the Supreme Court by also challenging the right of unions to be the collective bargaining agents of workers.

Attacking Unions for Decades

Since it was set up in 1968, the National Right to Work Legal Defense Foundation has slowly chipped away at the legal basis of unionism. It has taken nearly 20 cases to the Supreme Court aimed at undermining the right of unions to represent workers and collect dues.

The foundation is the legal arm of the National Right to Work Committee, which on its website describes its agenda as combating “compulsory unionism through an aggressive program designed to mobilize public opposition to compulsory unionism and, at the same time, enlist public support for Right to Work legislation.”

The National Right to Work Legal Defense Foundation is clear about its anti-unionism.

In a section on its website called “How Can I Help?” the foundation says, “No force is inflicting more damage on our economy, citizens, and cherished democracy than the union bosses.”

Between 1991 and 2005, the foundation received 85 grants totaling $4.54 million from conservative foundations, including the Castle Rock Foundation, John M. Olin Foundation, Inc., and the Walton Family Foundation, according to Media Transparency. The foundation also has links to the Koch brothers.

Currently, the foundation is involved in nearly 300 legal actions nationwide in courts and administrative agencies, including the National Labor Relations Board, according to its website. It has a full-time staff of 11 attorneys, who are working with hundreds of local attorneys throughout the country.

Will Public-Employee Unions be Crippled?

At the Jan. 21 Supreme Court hearing, Associate Justice Elena Kagan underscored the far-reaching implications of Harris v. Quinn, noting that the discussion ultimately is about “a radical restructuring of the way workplaces are run” throughout the country. Associate Justice Samuel A. Alito Jr. and Associate Justice Anthony Kennedy were clearly sympathetic to the foundation’s arguments that the case raises legitimate questions about public employee unionism, including the right of unions to speak on behalf of workers and affect public policy, as well as their impact on the size of government.

Predicting the outcome of Supreme Court cases is never easy. But court watchers have mentioned a number of possible decisions.

The first, of course, would be that the court would let precedent stand, leaving the status quo in place. A narrow ruling would only affect home health care workers.

But if the court decides that fair share is unconstitutional, unions would be forced to devote resources to representing workers who refuse to pay dues.

Under current practice, unions are able to collect dues through automatic payroll deductions from “agency fee payers,” workers who have not signed up. Unions would need to recruit those workers to avoid losing substantial dues funding.

A ruling in favor of the National Right to Work Legal Defense Foundation would, of course, hurt the Democratic Party by defunding unions and further undermining their political activities.

The Quality of Home Care is Threatened

Together, AFSCME and SEIU represent 600,000 home care workers.

A decision against the unions would also undermine the quality of home care.

“Home care workers in Illinois have formed a union and bargained improvements in wages, health care benefits and training,” Christine Senteno writes on a log on SEIU’s website.

“These kinds of improvements have been shown to help states reduce turnover and make it easier for their citizens to recruit and retain home care workers,” Senteno says. “Reducing turnover and improving recruitment and retention can vastly improve quality of care for seniors and people with disabilities, and allow them to remain in their homes to live with dignity, rather than being forced into institutionalized care.”

Keith Kelleher, president of SEIU Healthcare Illinois and Indiana, told the Los Angeles Times that unionization has not only improved the lives of employees and the people for whom they care, but it has also saved the government billions of dollars in administrative expenditures.

Worsening Inequality

Washington Post columnist Harold Meyerson suggests in an op-ed on the court hearing that the home-care workers (and more broadly, low-wage workers) stand to become the ultimate victims if the ruling comes down in favor of the National Right to Work Legal Defense Foundation, which argues that home care workers are independent contractors and therefore should not be treated as public employees. He points out that “a ruling that neuters the organizations that poor, working women have joined to win a few dollars an hour more would put a judicial seal of approval on the United States’ towering economic inequality.”

Before they unionized, home-health care workers in Illinois earned $7 an hour without benefits. Now that they are covered by a union contract, they earn $11.65 per hour and enjoy health-care and other benefits.

“The eight workers who brought the lawsuit the court hearing Tuesday don’t want to pay dues to the union that won them their raises, though I’ve seen no reports suggesting they’ve volunteered to give back this additional money and forgo health insurance,” Meyerson writes, in a jab at Harrison and the seven other workers.

Whatever the outcome of Harris v. Quinn, the case is another sad example of how Americans workers sometimes stupidly act against their own economic interests.

February 3, 2014 0 comment

Economics Income Inequality Labor Issues News Taxes

Inequality Gone Wild

by Gregory N. Heires January 27, 2014

written by Gregory N. Heires

By GREGORY N. HEIRES

We have a winner-take-all global economy, a malady that undermines democracy, distorts economic development and fuels inequality.

Timed to coincide with the meeting of the global economic elite at the World Economic Forum in Davos, Switzerland, a report released by Oxfam on Jan. 20 shows how the wealthy have rigged the economic and political rules in their favor. So much so that the 85 richest people in the world own as much wealth as the 3.5 billion poorest people.

“It is staggering that in the 21^st century, half of the world’s population own no more than a tiny elite whose numbers could all sit comfortably in a single train carriage,” said Winnie Bryanyima, executive director of Oxfam, an international confederation of 17 organizations that work together to try to find solutions to injustice and poverty.

“We cannot hope to win the fight against poverty without talking inequality. Widening inequality is creating a vicious circle where wealth and power are increasingly concentrated in the hands of a few, leaving the rest of us to fight over crumbs from the top table.”

Concentration of Wealth and Power

Today, nearly half of the world’s wealth is concentrated in the hands of just 1 percent of the population, according to the 32-page report, “Working for the Few,” which is available at the organization’s website at www.oxfam.org. The wealth of the world’s richest 1 percent amounts to $110 trillion, which is 65 times what the bottom half of the global population owns.

According to the report:

• Seven out of 10 people reside in countries where inequality has risen in the last 30 years

• an estimated $1 trillion is held secretly in off-shore accounts

• From 1980 to 2012, the top 1 percent increased their share of wealth in 24 out of the 26 countries with available data, and

• The wealthiest 1 percent in the United States captured 95 percent of the post-financial crisis growth after 2009, while the bottom 90 percent became poorer.

Rigging the Rules

How did we get to this state of extreme inequality?

Over three decades, the global elite has shaped the economic and political rules of the game to stuff their pockets.

Privatization of public assets, the crippling the power of labor unions, free-trade policies, austere economic policies, the easing of financial regulations, the proliferation of tax havens, and tax breaks for the rich have allowed a tiny elite to accumulate vast wealth.

“Concentration of wealth in the hands of the few leads to undue political influence, which ultimately robs citizens of natural resource revenues, produces unfair tax policies and encourages corrupt practices, and challenges the regulatory powers of governments,” the report says. These policies have coincided with the greatest concentration of wealth since before the Great Depression.

In the United States, deregulation has allowed executives in the banking and financial sectors to become fabulously wealthy while creating the financial instability that led to the economic crisis that began in 2008. President Barack Obama signed the Dodd-Frank banking reform bill three years ago, but so far only 148 of its 398 rules have been implemented.

The growth in the power of corporations has coincided with the declining power of unions, the falling value of the minimum wage, lower tax rates for the wealthy and the suppression of wages and benefits. The decline of unions is correlated with the rising income of the 1 percent in the United States. “Had the share of income going to the richest one percent stayed the same as in 1980, the rest of America would have an additional $6000 at their disposal in 2012,” the report says.

In Europe, austerity has walloped public employees, the rest of the middle class and the poor. The richest 10 percent have seen their income grow, while the remaining population copes with unemployment, reduced pensions, and slashes in public services, such as health care and education.

In India, the number of billionaires has increased from about five to 61 in the last decade. The share of national wealth held by this tiny elite skyrocketed from 1.8 percent in 2003 to 26 percent in 2008.

Pakistan is a case study of how the rich and powerful rig the rules to allow for tax avoidance and a regressive tax system.

The landowners who control Parliament avoid taxes by exempting agriculture. Few parliamentarians pay taxes, even though their average income is $900,000. Only 2.5 million out of the 10 million people who should pay taxes actually do.

In Mexico, Carlos Slim has accumulated an estimated $73 billion through his control of the telecommunications industry, which was privatized two decades ago. A study by the Organisation for Economic Co-operation and Development says the monopolistic practices of Slim’s America Movil have hurt the economy by forcing citizens to pay inflated prices for phone service and siphoning away money that could be used for combating poverty.

A Beacon of Hope

Mexico stands in contrast to the rest of Latin America, which has become a beacon of hope in our polarized world as fiscal policy and social spending there have succeeded in reducing poverty over the past decade. The progress has come as the region makes the transition from the military dictatorships of the Cold War era to democracy.

“The reduction of inequality is the result of the right mix of government policies that focus on poor people by increasing social public expenditures,” the report says.

Social spending as a percentage of GDP throughout Latin America has increased by as much 66 percent over the past 20 years. Between 2002 and 2011, income inequality dropped in 14 of 17 countries, and 50 million people moved into the middle class.

“Without a concerted effort to tackle inequality, the cascade of privilege and of disadvantage will continue down the generations,” said Oxfam’s Bryanyima. “We will soon live in a world where equality of opportunity is just a dream. In too many countries economic growth already amounts to little more than a ‘winner takes all’ windfall for the richest.”

To combat inequality, Oxfam calls upon governments to crack down on financial secrecy and tax dodging. And it has made a moral appeal (however futile) to those gathered at the World Economic Forum at Davos to support progressive taxation, provide a living wage for their employees, publicly disclose all their investments and refrain from using their wealth to seek political favors.

“The large and rising concentrations of income and wealth in many countries represent a global threat to stable, inclusive societies for one simple reason: the unbalanced distribution of wealth skews institutions and erodes the social contract between citizens and the state,” the report says.

“Rising inequality, a trend that has grown apace over the past 30 years, must be reversed.”

January 27, 2014 0 comment

Newer Posts

Older Posts

The New Crossroads

Confronting political, economic and cultural issues

The New Crossroads

Confronting political, economic and cultural issues

Unions

How Outsourcing Whacks the Middle Class

Three sentenced for $100 million fraud in botched automated payroll project in New York City

Contracting Out Public Services Worsens Inequality and Lowers Wages

Wage Theft at McDonald’s

Corporate Fat Cats Become the Nation’s Richest “Government Employees” by Leaching Off Taxpayers

Queens Public Library Head Under Fire for Perks and Pay Worthy of a Corporate Fat Cat

Inequality Gone Wild

Subscribe To Our Newsletter

About Us

National Union Holds Hearing on Takeover of DC 37 Retirees Association

Recent Articles

Featured