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View Diary: It's Not Wage Stagnation, It's Wage Robbery (151 comments)

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  •  Actually that could not be further from the truth (40+ / 0-)

    Before Reagan and when corporations could not compensate their top executives with company stocks to avoid taxes there was a tax incentive to pay the companies employees a better wage.

    CEO's made an average of around 20 to 30 times the lowest paid employee in the company over three decades ago but today they make 300 to 1000 times more. The top executives and stock holders have captured 95% of the productivity gains produced by the employees while the employee's wages have lost purchasing power in the economy. CEO pay in company stocks changes the whole business structure, business decisions are now made on what is best for the stock price rather than what is best for the customer and the health of the company in general.

    Yes CEO pay is a major part of the problem creating lower wages for American workers. It was caused by changes in the federal tax structure that began with Reaganomics.

    Really don't mind if you sit this one out. My words but a whisper -- your deafness a SHOUT. I may make you feel but I can't make you think..Jethro Tull

    by RMForbes on Tue Mar 04, 2014 at 10:29:50 AM PST

    [ Parent ]

    •  It's the coupling of compensation to stock price (8+ / 0-)

      ...rather than wage rate that, as you say, changes the whole business structure and how business decisions are made. However, it's not just CEOs getting those options and bonuses. Variable compensation based on corporate goals and market prices have been pushed way down in corporations since the early '90s and staff from the CEOs down to supervisors have been reaping those gains. Profits have been reinvested into raising productivity with technology and financialization which further raises the compensation of all vested staff. Yes, that's not an incentive for higher base wages and there are even lower emloyee counts as a result. But for decades now productivity gains are not being accomplished by the same staff working harder or smarter. The people creating the higher productivity methods and systems are instead being compensated. So, I think it's a lot more complex than you say and the facts you share are more coincident than causal.

      •  It's pretty simple (2+ / 0-)
        Recommended by:
        kck, VClib

        A cobbler is a high skill position. They need to make shoes using very specialized skill sets.

        Someday their company comes along and hires an engineer to design a machine to make shoes. The owner and the engineer are highly compensated for this work.

        The cobbler's job has now been replaced by an unskilled guy who only knows how to push the "make shoes" button and a tiny fraction of a highly paid guy who fixes the machine when it breaks.

        What has happened here? A skilled middle class job has fallen to automation. The company owner made a lot of money. The design engineer is paid a considerable salary. Society in general benefits from extremely lower cost (and higher quality generally) automated produced items.

        But the net effect has been the elimination of a previously "good job". "Productivity" has increased, but the salary for the position falls. It's not like pushing a button is a skill like being a cobbler is. You can find a person to push a button anywhere. So "wages don't track productivity", especially median wages.

        This goes on every day. There doesn't have to be a conspiracy or "theft" (though it feels that way to the displaced worker). There just has to be the normal human desire to do more with less resources.

        (-5.50,-6.67): Left Libertarian
        Leadership doesn't mean taking a straw poll and then just throwing up your hands. -Jyrinx

        by Sparhawk on Tue Mar 04, 2014 at 02:09:42 PM PST

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        •  Exactly, it's not hard to org and reorg... (2+ / 0-)
          Recommended by:
          Tonedevil, FindingMyVoice

          ...around these realities so that everyone gets invested. We can handle this.  American workers can be protected without protectionism, can unify labor and organize to protect the interests of all workers without industrial era type labor unions, and can extend social benefits cradle-to-grave to all Americans as they move in and out of jobs without the adversarial and inefficient industrial era coupling of benefits to employers.

          The status quo is unacceptable but nothing is being done to address it and no one, Dems included, are even talking about solutions. Raising the min wage is not a solution, it's not a strategy, it's a no-brainer to stop the bleeding and at least maintain the status quo.

        •  This is NOT (2+ / 0-)
          Recommended by:
          Tonedevil, ozsea1

          a normal human desire.

          to do more with less resources.
          This is a "normal unfettered capitalistic desire on behalf of stockholders". There's nothing human about it.

          This all started with "what the Republicans did to language".

          by lunachickie on Tue Mar 04, 2014 at 03:09:32 PM PST

          [ Parent ]

          •  Really (2+ / 0-)
            Recommended by:
            VClib, nextstep

            So, you don't shop for items based on price?

            Anyone who does so contributes to this dynamic.

            If you buy plane tickets on the web instead of a travel agent, you are doing the same thing the "capitalists" are.

            No matter how obliquely you choose to participate in this process, buying this and not that because of price, at the end of the day, drives someone to make these decisions.

            (-5.50,-6.67): Left Libertarian
            Leadership doesn't mean taking a straw poll and then just throwing up your hands. -Jyrinx

            by Sparhawk on Tue Mar 04, 2014 at 03:24:35 PM PST

            [ Parent ]

            •  You're talking about two different things (4+ / 0-)
              you don't shop for items based on price?
              I am not a company paying wages. "Humans shopping for groceries and looking for sales" is not the same thing as "A corporation paying wages to one human, and expecting those wages to compensate for that one human doing the work of two or more other humans."

              Most of your previous comment was reasonable enough, but that last sentence completely tanked it. There's nothing human about the desire to do more with less in that particular context. Unless you want to refer to it as unconscionable greed. THAT is human.

              This all started with "what the Republicans did to language".

              by lunachickie on Tue Mar 04, 2014 at 03:39:47 PM PST

              [ Parent ]

    •  I work at a privately owned company... (25+ / 0-)

      ...and the owner takes home between 576 times what the low paid worker in the shop makes or 240 times what I make. Each year we get about a 1.5% raise. It doesn't matter how hard we work (I worked my ass off the first couple of years there, but now I only give a little over 40 hours a week). They get mad when you don't work massive amounts of overtime, but there isn't an incentive. In fact, I can tell their incentive tends to be, "You have a job."

      I also see this in job adverts while I job hunt for new work. "Applicant must be able to multi-task (Do the work of four people) and do what is necessary to get the job done (Massive unpaid overtime) and have a positive job outlook (Not call out the Mother fuckers on their immoral B.S.)."

      The beatings will continue until moral improves.

      Regulated capital serves the people, unregulated capital serves itself.

      by Alumbrados on Tue Mar 04, 2014 at 12:30:20 PM PST

      [ Parent ]

      •  Amen! (8+ / 0-)

        Particularly the "multi-task" reference:

        "Applicant must be able to multi-task (Do the work of four people) and do what is necessary to get the job done (Massive unpaid overtime) and have a positive job outlook (Not call out the Mother fuckers on their immoral B.S.)."
        The qualifications are ridiculous for a lot of Good Jobs, particularly in the tech sector (or what remains of it, anyway). I always wonder why they cry the blues because they can't find people to fill their positions. Maybe if the qualifications listed in their damned help-wanted ads made some freakin' common sense, they'd get what they need! Someone pointed out the other day that it's not unusual to see tech ads specifying 2-5 years experience with a particular discipline or set of code spec that's only been around for several months. And you know what? I've seen that. Absolutely.

        This all started with "what the Republicans did to language".

        by lunachickie on Tue Mar 04, 2014 at 03:15:23 PM PST

        [ Parent ]

        •  Same here (2+ / 0-)
          Recommended by:
          lunachickie, Alumbrados

          Those ads are almost always cover for meeting the letter of the H1-B visa laws:

          "We advertised the position, but couldn't find anyone with the qualifications, honest! The only person we could find is this college student from [other country with slave-level wages] whose student visa is about to expire after he has "interned" for us for the last 2 years. Can we get an H1-B for him, pretty please?"
          •  Yup (2+ / 0-)
            Recommended by:
            radical simplicity, Alumbrados

            and they can rob the H1-B holder blind, because all they have to do is threaten them with loss of their visa.

            Not that it's not bad enough what they do to the natives--I'm just saying if you're here on any kind of visa and you get threatened with having it pulled and you have to go back where you came from, that's a huge incentive to shut up and take whatever they're dishing out.

            This all started with "what the Republicans did to language".

            by lunachickie on Tue Mar 04, 2014 at 05:46:29 PM PST

            [ Parent ]

            •  Even worse (2+ / 0-)
              Recommended by:
              lunachickie, Alumbrados

              They're often actually employed by front companies that hire them out on a contract basis and take a huge cut of what little they do get paid.

              The contracts they've signed with those companies require that they pay the company some ridiculous sum should one of the hiring companies try to bring them on as a full time employee. I had an employee discover this the hard way, when I hired him full time. He discovered that little bit of fine-print when my employer's legal department received a letter demanding we pay the person's former employer $10k for the privilege of having hired him. I was given two options: let him go, or get him to pay the money himself and present proof to our legal department that the payment settled all debts to the contract house.

              They are, essentially, indentured servants.

    •  ...which Reagan policy was this? (3+ / 0-)
      Before Reagan and when corporations could not compensate their top executives with company stocks to avoid taxes there was a tax incentive to pay the companies employees a better wage.
      The 1986 TRA changed the law to tax capital gains at the same rate as income (something which has since been changed.)

      The top income rate was lowered in the 1986 reforms, but it was already down to 50% prior to that, having come of historic highs some time before.

    •  RMF - you are misinformed about the stock (2+ / 0-)
      Recommended by:
      nextstep, Balto

      There is no doubt that lower marginal rates make high incomes more valuable to the recipients. But since Reagan left office, and the top marginal rate was 28%, they have moved back up to nearly 40%, the highest rate since the Tax Reform Act of 1986 which completely rewrote the IRS code for individuals. And I have no argument that the wage disparity has grown significantly as CEO pay has mushroomed and pay for hourly workers has flattened, that's just a fact. But that's not my point, which was that if the CEO gave up all his cash compensation it wouldn't fund much of a raise for all the hourly workers.

      You are misinformed about the tax impact of equity compensation. This is a widely held view here and I should do a diary about it just as a reference piece. All equity compensation to the CEOs of the Fortune 1000 is taxable as W2 income at the top marginal rate, currently about 40%. There is no way to structure that income so that it qualifies for long term capital gains, now taxed at 23.8%. It is impossible. Only executives who manage investment partnerships can structure their incentive compensation so that it qualifies for long term capital gains treatment.

      "let's talk about that"

      by VClib on Tue Mar 04, 2014 at 03:43:25 PM PST

      [ Parent ]

      •  Nonsense n/t (2+ / 0-)
        Recommended by:
        ozsea1, RMForbes

        This all started with "what the Republicans did to language".

        by lunachickie on Tue Mar 04, 2014 at 04:51:29 PM PST

        [ Parent ]

        •  lunachickie - this is one area where I am an (1+ / 0-)
          Recommended by:
          Balto

          expert and every tax professional on this site agrees with my statement about equity compensation and that it is taxable as W2 income. This isn't my opinion.

          I have engaged the best tax professionals in SF, NYC, and DC on this issue and there is no way to make non-qualified stock options (the only kind CEOs receive) and restricted stock qualify for long term capital gains. If it could have been done I would have done it while serving as compensation committee chairman, a role I have had at numerous public companies since 1988.

          If you have some specific examples that show otherwise, I'd like to see them. I'd love to know how to do it.  

          "let's talk about that"

          by VClib on Tue Mar 04, 2014 at 05:47:52 PM PST

          [ Parent ]

          •  So if that were true how did Romney have (1+ / 0-)
            Recommended by:
            VClib

            an effective tax rate of less than 15%? Wasn't he paying deferred income taxes at the capital gains rate? I guess you agree that the very wealthy should have the tax code written in their favor. What we have today is not a progressive tax system which incentivizes reinvestment in our domestic economy. That's not okay by me and something I believe we need to work to change.

            Really don't mind if you sit this one out. My words but a whisper -- your deafness a SHOUT. I may make you feel but I can't make you think..Jethro Tull

            by RMForbes on Tue Mar 04, 2014 at 06:28:06 PM PST

            [ Parent ]

            •  RMF - Romney was in one of those rare (1+ / 0-)
              Recommended by:
              Balto

              businesses where the managers can structure their incentive compensation to qualify for long term capital gains. You have to start with a partnership structure. So that eliminates all corporations. This is important because in a partnership profits and losses are determined by contract, the limited partnership agreement, not by the amounts invested by all of the parties. The partnership must have a finite life, typically ten years. So that also rules out corporations. The partnership must acquire assets, hold them long enough to qualify for long term capital gains treatment and then within the finite life of the partnership all the assets must be SOLD to recognize the gains and the proceeds distributed to the parties.

              Subject to certain performance requirements the partnership managers are awarded, by contract with the investors, an equity ownership position in the assets. Upon liquidation all partners are treated the same so the managers receive incentive compensation that is eligible for long term capital gains treatment, just like the financial investors who provided the capital to the partnership. This incentive structure is called a "carried interest" and has been how all investment partnerships have been structured since the early 1970s. The typical partnership managers are in venture capital, hedge funds, private equity, real estate, oil & gas and movies.

              Bain Capital was initially a venture capital firm and expanded to also be a private equity investor. Both of those investment areas are structured as investment partnerships and conform to the requirements I outlined above. Mitt Romney has a continuing carried interest in each investment partnership formed by Bain Capital and that is why his income was eligible for long term capital gains tax rates.

              It's unfortunate that people think that because Mitt Romney had such a low tax rate that all equity compensation awarded to executives has the same tax treatment. Romney was not a corporate manager, he was an investment manager.  

              "let's talk about that"

              by VClib on Tue Mar 04, 2014 at 07:00:05 PM PST

              [ Parent ]

              •  I know all about sole proprietorships, partnership (0+ / 0-)

                LLC's and S-Corps, their profits are all like you say taxed as the individual income of the owner(s). However, C-Corps and especially transnational corporations are not taxed this way at all. Why do you say they are?

                Really don't mind if you sit this one out. My words but a whisper -- your deafness a SHOUT. I may make you feel but I can't make you think..Jethro Tull

                by RMForbes on Tue Mar 04, 2014 at 07:42:39 PM PST

                [ Parent ]

                •  RMF - I didn't write about the taxation (0+ / 0-)

                  of corporations at all. I was only discussing the taxation of the incentive compensation of executives and the differences between corporate executives and investment managers.

                  I made no mention of corporate taxes. This was all about the taxation of individuals.

                  I would appreciate your feedback because I obviously wasn't clear and I am thinking of making this comment into a diary.

                  "let's talk about that"

                  by VClib on Tue Mar 04, 2014 at 07:48:31 PM PST

                  [ Parent ]

                  •  You're right, I wasn't clear (0+ / 0-)

                    Corporate executives at a fortune 500 transnational corporations don't have their compensation taxed in the same way as the rest of us small business owners at all. The current tax code favors these already very wealthy individuals which I believe is incredibly wrong in my point of view. I believe all income from any source should be taxed at least 50% on income over $3 million a year like it was between 1935 and 1986 when Reagan deregulated corporate compensation regulations. We need to close these loopholes that allow corporate CEO's to pay little or now income taxes on their compensation.

                    Really don't mind if you sit this one out. My words but a whisper -- your deafness a SHOUT. I may make you feel but I can't make you think..Jethro Tull

                    by RMForbes on Tue Mar 04, 2014 at 08:12:13 PM PST

                    [ Parent ]

                    •  RMF - Senior Fortune 500 execs (2+ / 0-)
                      Recommended by:
                      nextstep, Balto

                      pay the top marginal rate of nearly 40%. You can argue that is too low and should be higher. But because all of their corporate compensation is W2 earned income, they are paying the top rate. They would have to have a huge investment portfolio and generate a lot of capital gains from selling appreciated capital assets, or making very big charitable gifts, to drive down their effective rate. So these executives do in fact pay taxes on the same basis as successful small business owners. In fact, small business owners have more options (but less income) to legally shelter income than Fortune 500 execs.

                      When the Tax Reform Act of 1986 passed it closed nearly all the loopholes, that was the rationale of dropping the top marginal rate from 50% to 28%. Rates before 1986 and after really can't be compared, because they apply to a completely different IRS code for individuals. Not many loopholes remain for corporate executives. All their perks are now taxable income. I remember when car allowances, and other similar executive benefits weren't taxable income. That's long gone.

                      "let's talk about that"

                      by VClib on Tue Mar 04, 2014 at 08:53:00 PM PST

                      [ Parent ]

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