Corporations win - Workers lose Options

[rox63]

http://www.csmonitor.com/2005/0502/p17s01-cogn.html

In this recovery, corporations win - workers lose
By David R. Francis

By historical standards, the economic recovery in the United States has been unfair. It has devoted too big a share of income growth to corporate profits, too little to workers.

Indeed, in 2004, wages and salaries received the lowest share of total national income ever recorded, with the data going back to 1929, the year the Great Depression began, note Isaac Shapiro and David Kamin, economists at the Center on Budget and Policy Priorities in Washington, in a new study. By contrast, corporate profits' share of national income last year, at 11.4 percent, was "exceptionally high," the study found. The trend has both political and economic implications. For example:

Wage earners suffer: Democrats will surely blame Republicans for the weak job and wage scene. "The distribution of earnings is becoming more unequal," complained Sen. Jack Reed (D) of Rhode Island earlier this month. Since last May, when the economy began creating jobs again, average hourly earnings of nonfarm production workers have actually fallen - by 0.7 percent - after adjusting for inflation.

Investors benefit: High corporate profits are always good news for investors. Last month, the Dow Industrial Average notched its biggest one-day gain since 2003. "There are many factors that affect stock market prices," notes Mr. Shapiro. "But robust corporate profits always help."

Social Security weakened: If wages were growing more robustly - and not so inequitably - the financing gap in the Social Security system would not be so big. In fact, economics, more than demographics, are causing a large part of the Social Security gap, says Jack Bivens, an economist at the pro-labor Economic Policy Institute in Washington.

In 1983, the year of the last major reform of the system, payroll taxes were imposed on 90 percent of all earnings. But over the past four years, the cap has covered only an average of 85 percent of earnings. That's because the cap - $90,000 this year - has not been increased sufficiently to make up for the more rapid growth in income of prosperous Americans.

"This erosion of the taxable base of Social Security, driven by rising earnings inequality, has greatly exacerbated the long-run outlook of the system," Mr. Bivens notes in a new study. Raising the cap so it again covers 90 percent of earnings would cover 40 percent of the gap in financing over the 75-year planning period used by the Social Security Administration, says Bivens.

If Social Security actuaries used "more realistic" assumptions on productivity and economic growth for coming years, another 20 percent of the gap would disappear, he adds.

Of course, wage and salary growth doesn't tell the whole story - at least not for employers. Largely because of rising health insurance costs and increased contributions to company pension plans, labor costs have risen decidedly in the current recovery that began in November 2001. Since then, 20 percent of real income growth has gone toward these benefits, compared with an average of 8 percent in the nine previous post-World War II recoveries.

For workers, however, that extra cost of benefits doesn't necessarily mean any improvement in healthcare or any change in pensions. Only wages and salaries fatten their wallets and purses. Wages and salaries got only 23 percent of real income growth in this recovery, compared with 49 percent for the same years and months in previous recoveries. For corporate profits, the comparable numbers are 44 percent this time and 18 percent in the past.

Even if all employee compensation, including benefits, is included, workers still received an exceptionally small share of the growth in income in the current recovery, according to Shapiro. The trend is just not as marked as when wages and incomes alone are considered, however.

Aware of an economic slump, President Bush tried to counter it with tax cuts. Economists generally don't dispute that the 2001 cuts helped lift the economy out of that year's brief recession. A new study for the National Bureau of Economic Research in Cambridge, Mass., for instance, finds that the average household spent roughly two-thirds of the typically $300 to $600 income-tax rebates mailed to about two-thirds of US households in 2001 within a few months of receiving the check. By the fourth quarter of 2001, the economy was back on a growth path.

But both Shapiro and Bivens say that if tax cuts had been targeted more at the middle class and poor, rather than the rich, the economy would have made for a more vigorous recovery.

Moreover, says Bivens, a better economic rebound would have boosted Social Security payroll taxes. As it is, the projected shortfall in Social Security revenues amounts to 1.92 percent of current taxable payroll. The prime problem is not a falling worker-to-retiree ratio, says Bivens. It's the economy. He doesn't add the word, "stupid," as Clinton campaigners did in 1992.

[heritage]

General Motors to Cut 25,000 Jobs

Updated 9:30 AM ET June 7, 2005
http://dailynews.att.net/cgi-bin/news?e=pr...8aiq3201&src=ap

WILMINGTON, Del. (AP) - General Motors Corp. expects to cut 25,000 or more jobs as it closes more assembly and component plants over the next few years, Chairman and CEO Rick Wagoneer told shareholders at the company's annual meeting on Tuesday.

Wagoneer said the company expects the actions will generate annual savings of about $2.5 billion.

[heritage]

Overhaul of Pension-Funding Rules Sought

Updated 7:43 AM ET June 7, 2005
http://dailynews.att.net/cgi-bin/news?e=pr...8aiogoo0&src=ap

By GLEN JOHNSON

WASHINGTON (AP) - Fearing that airlines and other struggling industries could present the country with its next S&L crisis, Congress and the White House are pushing an overhaul of pension-funding rules that has been overshadowed by Social Security.

The heads of three major airlines were called to appear Tuesday before the Senate Finance Committee. Its leaders are alarmed that the Pension Benefit Guaranty Corp. _ the federal agency that insures private pension plans _ already has a $23.3 billion deficit because of defaults.

More than half of the 100 largest plans had less than their promised benefits on deposit, which the committee's chairman blames on lax rules that are supposed to guarantee full endowment.

About 34 million people _ roughly 20 percent of the nation's workforce _ expect to receive payments from their employers through defined benefit plans.

The risk those workers face was highlighted last month when a federal judge allowed United Airlines to default on $9 billion in pension obligations as it attempts to emerge from bankruptcy. The ruling shifted responsibility for paying benefits for 120,000 current and former workers to the PBGC, but the agency will pay only about two-thirds of promised benefits.

"As the $9 billion hole in United's pension plans has made painfully clear, a company's pension promise is only as strong as the rules that require companies to fund these plans," Sen. Charles Grassley, R-Iowa, said in a statement issued before his committee hearing. "We saw similar practices and events at Enron, but, unfortunately, this time it's perfectly legal."

The pension funding problem recalls the savings and loan crisis of the 1980s, when hundreds of thrifts became insolvent and were taken over by the government. A congressional study in 1996 put the price tag for the S&L bailout at $480.9 billion.

In January, the Bush administration proposed an overhaul of regulations dating to the 1974 establishment of the Employee Retirement Income Security Act and the PBGC.

Among the changes favored by the White House are a boost in the PBGC premiums paid by employers, as well as a rewrite of rules that have allowed companies to use favorable stock trends and interest rates to conceal underfunding in their plans.

Similar legislation is being drafted in the House by Rep. John Boehner, R-Ohio, who serves as chairman of the House Committee on Education and the Workforce.

Airline pilots in particular are concerned that other airlines may follow United's lead if they perceive the carrier gaining a competitive advantage by dumping its pension obligation. Among those invited to testify were United Chairman Glenn Tilton, Northwest Airlines Chairman Douglas Steenland and Gerald Grinstein, chief executive of Delta Air Lines.

"Under current law, the only way an airline can avoid burdensome pension costs is by entering bankruptcy and terminating the plans," said Duane Woerth, president of the Air Line Pilots Association, in remarks prepared for the hearing.

"But if more and more airlines choose to shed their pension liabilities in bankruptcy, it sets up the potential for the 'domino effect,' in which all the other legacy carriers are incentivized, or even forced, to file bankruptcy, in order to achieve the same cost savings and level the playing field," Woerth said.

Rep. George Miller of California, the top Democrat on the Workforce Committee, urged Boehner to also include language in his bill requiring companies to release more of the data about their plans that they provide to the PBGC. The congressman argued it frequently does not jibe with more general information released to the public.

"The differences are dramatic," Miller wrote in a letter dated Monday. "Some companies report financial results for the pension plan assets and liabilities in their 10-Ks that are hundreds of millions of dollars _ and in some cases, billions of dollars _ more optimistic than their secret 2010 filings."

[Eino]

WOW! Those articles are showing the rich get richer and the poor get poorer. GM blames its woes on having to pay healthcare for aging workers. Seems that they don't have this problem in other countries. Lots of rich doctors out there. Airlines don't want to pay pensions. (or can't)

Looks like American companies want disposable employees after their prime working years are done. A lot of these companies have gone to other countries to find them.

It's all the fault of these darn unions who want their employers to treat them as human beings.

[Beamer]

This article should go along with the Paul Krugman editorial that mommadona posted. Both tell the true story about what's happening.

[Beamer]

General Motors to Cut 25,000 Jobs

Updated 9:30 AM ET June 7, 2005 
http://dailynews.att.net/cgi-bin/news?e=pr...8aiq3201&src=ap

WILMINGTON, Del. (AP) - General Motors Corp. expects to cut 25,000 or more jobs as it closes more assembly and component plants over the next few years, Chairman and CEO Rick Wagoneer told shareholders at the company's annual meeting on Tuesday.

Wagoneer said the company expects the actions will generate annual savings of about $2.5 billion.

Workers suffer over management's shortsightedness. Why build nothing but large SUVs and other big vehicles when the Japanese again are ahead of the game with the Prius and other hybrid vehicles? You would think GM and the other American automakers would have learned their lesson in the 70s.

[Eino]

Why build nothing but large SUVs and other big vehicles when the Japanese again are ahead of the game with the Prius and other hybrid vehicles?

There is a market for hybrid vehicles. How big?

Car batteries last about 5 years and you replace them. This is usually no big deal.

These hybrid cars have a lot of batteries. I've heard replacing them is thousands of dollars. I'm all for clean emissions, but I'm a bit selfish and try to be practical. I am not sure I'd want a vehicle that I'd have to dump a lot of money in after a few years to cahnge out a major component (the batteries).

I know there are a lot of people out there that do not consider vehicle maintenance when they buy a vehicle. There have been cars where the engine must be unbolted from its mounts and hoisted up to change the spark plugs. I wouldn't want a vehicle like that.

Hybrid cars are rather complex. They are still quite new. It's true that they cannot keep up with their current limited market, but I don't think there is enough demand out there to replace our present vehicles with hybrids. A lot of us don't want to take a chance on one even if they were readily available.

I'm not ready to take a wrench to one, are you?

I think the car companies are trying to supply what they see as what the public wants. This is why there are so many trucks and SUVs sold. People wouldn't buy them if they didn't want them. We are not all sheep.

[jeffmoskin]

There is a market for hybrid vehicles.  How big?

Car batteries last about 5 years and you replace them.  This is usually no big deal.

These hybrid cars have a lot of batteries.  I've heard replacing them is thousands of dollars.  I'm all for clean emissions, but I'm a bit selfish and try to be practical.  I am not sure I'd want a vehicle that I'd have to dump a lot of money in after a few years to cahnge out a major component (the batteries).

I know there are a lot of people out there that do not consider vehicle maintenance when they buy a vehicle.  There have been cars where the engine must be unbolted from its mounts and hoisted up to change the spark plugs.  I wouldn't want a vehicle like that.

Hybrid cars are rather complex.  They are still quite new.  It's true that they cannot keep up with their current limited market, but I don't think there is enough demand out there to replace our present vehicles with hybrids.  A lot of us don't want to take a chance on one even if they were readily available. 

I'm not ready to take a wrench to one, are you?

I think the car companies are trying to supply what they see as what the public wants.  This is why there are so many trucks and SUVs sold.  People wouldn't buy them if they didn't want them.  We are not all sheep.

See how you feel about it when gas costs $7.00 a gallon and you are stalled in city traffic.

[rla]

The intro. article emphasized that profits are up, wages are flat and the meager earnings of workers are further dimenished by rising medical and retirement
cost and they could have added higher state and local taxes. In spite of all of
this burden on the persons who do the work, productivity still reached higher than expected gains. If you believe in preserving constitutional democracy and expanding participatory democracy, contact your Representatives and Senators and demand that they support the removal of the ceiling on taxable income on social security earnings and that they support legislation limiting the pay and benefits of anyone in any organization to 100 X the pay and benefits of the lowest paid person.

[grammydidi]

A thought came to me last week concerning the cause and effect of corporate tax cuts.

When any for-profit entity is taxed on its profits, there is an incentive to reduce the tax liability. This used to be done generally by increasing expenses in relationship to income. Such expenses include employee compensation and benefits and amortization of expansion costs or research and development. This is what brought about the offerings of health insurance and pension fund contributions years ago. These things were legitimate expenses used to reduce taxes, AND had to be approved by the IRS. (A side benefit was also a way to convince employees to accept lower salary or wage increases, funneling cash to R & D.)

However, when there is a marked reduction in tax liability, the incentive to spend the profits is erased; the profits are kept for the owners or stockholders, rather than to pay income taxes.

This cause and effect in America is further exacerbated by laws allowing corporations who previously operated and were based within the US to now claim their nexus as being anywhere else. Therefore, their tax liability is reduced to zero which reduces their incentive to spend profits (cash) on employees and benefits or expansion within this country.

The corporate tax cuts have caused two major problems; Reduction in the overall expected standard of living by employees and the reduction in taxes paid to the federal government, adding to the national debt and deficit.

If for-profit business entities were again made to pay taxes, it would be a start toward normalizing this country's economy. But, obviously, under the Bushies or their influence, this will not occur.

This post has been edited by grammydidi: Jun 12 2005, 09:07 AM

[rla]

Grammydidi,
I think you are exactly right. We should raise taxes on business and remove their health care obligations by supporting a universal, single
payer health care program.

[Beamer]

There is a market for hybrid vehicles.  How big?

Car batteries last about 5 years and you replace them.  This is usually no big deal.

These hybrid cars have a lot of batteries.  I've heard replacing them is thousands of dollars.  I'm all for clean emissions, but I'm a bit selfish and try to be practical.  I am not sure I'd want a vehicle that I'd have to dump a lot of money in after a few years to cahnge out a major component (the batteries).

I know there are a lot of people out there that do not consider vehicle maintenance when they buy a vehicle.  There have been cars where the engine must be unbolted from its mounts and hoisted up to change the spark plugs.  I wouldn't want a vehicle like that.

Hybrid cars are rather complex.  They are still quite new.  It's true that they cannot keep up with their current limited market, but I don't think there is enough demand out there to replace our present vehicles with hybrids.  A lot of us don't want to take a chance on one even if they were readily available. 

I'm not ready to take a wrench to one, are you?

I think the car companies are trying to supply what they see as what the public wants.  This is why there are so many trucks and SUVs sold.  People wouldn't buy them if they didn't want them.  We are not all sheep.

Is Toyota laying off 25,000 people?

I agree with you that GM and everyone else are responding to demand. This is where the government should come in because they should have been encouraging us - since 1977 especially - to use less energy. Then, GM wouldn't have to be playing catchup all the time. I think they must have poor management, although I certainly am no economic expert.

[rla]

Look at the bright side. This will provide more bodies to correct for
Bush's mis-calculations in Iraq.

[Eino]

See how you feel about it when gas costs $7.00 a gallon and you are stalled in city traffic.

At that time, there should be more of a demand for hybrid, electric and other high mileage vehicles. As the price goes up, the vehicle suppliers should respond.

You know, if these big cities decide to provide good mass transit, maybe I won't be stuck in the traffic burning $7.00 / gallon gas.

I agree with you that GM and everyone else are responding to demand. This is where the government should come in because they should have been encouraging us - since 1977 especially - to use less energy. Then, GM wouldn't have to be playing catchup all the time. I think they must have poor management, although I certainly am no economic expert.

Is this the role of government? I can see the government providing education to the public, but I'm not sure I want to be "encouraged" by the government. This sounds a bit like Big Brother. On the other hand, it is definitely to the common good if we burnt less fuel. Money would not be going to pay for terrorists and vehicles that burn less fuel will pollute less. Tobacco is a sin tax. It is taxed heavily. Should a sin tax be put on gas guzzlers? This would be a hard sell.

I think GM has had bad management for years. This predates "Roger and Me." They are a marketing driven organization and not an organization that drives the technical innovations. Have you ever worked for a big company? In my opinion, the management of big American companies stifle innovation. Innovation means risk. Managers want a guaranteed return for their stockholder's investment. I think many of them would rather pay licensing fees than a dime for development.

Do you hear the business leaders in the US bragging about their R&D?

It's odd that the Japanese companies who have been criticized for their lack of creativity and innovation are coming up with the solutions to our problems. Perhaps their corporate cultures are more innovative than they have been given credit for.

I still don't want a hybrid. I've been the victim of foreign car parts in the past. The price of these parts has been much higher than the cost of parts for domestic vehicles. I also like to support the American car companies. There have been enough layoffs. Any new product has bugs. I'm as guilty as American managers in not wanting to take that risk with my transportation.

They won't be sending the laid off GM workers to fight the oil war in Iraq. Most of those guys will be too old. Maybe a few will end up as contractors to be shot at. Their hard earned savings will slowly erode away and they will find jobs that pay less. Maybe one or two will be greeters at Wal Mart helping to peddle Chinese products to us.

I won't be paying the $7.00 / gallon for gas anyway. I drive a diesel. Maybe, I'll be burning French Fry oil by that time.

Thanks for the responses. Some very good thoughts.

[jeffmoskin]

At that time, there should be more of a demand for hybrid, electric and other high mileage vehicles.  As the price goes up, the vehicle suppliers should respond.

No doubt we can replace the entire American fleet... in 20 years.

You know, if these big cities decide to provide good mass transit, maybe I won't be stuck in the traffic burning $7.00 / gallon gas.

No doubt we can build mass transit... in 40 years.

I've been the victim of foreign car parts in the past.  The price of these parts has been much higher than the cost of parts for domestic vehicles.  I also like to support the American car companies.  There have been enough layoffs.  Any new product has bugs.  I'm as guilty as American managers in not wanting to take that risk with my transportation.

There are no American car companies - - they merely assemble components made from mexico to indonesia, in America of course. Just like Toyota does.

I won't be paying the $7.00 / gallon for gas anyway.  I drive a diesel.  Maybe, I'll be burning French Fry oil by that time.

I've followed one of those. I smelled the french fries for several hours after I parked my car. I can't wait for fry oil to hit the market. I'll start a nose clip business.

[Marine]

GM CEO Cuts 25,000 Jobs; To Be In New Michael Moore Documentary
Business News

General Motors CEO Rick Wagoner has announced that GM will be closing down several plants in the next 3 years and will cut close to 25,000 jobs.

"We decided to close down the plants and cut jobs so that Michael Moore can create a sequel to his Roger and Me documentary." Stated GM CEO Rick Wagoner, "I wanted to get the same coverage that Roger Smith received back in 1989 when Michael Moore came out with his documentary."

When asked if he feels that cutting 25,000 jobs so that Michael Moore can create a documentary based on him was a bit too shallow, Mr. Wagoner responded, "You know, life is hard. I'm sure Toyota will hire them. I want to be in a documentary."

"You bet I'm going to make a sequel to Roger and Me." Stated Michael Moore, "Not that I really care about those people or can even come close to feeling what they are feeling, considering the fact that I'm a super millionaire using the tax cuts that Bush passed, but I do like money, so sure, I'll create a sequel."

Speaking at GM's annual shareholders meeting in Wilmington, Del., Wagoner said "Sure, many people will lose their jobs and some of them even their retirement, but heck, you guys here will profit from that when the stock goes up. We are running a tight ship."

In other news, Rick Wagoner has asked GM's board to approve a 59% annual raise and a $10 million dollar bonus.

[heritage]

Ford Cutting Another 1,700 Positions

Updated 2:35 PM ET June 22, 2005

http://dailynews.att.net/cgi-bin/news?e=pr...8asqut01&src=ap

DEARBORN, Mich. (AP) - Ford Motor Co., reeling from costs and weaknesses in its North American operations, is cutting another 1,700 salaried positions and reducing its full-year profit outlook for the second time in two months.

Shares of Ford fell 41 cents, or nearly 4 percent, to $10.76 in early trading Wednesday on the New York Stock Exchange.

Standard and Poor's Ratings Services said Wednesday that the announcement won't immediately affect Ford's credit rating, although it said it is increasingly likely that Ford will be downgraded in the future. S&P downgraded Ford to "junk" status in May........

Ford also said it was taking new steps to reduce costs related to salaried employees this year. The company will cut salaried positions at its North American operations by 5 percent, or about 1,700, and reduce the use of agency and purchased services by 10 percent. The new cuts come atop 1,000 salaried job cuts also announced in April......

[heritage]

Study: More Companies Terminate Pensions

Updated 4:49 PM ET June 22, 2005
By ADAM GELLER

http://dailynews.att.net/cgi-bin/news?e=pr...8asstoo0&src=ap

NEW YORK (AP) - Big employers sharply accelerated freezes and terminations of pension plans last year, steering away from the increasing expense and uncertainty of paying for workers' retirement, a new study says.

About 11 percent of the big companies offering traditional pensions terminated their plans or froze accrual of new benefits to workers, according to a study by consulting firm Watson Wyatt Worldwide, released Wednesday. That is up from 2003, when 7 percent of the nation's 1,000 largest companies capped pension plans.

That trend, long in the making, has continued into this year, most notably with UAL Corp.'s United Airlines defaulting on its severely underfunded pension plans. Whether it continues could hinge on how lawmakers resolve a number of difficult questions swirling around pensions, experts say.

About half of the companies that froze pension accruals or terminated plans last year are financially troubled businesses, the study found.

But even many healthy companies are rethinking pensions, partly because of the uncertain legal status of some pension plans. Many companies that, for years, were able to get by making minimal contributions to their pension plans are now faced with massive increases in required payments. Congress is debating whether to jack up the premiums companies pay the federal government to insure their pension plans.

That could lead even more companies to abandon pensions.

"The companies are operating in a world of uncertainty," said Sylvester Schieber, director of U.S. benefits consulting at Watson Wyatt. "Big companies that continue to be viable, for the most part, have not cut and run, although if we go on indefinitely with this uncertainty they undoubtedly will."

Nearly two-thirds of the 1,000 largest U.S. companies still sponsor a pension plan. But last year 71 of those companies froze or terminated plans, up from 45 in 2003.

In a freeze, an employer leaves a plan in place, but current workers cannot accrue any additional benefits. In a termination, a company closes down a plan, defaulting to the federal government or moving pension funds into an insurance policy that will eventually pay out to workers.

Many pension plans were squeezed in the early part of this decade by plummeting stock prices that cut sharply into investment returns. At the same time, record low interest rates, which companies use to determine how much they need to set aside to satisfy eventual pension payouts, drove up the amount needed to satisfy those future costs.

The stock market has recovered considerably. But pension plans remain under pressure, partly because administrators spread the cost of the market downturn out over five years, experts said.

At the same time, many companies are faced with paying substantial amounts into pension plans after years of minimal costs. During the 1980s and 1990s, investment returns and laws limiting contributions meant many companies could put off funding the future retirement of their workers.

"I think CEOs and CFOs (chief financial officers) started to suddenly realize there's actually a dollar value to these promises we've been making," said Jack VanDerhei, a professor at Temple University and fellow at the nonpartisan Employee Benefits Research Institute. "They're getting to a point where, if we (companies) want to go forward, it's going to cost us money."

Companies are also doubtful about Congress' slowness to clear up uncertainty over a type of pension known as cash balance plans, which have been criticized as unfairly discriminating against older workers.

Lawmakers also are debating changes in pension funding rules, and premium companies pay to the financially strapped Pension Benefit Guaranty Corporation, the government agency that insures pensions.

In addition to United, the PBGC this year has taken over pensions covering US Airways Group Inc. flight attendants and machinists.

Companies including Sears Holding Co., NCR Corp., Circuit Stores Inc., and others have frozen pension plans for all or some of their employees during the past year.

[Eino]

What do these pension cuts mean on a personal level?

Do these cuts only affect "new" employees? Is the promise that was given to workers who have put years of sweat and blood into a company now being abrogated?

Are we all getting just a bit poorer?

If so, why?

Could it all boil down to excess greed?

[wundermaus]

... And go round and round and round
In the circle game ...