Saturday, November 22, 2014

Capitalism collapsing Global Economies as Wages Plummet, Killing Demand and the Middle Class.

For the longest time, wage declines in the U.S. have helped increased corporate bottom lines. But it also slowed consumer demand. Not to worry, global corporations simply shifted their focus to growing markets elsewhere. But that’s about to come to an end too.

Two major stories hit the business section of the paper today, and I can’t help think they’re connected. 

Story # 1Austere economic efforts globally have taken their toll, and now growth is slowing in dangerous ways.
China's central bank unexpectedly slashed interest rates on Friday to re-energize the world's No. 2 economy, joining a growing list of major economies that are trying to encourage growth in the face of a global slowdown. The president of the European Central Bank said he was ready to step up stimulus for the 18-country Eurozone economy, where growth is meager and unemployment is soaring, encouraging delays in spending and investment. And Japan's government this week delayed a tax increase after the country slipped back into recession. 
The U.S. escaped much of this due to increased stimulus spending:
The United States is showing signs of steady growth, prompting the Federal Reserve to rein in its stimulus efforts. So far, the U.S. has escaped any drag from the slowdown overseas. Fed policy-makers said … exports are a smaller source of growth than in other developed nations and many major employers, such as health care and education providers, are largely unaffected by overseas activity.
Story # 2: Wages are plummeting due to anti-union efforts everywhere. I don’t expect a change in that anytime soon either, knowing how driven my conservative friend in Milwaukee is about these issues.

While Republicans complain about raising the minimum wage and increased dependence of Americans on government assistance (they don’t see a correlation?), the middle class manufacturing working stiff is already making close to that “job killing” $10.10 an hour already. And that can’t be good:
More than 600,000 U.S. manufacturing workers earn less than $9.60 an hour, and 1.5 million — or one-fourth of all manufacturing workers — make $11.91 or less, according to an analysis released Friday.

The National Employment Law Project said that manufacturing jobs — once considered the solid source of middle-class income — increasingly are paying wages that can barely support a family.

For 30 years, from 1976 to 2006, U.S. manufacturing workers were paid a median wage that was above the U.S. pay median. That manufacturing advantage peaked in the mid-1980s. By 2013, the median manufacturing wage was 7.7 percent lower than the median U.S. wage for all public and private sector workers, according to the Census Bureau’s survey data.

Wage concessions by unions, hiring of non-union workers, other pay cuts and broader use of temporary workers have contributed to the declining pay scales, particularly in the automotive sector, the report said. “While foreign and domestic automakers have added 350,000 new jobs in the U.S. since 2009, nearly three-fourths of all auto workers are now employed at parts plants, where workers are paid nearly 15 percent less on average than motor vehicle manufacturing workers overall.” 

It said that from 2003 to 2013, real wages for auto parts workers fell nearly 14 percent, three times faster than for all manufacturing workers and nine times faster than the drop for all occupations.
And as I’ve emphasized so many times here, the new business model after the Great Recession is to keep full time jobs at a minimum, while hiring part time workers when demand picks up:
The report also said that 14 percent of workers in the auto parts sector are employed by temporary staffing agencies, earning 29 percent less on average than workers employed directly by auto parts manufacturers.


  1. There's no "too big to fail" in capitalism. The U.S. hasn't escaped anything. We never had a washout of all the debt. You might want to start thinking for yourself and questioning where you get your information if you want to get through this. If the Fed has reined in its stimulus, why is it's balance sheet still ticking up?

    Yeah this looks normal...

    But go on and blame republicans for everything like all of the rest of the morons. It's not like democrats like to spend other people's money.

    "There is no means of avoiding a final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion or later as a final and total catastrophe of the currency system involved."
    - Ludwig von Mises

    1. Ludwig Von Mises? No wonder why you don't have a clue.

      Debt is not our problem. Low demand and low wages is our problem. This is not a debate outside of bubble-world

  2. Then why is Russia, China, and the rest of the world dumping treasuries and bypassing the dollar Jake? The US has already defaulted on it's debt. Americans are just about the only morons that haven't realized it yet. Debt is not a problem. Debt as a percentage of GDP is. If America produced anything, there would be demand for it. Unfortunately nobody wants to pay for a bunch of whiny complaining crybabies. Not much demand for that.

    Demand for what? The average consumer has no savings and is strapped with debt. How high do wages need to be? $15/hr? $25/hr? $50/hr? And for what? Ringing a cash register? You didn't dispute the quote. You just tried to insult me with your ignorance.

    1. Thank you for illustrating the Dunning-Kruger effect for all of us, kiddo.

      You just admitted that low demand and low wages are the problem. Go back and read your word salad above. And all those countries are buying up US debt, which is why the 10-year bond rate is significantly lower now than it was 5 years ago, with the deficit at its lowest levels in several years.

      These are not debatable points. I'd just wish you'd be man enough to learn something from them

  3. Wow. You're either stupid or in denial.

    Let's get something straight. There is an economic law called the law of demand. A law is natural and undeniable like the law of gravity, as opposed to a statute which politicians pass. The law of demand states that demand is a function of price, and when price rises, demand falls. So if low demand is the problem as you say, then why are central bankers calling for even more inflation? QE1, QE2, and QE3 wasn't enough for you? I hope you like paying higher prices at the grocery store because the endgame is here.

    The 10 year bond is lower now because the Federal Reserve has expanded their balance sheet 6 fold in 5 years and is recapitalizing banks balance sheets. If you think other nations are the ones buying up US debt, I have a bridge to sell you in Brooklyn.