A new report shows exactly who the top 0.1 percent of Americans with all the wealth are. The question is, what can we do about it?
By **Sarah Jaffe**
By arrangement with Alternet.Org.
S. Robson “Rob” Walton, Walmart chairman, has a net worth of about $19.7 billion. And he’s only number 9 on the list of 2010’s top 20 richest Americans.
Walmart workers, meanwhile, make around $8.75 an hour—about $18,000 a year. They’d have to work over a million years to approach what the chairman of Walmart Stores is sitting on. Alice and Jim Walton each have about $20 billion, and Christy Walton has $24 billion.
Last year Jonathan Turley noted that the CEO of Walmart, Michael Duke, makes his average employee’s yearly salary every hour.
A new report by the Washington Post on “Breakaway Wealth” contains new research by economists Jon Bakija, Adam Cole and Bradley T. Heim, who analyzed tax returns from the top 0.1 percent of earners in the U.S. That top percentile takes home more than 20 percent of the personal income in the country, and their average income is $5.4 million. The average income of the bottom 90 percent, according to the Post, is just $31,244.
The news that the income gap is growing in the United States is probably not news at all to most working people. But this data throws the trend into sharp relief. Surprise, surprise, they’re mostly not media personalities or athletes (just 3 percent). They’re chief executives and managers (41 percent), and of course they work in finance (18 percent)—the same executives who are benefiting nicely from policies that have favored the rich and tilted the playing field in their favor, maintaining low personal and corporate tax rates and in some cases actually bailed their companies out with government funds.
Executive pay has been heading sharply upward since the 1970s, but at the moment the gap looks especially ugly as unemployment stagnates and real wages decline, as conservatives attack union pay and benefits and Congress has Social Security, Medicaid and Medicare in its sights.
Moreover, it’s not an inevitable result of the invisible hand of the free market. The Post writes:
“What the research showed is that while executive pay at the largest U.S. companies was
relatively flat in the ‘50s and ‘60s, it began a rapid ascent sometime in the ‘70s.
As it happens, this was about the same time that income inequality began to widen in the
United States, according to the Saez figures.
More importantly, however, the finding that executive pay was flat in the ‘50s and ‘60s, when
firms were growing, appears to contradict the idea that executive pay should naturally rise
when companies grow.
This is a ‘challenge for the market story,’ Frydman said.”
The Post offers one other possible explanation. Economists theorize that the “social norms that once reined in executive pay” are gone. A dairy executive the Post lovingly describe from the 1970s turned down raises several times, saying that he made enough money. There are few such protestations from today’s multimillionaires.
We got the New Deal during the Great Depression, let’s not forget, less because we had benevolent overlords than because the wolves were at the door. Communism had come to Russia; unions were strong and many run by socialists themselves. The New Deal was a compromise position between the threat of communism, organizing by progressive and socialist activists aligned with labor, and the pushback from business. And during the ‘50s and ‘60s, while executive pay was less exorbitant, those New Deal programs were still strong and unions had organized over 30 percent of the workforce. (Even now, the median wage for union workers is more than $10,000 a year more than non-union.)
[P]oll after poll has found that Americans want taxes raised on the richest Americans in order to balance the budget, rather than cuts to social programs.
Those “social norms” started to change in the 1970s as union density dropped and business fought back hard against the New Deal. They began to change fast in the ‘80s, with Reagan’s deregulation-first agenda—in 1980, CEOs made 42 times what workers made; now it’s 343 times. This, coupled with the failures of communism in practice, led to what British author Mark Fisher calls “capitalist realism”—the idea that there is no alternative and so we’re stuck with what we’ve got. It might not be fair that the company CEO makes hundreds of times your salary, but that’s the way the system is, and it’s the best system we’ve got.
In practice, that means what we get is corporations making the rules, corporate executives making the money, and the rest of us making, in real terms, less than ever. To suggest there might be anything wrong with corporations paying CEOs millions is treated like heresy.
Other countries have seen their income inequality rise, but none of the so-called developed countries have seen a spike like that here in the States—the Post notes that we belong in the company of Cameroon, Ivory Coast, Uganda, and Jamaica in terms of raw wealth disparity.
Another new report, this one in Mother Jones, points out some more maddening statistics. Productivity is up 80 percent since 1979, but workers’ wages have hardly risen at all. The number of people working more than 50 hours a week has steadily increased, and workers are now expected to be available and responsive to email communications when not at the office. The report charts the return of growth in gross domestic product (GDP), but not jobs to match. And those multinational corporations with multimillionaire CEOs are hiring more people overseas than they are at home.
Meanwhile, the New York Times reports that companies with billions held offshore—including companies we all know and use, like Google, Apple, and Microsoft—are asking for a “repatriation” tax holiday to bring that money back to the U.S. In other words, they want to drop the rate they’d pay on that money—$29 billion from Microsoft alone—to 5.25 percent from the 35 percent it is normally, as a reward to them for bringing their money back home.
The kicker to that is that even 5 percent of that cash would be a much-needed jolt of revenue for the U.S. economy, but the last time such a deal was offered, companies shipped money home only to return it to shareholders, lay off workers, close plants, and make plans for the next time the government would reward them for pretending to be patriotic. Merck, the Times notes, “brought back $15.9 billion in October 2005. The next month, it unveiled a restructuring plan to cut 7,000 jobs.”
Once again, then, we see companies seeking a reward for doing a tiny bit of what they should have done all along—in this case, paying their taxes here at home. They claim, over and over again, that they’ll create jobs, if only this or that bit of money is conceded to them. Meanwhile the jobs are not being created, and the ones that exist are paying less and less.
Since 1987, research has found that 60 percent or more of Americans agree that “differences in income in America are too large.” The Post’s very non-scientific user poll asks: “Business executives make up the largest slice of top earners in the U.S., more than 40%, according to a new study. Should their pay increases be capped at the level of increases awarded to their firms’ workers?” At the time I took it this morning, 85 percent of respondents had voted yes.
And poll after poll has found that Americans want taxes raised on the richest Americans in order to balance the budget, rather than cuts to social programs.
Another Post reporter notes that this year’s executive pay packages are especially high because it’s the last year before new regulations take effect, mandating “say-on-pay” shareholder votes on executive salaries. Brandon Rees of the AFL-CIO’s office of investment told the Post that executives have been able to profit nicely off the stock options they received back in 2008, when the market was, of course, way down. “The stock options they received in 2008 have allowed many CEOs to profit for simply getting share prices back up to where they were.”
“Say-on-pay” votes may be nice, but they’re hardly enough on their own to serve as equalizers. Of 2061 votes taken, only 33 have resulted in what the Post calls “sizable ‘nay-on-pay’” votes. Executives aren’t going to be reined in by stockholders, and both parties in Congress seem more likely to give them more tax breaks than take any significant action.
Whether it’s social norms or political decisions that have changed, the system that we’ve got is working everyday people harder and harder for a smaller and smaller share of the pie. There may not be an obvious alternative yet, but how long will 90 percent of Americans be content with the squeeze?
Copyright 2011 Sarah Jaffe
By arrangement with Alternet.Org.
Sarah Jaffe is a contributor to AlterNet and a freelance writer.