This Is The Biggest Problem Facing The World Today: 9 Countries Have Debt-To-GDP Over 300%

On February 23, 2015, Tyler Durden writes on Zero Hedge:

If anyone has stopped to ask just why global central banks are in such a rush to create inflation (but only controlled inflation, not runaway hyperinflation… of course when they fail with the “controlled” part the money paradrop is only a matter of time) over the past 5 years, and have printed over $12 trillion in credit-money since Lehman, the bulk of which has ended up in the stock market, and which for the first time ever are about to monetize all global sovereign debt issuance in 2015, the answer is simple, and can be seen on the chart below.

It also shows the biggest problem facing the world today, namely that at least 9 countries have debt/GDP above 300%, and that a whopping 39% countries have debt-to-GDP of over 100%!

We have written on this topic on countless occasions in the past, so we will be brief: either the Fed inflates this debt away, or one can kiss any hope of economic growth goodbye, even if that means even more central bank rate cuts, more QEs everywhere, and stock markets trading at +? while the middle class around the globe disappears and only the 0.001% is left standing.

Finally, those curious just how the world got to this unprecedented and sorry state, this full breakdown courtesy of McKinsey should answer all questions.

http://www.zerohedge.com/news/2015-02-23/biggest-problem-facing-world-today-9-countries-have-debt-gdp-over-300

Unfortunately, many progressive and Modern Monetary advocates believe that public debt does not matter. But it does and without debt tied to financing asset-based growth, the result is inherently inflationary. Any public debt other than issuing new money for  asset-based growth will put a damper on economic activity, thus  leading the central banks to take more and more desperate actions to fight deflation. What we need is a new currency, which is based on real assets, and real productivity.

As David Stockman states (http://davidstockmanscontracorner.com/krugmans-latest-debt-denial-why-his-two-magic-numbers-dont-cut-it/?utm_source=wysija&utm_medium=email&utm_campaign=Mailing+List+AM+Tuesday), “there is no reason to assume that U.S. real growth will sharply accelerate from the tepid trends of the recent past” unless the system is radically reformed to balance production with consumption and simultaneously create new ownership with EVERY child, woman and man a share owner participant as the economy grows.

The  debate about a fairer tax code and ending the Bush tax cuts relates to what percent of Gross Domestic Product (GDP) should the federal government spend and what percent of GDP should be collected in taxes. Unfortunately, the current economy is growing at the Congressional Budget Office projected rate of less than 3 percent. This is pitiful, especially in light of the advances in technological production processes that are capable of producing a quality material lifestyle for ALL American citizens. The focus needs to be on growth with a targeted 20 percent growth rate, which would allow the society to maintain promised health care and Social Security commitments to a growing elderly population, stabilize taxes at 15 percent of GDP, and balance the budget. With growth rates well over 6 percent, health care and Social Security benefits could be increased, taxes could be lowered, while achieving a surplus.

The path to such prosperity requires re-charting the financial system to empower ALL citizens to acquire long term viable private, individual ownership portfolios representing full dividend-payout assets of new productive capital (the non-human factor of production embodied in super-automated, robotic and computerized processes that require less labor worker or no labor worker input) and pay for their acquisition out of the future earnings of the productive capital investments financed by credit insured by the Federal Reserve.

The accelerated growth rate, due to the the infusion of credit into productive capital investment, would result in a majority of Americans earning additional income from wages and salaries and dividends, interest, and capital gains from other opportunities created beyond the dividend income payout from the productive capital investments. The accelerated growth rate would produce jobs that pay well and would significantly expand markets due to rising consumer demand, which in turn would generate greater business profits and opportunity for more productive capital investment. Everyone would benefit––rich and poor. There would be lower unemployment (making for the elimination of make-work), higher personal incomes, lower deficits due to greater tax revenues, lower tax rates, and better government services, with every citizen benefiting from a higher standard of living.

Such a path to prosperity would empower ordinary citizens, the majority of which are capitalless, to own a substantial percentage of the future productive capital formation creating the growth of the economy. The GOAL would be to assure that every child, woman and man would be able to accumulate a portfolio of productive capital assets large enough to provide a secure source of income. After a few decades, dividend income from the ownership of productive capital assets would become the primary source of income, though well-paying job opportunities would be plentiful for those who want to work for the satisfaction that can come from employment, whether in business, education, healthcare, science, and government or other self-rewarding contributions to society.

If you want to change this gross economic inequality support the Platform of the Unite America Party.

What our leaders and those in academia need to advocate is their ability to lead America on a path based on a paradigm shift to an equal opportunity economic democracy.

To accomplish this objective, the Federal Reserve System needs to be reformed to act as a purveyor of economic growth.

Influential economists and business leaders, as well as political leaders, should read Harold Moulton’s The Formation Of Capital, in which he argues that it makes no sense to finance new productive capital out of past savings. Instead, economic growth should be financed out of future earnings (savings), and provide that every citizen become an owner. The Federal Reserve, which has been largely responsible for the powerlessness of most American citizens, should set an example for all the central banks in the world.

Chairman Janet Yellen and other members of the Federal Reserve need to wake-up and implement Section 13 paragraph 2, which directs the Federal Reserve to create credit for local banks to make loans where there isn’t enough savings in the system to finance economic growth. We should not destroy the Federal Reserve or make it a political extension of the Treasury Department, but instead reform it so that the American citizens in each of the 12 Federal Reserve Regions become the owners. The result will be that money power will flow from the bottom up, not from the top down––not for consumer credit, not for credit that doesn’t pay for itself or non-productive uses of credit, but for credit for productive uses to expand the economy’s rate of growth.

The JUST Third Way is that paradigm shift. It calls for a radical overhaul of the economic system (i.e., the Federal tax system, Federal Reserve policy, inheritance law, welfare and entitlement system, etc.) that will achieve genuine economic democracy, based on the Platform of the Unite America Party and its links and the proposed Capital Homestead Act. Our Platform is a call for a vision of political economy that can unite the left and the right, based on Louis Kelso’s ownership-based paradigm. Now is the time to cure America’s political cancer (Crony Capitalism) and restore America to again becoming a model for global citizens in all countries.

For a new vision see http://www.foreconomicjustice.org/?p=12331 andwww.facebook.com/uniteamericaparty. Support the Unite America Party Platform, published by The Huffington Post at http://www.huffingtonpost.com/gary-reber/platform-of-the-unite-ame_b_5474077.html as well as Nation Of Change at http://www.nationofchange.org/platform-unite-america-party-1402409962 and OpEd News at http://www.opednews.com/articles/Platform-of-the-Unite-Amer-by-Gary-Reber-Party-Leadership_Party-Platforms-DNC_Party-Platforms-GOP-RNC_Party-Politics-Democratic-140630-60.html.

Robert Reich: America Is Winning The Race To The Bottom

On February 24, 2015, Robert Reich writes on Salon:

GM is worth around $60 billion, and has over 200,000 employees. Its front-line workers earn from $19 to $28.50 an hour, with benefits.

Uber is estimated to be worth some $40 billion, and has 850 employees. Uber also has over 163,000 drivers (as of December – the number is expected to double by June), who average $17 an hour in Los Angeles and Washington, D.C., and $23 an hour in San Francisco and New York.

But Uber doesn’t count these drivers as employees. Uber says they’re “independent contractors.”

What difference does it make?

For one thing, GM workers don’t have to pay for the machines they use. But Uber drivers pay for their cars – not just buying them but also their maintenance, insurance, gas, oil changes, tires, and cleaning. Subtract these costs and Uber drivers’ hourly pay drops considerably.

For another, GM’s employees get all the nation’s labor protections.

These include Social Security, a 40-hour workweek with time-and-a-half for overtime, worker health and safety, worker’s compensation if  injured on the job, family and medical leave, minimum wage, pension protection, unemployment insurance, protection against racial or gender discrimination, and the right to bargain collectively.

Not to forget Obamacare’s mandate of employer-provided healthcare.

Uber workers don’t get any of these things. They’re outside the labor laws.

Uber workers aren’t alone. There are millions like just them, also outside the labor laws — and their ranks are growing. Most aren’t even part of the new Uberized “sharing” economy.

They’re franchisees, consultants, and free lancers.

They’re also construction workers, restaurant workers, truck drivers, office technicians, even workers in hair salons.

What they all have in common is they’re not considered “employees” of the companies they work for. They’re “independent contractors” – which puts all of them outside the labor laws, too.

The rise of “independent contractors” Is the most significant legal trend in the American workforce – contributing directly to low pay, irregular hours, and job insecurity.

What makes them “independent contractors” is the mainly that the companies they work for say they are. So those companies don’t have to pick up the costs of having full-time employees.

But are they really “independent”? Companies can manipulate their hours and expenses to make them seem so.

It’s become a race to the bottom. Once one business cuts costs by making its workers “independent contractors,” every other business in that industry has to do the same – or face shrinking profits and a dwindling share of the market

Some workers prefer to be independent contractors because that way they get paid in cash. Or they like deciding what hours they’ll work.

Mostly, though, they take these jobs because they can’t find better ones. And as the race to the bottom accelerates, they have fewer and fewer alternatives.

Fortunately, there are laws against this. Unfortunately, the laws are way too vague and not well-enforced.

For example, FedEx calls its drivers independent contractors.

Yet FedEx requires them to pay for the FedEx-branded trucks they drive, as well as the FedEx uniforms they wear, and FedEx scanners they use – along with insurance, fuel, tires, oil changes, meals on the road, maintenance, and workers compensation insurance. If they get sick or need a vacation, they have to hire their own replacements. They’re even required to groom themselves according to FedEx standards.

FedEx doesn’t tell its drivers what hours to work, but it tells them what packages to deliver and organizes their workloads to ensure they work between 9.5 and 11 hours every working day.

If this isn’t “employment,” I don’t know what the word means.

In 2005, thousands of FedEx drivers in California sued the company, alleging they were in fact employees and that FedEx owed them the money they shelled out, as well as wages for all the overtime work they put in.

Last summer, a federal appeals court agreed, finding that under California law – which looks at whether a company “controls” how a job is done along with a variety of other criteria to determine the real employment relationship – the FedEx drivers were indeed employees, not independent contractors.

Does that mean Uber drivers in California are also “employees”? That case is being considered right now.

What about FedEx drivers and Uber drivers in other states? Other truck drivers? Construction workers? Hair salon workers? The list goes on.

The law is still up in the air. Which means the race to the bottom is still on.

It’s absurd to wait for the courts to decide all this case-by-case. We need a simpler test for determining who’s an employer and employee.

I suggest this one: Any corporation that accounts for at least 80 percent or more of the pay someone gets, or receives from that worker at least 20 percent of his or her earnings, should be presumed to be that person’s “employer.”

Congress doesn’t have to pass a new law to make this the test of employment. Federal agencies such as the Labor Department and the IRS have the power to do this on their own, through their rule making authority.

They should do so. Now.

http://www.salon.com/2015/02/24/robert_reich_america_is_winning_the_race_to_the_bottom_partner/?utm_source=facebook&utm_medium=socialflow

Robert Reich continues not to get it! EVERY for-profit company seeks to operate at the lowest possible cost in order to maximize the OWNERS’ return-on-investment (ROI).  Their objective is not full employment nor paying workers more than the market value of labor.

If General Motors could produce vehicles with less labor, thus saving operational costs, they would. The fact is they are constantly looking and adopting labor-saving robotic machines, more and more so with human-intelligent skills, to manufacture and save costs.

“Independent contractors” is not a new form of for-profit business structure. And this particular form of “independent contractor” for-profit business structure will continue to expand as more and more companies will have less need for full-time workers.  And yes, this means as Reich points out that this structural form of providing services and producing products is “contributing directly to low pay, irregular hours, and job insecurity,” and people need to earn income to survive in an economy of business corporations who constantly seek to minimize or eliminate the need for incurring the costs of full-time labor workers.

Reich advocates a band-aid solution, as with all of his proposals related to abating economic inequality. Reich needs to realize that the golden rule of for-profit businesses is to keep labor input and other costs at a minimum in order to maximize profits for the owners. They strive to minimize marginal cost, the cost of producing an additional unit of a good, product or service once a business has its fixed costs in place, in order to stay competitive with other companies racing to stay competitive through technological innovation. Reducing marginal costs enables businesses to increase profits, offer goods, products and services at a lower price (which people as consumers seek), or both. Increasingly, new technologies are enabling companies to achieve near-zero cost growth without having to hire people. Thus, private sector job creation in numbers that match the pool of people willing and able to work is constantly being eroded by physical productive capital’s ever increasing role.

Over the past century there has been an ever-accelerating shift to productive capital––which reflects tectonic shifts in the technologies of production and result in the destruction of jobs and the devaluation of the worth of labor.  The result is that the price of products and services are extremely competitive as consumers will always seek the lowest cost/quality/performance alternative, and thus for-profit companies are constantly competing with each other (on a local, national and global scale) for attracting “customers with money” to purchase their products or services.

The reality is that most changes in the productive capacity of the world since the beginning of the Industrial Revolution can be attributed to technological improvements in our capital assets, and a relatively diminishing proportion to human labor. Simply, people invent “tools” to reduce toil, enable otherwise impossible production, create new highly automated industries, and significantly change the way in which products and services are produced from labor intensive to capital intensive––the core function of technological invention and innovation.

Because such shifts in the technologies of production are constantly advancing,  many forms of labor are unnecessary. Because of this undeniable fact, free-market forces no longer establish the “value” of labor. Instead, the price of labor is artificially elevated by government through minimum wage legislation, overtime laws, and collective bargaining legislation or by government employment and government subsidization of private employment solely to increase consumer income––all of which is advocated by Reich and other conventional economists.

Reich should understand all of this as a “professor of economics” and past Labor Secretary under President Clinton, but his focus is always on full employment and job creation. Reich fails to connect the dots and therefore does not see that productive capital is increasingly the source of the world’s economic growth and, therefore, should become the source of added property ownership incomes for all. As simple a concept that it is, Reich should postulate to himself that if both labor and capital are independent factors of production, and if physical capital’s proportionate contributions are increasing relative to that of labor, then equality of opportunity and economic justice demands that the right to property (and access to the means of acquiring and possessing property) must in justice be extended to all. Yet, sadly, Reich and other academia still pretend to believe that labor is becoming more productive and should reap more of the profit produced business corporations, and ignore the necessity to simultaneously broaden personal ownership of wealth-creating, income-producing capital assets of the dominant business corporations growing the American economy.

Unfortunately, ever since the 1946 passage of the Full Employment Act, economists such as Reich and politicians formulating national economic policy have beguiled us into believing that economic power is democratically distributed if we have full employment––thus the political focus on job creation and redistribution of wealth rather than on full production and broader capital ownership accumulation. This is manifested in the belief that labor work is the ONLY way to participate in production and earn income. Long ago that was once true because labor provided 95 percent of the input into the production of products and services. But today that is not true. Physical capital provides not less than 90 to 95 percent of the input. Full employment as the means to distribute income is not achievable. When the “tools” of capital owners replace labor workers (non-capital owners) as the principal suppliers of products and services, labor employment alone becomes inadequate. Thus, we are left with government policies that redistribute income in one form or another, as Reich advocates.

Thus, Reich sees the need for the government to continue to discharge its responsibility for the health and prosperity of the economy through coerced trickle-down; in other words, through redistribution achieved by the rigging of labor prices, by taxation to support redistribution and job “creation,” or subsidization by inflation and by all kinds of welfare, open and concealed.

If Reich really wants to abate economic inequality then he needs to advocate reform of the system. Presently the system supports the ability of greedy rich people to manipulate the lives of people who struggle with declining labor worker earnings and job opportunities, and then accumulate the bulk of the money through monopolized productive capital ownership. Our scientists, engineers, and executive managers who are not owners themselves, except for those in the highest employed positions, are encouraged to work to destroy employment by making the capital “worker” owner more productive. How much employment can be destroyed by substituting machines for people is a measure of their success––always focused on producing at the lowest cost. Only the people who already own productive capital are the beneficiaries of their work, as they systematically concentrate more and more capital ownership in their stationary “1 percent” ranks. Yet the 1 percent are not the people who do the overwhelming consuming. The result is the consumer populous is not able to get the money to buy the products and services produced as a result of substituting machines for people. And yet you can’t have mass production without mass human consumption made possible by “customers with money.” It is the exponential disassociation of production and consumption that is the problem in the United States economy, and the reason that ordinary citizens must gain access to productive capital ownership to improve their economic well-being.

The Real Middle-Class Challenge

On February 22, 2015, Robert J. Samuelson writes in The Washington Post:

Given the obsession with economic inequality, you might think it’s the main force squeezing the middle class. It isn’t. We have this not from some right-wing think tank but from President Obama’s top economists. The bigger culprit, they show, is the slow growth of productivity — that messy process by which the economy improves efficiency and living standards. Greater inequality is a distant second in assaulting middle-class incomes.

So concludes the annual report of the White House Council of Economic Advisers. The CEA, as it’s known, performed a fascinating “what if” exercise. Assume that the most favorable post-World War II trends had continued, it said. Specifically: Productivity maintained its rapid growth of the 1950s and 1960s; inequality stayed at lower levels; and labor-force participation didn’t drop.

What happens then to middle-class incomes?

Answer: They double. The income of the median household goes from roughly $50,000 to $100,000 after inflation. The biggest increase, about $30,000, would stem from faster productivity growth. Less economic inequality would account for $9,000 and higher labor-force participation — more workers — for $3,000. (Yes, that’s only $42,000; the rest reflects the favorable interaction of the three trends.)

Just why this didn’t happen is a central economic story of our time. The CEA doesn’t offer a comprehensive theory. It merely divides the postwar era into three subperiods based on the economy’s changed performance. For example, the years from 1948 to 1973 are labeled “The Age of Shared Growth,” because the economy grew rapidly and gains were widely distributed.

I’d tweak the CEA’s approach slightly. Here’s how I’d characterize the different phases of the postwar economy.

The Postwar Boom, 1945-1964: It was unexpected. Memories of the 1930s endured. A 1946 Gallup poll found that 60 percent of Americans feared a depression within a decade. But underlying conditions favored expansion. There was a huge pent-up demand for consumer goods as a result of weak spending in the Depression and World War II; also, a backlog of new technologies to be exploited (television, synthetic fibers, air conditioning, jet travel); and low household debt. Suburbanization was in full swing. As the CEA notes, income gains were widely shared.

The Great Inflation, 1965-1982: We couldn’t let well enough alone. Economists argued that deft policies could keep the economy close to “full employment” (defined as a 4 percent unemployment rate). The experiment backfired. Inflation — virtually nonexistent in 1960 — hit 6 percent in 1969 and 13 percent in 1979. This led to four recessions (1969, 1973, 1980 and 1981). Because no one seemed capable of subduing inflation, people lost faith in national leaders. Rising foreign competition deepened pessimism.

The Great Moderation, 1983-2007: A period of brutally tight money, engineered by Federal Reserve chairman Paul Volcker, crushed inflationary psychology and started a 25-year boom. There were only two mild recessions (1990, 2001). As inflation fell, so did interest rates; and as interest rates fell, stocks and home prices rose. People spent or borrowed against newfound wealth. The personal savings rate dropped from 10.6 percent of disposable income in 1980 to 2.5 percent in 2005.

● The Big Scare, 2008-????: The boom’s confidence turned self-destructive. People overborrowed; lenders over-lent. What was scary about the ensuing crisis was that it was supposedly made impossible by modern economics and financial regulation. The fact that it happened anyway made consumers and business managers extra cautious. They are now protecting themselves against both known and unknown risks. We remain in the grip of “the big scare,” though it may be loosening.

What this history teaches is that we have less control over our economic destiny than is often assumed. At every juncture in the chronology, people — including “experts” — did not foresee the next major change. In the early 1960s, they didn’t anticipate high inflation; in the late 1970s, they didn’t expect its demise. In this respect, the surprise 2008-2009 financial crisis was typical.

The same ignorance inhibits what we can do for the middle class. Government — a.k.a., politicians — can address some middle-class wants by redistributing income from the rich through tax breaks and subsidies. But this approach has limits and not merely because the rich will resist.

Recall, as the CEA found, that inequality isn’t the main cause of sluggish middle-class incomes. It’s poor productivity. There are always rhetorical solutions: more infrastructure spending; better schools; simpler taxes; more research. Though some policies may be desirable, there’s no guarantee they will improve productivity. Influencing productivity is hard because it depends on so much (management and workers, technology, market behavior, government policies and more).

We simply don’t know how to orchestrate predictable productivity increases. If it were easy, it would already have been done. Saving the middle class, though popular, is qualified by economic reality. Our ambitions often exceed our powers.

http://www.washingtonpost.com/opinions/the-real-middle-class-challenge/2015/02/22/ee7ecec4-b937-11e4-aa05-1ce812b3fdd2_story.html

The White House Council of Economic Advisors (CEA) should ALL be fired! Their whole premise is couched in non-reality and based on a one-factor labor perspective, oblivious to the reality that people invent “tools” to reduce toil, enable otherwise impossible production, create new highly automated industries, and significantly change the way in which products and services are produced from labor intensive to capital intensive––the core function of technological invention and innovation.

The CEA and author Robert Samuelson fail to understand that most changes in the productive capacity of the world since the beginning of the Industrial Revolution can be attributed to technological improvements in our capital assets, and a relatively diminishing proportion to human labor. The reason that “productivity maintained its rapid growth of the 1950s and 1960s [while] inequality stayed at lower levels; and labor-force participation didn’t drop” is because production during that time was still balanced toward labor intensiveness. Also, because they believe technological improvements “enhance” labor productivity (labor’s ability to produce economic goods) they conclude that it is the slow growth of productivity that is the problem why people’s wages are stagnant. The fact is, the opposite is true. Technological invention and innovation makes many forms of labor unnecessary. Technological change makes tools, machines, structures, and processes ever more productive while leaving human productiveness largely unchanged (our human abilities are limited by physical strength and brain power––and relatively constant). The technology industry is always changing, evolving and innovating. The result is that primary distribution through the free market economy, whose distributive principle is “to each according to his production,” delivers progressively more market-sourced income to capital owners and progressively less to workers who make their contribution through labor.

Because productive capital is increasingly the source of the world’s economic growth it should become the source of added property ownership incomes for all. But “OWNERSHIP” is not addressed. Instead,  they pretend to believe that labor is becoming more productive and thus the need for a more rapid growth of productivity, but ignore the necessity to broaden personal ownership of wealth-creating, income-producing capital assets simultaneously with the growth of the American economy.

At the Rand Corporation, the statistic was 98 percent, to represent the productive capital factor input to creating products and services. In concentrated capital ownership terms, today roughly 1 percent own 50 percent of the corporate wealth with 10 percent owning 90 percent. This leaves 90 percent of the people scrambling for the last 10 percent, with them dependent on their labor worker wages to purchase capital. Thus, we have the great bulk of the people providing a mere 10 percent or less of the productive input. Contrast that to the less than 5 percent who own all the productive capital providing 90 percent or more of the productive input, and who initiate and oversee most of the technological advances that replace labor work with capital work. As a result, the trend has been to diminish the importance of employment with productive capital ownership concentrating faster than ever, while technological change makes capital ever more productive. Technology is an easier and faster way to get a job done. Because technology increases the profitability of companies throughout the world, technology always has the advantage over human labor when the costs of them are the same. But because this is not well understood, what we as a society have been doing is to continually shift the work burden from people labor to real physical capital while distributing the earning capacity of physical capital’s work (via capital ownership of stock in corporations) to non-owners through jobs, minimum wage, and welfare. Such policies do not function effectively.

The CEA doesn’t offer a comprehensive theory to abate economic inequality. But there are solutions that have yet to be recognized by established power elite, which would result in a democratic growth economy. Based on binary economics (human and non-human contributions), the ownership of capital would be spread more broadly as the economy grows, without taking anything away from the 1 to 10 percent who now own 50 to 90 percent of the corporate wealth. Instead, the ownership pie would desirably get much bigger and their percentage of the total ownership would decrease, as ownership gets broader and broader, benefiting EVERY citizen, including the traditionally disenfranchised poor and working and middle class. Thus, productive capital income would be distributed more broadly and the demand for products and services would be distributed more broadly from the earnings of capital and result in the sustentation of consumer demand, which will promote economic growth. That also means that society can profitably employ unused productive capacity and invest in more productive capacity to service the demands of a growth economy.

While Samuelson also does not know how to influence productivity or orchestra predictable productivity, he and the CEA he writes about need to WAKE UP and understand that the system, as structured, is enriching the capital wealth of a tiny minority who then have the financial and political power to manipulate the lives of people who struggle with declining labor worker earnings and job opportunities. It is the wealthy ownership class that continues to benefit from a rigged system and accumulate the bulk of the money through monopolized productive capital ownership. Our scientists, engineers, and executive managers who are not owners themselves, except for those in the highest employed positions, are encouraged to work to destroy employment by making the “capital worker” owner more productive. How much employment can be destroyed by substituting machines for people is a measure of their success––always focused on producing at the lowest cost. Only the people who already own productive capital are the beneficiaries of their work, as they systematically concentrate more and more capital ownership in their stationary 1 percent ranks. Yet the 1 percent are not the people who do the overwhelming consuming. The result is the consumer populous is not able to get the money to buy the products and services produced as a result of substituting machines for people. And yet you can’t have mass production without mass human consumption made possible by “customers with money.”

It is the exponential disassociation of production and consumption that is the problem in the United States economy, and the reason that ordinary citizens must gain access to productive capital ownership to improve their economic well-being.

Binary economist Louis Kelso postulated: “When consumer earning power is systematically acquired in the course of the normal operations of the economy by people who need and want more consumer goods and services, the production of goods and services should rise to unprecedented levels; the quality and craftsmanship of goods and services, freed of the corner-cutting imposed by the chronic shortage of consumer purchasing power, should return to their former high levels; competition should be brisk; and the purchasing power of money should remain stable year after year.”

Without this necessary balance hopeless poverty, social alienation, and economic breakdown will persist, even though the American economy is ripe with the physical, technical, managerial, and engineering prerequisites for improving the lives of the 99 percent majority. Why? Because there is a crippling organizational malfunction that prevents making full use of the technological prowess that we have developed. The system does not fully facilitate connecting the majority of citizens, who have unsatisfied needs and wants, to the productive capital assets enabling productive efficiency and economic growth.

In Kelso’s words, “a democratic capitalist economy is a private-property, free-market economy in which goods and services are produced through the voluntary and universal cooperation of concurrent labor workers and ‘capital workers’ [those who own the “tools”] under a politically democratic government.” At present the United States economy, nor for that matter any other economy does not operate as a private-property democratic-capitalist, free-market economy. What needs to transpire is an understanding of binary economics along with instituting credit mechanisms that will implement the goal of broadening productive capital ownership in ways wholly compatible with the U.S. Constitution and the protection of private property.

The solutions to put us on the path to inclusive prosperity, inclusive opportunity, and inclusive economic justice are available for one to study and act upon by sharing them with the people you know, and demanding that politicians support and advocate them.

Support the Agenda of The Just Third Way Movement at http://foreconomicjustice.org/?p=5797http://www.cesj.org/resources/articles-index/the-just-third-way-basic-principles-of-economic-and-social-justice-by-norman-g-kurland/http://www.cesj.org/wp-content/uploads/2014/02/jtw-graphicoverview-2013.pdf and http://www.cesj.org/resources/articles-index/the-just-third-way-a-new-vision-for-providing-hope-justice-and-economic-empowerment/.

Support Monetary Justice at http://capitalhomestead.org/page/monetary-justice

Support the Capital Homestead Act at http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-a-plan-for-getting-ownership-income-and-power-to-every-citizen/ and http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-summary/. See http://cesj.org/learn/capital-homesteading/ and http://cesj.org/…/uploads/Free/capitalhomesteading-s.pdf.

 

A Loophole In Immigration Law Is Costing Thousands Of American Jobs

Edison cuts hundreds of tech jobs

On February 22, 2015, Michael Hiltzik writes in the Los Angeles Times:

Imagine getting a layoff notice, then being ordered to train your replacement.

That’s what has happened to hundreds of information technology employees at Southern California Edison. Since last summer, Edison, which serves nearly 14 million customers, has been firing its domestic IT workers and replacing them with outsourced employees from India.

In doing so, the utility is exploiting a gaping loophole in immigration law, which Congress has failed to close despite years of warnings that it’s costing thousands of American jobs.

The Indian workers are brought in on H-1B visas, which are temporary work permits for “specialty occupations” — those requiring “highly specialized knowledge” and a bachelor’s degree.

The purpose is to allow employers to fill slots for which adequately trained Americans aren’t available, not to replace existing workers with cheap foreign labor. That’s why employers such as Google and Microsoft, which say they’re short of highly trained software engineers, have lobbied hard to expand the program beyond the 65,000 visas available annually. These high-tech companies say they can’t meet their needs from the pool of U.S. graduates in STEM specialties — science, technology, engineering and math.

But Edison is using the program for a different purpose — to cut its wage costs, possibly by as much as 40%, according to data compiled by Ron Hira, a public policy expert at Howard University.

The pay for Edison’s domestic IT specialists is about $80,000 to $160,000 not including benefits, with the average at about $120,000 for experienced personnel, according to records Edison submitted to the state Public Utilities Commission.The two Indian outsourcing firms providing workers to Edison, Tata Consultancy Services and Infosys, pay their recruits an average of about $65,000 to $71,000, according to their federal filings.

“They told us they could replace one of us with three, four, or five Indian personnel and still save money,” one laid-off Edison worker told me, recounting a group meeting with supervisors last year. “They said, ‘We can get four Indian guys for cheaper than the price of you.’ You could hear a pin drop in the room.”

This worker and the half-dozen others I interviewed asked to remain anonymous because their severance packages forbid them to speak disparagingly about the company.

These employees perform the crucial work of installing, maintaining and managing Edison’s computer hardware and software for functions as varied as payroll and billing, dispatching and electrical load management across Edison’s vast power generating and electric transmission network. The workers I interviewed are in their 50s or 60s and have spent decades serving as loyal Edison employees.

They’re not the sort of uniquely creative engineering aces that high-tech companies say they need H-1B visas to hire from abroad, or foreign students with master’s degrees or doctorates from U.S. universities who also can be employed under the H-1B program. They’re experienced systems analysts and technicians for whom these jobs have been stairways from the working class to five- or six-figure middle-class incomes. Many got their training at technical institutes or from Edison itself.

Some laid-off Edison employees say the transition is not going well.

Some report that Tata was unable to recruit enough workers in time to replace — or get training from — the domestic workers ushered out the door. Edison delayed some layoffs scheduled for November and December until as late as March. Sources say the utility may now even be considering recalling some laid-off employees to fill the gaps.

Meanwhile, important IT projects have been delayed and complaints from Edison offices about poor tech support are rising, according to some workers and sources at the International Brotherhood of Electrical Workers, which represents thousands of Edison employees (though not the laid-off IT workers).

Edison acknowledges that the transition “has not been seamless but it is also not complete.” The firm says the outsourcing will be completed early this year, and that once the transition reaches “a mature state,” its IT operating costs will fall 20%.

Thus far, the PUC’s interest in this affair has been to demand that any savings get passed on to ratepayers. The commission should be more concerned about potential problems: The consequences a botched transition could have for Edison’s service and emergency response could be dire.

Edison has been less than forthright about the outsourcing, which it says will cost the jobs of 500 IT employees — 400 laid off and an additional 100 “leaving voluntarily.”

Edison relies on a loophole to skate around rules forbidding the use of cheap H-1B labor to replace existing domestic employees. Technically, Edison isn’t the H-1B employer; Tata and Infosys are. This sleight of hand allows Edison to say, as it told The Times, that it is “not hiring H-1B visa workers to replace displaced employees.” The contractors, Tata and Infosys, are doing the hiring. Edison says those firms “determine the composition of their own workforce.” Because the outsourcing firms employ minimal American staffs themselves, the thousands of Indian workers they import aren’t technically replacing Americans.

What’s even more disgraceful is how Tata and Infosys are alleged to treat their employees. In 2013, Tata paid $29.8 million to settle a federal class action brought by 12,800 outsource workers. The employees alleged that Tata cheated them of wages they were due and forced them to sign over their U.S. tax refund checks to the firm. Tata didn’t admit wrongdoing.

The same year, Infosys paid $34 million — a record penalty in an immigration case — to settle federal charges that it had systematically defrauded immigration authorities.

Infosys told Edison the settlement was related to “paperwork administrative issues.”

The Department of Justice put it differently. When federal prosecutors announced the settlement, they specified that Infosys was alleged to have deliberately submitted falsified documents to U.S. immigration authorities, and even instructed visa holders how to deceive consular officials. Infosys denied wrongdoing.

Tata and Infosys declined to comment.

It has long been an open secret that the H-1B program has gone off the rails.

“The reality is that what’s going on at Southern California Edison is the most common usage,” Hira says. Last year, for instance, Minnesota-based agribusiness behemoth Cargill said it would outsource as many as 900 IT jobs to Tata.

Tata and Infosys have become two of the largest recipients of H-1B visas, receiving more than 12,400 new visas in fiscal 2013. A report last year from the Federal Reserve Bank of Boston observed that a majority of firms requesting and receiving H-1B visas “specialize in offshore outsourcing and rarely sponsor H-1B workers for permanent residency.”

That conforms to Hira’s findings that Tata filed only seven applications for permanent residency in fiscal 2013 despite receiving 6,163 H-1B visas; Infosys received 6,269 visas and filed no applications for permanent residency.

The H-1B system turns the Indian workers virtually into indentured servants, Hira says. The visas are held in the employer’s name, and are canceled if the worker loses the job. That gives the employer immense power to keep its workforce docile. “If you speak out, they’ll terminate you and you’ll have to leave the country,” Hira says.

The H-1B program has turned into a scam for outsourcing firms and their U.S. clients. Congress must fix it so it serves its original purpose. Instead, a measure introduced by Sen. Orrin Hatch (R-Utah) would increase the number of available H-1B visas to 115,000 per year. Democrats Amy Klobuchar (D-Minn.), whose state is home to Cargill, andRichard Blumenthal of Connecticut, where Northeast Utilities announced plans last year to outsource some 200 IT jobs, have signed on as co-sponsors. But critics say the bill would do almost nothing to stem the abuses.

Some pushback is coming from legislators such as Sens. Dick Durbin (D-Ill.); Chuck Grassley (R-Iowa); and Jeff Sessions (R-Ala.).

Sessions asked, in a “primer” for his GOP colleagues last month, why Congress should ever consider “advancing legislation that provides jobs for the citizens of other countries at the expense of our own.”

As it stands now, the H-1B program works chiefly for employers looking for new ways to fire older, experienced workers. One laid-off Edison worker put it best: “When you are referred to as a commodity or a cost, not even treated as a human being, it’s pretty degrading.”

http://www.latimes.com/business/hiltzik/la-fi-hiltzik-20150222-column.html#page=2

While the  H-1B program works chiefly for employers looking for new ways to fire older, experienced workers and dramatically cut labor costs, this excellent article by Michael Hiltzik should be a call for supporting free university education to students with earned academic excellence during high school. But the reality is that given the current invisible structure of the economy, except for a relative few, the majority of the population, no matter how well educated, will not be able to find a job that pays sufficient wages or salaries to support a family or prevent a lifestyle, which is gradually being crippled by near poverty or poverty earnings. Thus, education is not the panacea to income and wealth ownership inequality, though it is critical for our future societal development. And younger, as well as older people, will increasingly find it harder and harder to secure a well-paying job––for most, their ONLY source of income––and will find themselves dependent on taxpayer-supported government welfare, open and disguised or concealed.

Unfortunately, the disruptive nature of exponential growth in technology and its impact on productivity––tectonically shifting production of products and services from human workers to non-human means––is not understood and ignored by the economic establishment, academia, and our political leaders.

While the rate of technological progress is directly proportional to the number and quality of the people engaged in the fields of science and engineering, economic policy is the mechanism that fuels investment and development of technological innovation and invention. This is where education is critical to our future societal development.

Education should be encouraged and expanded. Everyone should have the opportunity to personally develop their own exceptional innate abilities and unlock their creativity.

But except for the personal development benefit to advancing one’s education, the reality is that far less “educated” people will be necessary in the long term to produce the products and services necessary and valued by society. This is due to the exponential development of human-level artificial intelligence, which is embodied in advanced automation and robotics.

Those college graduates who do succeed within the fields of science and engineering are hired workers to do what? Our scientists, engineers, and executive managers, who are not owners themselves of the companies they work for, except for those in the highest employed positions, are encouraged to work to destroy employment by making the capital owners’ assets more productive. How much employment can be destroyed by substituting machines for people is a measure of their success––always focused on producing at the lowest cost.

Sadly, our leaders are not prepared and are not preparing the American people for the coming economic collapse and the next Great Depression, due to their lack of wisdom and foresight to understand that full employment is not an objective of businesses and private sector job creation opportunities are constantly being eroded by physical productive capital’s ever increasing role––as the use of human-intelligent machines, super-automation, robotics, digital computerized operations, etc. replaces labor workers to produce products and services.

 

 

 

Lawrence H. Summers On The Economic Challenge Of The Future: Jobs

The Former Treasury Secretary Says the Problem Will Not Be Producing Enough. It Will Be Providing Enough Work.

We’re Heading Into A Jobless Future, No Matter What The Government Does

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On July 21, 2014, The Wall Street Journal published an op-ed by former Treasury Secretary Lawrence Summers. Vivek Wadhwa writes about this op-ed on Wadhwa.com:

In an op-ed in The Wall Street Journal, former Treasury Secretary Lawrence Summers revived a debate I’d had with futurist Ray Kurzweil in 2012 about the jobless future.

He echoed the words of Peter Diamandis, who says that we are moving from a history of scarcity to an era of abundance. Then he noted that the technologies that make such abundance possible are allowing production of far more output using far fewer people.

On all this, Summers is right. Within two decades, we will have almost unlimited energy, food, and clean water; advances in medicine will allow us to live longer and healthier lives; robots will drive our cars, manufacture our goods, and do our chores.

There won’t be much work for human beings. Self-driving cars will be commercially available by the end of this decade and will eventually displace human drivers—just as automobiles displaced the horse and buggy—and will eliminate the jobs of taxi, bus, and truck drivers. Drones will take the jobs of postmen and delivery people.

The debates of the next decade will be about whether we should allow human beings to drive at all on public roads. The pesky humans crash into each other, suffer from road rage, rush headlong into traffic jams, and need to be monitored by traffic police. Yes, we won’t need traffic cops either.

Robots are already replacing manufacturing workers. Industrial robots have advanced to the point at which they can do the same physical work as human beings. The operating cost of some robots is now less than the salary of an average Chinese worker. And, unlike human beings, robots don’t complain, join labor unions, or get distracted. They readily work 24 hours a day and require minimal maintenance. Robots will also take the jobs of farmers, pharmacists, and grocery clerks.

Medical sensors in our smartphones, clothing, and bathrooms will soon be monitoring our health on a minute-to-minute basis. Combined with electronic medical records and genetic and lifestyle data, these will provide enough information for physicians to focus on preventing disease rather than on curing it.

If medications are needed, they can be prescribed based on a person’s genome rather than a one-size-fits-all basis as they are today. The problem is that there is now so much information that humans cannot effectively analyze it. But artificial intelligence–based physicians such as IBM Watson can. The role of the doctor becomes to provide comfort and compassion—not to diagnose disease or to prescribe medications. In other words, computers will be also taking over some of the jobs of our doctors, and we won’t need as many human doctors as we have today.

It will be like the future that Autodesk CEO Carl Bass once described to me: “The factory of the future will have only two employees, a man and a dog. The man will be there to feed the dog. The dog will be there to keep the man from touching the equipment.”

Summers is wrong, however, in his belief that governments can do as they did in the industrial age: create “enough work for all who need work for income, purchasing power and dignity.” They can barely keep up with the advances that are happening in technology, let alone develop economic policies for employment. Even the courts are struggling to understand the legal and ethical issues of advancing technologies.

Neither they nor our policy makers have come to grips with how to protect our data and personal information, control cable and Internet monopolies, regulate advances in genetics and medicine, and tax the sharing economy that companies such as Uber and AirBnb inhabit. How are policy makers going to grapple with entire industries’ disruptions in periods that are shorter than election cycles? The industrial age lasted a century, and its consequent changes have happened over generations. Now we have startups in Silicon Valley shaking up bedrock industries such as cable and broadcasting, hotels, and transportation.

The writing is clearly on the wall about what lies ahead. Yet even the most brilliant economists—and futurists—don’t know what to do about it.

In his debate with me, Kurzweil said: “Automation always eliminates more jobs than it creates if you only look at the circumstances narrowly surrounding the automation. That’s what the Luddites saw in the early 19th century in the textile industry in England. The new jobs came from increased prosperity and new industries that were not seen.” Kurzweil’s key argument was that just as we could not predict that types of jobs that were created, we can’t predict what is to come.

Kurzweil is right, but the problem is that no matter what the jobs of the future are, they will surely require greater skill and education—robots can do all the grunt work. Manufacturers who want to bring production back already complain that they can’t find enough skilled workers in the U.S. for their automated factories. Technology companies that write the software also complain about shortages of workers with the skills that they need. We won’t be able to retrain the majority of the workforce fast enough to take the new jobs in emerging industries. During the industrial revolution, it was the younger generations who were trained—not the older workers.

The only solution that I see is a shrinking work week. We may perhaps be working for 10 to 20 hours a week instead of the 40 for which we do today. And with the prices of necessities and of what we today consider luxury goods dropping exponentially, we may not need the entire population to be working. There is surely a possibility for social unrest because of this; but we could also create the utopian future we have long dreamed of, with a large part of humanity focused on creativity and enlightenment.

Regardless, at best we have another 10 to 15 years in which there is a role for humans. The number of available jobs will actually increase in the U.S. and Europe before it decreases. China is out of time because it has a manufacturing-based economy, and those jobs are already disappearing. Ironically, China is accelerating this demise by embracing robotics and 3D printing. As manufacturing comes back to the U.S., new factories need to be built, robots need to be programmed, and new infrastructure needs to be developed. To install new hardware and software on existing cars to make them self-driving, we will need many new auto mechanics. We need to manufacture the new medical sensors, install increasingly efficient solar panels, and write new automation software.

So the future is very bright for some countries in the short term, and in the long term is uncertain for all. The only certainty is that much change lies ahead that no one really knows how to prepare for.

http://wadhwa.com/2014/07/21/were-heading-into-a-jobless-future-no-matter-what-the-government-does/?utm_content=bufferc803d&utm_medium=social&utm_source=twitter.com&utm_campaign=buffer

This is a MUST READ article that projects a future where “machines” of all sorts of sophisticated capabilities, including robotics, super-automation, computerization, etc, will virtually replace the necessity for human labor, with the exception of a minority of highly educated and skilled workers to continue invention and innovation and the operation and maintenance of the “machines.”

But I disagree with Vivek Wadhwa’s assessment that “no one really knows how to prepare for” this future where there will be  hordes of citizens of zero economic value. The way to deal with this imminent reality, while strengthening the person and honoring private property principles is to reform the system to empower EVERY citizen to acquire ownership in the wealth-creating, income-producing capital assets resulting from future technological invention and innovation.

Because productive capital is increasingly the source of the world’s economic growth it should become the source of added property ownership incomes for all. The reality is if both labor and capital are independent factors of production, and if capital’s proportionate contributions are increasing relative to that of labor, then equality of opportunity and economic justice demands that the right to property (and access to the means of acquiring and possessing property) must in justice be extended to all. 

Rather than focus on Job Creation which is a dead end endeavor and  holds back technological invention and innovation, our economic policies should focus on wealth-creating, income-producing capital Ownership Creation.

Given that there is no question that robotic technology will continue to expand the productivity and in large measure destroy jobs and devalue the worth of human labor, the question that SHOULD be urgently addressed is WHO SHOULD OWN THE FUTURE TECHNOLOGY ECONOMY? Will ownership continue to concentrate among the 1 percent wealthy ownership class who now OWNS America, or will we reform the system to provide equal opportunity for EVERY child, woman, and man to acquire personal ownership in FUTURE non-human capital assets paid for with the FUTURE earnings produced by the investments in our technological future?

The solutions to put us on the path to inclusive prosperity, inclusive opportunity, and inclusive economic justice are available for one to study and act upon by sharing them with the people you know, and demanding that politicians support and advocate them.

Support the Agenda of The Just Third Way Movement at http://foreconomicjustice.org/?p=5797http://www.cesj.org/resources/articles-index/the-just-third-way-basic-principles-of-economic-and-social-justice-by-norman-g-kurland/http://www.cesj.org/wp-content/uploads/2014/02/jtw-graphicoverview-2013.pdf and http://www.cesj.org/resources/articles-index/the-just-third-way-a-new-vision-for-providing-hope-justice-and-economic-empowerment/.

Support Monetary Justice at http://capitalhomestead.org/page/monetary-justice

Support the Capital Homestead Act at http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-a-plan-for-getting-ownership-income-and-power-to-every-citizen/ and http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-summary/. See http://cesj.org/learn/capital-homesteading/ and http://cesj.org/…/uploads/Free/capitalhomesteading-s.pdf.

Support the Unite America Party Platform, published by The Huffington Post at http://www.huffingtonpost.com/gary-reber/platform-of-the-unite-ame_b_5474077.html as well as Nation Of Change at http://www.nationofchange.org/platform-unite-america-party-1402409962 and OpEd News at http://www.opednews.com/articles/Platform-of-the-Unite-Amer-by-Gary-Reber-Party-Leadership_Party-Platforms-DNC_Party-Platforms-GOP-RNC_Party-Politics-Democratic-140630-60.html.

 

 

Why A Medieval Peasant Got More Vacation Time Than You

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On August 29, 2013, Lynn Stuart Parramore writes on Reuters:

Life for the medieval peasant was certainly no picnic. His life was shadowed by fear of famine, disease and bursts of warfare. His diet and personal hygiene left much to be desired. But despite his reputation as a miserable wretch, you might envy him one thing: his vacations.

Plowing and harvesting were backbreaking toil, but the peasant enjoyed anywhere from eight weeks to half the year off. The Church, mindful of how to keep a population from rebelling, enforced frequent mandatory holidays. Weddings, wakes and births might mean a week off quaffing ale to celebrate, and when wandering jugglers or sporting events came to town, the peasant expected time off for entertainment. There were labor-free Sundays, and when the plowing and harvesting seasons were over, the peasant got time to rest, too. In fact, economist Juliet Shor found that during periods of particularly high wages, such as 14th-century England, peasants might put in no more than 150 days a year.

As for the modern American worker? After a year on the job, she gets an average of eight vacation days annually.

It wasn’t supposed to turn out this way: John Maynard Keynes, one of the founders of modern economics, made a famous prediction that by 2030, advanced societies would be wealthy enough that leisure time, rather than work, would characterize national lifestyles. So far, that forecast is not looking good.

What happened? Some cite the victory of the modern eight-hour a day, 40-hour workweek over the punishing 70 or 80 hours a 19th century worker spent toiling as proof that we’re moving in the right direction. But Americans have long since kissed the 40-hour workweek goodbye, and Shor’s examination of work patterns reveals that the 19th century was an aberration in the history of human labor. When workers fought for the eight-hour workday, they weren’t trying to get something radical and new, but rather to restore what their ancestors had enjoyed before industrial capitalists and the electric lightbulb came on the scene. Go back 200, 300 or 400 years and you find that most people did not work very long hours at all. In addition to relaxing during long holidays, the medieval peasant took his sweet time eating meals, and the day often included time for an afternoon snooze. “The tempo of life was slow, even leisurely; the pace of work relaxed,” notes Shor. “Our ancestors may not have been rich, but they had an abundance of leisure.”

Fast-forward to the 21st century, and the U.S. is the only advanced country with no national vacation policy whatsoever. Many American workers must keep on working through public holidays, and vacation days often go unused. Even when we finally carve out a holiday, many of us answer emails and “check in” whether we’re camping with the kids or trying to kick back on the beach.

Some blame the American worker for not taking what is her due. But in a period of consistently high unemployment, job insecurity and weak labor unions, employees may feel no choice but to accept the conditions set by the culture and the individual employer. In a world of “at will” employment, where the work contract can be terminated at any time, it’s not easy to raise objections.

It’s true that the New Deal brought back some of the conditions that farm workers and artisans from the Middle Ages took for granted, but since the 1980s things have gone steadily downhill. With secure long-term employment slipping away, people jump from job to job, so seniority no longer offers the benefits of additional days off. The rising trend of hourly and part-time work, stoked by the Great Recession, means that for many, the idea of a guaranteed vacation is a dim memory.

Ironically, this cult of endless toil doesn’t really help the bottom line. Study after study shows that overworking reduces productivity. On the other hand, performance increases after a vacation, and workers come back with restored energy and focus. The longer the vacation, the more relaxed and energized people feel upon returning to the office.

Economic crises give austerity-minded politicians excuses to talk of decreasing time off, increasing the retirement age and cutting into social insurance programs and safety nets that were supposed to allow us a fate better than working until we drop. In Europe, where workers average 25 to 30 days off per year, politicians like French President Francois Hollande and Greek Prime Minister Antonis Samaras are sending signals that the culture of longer vacations is coming to an end. But the belief that shorter vacations bring economic gains doesn’t appear to add up. According to the Organisation for Economic Co-operation and Development (OECD) the Greeks, who face a horrible economy, work more hours than any other Europeans. In Germany, an economic powerhouse, workers rank second to last in number of hours worked. Despite more time off, German workers are the eighth most productive in Europe, while the long-toiling Greeks rank 24 out of 25 in productivity.

Beyond burnout, vanishing vacations make our relationships with families and friends suffer. Our health is deteriorating: depression and higher risk of death are among the outcomes for our no-vacation nation. Some forward-thinking people have tried to reverse this trend, like progressive economist Robert Reich, who has argued in favor of a mandatory three weeks off for all American workers. Congressman Alan Grayson proposed the Paid Vacation Act of 2009, but alas, the bill didn’t even make it to the floor of Congress.

Speaking of Congress, its members seem to be the only people in America getting as much down time as the medieval peasant. They get 239 days off this year.

http://blogs.reuters.com/great-debate/2013/08/29/why-a-medieval-peasant-got-more-vacation-time-than-you/

Face it, this is the plight of the modern-day American worker––insecurity and fear of losing his or her ONLY source of income––a JOB.

Why is it then that in our so-called advanced society ONLY a tiny minority are wealthy enough that leisure time, rather than work, characterize their lifestyles? The reason is they are economically independent and ONLY work not because they have to but because that is their passion. They don’t need to work because their primary source of income is earned by way of the “tools” they own as their personal private property. By “tools” I mean wealth-creating, income-producing capital assets––land, structures, machines, robotics, super-automated production, computerized operations, etc––used to produce products and services needed and wanted by society.

The invisible structure for their ownership holdings is the corporation, which can comprise a single individual or an association of individuals, sharing ownership via the stock issued by the corporation. This stock has value, which when a corporation is successful gains in value, and can be sold, either privately or on the stock exchanges (if the corporation is registered as a public, for-profit privately-held entity). Some corporations actually do pay dividends––not 100 percent of corporate earnings––but some, and if one OWNS sufficient shares of stock, this can produce a significant income without ever having to relinquish their stock holdings.

If then this is the means by which the rich enrich themselves, why is not EVERY citizen an OWNER? And why does not the media, academia or politicians speak up and educate. The reason is because the system is rigged to enrich ONLY those who are already wealthy through capital asset ownership, which they have acquired either through withholding consumption (they earn high wages to enable them to save and invest), through inheritance or through an invention or innovation that receives investors attention (those with savings). This then effectively acts as a collateralization barrier that excludes the non-halves (those without savings or equity in the form of valuable assets) from access to productive capital ownership.

While this is today’s system reality, we can change the system by radically overhauling the Federal tax system and monetary policies and instituting proposals to get money power to the 99 percent of American citizens who now only rely on their labor worker earnings. Under The Just Third Way more just and simple tax system, access would by provided to ownership of the means of production in the future to every child, woman and man by requiring the government to lift all existing legal and institutional barriers to private property stakes as a fundamental human right. The system was made by people and can be changed by people. Guided by the right principles of economic justice, “we the people” can organize and demand that the system be reorganized to make true economic democracy the new foundation for true political democracy.

One feasible way to accomplish this objective is to lift ownership-concentrating Federal Reserve System credit barriers and other institutional barriers that have historically separated owners from non-owners and link tax and monetary reforms to the goal of expanded capital ownership. This can be done under the existing legal powers of each of the 12 Federal Reserve regional banks, and will not add to the already unsustainable debt of the Federal Government or raise taxes on ordinary taxpayers. We need to free the system of dependency on Wall Street and the accumulated savings and money power of the rich and super-rich who control Wall Street.

The Federal Reserve System has stifled the growth of America’s productive capacity through its monetary policy by monetizing public-sector growth and mounting Federal deficits and “Wall Street” bailouts; by favoring speculation over investment; by shortchanging the capital credit needs of entrepreneurs, inventors, farmers, and workers; by increasing the dependency of with usurious consumer credit; and by perpetuating unjust capital credit and ownership barriers between rich Americans and those without savings.

The Federal Reserve Bank should be used to provide interest-free capital credit (including only transaction and risk premiums) and monetize each capital formation transaction, determined by the same expertise that determines it today––management and banks––that each transaction is viably feasible so that there is virtually no risk in the Federal Reserve. The first layer of risk would be taken by the commercial credit insurers, backed by a new government corporation, the Capital Diffusion Reinsurance Corporation, through which the loans could be guaranteed. This entity would fulfill the government’s responsibility for the health and prosperity of the American economy.

Other actions necessary for the system reform to result in broadening wealth-creating, income-producing capital asset ownership is as follows:

  • Eliminate all tax loopholes and subsidies,
  • Provide an exemption of $100,000 for a family of four to meet their ordinary living needs,
  • Encourage corporations to pay out all their profits as taxable personal incomes to avoid paying corporate income taxes and to finance their growth by issuing new full-dividend payout shares for broad-based citizen ownership,
  • Eliminate the payroll tax on workers and their employers, but
  • Pay out of general revenues for all promises for Social Security, Medicare, government pensions, health, education, rent and subsistence vouchers for the poor until their new jobs and ownership accumulations provide new incomes to substitute for the taxpayer dollars to fill these needs.
  • The tax rate would be a single rate for all incomes from all sources above the personal exemption levels so that the budget could be balanced automatically and even allow the government to pay off the growing unsustainable long-term debt, but the poor would pay the first dollar over their exemption levels as would the hedge fund operator and others now earning billions of dollars from capital gains, dividends, rents and other property incomes which under some tax proposals would be exempted from any taxes.
  • As a substitute for inheritance and gift taxes, a transfer tax would be imposed on the recipients whose holdings exceeded $1 million, thus encouraging the super-rich to spread out their monopoly-sized estates to all members of their family, friends, servants and workers who helped create their fortunes, teachers, health workers, police, other public servants, military veterans, artists, the poor and the disabled.
  • The Federal Reserve would stop monetizing unproductive debt, including bailouts of banks “too big to fail” and Wall Street derivatives speculators, and
  • Begin creating an asset-backed currency that could enable every child, woman and man to establish a Capital Homestead Account or “CHA” (a super-IRA or asset tax-shelter for citizens) at their local bank to acquire a growing dividend-bearing stock portfolio to supplement their incomes from work and all other sources of income.
  • The CHA would process an equal allocation of productive credit to every citizen exclusively for purchasing full-dividend payout shares in companies needing funds for growing the economy and private sector jobs for local, national and global markets.
  • The shares would be purchased using interest-free credit wholly backed by projected “future savings” in the form of new productive capital assets as well as the future marketable goods and services produced by the newly added technology, renewable energy systems, plant, rentable space and infrastructure added to the economy.
  • Risk of default on each stock acquisition loan would be covered by private sector capital credit risk insurance and reinsurance, but
  • Would not require citizens to reduce their funds for consumption to purchase shares.

The end result would be that citizens would become empowered as owners to meet their own consumption needs and government would become more dependent on economically independent citizens, thus reversing current global trends where all citizens will eventually become dependent for their economic well-being on the State and whatever oligarchical elite controls the coercive powers of government and uses their money influence and political power to further enrich themselves at the exclusion of the citizen majority.

If you think this is the path our nation needs to get on to achieve inclusive prosperity, inclusive opportunity, and inclusive economic justice, then do the following and comment positively:

Support the Agenda of The Just Third Way Movement at http://foreconomicjustice.org/?p=5797, http://www.cesj.org/resources/articles-index/the-just-third-way-basic-principles-of-economic-and-social-justice-by-norman-g-kurland/, http://www.cesj.org/wp-content/uploads/2014/02/jtw-graphicoverview-2013.pdf and http://www.cesj.org/resources/articles-index/the-just-third-way-a-new-vision-for-providing-hope-justice-and-economic-empowerment/.

Support Monetary Justice at http://capitalhomestead.org/page/monetary-justice

Support the Capital Homestead Act at http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-a-plan-for-getting-ownership-income-and-power-to-every-citizen/ and http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-summary/. See http://cesj.org/learn/capital-homesteading/ and http://cesj.org/…/uploads/Free/capitalhomesteading-s.pdf.

 

WHY WOULD ANY WORKING PERSON OPPOSE UNIONISM?

On February 17, 2015, John Kubinski writes on The Middle Class Action Project:

Last summer I went with my family to Hershey Park. The Hershey experience is much more than just an amusement park. The entire town is devoted to the memory of Milton Hershey. The famous chocolate tycoon created the town of Hershey, Pennsylvania. It was home to the original Hershey chocolate factory and Hershey created the town so that his workers would have a nice place to live.

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The amusement park is the result of Hershey providing rides and games for his employees at their annual picnic. Hershey was devoted to his company and his employees. This is all chronicled at the Hershey museum and in various other locations throughout the town, including on the tour trolley which takes you past Hershey’s home and the school he founded for orphaned children.

Just to see how working people are being treated and to talk to them about the benefits of being a member of a union. While waiting on line for the monorail I talked to a young man who operated the ride. I asked him if working at Hershey was a dream job (at this point my head was filled with all the pro-Hershey propaganda). He told me he was exhausted and that he was only in the middle of working a double shift, 16 hours. He went on to tell me that it is a regular occurrence and that some nights he sleeps in his car because he has to be back so early in the morning it is not worth the ride home.

I tried to lighten the mood by telling him he must be happy with all the overtime he was making. He told me he didn’t receive any overtime benefits that he was paid straight time at a little more than the minimum wage. When he told me that he sometimes worked more than 50 hours in a week I asked him why Hershey treated their full-time employees so poorly. He told me he wasn’t full-time and that he was considered part-time seasonal help.

At this point I was ready to organize a union right on the spot. I was positive this kid would jump on board. I said to him, you guys should find a union to join. His response all but floored me. He said “Aw, Unions, those guys are always on a break”.

I couldn’t believe what I was hearing. This kid who slept in his car because he was so exhausted and so over-worked was against unions because they were always on a break. I told the kid he sounded like he could use a break and a raise and what the hell, maybe some health benefits too.

This is a major problem in our country. The corporate media has used its power to brain-wash people against unions. The fictitious portrayal of unions as corrupt tools of organized crime and thuggish brutes that extort money from union members has permeated throughout our society.

Our elected officials that have become rich from private business owners and corporations propose anti-union legislation and have the audacity to call it “right to work” laws. As more and more of our factories are being closed and these jobs are being out-sourced overseas to countries that pay their workers less than a dollar a day and violate their human rights, the companies performing these atrocities are blaming unions for “out pricing” themselves out of the job market.

These companies want the workers to take the blame for their greed. They have actually convinced working people that earning a decent living is bad for business and that they’d better get used to taking less or they won’t get anything at all. Since giant corporations control all aspects of the media, very rarely will you be able to hear the truth. You rarely see Union representatives on Sunday morning talk shows or on news outlets. Our politicians rarely even utter the words Union or Organized Labor.

The decline of Middle Class wages is a direct parallel with the decline in union membership. It is fact that when Unions were strongest in this country, we had a striving and successful middle class. Now, with union membership at its lowest point since the Great Depression, we have a struggling middle class and growing amount of working poor. The only jobs being created are service industry jobs that pay minimum wage. Working people are burdened with bailing out banks and paying for tax breaks for billionaires while their wages remain stagnant and the cost of living keeps rising.

It’s time for the working people of this country to WAKE UP. We need to start standing together. We need to realize that the myth of working harder gets you more. It only makes the rich richer. It’s time for higher wages, fair schedules, vacation time and paid sick leave. It’s time for workers to start taking back the power.

https://tmcap.wordpress.com/2015/02/17/why-would-any-working-person-oppose-unionism/

Amazingly, [wait, this is not amazing or unexpected], our citizens, for the most part are ignorant, if not intelligible enough to know what is in their best interests, economically. And no one in the national mainstream media or academia, nor in the political arena is educating in the way that will transform repressive economic policies and put us on the path to inclusive prosperity, inclusive opportunity, and inclusive economic justice.

Our elected officials continue to allow themselves to be bribed in order to hang on to power and to do the bidding of private business owners and corporations who propose anti-union legislation under the seemingly friendly “right to work” slogan.

The reality is that full employment or even good-paying employment is not the objective of businesses. Companies strive to keep labor input and other costs at a minimum in order to maximize profits for the owners. They strive to minimize marginal cost, the cost of producing an additional unit of a good, product or service once a business has its fixed costs in place in order to stay competitive with other companies racing to stay competitive through technological innovation. Reducing marginal costs enables businesses to increase profits, offer goods, products and services at a lower price, or both. Increasingly, new technologies are enabling companies to achieve near-zero cost growth without having to hire people. Thus, private sector job creation in numbers that match the pool of people willing and able to work is constantly being eroded by physical productive capital’s ever increasing role.

In addition, to lowering the fixed costs of doing business, jobs are being out-sourced overseas to companies in countries that pay their workers far, far less. The result is that more and more of our factories have been closed with those remaining transforming to even more efficient non-human means of production. As a result of such tectonic shifts in the technologies of production, jobs are constantly being destroyed or shifted to other countries with far lower wage requirements and the worth of labor is being devalued here in the United States.

While working people do understand they are dependent on their labor worker wages as currently their ONLY means to earn income to survival, and believe that this is their fate, they do not understand that there are real opportunities to advance significantly. This is because business owners and managers constantly drill in the reality that their workers better get used to taking less or they won’t get anything at all, and politicians ONLY see boosting minimum wage rates as a solution.

While this all sounds hopelessly unsolvable, there are solutions that use insured, interest-free capital credit to empowers workers and for that matter, EVERY citizen, to have access to the means of acquiring and possessing wealth-creating, income-producing capital assets resulting from technological advancement, on the basis that the future investments will generate earnings to pay off the loans and continue to earn income for their new owners.  For workers, strong unions are the way to realize this objective, but not any union structure will be suited––certainly not the present union structure and approach that has NEVER even pursued employee ownership of corporations.

The labor union movement needs to transform to a producers’ ownership union movement and embrace and fight for economic democracy––EVERY worker an OWNER. They should play the part that they have always aspired to––that is, a better and easier life through participation in the nation’s economic growth and progress. As a result, labor unions will be able to broaden their functions, revitalize their constituency, and reverse their decline.

Unfortunately, at the present time the movement is built on one-factor economics––the labor worker. The insufficiency of labor worker earnings to purchase increasingly capital-produced products and services gave rise to labor laws and labor unions designed to coerce higher and higher prices for the same or reduced labor input. With government assistance, unions have gradually converted productive enterprises in the private and public sectors into welfare institutions. Kelso stated: “The myth of the ‘rising productivity’ of labor is used to conceal the increasing productiveness of capital and the decreasing productiveness of labor, and to disguise income redistribution by making it seem morally acceptable.”

Binary economist Louis Kelso argued that unions “must adopt a sound strategy that conforms to the economic facts of life. If under free-market conditions, 90 percent of the goods and services are produced by capital input, then 90 percent of the earnings of working people must flow to them as wages of their capital and the remainder as wages of their labor work…If there are in reality two ways for people to participate in production and earn income, then tomorrow’s producers’ union must take cognizance of both…The question is only whether the labor union will help lead this movement or, refusing to learn, to change, and to innovate, become irrelevant.”

Unions are the only group of people in the whole world who can demand a real Kelso-designed ESOP (Employee Stock Ownership Plan), who can demand the right to participate in the expansion of their employer by asserting their constitutional preferential rights to become capital owners, be productive, and succeed. The ESOP can give employees access to credit so that they can purchase the employer’s stock, pay for it in pre-tax dollars out of the assets that underlie that stock, and after the stock is paid for earn and collect the capital worker income from it, and accumulate it in a tax haven until they retire, whereby they continue to be capital workers receiving income from their capital ownership stakes. This is a viable route to individual self-sufficiency needing significantly less or no government redistributive assistance.

The unions should reassess their role of bargaining for more and more income for the same work or less and less work, and embrace a cooperative approach to survival, whereby they redefine “more” income for their workers in terms of the combined wages of labor and capital on the part of the workforce. They should continue to represent the workers as labor workers in all the aspects that are represented today––wages, hours, and working conditions––and, in addition, represent workers as full voting stockowners as capital ownership is built into the workforce. What is needed is leadership to define “more” as two ways to earn income.

If we continue with the past’s unworkable trickle-down economic policies, governments will have to continue to use the coercive power of taxation to redistribute income that is made by people who earn it and give it to those who need it. This results in ever deepening massive debt on local, state, and national government levels, which leads to the citizenry becoming parasites instead of enabling people to become productive in the way that products and services are actually produced.

When labor unions transform to producers’ ownership unions, opportunity will be created for the unions to reach out to all shareholders (stock owners) who are not adequately represented on corporate boards, and eventually all labor workers will want to join an ownership union in order to be effectively represented as an aspiring capital owner. The overall strategy should assure that the labor compensation of the union’s members does not exceed the labor costs of the employer’s competitors, and that capital earnings of its members are built up to a level that optimizes their combined labor-capital worker earnings. A producers’ ownership union would work collaboratively with management to secure financing of advanced technologies and other new capital investments and broaden ownership. This will enable American companies to become more cost-competitive in global markets and to reduce the outsourcing of jobs to workers willing or forced to take lower wages.

Kelso stated, “Working conditions for the labor force have, of course, improved over the years. But the economic quality of life for the majority of Americans has trailed far behind the technical capabilities of the economy to produce creature comforts, and even further behind the desires of consumers to live economically better lives. The missing link is that most of those unproduced goods and services can be produced only through capital, and the people who need them have no opportunity to earn income from capital ownership.”

Walter Reuther, President of the United Auto Workers, expressed his open-mindedness to the goal of democratic worker ownership in his 1967 testimony to the Joint Economic Committee of Congress as a strategy for saving manufacturing jobs in America from being outcompeted by Japan and eventual outsourcing to other Asian countries with far lower wage costs: “Profit sharing in the form of stock distributions to workers would help to democratize the ownership of America’s vast corporate wealth, which is today appallingly undemocratic and unhealthy.

“If workers had definite assurance of equitable shares in the profits of the corporations that employ them, they would see less need to seek an equitable balance between their gains and soaring profits through augmented increases in basic wage rates. This would be a desirable result from the standpoint of stabilization policy because profit sharing does not increase costs. Since profits are a residual, after all costs have been met, and since their size is not determinable until after customers have paid the prices charged for the firm’s products, profit sharing [through wider share ownership] cannot be said to have any inflationary impact on costs and prices.”

Unfortunately for democratic unionism, the United Auto Workers, American manufacturing workers, and American citizens generally, Reuther was killed in an airplane crash in 1970 before his idea was implemented. Leonard Woodcock, his successor, nor any subsequent successor, never followed through.

Wal-Mart’s Wage Hike Still Too Little Too Late

On February 20, 2015, David Lazarus writes in the Los Angeles Times:

As Spider-Man so wisely put it, “With great power comes great responsibility.”

Wal-Mart announced Thursday that it will boost wages for about half a million workers to at least $9 an hour, or $1.75 above the federal minimum wage. This is a good thing.

But it’s not enough.

Wal-Mart is the nation’s largest private-sector employer, with about 1.3 million people on its domestic payroll. The company is uniquely positioned to influence other employers and set benchmarks for U.S. businesses.

The fact that it took this long for Wal-Mart to recognize that many of its workers weren’t making a living wage demonstrates a reluctance on management’s part to act responsibly, as if the executive suite had to be dragged kicking and screaming toward the right decision.

Wal-Mart’s decision probably was influenced by the fact that many states already are raising minimum wages to levels at or above Wal-Mart’s new level, said Lee Ohanian, an economist at UCLA.

California has passed legislation gradually raising the minimum wage for workers to $10 an hour by next January. It hit $9 last summer.

“By doing this earlier, Wal-Mart is getting kudos and a lot of good publicity,” Ohanian said. “But they didn’t get to be one of the biggest companies in America by giving out goodies.”

Doug McMillon, Wal-Mart’s chief executive, patted himself on the back Thursday for implementing changes that “give our U.S. associates the opportunity to earn higher pay and advance in their careers” and for shelling out more than $1 billion to make this happen.

What he didn’t say was that working the floor at Wal-Mart isn’t easy. These are big stores with a lot of customers, and there’s a lot to do.

McMillon also left unmentioned the fact that the national unemployment rate was 5.7% last month, compared with nearly 10% five years ago. It’s not as easy as it once was to get people to work at minimum wage.

And Wal-Mart’s self-congratulation completely ignored America’s rising income inequality. The rich, to put it mildly, are getting a lot richer while everyone else is struggling to stay afloat.

A report issued Thursday by the Economic Policy Institute found that most income brackets saw wages decline last year, relative to inflation.

The sharpest drop of 2.2% was among workers with advanced degrees, indicating that “poor wage performance cannot be blamed on workers lacking adequate education or skills,” the report found.

“Only those at the top of the wage distribution have real wages [that are] higher today than before the recession began,” it concluded.

So Wal-Mart shareholders should be encouraged that the company’s leaders are prudent enough to act out of self-interest. Management wants to make sure the stores can attract good workers.

Even so, Wal-Mart deserves little credit for recognizing that for-profit companies also bear the weight of social responsibility, and the biggest companies must, by definition, shoulder the greater share of the load.

Christine L. Owens, executive director of the National Employment Law Project, said that Wal-Mart workers “have helped make the company one of the largest and most profitable corporations on Earth, building untold wealth for the Walton family.”

That would be the kin of Wal-Mart founder Sam Walton. They own about half of the company’s shares and are collectively estimated to be worth about $140 billion.

“The changes in company policy announced by Wal-Mart are inadequate for the hundreds of thousands of employees who struggle to support themselves and their families,” Owens said.

There will be some who say it’s unfair to impose a moral imperative on a private company. Wal-Mart isn’t a charity. It’s not in the business of improving people’s lives. It’s sole purpose is to sell stuff, and the more it can sell, the better for shareholders.

Still, “businesses have an obligation to the public good,” said Chris Faricy, an assistant professor of political science and public policy at Syracuse University.

This doesn’t just mean following laws and being philanthropic, he said. It means being committed to the well-being of employees and their families.

Wal-Mart merits no praise for enlightened thinking, Faricy said. With the public’s awareness of income inequality growing, he said, “they’re just trying to keep people from grabbing pitchforks.”

“Wal-Mart saw which way the wind was blowing, both economically and politically,” Faricy said. “This is an opportunity to get good press.”

Cynicism comes easy — a trap I can easily fall into myself. Wal-Mart does deserve credit for being nimble enough to do the right thing when doing the right thing makes good financial sense.

And now that Wal-Mart has taken the plunge, it seems inevitable that other large employers will follow suit or risk a hit to their bottom lines by hiring less-qualified workers.

Wal-Mart, though, shouldn’t kid itself. Empowering workers, either through higher wages or improved benefits, always has been within the company’s power.

The fact that it waited this long to take action on the wage front speaks more to the company’s parsimony than to its economic courage.

Spider-Man wouldn’t be impressed.

http://www.latimes.com/business/la-fi-lazarus-20150220-column.html

Unfortunately, David Lazarus and his colleagues at the Los Angeles Times (in a related article) demonstrates that the media focus is ALWAYS on boosting wages, without a single mention or suggestion that companies transform to employee-owned companies. Even a wage boost to $15 per hour is a pittance in today’s reality of creeping inflation. But it appears that advocates believe that $15 per hour should be the target. And then what, mission accomplished,  economic injustice solved, retreat?

The better solution to wage boosts, which inevitably are passed on in the form of higher consumer prices for products and services (inflationary spiral) is to institute an Employee Stock Ownership Plan (ESOP) to enable working people without savings to buy stock in their employer company and pay for it out of its future dividend yield––on the promise of the capital investment’s future income.

The ESOP provides access by employees to capital credit to buy company stock and pay for it in pre-tax dollars out of what the assets underneath that stock yield. Bank loans are made to the ESOP trust that represents employees, instead of to the company (current owners). The trust gives the lender a note and with the borrowed monies makes the investment in the company stock. The company then issues stock to the ESOP trust. The company now has the money, which otherwise could have been borrowed directly without the ESOP (benefiting current owners), to make the planned investment and repay the loan from pre-tax forecasted future capital earnings. The company promises the bank to make pre-tax full-dividend payments to the ESOP trust to enable the trust to replay the lender. Assuming that it would take five years for that capital investment to pay for itself, at the end of five years the employees now own the full stock value in the expanded company.

Companies can use the ESOP as the credit mechanism to create employee ownership in ratios up to a 100 percent leverage buyout. Nothing has been taken away from the existing owners. However, using the ESOP, the existing owners will surrender the exclusive right to acquire more ownership in the company and have a smaller percentage of ownership in the total company, but they have not been prevented from making a fair rate of return on their thus-far accumulated ownership shares because the company earns a rate of return throughout the process. After the loan has been paid off with pre-tax earnings, the employees will have more earnings from capital and they will have more consumer power to purchase products and services. Multiply this by tens of thousands of employee-owned companies and the economy revs up to grow dramatically.

ESOPs work as designed and optimized when the workers receive the full property rights as owners, including full voting rights, not simply treated as beneficial owners with power concentrated at the top of the company, without any accountability or transparency. Unfortunately, some ESOPs have been structured so that the rights, powers, and benefits of ownership remain concentrated in a small non-accountable elite controlling corporate and financial governance. When the employees are owners, dependent on their income from the company’s bottom line rather than through ordinary labor wages and benefits, the workers’ economic interests are more invested to see that their company succeeds. In this way, each person in the company is empowered as a labor worker and as a capital worker (owner) and inspired to work together as a team to make better operational decisions to serve and maximize value to their customers.

Wal-Mart Pay Hike May Put Pressure On Other Low-Paying Industries

On February 20, 2015, Jim Puzzanghera, Shan Li and Sarah Parvenu write in the Los Angeles Times:

Wal-Mart’s advertising slogan is “Save money, live better,” but for years the world’s largest retailer has been criticized for not paying its workers enough to do that.

Now, facing rising minimum wages in California and other states, competition for employees and a poor corporate image, Wal-Mart Stores Inc. said Thursday it would raise the minimum pay to $9 an hour for nearly 40% of its U.S. workforce.

The action is a major milestone in the growing movement to lift the pay of the nation’s lowest-paid workers as the gap between rich and poor has widened. It’s also a nod to a strengthening economic recovery in which the labor market has expanded by more than 200,000 jobs every month, giving workers more choices.

Advocates for low-wage workers cheered the news after years of pressuring the company to raise wages. But they said the pay increases fell short of what workers need and demonstrated that the federal minimum wage needs to be raised.

Starting in April, about 500,000 Wal-Mart employees will get a raise to the new level — $1.75 an hour more than the federal minimum wage — as part of major changes to the company’s hiring, training, scheduling and compensation programs. Next February, current employees will receive another raise, to at least $10 an hour.

“We’re always trying to do the right thing and build a stronger business,” Chief Executive Doug McMillon said in a letter to employees. “We frequently get it right, but sometimes we don’t. When we don’t, we adjust.”

The changes will bump up the average hourly wage for a full-time worker to $13 an hour from $12.85, the company said. In addition, the company said it is raising the caps on pay ranges for jobs, giving hope to those in states such as California where the minimum wage already is $9 an hour.

Juanita Cason, 24, for instance, makes $9.40 an hour at the Baldwin Hills Wal-Mart, and a bump to at least $10 would help the single mother provide for her infant daughter, Zah’Mya.

Moreover, Cason said as she arranged pink scooters near the store’s toy area, “it would make it worth it to be here.”

Wal-Mart said the pay raises will cost the company more than $1 billion this fiscal year, which began Feb. 1. Wall Street balked: Shares fell $2.77, or 3.2%, to $83.52.

But higher wages for low-income workers lead to greater productivity, said Justin Wolfers, a senior fellow at the Peterson Institute for International Economics.

“You know the old saying ‘Pay peanuts, get monkeys’? If you want better than monkeys, you’ve got to pay a little bit more,” he said. “Paying above the minimum wage is by no means a radical step.”

The pay raises make sense for Wal-Mart, which will save money by not having to train new employees continually because of turnover, said Craig Johnson, president of Customer Growth Partners.

“You can never go wrong in retail by treating both customers and employees well, because your shareholders get treated well too,” he said. “If you need proof, look no further than Costco.”

Costco Wholesale Corp. has been praised by President Obama and others for starting workers at $11.50 an hour. It’s one of many companies, including Trader Joe’s and the Gap, that pay well above the federal minimum wage of $7.25.

Wal-Mart’s move could pressure low-wage competitors to increase wages too, Johnson said. But the effects could be limited.

“Target may be affected because their pay scale is more similar to Wal-Mart,” he said.

“But I don’t think people will leave good jobs at Safeway or Kroger to jump over to Wal-Mart.”

Wal-Mart, which has 1.3 million U.S. employees, has been under intense pressure from organized labor groups to raise its starting hourly wages and provide workers with more consistent hours. Employees held rallies and marches nationwide last year, highlighting the low pay.

The company’s image has taken a hit. Its rating fell 4% last year and ranked last among department and discount stores, according to the American Customer Satisfaction Index results released this week.

“We are so proud that by standing together we won raises for 500,000 Wal-Mart workers, whose families desperately need better pay and regular hours from the company we make billions for,” said Emily Wells, a leader of Organization United for Respect at Walmart, an organization of employees that advocates for better wages and hours.

She said, however, that the company could afford to pay its workers $15 an hour.

Sanders Mosley, 26, who works at the Baldwin Hills store, echoed that sentiment: “Ten dollars is pocket change. Give us a little love.”

Obama and many Democrats want to raise the federal minimum wage to $10.10 an hour.

Six in 10 Americans favor a higher minimum wage, according to poll results this week from the Associated Press and GfK Public Affairs.

But Republicans and some leading business groups oppose the move because they said it would lead companies to cut their workforces.

“Wal-Mart made its decision based upon what is best for their employees, their customers, their shareholders and the communities in which they operate,” the National Retail Federation pointed out, and there was no need for the government to mandate pay increases.

The White House said Wal-Mart was following a national trend in acting on its own to boost pay because Congress has failed to raise the minimum wage.

“Today’s announcement is another example of businesses, along with cities and states, taking action on their own to raise wages for their workers, recognizing that doing so can raise productivity, reduce turnover and improve morale,” White House spokesman Eric Schultz said.

Congressional action to raise that base has been stalled for years. The wage hasn’t increased since 2009, and now, 29 states and the District of Columbia have minimum wages above the federal standard, and seven of them are at $9 or higher.

Some cities, such as San Francisco and Seattle, have even higher minimum wages. Los Angeles Mayor Eric Garcetti wants to raise the city’s minimum wage to $13.25 by 2017.

http://www.latimes.com/business/la-fi-walmart-raise-20150220-story.html

Unfortunately, this article demonstrates that the media focus is ALWAYS on boosting wages, without a single mention or suggestion that companies transform to employee-owned companies. Even a wage boost to $15 per hour is a pittance in today’s reality of creeping inflation. But it appears that advocates believe that $15 per hour should be the target. And then what, mission accomplished,  economic injustice solved, retreat?

The better solution to wage boosts, which inevitably are passed on in the form of higher consumer prices for products and services (inflationary spiral) is to institute an Employee Stock Ownership Plan (ESOP) to enable working people without savings to buy stock in their employer company and pay for it out of its future dividend yield––on the promise of the capital investment’s future income.

The ESOP provides access by employees to capital credit to buy company stock and pay for it in pre-tax dollars out of what the assets underneath that stock yield. Bank loans are made to the ESOP trust that represents employees, instead of to the company (current owners). The trust gives the lender a note and with the borrowed monies makes the investment in the company stock. The company then issues stock to the ESOP trust. The company now has the money, which otherwise could have been borrowed directly without the ESOP (benefiting current owners), to make the planned investment and repay the loan from pre-tax forecasted future capital earnings. The company promises the bank to make pre-tax full-dividend payments to the ESOP trust to enable the trust to replay the lender. Assuming that it would take five years for that capital investment to pay for itself, at the end of five years the employees now own the full stock value in the expanded company.

Companies can use the ESOP as the credit mechanism to create employee ownership in ratios up to a 100 percent leverage buyout. Nothing has been taken away from the existing owners. However, using the ESOP, the existing owners will surrender the exclusive right to acquire more ownership in the company and have a smaller percentage of ownership in the total company, but they have not been prevented from making a fair rate of return on their thus-far accumulated ownership shares because the company earns a rate of return throughout the process. After the loan has been paid off with pre-tax earnings, the employees will have more earnings from capital and they will have more consumer power to purchase products and services. Multiply this by tens of thousands of employee-owned companies and the economy revs up to grow dramatically.

ESOPs work as designed and optimized when the workers receive the full property rights as owners, including full voting rights, not simply treated as beneficial owners with power concentrated at the top of the company, without any accountability or transparency. Unfortunately, some ESOPs have been structured so that the rights, powers, and benefits of ownership remain concentrated in a small non-accountable elite controlling corporate and financial governance. When the employees are owners, dependent on their income from the company’s bottom line rather than through ordinary labor wages and benefits, the workers’ economic interests are more invested to see that their company succeeds. In this way, each person in the company is empowered as a labor worker and as a capital worker (owner) and inspired to work together as a team to make better operational decisions to serve and maximize value to their customers.