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Centralized labor agreements in Finland: How unions, companies, and government can work together for a better society

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Here in the United States, corporations treat their workers as adversaries.  The role of management is to “keep costs down,” which is another way of saying that it gets paid to cut other people’s salaries.  The role of the worker is to deliver “more for less” every year or look for another job.  The role of government is to keep its nose out of the whole mess.

People on all sides think of this adversarial system as the only one, almost a law of nature.  Not all countries, however, are so combative in their approaches to labor relations.  Many European countries have more consensus-driven systems.  The Finnish system in particular is one of the most cooperative in the world.

In Finland, representatives of the Central Organisation of Finnish Trade Unions (equivalent to our AFL-CIO) sit down with representatives of Confederation of Finnish Industries and other stakeholders to negotiate a broad framework agreement for the economy as a whole.  Government takes a seat at the table and helps the two sides come together.  The whole system relies on cooperation, consensus, and goodwill — all sorely lacking in the United States.

Their most recent agreement — worked out last month, and due for ratification in a few weeks — covers 23 points, ranging from hours and wages to on-the-job training to family leave policies.  It even includes seven changes to tax and benefits policies, agreed to by the government.  With all parties at the table, broad reform is possible.

Contrast this with the United States, where a simple extension of unemployment benefits during a recession sparks a major nation-wide political battle.

Centralized labor agreements in Finland have served the country well.  The Finnish system delivered a cumulative 37% increase in real wages for Finnish workers over the past ten years.  A recently-inked agreement will give them a further 2.4% raise in 2012 and 1.9% in 2013.  By comparison, the average American has seen no increase in real wages since the year 2000 . . . at all.

Oh — and while the US economy has shed jobs over the past decade, the Finnish labor market has been expanding.  Finland’s official unemployment rate is 7.8% (versus 9.0% here).  Its real underemployment rate compares even more favorably: because corporate layoffs in Finland are coordinated with unions and government, far fewer Finns than Americans are forced to take inappropriate jobs just to make ends meet.

Of course, all this consensus comes at a price: CEO and other executive salaries are much lower in Finland than in the United States.  When corporate CEOs have to sit down at the table with workers and government to hammer out agreement on wages and working conditions, it’s much harder for them to claim extraordinary wages for themselves.  You can’t cry poor when you make 350-400 times as much as your workers, as in the United States.

The average big-company Finnish CEO makes 21 times as much as the average Finnish worker.

So Finland gets low unemployment, strong wage growth, and consensus-driven policies on retraining and family leave.  What’s not to like?  Maybe it’s time for centralized labor agreements in America.  Fantasyland?  Perhaps.  But it’s a fantasy we should be moving towards, not moving away from.

Preventing another women’s wage lost decade

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The Institute for Women’s Policy Research reports that, on average, women are finding it harder to recover from the recession than men.  As of October 2011, the “recovering” economy has added 1.8 million jobs for men but only 465,000 jobs for women.

Both figures fall far short of what’s needed.  The IWPR estimates that men have regained only 30 percent of the jobs they lost during the recession, women just 17 percent.

There has always been a gender gap in jobs and wages, but until recently it was narrowing.  In the 1980s and 1990s, American women’s wages rose rapidly toward  —  but never reaching —  parity with men’s.  Since the year 2000, however, women’s wages have stagnated.

The median wage for full-time employed women over the age of 25 rose from $36,934 in 2000 to $38,294 in 2010, adjusted for inflation.  That’s a total increase of 3.7 percent over ten years, or just 0.4 percent per year.

Less than half a percent per year is very slow growth, but at least it’s growth.  Over the same period the median wage for full-time employed men actually fell.

The median wage is the middle of the total distribution of wages, the wage of the average person.  If you lined up all workers of a particular type — women or men or all workers —  from lowest to highest paid, the median wage would be the wage of the person in the middle of the line, halfway between the lowest and the highest paid.

The median wages of American men have been stagnant since the early 1970s.  Despite a doubling in U.S. labor productivity per hour worked since 1973, men’s wages haven’t increased at all.  Coincidentally, in the early 1970s women’s participation in full-time work started to expand dramatically.  Many pundits — and even a few social scientists — blamed women for the stagnation in men’s wages.

These analysts reasoned that as more and more women entered the labor force and demanded higher and higher wages, less money would be available to pay male workers.  The labor market was struggling to accommodate all the new women who wanted to work for the first time.  Women were pushing men out of the best jobs.  There wasn’t enough money to go around.

That argument was never very fair, but now we know that that wasn’t even true.  Women’s labor force participation peaked in 1999 and has actually been going down for the past 12 years.  Women’s wages at any given level of education are no longer catching up with men’s.  More and more women are now exiting the labor market, and still wages for both men and women are stagnant.

Since 2008 the American economy has been in recession, and a lot of people have been struggling.  Unemployment is way up, and a lot of people who want to work full-time are only able to get part-time jobs.  But the figures reported here on women’s wages cover only people who have full-time jobs.  Include part-time workers and unemployed people and the figures look far worse.

In a recession, people tend to focus on the short-term problems of the economy.  America’s short-term problems are serious enough.  But the stagnation of median wages — the wages paid to ordinary, middle-of-the-line people — is something far more serious.  Long after the recession is over, we’ll still be living with the fact that median wages are still stuck at 2000 levels for women and 1973 levels for men.

In theory, median wages should grow at roughly the same rate as the economy as a whole.  For the century plus from 1860 to 1973 they grew slightly faster than the economy as a whole.  Now they’ve stopped growing entirely.  The economy stopped growing in December, 2007 — for 18 months.  It started growing again in June, 2009.  Wages didn’t.  That’s a problem.

When the economy grows and median wages do not, there are only two possible explanations.  First, it’s possible that more money may be going into investment, leaving less available to pay in wages.  America could certainly use some investment, but that’s not what’s happened in the U.S. economy.

Second, the money may be going to the small number of people at the front of the line, the highest-paid individuals in society.  In American society, these are mostly men, and this is where the extra money is going.  Highly paid men, the few men at the very front of the line, have been taking almost all of the increase in American national income over the past decade.

Over the past decade, women’s and men’s median wages have been growing at roughly the same rate: zero.  To keep even with economic productivity growth, median men’s wages should be growing at a rate of 2 percent per year.  To keep up with productivity and catch up with men’s wages, median women’s wages should be growing at almost 4 percent per year.

To restore the balance between rich and poor that existed in America as recently as 1973, men’s and women’s median wages should be growing even faster, at 7 percent and 9 percent respectively.  Wage growth of 7 percent or 9 percent per year may seem like a fantasy, but the pay of chief executive officers of major U.S. corporations grew on average 8.8 percent per year in the 2000s.  There is some evidence that it’s now growing even faster.

America can afford to restore equity to its wage levels.  If corporations would accept lower profits and male executives lower pay, ordinary women and men could all earn fair wages.  It’s unlikely that corporations and their executives will be willing to make these sacrifices voluntarily, but that’s no excuse for allowing them to grab ever larger shares of America’s national income.

A little corporate austerity might be good for the American economy. It would certainly be good for ordinary Americans.

How to make $30,000 a day by bankrupting your company: Jon Corzine and MF Global

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In March 2010 former Goldman Sachs CEO, US Senator, and Governor of New Jersey Jon Corzine was appointed Chairman and Chief Executive Officer of MF Global, a mid-tier investment bank.  Corzine had big plans to turn it into the next Goldman Sachs.  Nineteen months later, MF Global was bankrupt.

The MF Global Bankruptcy is bad news for MF Global’s employees, account holders, and creditors.  Is it bad news for Jon Corzine?  Well, according to the International Herald-Tribune Mr. Corzine is “expected to receive a severance payment of nearly $12.1 million” (November 1, 2011, page 15).  That’s over $30,000 for every business day Mr. Corzine spent at MF Global.  And Mr. Corzine supposedly only worked there “part-time.”

We don’t know (yet) what other perqs and payments Mr. Corzine may have received from MF Global, but $30,000 a day for part-time work isn’t bad, even if you’re successful.  Earning $30,000 a day for bankrupting your company . . . that’s plain impressive.   Bankrupting your company when you only work there part-time . . . priceless.

Sadly for Mr. Corzine, it’s looking more and more like he may never see a cent of his severance pay.  Regulators are now investigating MF Global for accounting improprieties.  There’s a small matter of $600 million that’s gone missing.

Investment banks make money by playing two sides of a fixed game.  On one side of the game, they hold money for their clients and make trades on their behalf.  They don’t make any real money doing this, but they collect tons of information about what their clients are doing.  Call it “market intelligence.”

On the other side of the game, they make trades using their own money.  The most successful investment banks (including especially the most successful of them all) use the “market intelligence” gained from managing clients’ accounts to consistently out-guess the market.  It’s unethical, unfair, and fundamentally corrupt — but it’s legal.  Most days it’s a license to print money.

The investment banks are, however, required by law to keep their money separate from their clients’ money.  Investment banks can peek at your pot, but they can’t use it to make their own bets.  No matter how much money the investment bank loses, it shouldn’t affect your accounts.

Oops.

No one knows yet whether or not MF Global dipped into its clients’ funds to support its own trading, but major news outlets are reporting that the FBI, SEC, and CFTC are investigating the possibility of this kind of behavior.  In the meantime, Mr. Corzine’s severance package is probably on hold.  For now it’s wait-and-see.

The bigger story, though, is all too familiar.  CEOs make massive salaries whether their companies succeed or fail.  They ring-fence their severance packages so that when a company goes bankrupt, they keep their retirement.  When a company goes under, everyone pays — except the CEO.  Instead, the CEO gets paid.

This has to stop.  America needs more shareholder democracy and oversight of corporate management.  American needs more discipline for boards of directors who don’t properly watch over their companies.  Most of all, America needs to stop paying CEOs like gods.  Give them an honest day’s pay for an honest day’s work.

No one’s honest day’s work is worth $30,000 a day, part-time.

Outrageous CEO pay is tearing apart American society.  Only a few people are CEOs, but CEOs set the tone for pay — and expectations — for top professionals in all fields.  Today, CEOs make off with millions whether or not their companies succeed.  Other top professionals (and their politician friends) increasingly demand the same un-accountability.  It’s time we restored some sanity to the boardroom . . . and to our country.

Aviation union busting at Qantas

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Americans have long experience of companies cutting benefits, cutting wages, and trying to prevent workers from joining unions.  Few workers in America have been hit harder than aviation workers.  US airlines have long used hardball tactics including bankruptcy courts, anti-union consultants, and offshore maintenance centers to undermine US aviation unions.

When they haven’t been able to break the unions, they’ve simply outsourced out all their flights to subcontractors.  The strategy, in a nutshell, is to turn unionized Airline X into a shell company that subcontracts all its flights to a company with a name like “Airline X Express” that doesn’t have unions.  This destroys the livelihood of airline workers.  Many people believe it also compromises safety.

Now these American aviation industry practices are being copied in the rest of the world.  Australia’s main airline, Qantas, just announced a complete lock-out of all its employees.  Qantas has grounded all its flights, everywhere, in an attempt to break its unions.  The airline has estimated it will lose $20 million a day, but it considers the price worthwhile if in the end it can emerge union-free.

Qantas has already copied US tactics by founding separate, non-union subsidiaries and transferring flights to these.  It wants to go further by copying US companies in sending its airplanes offshore for maintenance in low-wage countries.  Many critics have argued that these offshore maintenance centers in Central America and Southeast Asia do much lower quality work than airline-owned maintenance centers in developed countries.

Many of us fly Qantas because of its high-quality staff and extraordinary safety record.  Qantas hasn’t experienced a fatal accident since 1951.  This record isn’t due to strong financial management by the Qantas board of directors.  This record is due to the high-quality work of Qantas employees on the ground and in the air.

The Qantas management argues that the airline can be more profitable if it can break its unions and impose management-dictated employment contracts.  It’s probably right.  But is that the most important thing an airline should be doing?  Most people would probably rank the most important priorities for an airline as: (1) safety, (2) service, (3) profitability.  Unions guarantee (1) and (2).  It would be a shame to see them sacrificed for (3).

It’s not easy to ground an airline.  An airline is an incredibly complex operation.  The management at Qantas must have secretly planned this lockout weeks or months in advance.  The Qantas management has effectively declared war on its current passengers in order to boost future profits for its investors.

That’s a dangerous strategy.  The Qantas management may find that its current passengers don’t want to be future passengers.  It’s hard to make a profit for your investors without passengers.  Today’s lockout may be the beginning of the end for Qantas.

The Greek debt crisis: What’s going on in Europe?

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As the economic news in the United States gets worse and worse every week, a lot of Americans are saying “at least we’re not Europe.”  To read the press accounts, it sounds like Greece is plunging Europe into a second Great Depression.  Greece is having trouble paying its debts, and many people are worried that the Greek debt crisis might cause a collapse of the entire European banking system.  Just what is going on in Europe?

What’s going on in Europe is: not much, really.  Greece makes up less than 2% of the European Union’s combined national income.  The German economy could eat 10 Greeces for breakfast and still have room left over to eat Finland for lunch.  The problems of the Greek economy are only a big deal because a few politically powerful European banks made investments that they now regret.

Not just banks, but hedge funds.  So-called “vulture” funds have bought up troubled Greek bonds at a big discount.  These hedge funds are now using their powerful political connections to lobby for full payment of Greece’s debt.  In other words, these vulture hedge funds have bought Greek bonds at 25 cents on the dollar but are pushing for full payment.

They’re not going to get full payment.  For months, the European Central Bank was talking about paying off 40% of the bonds’ face values.  Today they agreed to pay 50%.  That’s not a bad deal for the vulture funds: buy at 25 cents, sell to the ECB at 50 cents, take home a 100% return for a few months’ investment.

It was reported in June that the French (it’s always the French, isn’t it?) floated the idea of just having the ECB buy back the bonds on the open market — that is, at 25 cents on the dollar — but the banks and hedge funds would have none of that.  The French proposal was quickly shouted down.  Full payment is the demand; wring your hands, talk a lot, and pay 50 cents is the current agreement on what will actually happen.

And the banks and hedge funds are still pushing for at least a few more pennies.

Well, does it really matter if the banks squeeze a few extra pennies (or Euro-cents) out of the European Central Bank?  Sure it does.  It matters because the ECB isn’t going to just give Greece the money.  The ECB is going to lend Greece the money.  The ECB will lend the money to Greece, and Greece will use the money to pay its creditors.

If that were the end of the story, it would seem fair enough.  Greece gets a sweet deal on its debt repayments, the vulture funds get a sweet profit on their investments, and the ECB picks up the difference.  The Greek debt crisis is over.  But that’s not the end of the story.  The ECB is placing conditions on its bailout.  Not conditions on the vulture funds (of course not); conditions on Greece.

The Greek government is being forced to raise sales taxes on the goods that ordinary people buy, but has been warned not to raise income or investment taxes on the rich.  Government employees are having their salaries and pensions cut.  People are being forced to work longer and retire later.  And the government has been ordered to sell off state-owned companies.

The result has been a worsening of the recession in Greece, which has made the Greek debt crisis even worse.  People are struggling to pay higher taxes on lower salaries.  Worse, the fire-sale privatizations of state services are almost certain to benefit rich oligarchs and foreign companies who can sweep in to buy these assets at artificially low prices.  Look for a massive increase in inequality in Greece over the next few years.

The Greek economy is a mess.  Everyone agrees on that.  For years, Greece has had a problem with massive tax evasion and manipulated economic statistics.  One need have no sympathy for the doctors, layers, and accountants (!) who complain that the government is finally auditing them to make them pay their taxes.  But these problems have not been caused by ordinary Greek workers.  Ordinary workers have their taxes taken directly out of their paychecks.

A pro-worker solution to the Greek debt crisis would come in two parts.  First, force those who have long evaded their taxes to start paying them.  Millionaire shipowners, corporate executives, and highly-paid professionals should be the target.  Second, let Greece reimburse bondholders the amounts they actually paid for their bonds.  Then Greece could retire its debt in dignity instead of through begging from the ECB.

For all Europeans may worry (and they’re good at worrying), the European economy is in far better shape than ours.  Personal debt levels are much lower in Europe.  And Europe as a whole exports almost exactly as much as it imports, while the US has a massive trade deficit.

Europe has its problems.  Every part of the world does.  But even though Europeans are always more pessimistic than Americans, Europe’s problem are actually much smaller.  In relative terms, the Greek debt crisis is to Europe what the Arizona debt crisis is to the United States.  Bad, but hardly catastrophic.  Europe will survive.  Let’s just hope it doesn’t feed Greece to the vultures.

Occupy wall street? Better occupy Greenwich

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The Occupy Wall Street protests in lower Manhattan have struck at the symbolic heart of American corporate capitalism.  America’s big banks have deep roots there, and the New York Stock Exchange is still on Wall Street itself.  A protest in Liberty — I mean Zuccotti — Park is a protest at the core of the capitalist system.  If Wall Street represents the richest 2% of America, the Occupy Wall Street protesters represent the other 98%.

Certainly the other 98% are tired of subsidizing the lavish lifestyles of the top two.  What many Americans don’t realize, however, is that the real money in corporate America isn’t in banking.  Bankers are just rich, not filthy rich; they’re the top two percent, not the top .02 percent.  For the filthy rich, for the top .02 percent you have to look to hedge funds.  Hedge funds are where bankers go when they think they’re underpaid.

Hedge funds are largely unregulated investment companies that can do essentially whatever they want because they don’t take retail deposits from small investors.  They’re called “hedge” funds because they were originally created to reduce risk by hedging their bets.  They used risk management strategies to prevent large downside losses at the expense of giving up some of their potential for upside gains.  Hedge funds were designed to provide slow, steady returns without the risk of investing on the open market.

That was then.  This is now.  Like all financial institutions, hedge funds came to realize in the 1980s that they could use their expertise in managing risks to take risks instead.  Start with a strategy that reduces risk but also reduces returns, then reverse it.  Now you have a strategy that increases risk but also increases returns.  Hedge funds today are the high-risk, high-return segment of the investment universe.

The problem is that the high returns of hedge funds go to their managers and investors, while the high risks are ours.  The run on the British pound in 1992, the collapse of the sub-prime mortgage market in 2008, and the unfolding European debt crises of 2011 were all accelerated and exacerbated by hedge funds.  Hedge funds turn slowly-evolving policy problems into fast-bursting financial bubbles.

Unfortunately, the democratic process of government regulation and oversight can’t keep up with the pace set by hedge funds.  Worse, the whole idea that governments should manage and plan their economies has been undermined by propaganda from business-funded, free-market think tanks.  As a result, government no longer works to prevent crises.  It just picks up the pieces after the damage has already been done.

The center of the global hedge fund industry isn’t lower Manhattan.  It’s in the far suburbs of New York, in leafy Greenwich, Connecticut.  If the Occupy Wall Street kids want to kick corporate capitalism where it hurts the most, they might consider following the real money out to Greenwich.  For the top .02%, that’s where the action is.  Besides, it’s nice there, and much less windy than in lower Manhattan.  With winter coming that’s a big plus.

More importantly, Greenwich is where the hedge fund managers actually live.  They can’t see or hear you from their 35th floor offices on Wall Street.  They won’t be able to avoid you when they go out for a weekend cup of coffee.  And their spouses will have to walk around you every day of the week when they go boutique shopping on ritzy Greenwich Avenue.  There are no alternate routes in Greenwich.

The New York City police are highly experienced at handling mass protests and popular demonstrations.  The Greenwich police get far fewer opportunities to earn overtime pay.  They just might welcome the extra business.  Heck — they have to deal with superfluous calls to hedge fund manager mansions every day of the week.  They might just join in the protest.

Greenwich is an $8.00 (off-peak) one-way train ride from Grand Central Station in Manhattan.  If things get too hot (or too cold) in Zuccotti Park, the Occupy Wall Street kids just might want to decamp to spacious Havemeyer Fields in downtown Greenwich.  Thanksgiving in New England — Greenwich is the place to be!

Shortchanging our paychecks

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Back in the “Happy Days” of the 1950s and 1960s, most young American couples graduated from high school or college, got married, and immediately bought the most expensive house they could afford. They bought their houses on credit, their cars on credit, their appliances on credit, their furniture on credit, and even their baby clothes on credit. They didn’t have credit cards, but they sure did have debt.

Those young families in the 1950s and 1960s were perfectly rational in loading up on debt. It made sense for them to borrow as much as they could because they expected paying it off to get easier and easier every year. Between 1870 and 1970 the median male U.S. income rose on average 2 percent per year. In the 1950s and 1960s it grew even faster, at around a 2.5 percent clip.

In addition to this broad income growth, any individual could count on his or her income to rise with seniority. Add in another 1-percent yearly raise tied to seniority, and a typical American man could expect his paycheck to annually grow by 3.5 percent. Over the course of a 40-year career, he could expect his wages to quadruple – even after adjusting for inflation.

It made perfect sense to follow a “borrow now and pay later when you make four times as much” plan back then.

Today, everything has changed. Median male income hasn’t just stagnated since 1970. Wages for American men have actually declined.

The Baby Boomers kept on buying and borrowing, but many of them learned that one income wasn’t enough to pay their debts. That’s why the proportion of women with children who had jobs outside the home climbed from one in three in 1975 to two in three in 2008. For a while, women saved the American Dream.

Not anymore. Over the past decade women’s participation in the labor force has maxed out. Even if more women want to work, there aren’t any new jobs for them. The situation facing today’s indebted families is bleak. Wages overall are declining. Even if a worker does get a 1-percent annual seniority raise, that’s a 50-percent increase in income over a 40-year career – nothing like the 300-percent increases previous generations experienced. The money just isn’t there.

It gets worse. Young couples now have large debts before they ever get married, often from burgeoning student loans. On top of that, young couples now have to save for their own retirement, since Social Security benefits are far lower compared to national income than they were in the 1960s and private pensions have all but disappeared. And of course ordinary people now have to pay for health care expenses that used to be covered by insurance.

Families today are drowning in debt. Yet the problem isn’t the borrowing. Young families should be able to borrow to buy houses, cars, and furniture. The problem is that income and benefits for most Americans have stagnated over the past four decades.

If today’s young couples were getting 3.5-percent annual raises, didn’t have to worry about spiralling health care expenses and college tuition, and had solid company-sponsored pension plans to supplement ever more generous Social Security payments in retirement, they would have no problem getting themselves out of debt.

That may all sound like a dream. But it’s a dream that used to be reality for the majority of Americans.

It didn’t have to be this way.

Since 1970 the U.S. economy has doubled in per capita terms, after adjusting for inflation. We have the money for everyone to live very well – twice as well as in 1970.

Young families today are struggling because the benefits of America’s economic growth over the past 40 years haven’t been shared equally. They’ve all gone to the very top. It’s time to restore some balance. It’s time to give ordinary people a nice, big, fat raise. Then they could pay their debts on their own, with pride and dignity.

Are you worse off than your parents were?

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The story of America was always a story of progress.

Between 1873 and 1973 the wage earned by the average working American increased by more than 600%. Year after year, things got better and better for all Americans. There were short recessions that temporarily threw people out of work, and one Great Depression in the 1930s in which wages fell 10%, but for the most part living standards changed in only one direction: up. Even the Great Depression lasted just ten years.

Today, things are different.

Since 1973 the wage earned by the average working American man has declined by 7.5%. Wages for the average woman have increased, but only because many more women work today than did in 1973. For women working in the same job (comparing teachers today to teachers then, retail workers today to retail workers then, etc,) there have been no wage increases for women either. American families only feel richer than in 1973 because now they usually have two wage-earners, not one.

That’s not to say that the economy hasn’t grown. With a recession raging in America for the past three years, it’s easy to forget just how successful the American economy has been over the years. Total national income per person today is about twice as high as in 1973. The money is there. It just doesn’t filter down to ordinary Americans like it used to.

How is it possible that the average job pays less than it did in 1973 (adjusted for inflation) when the economy has doubled? The answer is income inequality. Economists usually focus on total income levels for the country as a whole while sociologists usually focus on the distribution of income by social class. Since 1973 total income has grown, but the distribution of income by social class has changed dramatically.

Since 1973 poor and working class Americans have seem massive declines in income. The minimum wage in 1973, adjusted for inflation, would be equal to $8.14 per hour today. Since overall per person income in America has doubled since 1973, an equivalent wage today would be $16.28 per hour. The fact that the minimum wage instead is just $7.25 per hour means that poor and working class Americans have fallen behind relative to other Americans.

Wages for middle-income Americans (median wages) are about the same as in 1973 (or slightly less). Again, if wages for middle-income Americans had risen at the same rate as income overall, middle-income Americans should be earning twice as much as middle-income Americans did in 1973. In other words, you should be doing twice as well as your parents. If you and your parents have roughly average incomes, you’re probably making the same as they did or a little less.

It’s mainly gone to two places. Wages for top professionals and executives — people like investment bankers, corporate lawyers, and company chief executive officers (CEOs) — have increased dramatically. There are no good statistics for these small groups, but most sources estimate that CEO pay has risen by 800% or more over the past forty years. The highest-paid employees in America are very well-paid indeed.

The second place all the money has gone is to company profits. American corporations and proprietors earn 140% more in profits today than they did in 1973. In fact, American corporations recorded record profits in 2010 — in the midst of serious recession and unemployment for everyone else. The American economy as a whole is doing just fine. It’s the distribution of rewards in that economy that is all askew.

You may or may not be worse off than your parents were at your age. For the vast majority of people, however, if they are better off it’s not by much. You should be much better off than your parents were. After all, your parents were incredibly better off than your grandparents were. Life should be getting easier for each generation. For the first 200 years of American history, it was. Today’s problems go back only 40 years. America is a democracy, and if Americans want to change the distribution of income we can. It’s up to us.