" "More Than Just Musing" #18
GROWING THE PIE/SHARING THE PIE
Our economy grows not because of an innovative individual or individuals, not because of raw capital, not because of free markets, but because of all of the above and so much more. Most importantly, it grows because the foundation of our democracy was conscientiously designed over two hundred forty years ago and cured by millions of Americans who struggled, sacrificed, and prevailed in the last two plus centuries. And, in stormy times our better angels democratically rose to right the ship of state. The Founding Fathers created a living document that encourages individual freedom, protects individual rights and demands moderation with its checks and balances. Our job to make sure it work that way.
Economic balance, vital to a democracy, is a continual struggle. As the pie grows, the demand swells for more of the pie. The factions that manipulate the levers of government, naturally, are first in line -- citing their intelligence, creativity, wealth, legacy, and simply because they deserve it. The majority is generally satisfied with a reasonable share of the ten inch pie; however, on occasion they realize that the pie has grown to sixteen inches and their percentage of the pastry has shrunk. Reasonable priced housing, college tuition, class mobility, job security, and generational opportunities have diminished if not vanished. Among other things long gone are the camper, the boat, the novel vacations, and the second home on the lake with the fishing dock. If their IRAs didn't evaporate with the 2008 disaster, they have no faith in that they will be there after the next one.
Retirement conjures up nightmares rather than dreams - "Social Security is becoming insolvent," "Medicare is devouring the national budget," health care insurance is beyond reach, vital prescription drugs take a big bite out of a fixed retirement income, etc.
Here is the kicker. In 1978, the GDP pie (gross domestic product -- the total of all commerce in the United States) was $2.4 trillion and the wages and salaries made up 48.8% of the GDP.
In 2018, the GDP pie was $20.5 trillion and the wages and salaries dropped to 43% of the GDP.
Over those last forty years the loss of wages and salaries percentage of the pie is 5.8% or $1.2 trillion. Over this span the workers' wages increased by 4.4 times; however, the CEO compensation increased 10.9 times. This results not only workers' portion of the wages and salaries shrinking to a smaller slice of the pie, but that workers received a smaller taste of the smaller slice.
1978 average income indexed $10,556.03 -----------CEO salary 1.5million (larger companies)
2018 average income indexed $46,800.00 (4.4 increase) ------CEO salary 16.3 million (10.9 increase)
Bloating the wages and salaries number is CEO compensation. The CEO compensation $1.5m for large companies in 1978 rose to $16.3m in 2014. The ratio of workers' wages to executives' compensation in 1978, was 32 to 1 ($46,800 X 32 = $1.5m). In 2014, it rose to 306 to 1 ($53,200 X 306 = $16.3m).
Of the GDP the larger portion of labor compensation includes all forms of pay and benefits: Wages and salaries from a MacDonald's employee to the CEO of a Fortune Five Hundred, Commissions, Tips, Bonuses, Severance payments and early retirement buyout payments, Regular supplementary allowances, such as housing allowances, nonqualified stock options, transit subsidies, meals, and lodging, Employer contributions to employee pension and insurance funds and to government social insurance.
Although most of the above is not available to the "worker," they are available to the executive element and puff up the GDP numbers that the "worker" must share when benefits are charted. This is misleading.
The levers of government need to change hands.
The 28th Amendment to the Constitution is a good place to start.