People Power
People Power
Irrespective of the size of the CEOs ego, more and more workers are beginning to realise that companies will fall apart without them!
I had written a piece on Inflation two years ago. At the time Inflation was high and the reason offered was the war in Ukraine. The pandemic was still in the rear-view mirror. I had argued, that the fight against inflation is not to reduce prices but to ensure that they put the fear of god in the heart of the workers and also to keep things in such an equilibrium that workers do not realise that prices are going up.
The problem is not that prices are rising.
The problem is that it is not leaving people scared shitless.
They are confident enough to quit their jobs! Why that vermin!! We will raise interest rates till you cannot find a job. Period. If inflation does not break your spirit we will keep increasing interest rates and ensure we break it one way or another.
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If the interest rates are not increased, it is not as if businesses will go on borrowing ad infinitum. Inflation will rise, but not like in Weimar Germany.
Say the inflation settled at 15%.
It would be clear to workers that prices double every 5 years. They would ask for a 20% raise every year and that would become the norm. It would not be possible to keep minimum wages at the same level for 40 years.
The cycle of the rich getting richer at the cost of the labour class would not persist and that is the problem.
Say you put a person in a large tub and the person does not know how to swim. You keep increasing the water level by 2.5%. To the “capitalist”, the person supplying the water, the immense volumes of water being added are clear but to the person in the tub, the increase would be imperceptible. This goes on cyclically over and over till suddenly it is no longer possible for the legs to reach the bottom of the pool or stand steadily.
Inflation kept in the right range works like this. The poor get poorer without even knowing that they are until one day they just don’t make enough to stand on their feet.
If the water level rose by 15%; very soon the person in the pool would realise that something was off. They would ask for support or ask out of the pool. An increase in pay or the death of capitalism.
Two things happened in quick succession:
- During the pandemic, everyone was asked to sit at home. Despite that, there were certain people whose jobs required them to show up at work. This made workers realise who was running the economy.
- It highlighted the indispensability of the work that they put in. Meat plant workers, supply chain workers, factory technicians, and many others were crucial and central to the success of what is called the Economy. Also, you could probably send the CEO to Mars and it would barely make a difference.
- The Inflation spike after the Ukraine war started made people pause and think about rising costs. It made them question the decade of wage stagnation. The Management seemed to be doing just fine, but the workers…
Some background
Nowadays, no sooner have you heard the word ‘Equity’ you assume shares in a company, but the definition of equity according to Merriam Webster Dictionary is
Equity ~ justice according to natural law or right
Equity means doing the right thing. Not to be confused with equality which is a different and more nuanced issue.
An absence of equity implies that if I have more money and I can trample over you - I will.
The US had a tradition of flip-flopping on equity. If any of you have watched the movie, Oppenheimer, you would know he was branded a Russian because he was part of a movement to form a teacher’s union. After the Second World War, thanks to McCarthyism, any person who breathed a word about unions or socialism would have had an FBI officer on their tail. In a very systematic manner, the entire thought was killed.
McCarthy fell as fast as he rose. The late 50s and 60s were a great time for equity in America. At the time, Ronald Reagan the president of the Screen Actors Guild (which is a union) led protests to have greater pay for the actors. Once he moved to a life of politics, he did everything in his power to break the ability of workers to act as a group. His presidency ended in 1989 and children born during that period who are now known as Millennials would not get within sniffing distance of any kind of equity.
US Corporate Tax
Source: Trading Economics
When Reagan entered office, the corporate tax rate in the US was 46%, by the time he exited it was 34%. This was the result of honest lobbying not corruption which is only to be found in Asia.
Since the 1990s lobbyist and their money incredible presentations, have convinced president after president, no matter from which party, that the right thing to do is to allow inequity to grow.
What does inequity look like?
Minimum Wage
Source: Statista
Minimum wages have been frozen since 2010. Note this because it will come back later.
Workers have not seen any real growth in their wages for one and a half decades now. While this graph indicates the state of affairs so far as minimum wages are concerned, the same can be said about wages just above minimum as well. The vast proportion of people in that bracket work in factories such as Boeing and therefore they are starting to rise up.
Boeing’s factory workers on Thursday voted to protest for better pay and conditions against the company’s management. According to the International Association of Machinists and Aerospace Workers (IAM) nearly 96 per cent of the aircraft giant’s workers supported the protest.
“This is about respect, this is about addressing the past, and this is about fighting for out future,” said Jon Holden as reported by Reuters. We will begin the protest at midnight, said Holden, who headed the negotiations for IAM.
The decision to protest was made collectively by the workers after rejecting the management’s contract, which offered a pay hike of 25 per cent over four years. According to IAM, nearly 94.6 per cent of its members voted against the contract.
Source: Outlook
This is not about respect, it is about money. But imagine the plight of these workers that they have to paint it as such just to get what is fairly owed them.
There is a stark dichotomy at play here.
While on the one hand salaries have been frozen, corporate profits have been achieving unseen heights.
Corporate Profits
Source: Wikimedia
Since 2010, corporate profits have doubled. The correlation with stagnant wages could not be happenstance.
This has been possible in no small part because of how the CEOs have been grinding down the workers and extracting everything out of them while paying them as little as possible. For having done a good job of pseudo-enslaving their “employees”, they got pay hikes!
Average CEO pay
Source: EPI
So while worker compensation has been stagnant; CEO pay has been inflated to crazy levels. The Average CEO pay is 399 times that of an average worker. Refer to the source above if you wish to see it.
And this is not a US-only phenomenon.
Hundreds of workers strike at major Samsung factory in India
Kenyan aviation workers end protest against India's Adani
German union ready to strike as industrial sector pay talks start
Around 400 workers protest, disrupt cargo flow at TVM airport
13,500 US hotel workers hold strike votes over pay and conditions
17,000 AT&T workers have been on strike for three weeks
South Africa: Public sector workers protest, demand wage increase
Frontier Airlines flight attendants have voted to authorize a strike
The underlying problem is not inflation or CEO pay; it is Capitalism.
A system where shareholder value is more important than stakeholder value. Workers are a category of stakeholders who have been given the short end of the stick. The protests are just highlighting the inequities that have been baked into the system since the 1980s.
You could ship off the CEO to Timbuktu for 6 months and straitjacket him/her, the company will run fine. If the workers do not show up for 6 weeks, well now that is a whole different story.
Thus protests.