Profits up, workers' wages down

Ted Smukler |

I read an article a couple of weeks ago in The New York Times, which showed that companies are seeing surges in profits through shrinking their workforces. Harley Davidson's profits are triple what they were a year ago, while sales are still declining and new rounds of mass layoffs are planned. It seems like the recession is indeed over for large corporations, even though the rest of us are in the midst of the greatest economic catastrophy of our lifetimes.

In fact, the Great Recession offered a way for corporate America to get leaner and meaner on the backs of their workers. Focusing on cost cutting, they have squeezed profits out by forcing workers to accept pay and benefit cuts while operating with fewer and fewer workers. For Harley Davidson, that meant a $71 million profit in the second quarter of 2010, more than triple the previous year, after cutting 2,000 jobs, with the cost savings going to shareholders and upper management. At the same time, the Milwaukee-based motorcyle maker is planning additional layoffs and threatening to close its plant and relocate in a cheaper labor market if its unionized workers don't accept even more draconian contract givebacks. Many other large corporations are also doing quite well on smaller sales and massive layoffs-the article mentions companies such as General Electric and JP Morgan Chase.

We need 11 million new jobs in the next three years just to get back to the 5 percent unemployment level that preceded the Great Recession. The statistics alone don't tell the full story of devastation, as foreclosures continue to mount, young people and long term unemployed workers lose hope, tax revenues decline and states and cities are forced to lay off essential workers such as teachers and police officers, and hunger, mental illness, and violence rises in battered communities. With official unemployment continuing to hover near 10 percent, companies use their workers' legitimate fear of losing their jobs to slash salaries and benefits. Demand for goods and services remains stagnant, and the private sector has neither the will nor the capacity to bring down unemployment.

If corporations are happy about the new equilibrium and demand remains low, the only way to generate jobs is for the federal government to make this a major priority. It takes roughly $100 million in federal spending to create 1 million jobs. We need a second bold stimulus plan, including creating government jobs. With the scale of this crisis, the federal government must create vital and sustainable jobs: jobs that rebuild infrastructure; green jobs; mass transit; jobs to fill needs that the private sector cannot create, such as expanded child care and cleanup of toxic dumps.

This won't be easy. Deficit hawks will say this is mortgaging our children's future. What is certainly mortgaging our kids' futures right now is that their parents are out of work and that young people can't find summer jobs or get stable employment even after graduating college. Long term reduction of the deficit depends on getting people back to work, which would bring tax reveues back while lowering the public costs of unemployment compensation, food stamps, and other services needed for an increasingly impoverished America.

Cities, states, and the federal government also need to stop tax giveaways to corporations in a competitive race to the bottom, giveaways that are usually justified because the companies say they need them to create jobs. If the private sector is eliminating jobs and tax giveaways lack any accountability measures to show that good jobs were indeed created that would not have existed without tax incentives, the only good they do is raise private profits while robbing the public coffers. We can find the money to invest in jobs in this country if we stop giving it away.