The drumbeat for economic advancement is filled with warnings that our kids must get a college education to get ahead. So it’s instructive to see where those college educations can lead. Take my friend’s son Dale, for example.
He’s 28, with a bachelor of arts degree from the University of Washington. He is highly skilled with computers, audio-visual equipment and other technical systems. He’s personable, articulate, and gets along well with almost anyone.
After graduation, Dale targeted the computer technology sector for job searches. His first job was through a labor supply agency, a three-month contract doing customer service at Nintendo through a new product launch and the Christmas holidays. He was paid $13 an hour, with no sick leave, vacation or paid holidays, or other benefits. His schedule was changed every week, averaging 35 hours or so.
This prevented him from taking a second job or attending classes, since he was never sure what days he would be told to work. And it left him 30 hours short of qualifying for unemployment insurance when he was laid off. So much for job security from a corporation that netted over $930 million last year.
In his current job, Dale has a six-month contract. He works at Microsoft’s Bing, but he is an employee of a different temporary services firm. Now we all assume that if you are at Microsoft, you are well paid. So let’s look at Dale’s situation.
He makes $14 an hour. No health care, no paid sick days, no retirement savings. He does get a bus pass. His job is somewhat mindless and extremely repetitive — and there are productivity standards tied to very modest team bonuses. The bonus structure was changed without notice, however, so those are more difficult to attain.
It is a weird world we live in. Productivity — the added value that each worker creates at his or her job — has doubled overall since 1973. Corporate profits per unit of value added have quadrupled. You can do the math — productivity increases two times and profits increase by four times, so where does the money come from? It comes from workers.
Altogether, workers in the middle of the middle class have seen their wages go up 8 percent since 1973 — that’s two-tenths of a percent per year. They have added a lot more value than that.
But what we hear about more is the young people who are hired at Microsoft, Amazon and Google at salaries that make a lot of older middle class workers look downright poor. I know this because I have relatives who are among that lucky bunch. And they get health coverage, retirement savings, paid time off, and even corporate-paid lunch brought into work.
But the prosperity and the privilege of the few mask the narrowing of opportunity for the many, whether they have high school diplomas, community college degrees or university degrees. And this prosperity also masks that generations-old transfer of income and wealth from workers to the Fortune 500.
The result is we have Dale, a university graduate, working a temporary job with no benefits, hoping and hoping that he will be brought on permanently, while his actual employer — Microsoft — was making over $23 billion in net profits last year. Not to mention that its top five executives were given between $1.3 million and $9.3 million, each! Dale has a job. But does he have a future in the middle class? That’s debatable.
Yesterday Microsoft released a study it sponsored that discussed the opportunity divide for youth. The report “documents the growing economic and social challenges facing youth around the world and the urgent need to provide the education, skills and employment opportunities required for them to succeed in today’s rapidly changing global economy.”
That wasn’t a message intended for Microsoft itself or the rest of the Fortune 500 in the United States. But it sure should be. It is definitely an economic challenge when you make wages that put you hovering above poverty, unable to pay for health insurance that your company won’t provide, saddled by student loans, and wondering how to scrape together the money for further training and education — and don’t even mention saving for retirement.
That is not the economic future Americans have bargained for — and it isn’t a future with which we should saddle our kids.
Originally published at HeraldNet
Excerpts from Ellen Brown’s WALL STREET CONFIDENCE TRICK: How “Interest Rate Swaps” Are Bankrupting Local Governments:
It was a deliberate, manipulated move by the Fed, acting to save the banks from their own folly in precipitating the credit crisis of 2008. The banks got in trouble, and the Federal Reserve and federal government rushed in to bail them out, rewarding them for their misdeeds at the expense of the taxpayers….
The banks have made outrageous profits by capitalizing on their own misdeeds. They have already been paid several times over: first with taxpayer bailout money; then with nearly free loans from the Fed; then with fees, penalties and exaggerated losses imposed on municipalities and other counterparties under the interest rate swaps themselves.
Bond-Graham writes: “The windfall of revenue accruing to JP Morgan, Goldman Sachs, and their peers from interest rate swap derivatives is due to nothing other than political decisions that have been made at the federal level to allow these deals to run their course, even while benchmark interest rates, influenced by the Federal Reserve’s rate setting, and determined by many of these same banks (the London Interbank Offered Rate, LIBOR) linger close to zero.”
Why are these swaps so popular, if they can be such a bad deal for borrowers? Bond-Graham maintains that capitalism as it functions today is completely dependent upon derivatives. We live in a global sea of variable interest rates, exchange rates, and default rates. There is no stable ground on which to anchor the economic ship, so financial products for “hedging against risk” have been sold to governments and corporations as essentials of business and trade. But this “financial engineering” is sold, not by disinterested third parties, but by the very sharks who stand to profit from their counterparties’ loss. Fairness is thrown out in favor of gaming the system. Deals tend to be rigged and contracts to be misleading.
How could local governments reduce their borrowing costs and insure against interest rate volatility without putting themselves at the mercy of this Wall Street culture of greed? One possibility is for them to own some banks. State and municipal governments could put their revenues in their own publicly-owned banks; leverage this money into credit as all banks are entitled to do; and use that credit either to fund their own projects or to buy municipal bonds at the market rate, hedging the interest rates on their own bonds.
The creation of credit has too long been delegated to a cadre of private middlemen who have flagrantly abused the privilege. We can avoid the derivatives trap by cutting out the middlemen and creating our own credit, following the precedent of the Bank of North Dakota and many other public banks abroad.
Vanguard founder and former CEO John Bogle says:
“We have one hell of a problem in this country, and it is not badly articulated by talking about the 99 percent and the 1 percent, although if you wanted to split hairs, we’d be talking about the 99.9 percent and the 0.1 percent.”
“Only one-half of 1 percent of what Wall Street does is capital formation [its classic function]. Most of the rest is short-term speculation.”
“The way we now compensate many corporate CEOs is also one of the great absurdities of the age.”
“It is outrageous that hedge-fund managers can take that income as a capital gain on the profits of the company. For everybody else, it would be considered salary income.”