Where the middle class went

The Coffee Shop
1

Short answer = stock buybacks.

Over the past 10 years, …Wal-Mart has spent more than $65.4 billion on stock buybacks—about 47 percent of its profits. That’s an average of more than $6.5 billion a year in stock buybacks, enough to give each of its 1.4 million U.S. workers a $4,670-a-year raise. It is also, coincidentally, an amount roughly equivalent to the estimated $6.2 billion Wal-Mart costs U.S. taxpayers every year in food stamps, Medicaid, subsidized housing and other public assistance…

The article, by venture capitalist Nick Hanauer, also touches on the fact that most salaried workers no longer get overtime:

you end up working harder—and the harder you work, the fewer employees I need. The fewer employees I need, the higher the unemployment rate. The higher the unemployment rate, the more leverage I have to “encourage” you to “do what it takes” to keep your job. And so you work even more hours, pushing unemployment up and wages down. And that, my friends, is one of the little tricks that keeps you poor and me rich.

Finally, as most of us already know, minimum wage has declined from $11 in 1968 to $7.25, when adjusted for inflation.

http://www.pbs.org/newshour/making-sense/middle-class-cant-g…

2

Great article.

3

Business Bad

Government Good
.

4

Short answer = stock buybacks.

Over the past 10 years, …Wal-Mart has spent more than $65.4 billion on stock buybacks—about 47 percent of its profits. That’s an average of more than $6.5 billion a year in stock buybacks, enough to give each of its 1.4 million U.S. workers a $4,670-a-year raise. It is also, coincidentally, an amount roughly equivalent to the estimated $6.2 billion Wal-Mart costs U.S. taxpayers every year in food stamps, Medicaid, subsidized housing and other public assistance…

The article, by venture capitalist Nick Hanauer, also touches on the fact that most salaried workers no longer get overtime:

you end up working harder—and the harder you work, the fewer employees I need. The fewer employees I need, the higher the unemployment rate. The higher the unemployment rate, the more leverage I have to “encourage” you to “do what it takes” to keep your job. And so you work even more hours, pushing unemployment up and wages down. And that, my friends, is one of the little tricks that keeps you poor and me rich.

Finally, as most of us already know, minimum wage has declined from $11 in 1968 to $7.25, when adjusted for inflation.

http://www.pbs.org/newshour/making-sense/middle-class-cant-g…]

So, first question that springs to mind. If you are in agreement with this article, can you explain why Wal-Mart “costs” the US taxpayer a single nickel?

Spot

5

Since when was working at Walmart a middle class job? Even back in the manufacturing days, I don’t think working for walmart (or more likely Woolworths) would have been a middle class job any more than working at Mc Donalds.

6

Business Bad

Government Good

For my education, please go beyond the ideology and let me know what you actually disagree with in this article. I know we will get the usual concerns about small business owners, but perhaps those concerns must be balanced against many of the points in this article? I don’t know the answer, but you seem to have a view, so that would be helpful to understand more about it.

Thanks.

7

nally, as most of us already know, minimum wage has declined from $11 in 1968 to $7.25

Not read the article but everything I’ve seen is that this is misleading at worst and factually incorrect at worst. The minimum wage was set at 1.60$ in 1968 and was not adjusted again until 1974. 1.60$ in 1968 is ~10.57, not 11$ today. Minimum wage dropped until around 1990 where it hit a low of an inflation adjusted ~5.75 and has been rising ever since. the 11$ an hour your are quoting is a historical high, not the norm or even close to average. The massive growth of the middle class from post WW II thru the 60’s all happened with a lower minimum wage then the historical high hit in the late 60’s. In fact the minimum wage in 1963 was only .26$ higher then it is today at 7.51$.

Point being that the middle class does not and never has, grown off the middle class. In fact for the most part they are entirely unrelated.

~Matt

8

For my education, please go beyond the ideology and let me know what you actually disagree with in this article.

Have not rad it in detail but the assumption seems to be that if the law was changed to force companies to spend more in wages that they middle class would make more money. Sorry, but in a global economy that doesn’t happen. Rich guys, like the author of the article, merely looks to see if they can get it done someplace else cheaper. If they can, that’s where the work goes.

Look at manufacturing. Gone, also one of the highest percentages of overtime payments of any sectors. In fact it’s nearly standard for machinists etc to work overtime because it’s cheaper to work a guy 45-50 hours when you have a lot of work and 40 hours a week when you don’t because they are relatively skilled and you can’t have people standing around doing nothing when there’s no work.

That of course is still happening, but not in the US, in cheaper labor markets where the law allows the owner to not pay overtime at all and make people work 20 hours a day.

Like it or not the shrinking middle class is a result of the Wests shrinking ability to be competitive globally, that’s it, end of story.

~MAtt

9

So, first question that springs to mind. If you are in agreement with this article, can you explain why Wal-Mart “costs” the US taxpayer a single nickel?

Spot

You a blindly ignoring the obvious. Wal-mart forces people people with skills to leave their middle class jobs and then work for minimum wage at Walmart. Walmart requires all employees to have several kids and become single parents. Also required is smartphones, name brand shoes, big screen TVs, cable and a daily supply of cheap Chinese crap from wal-mart. Nobody can afford this off a Wal-mart salary so the government must step in and provide.

10

I posted a similar article from Forbes and Business Insider a few months back. There are lots more where that came from.

The counter arguments here seem to be trending to discuss Wal-Mart. Don’t. Just look at nearly every Fortune500 and S&P100 over the past 25 years and you’ll see a significant trend towards stock repurchasing programs that have spent upwards of $1 TRILLION in Income on their own stock. IBM is a great study if you want to look at the model.

Many economists are beginning to join the conversation and I completely agree - Maximizing Shareholder Value (MSV) has become the go-to strategy for many top executives and its comes at the expense of 1) customers, 2) innovation and 3) employees.

Here’s more if you’re interested:

HARVARD BUSINESS REVIEW: Profits without Prosperity
http://hbr.org/2014/09/profits-without-prosperity/ar/1
(Roosevelt Institute White Paper referenced in HBR article)
http://rooseveltinstitute.org/sites/all/files/Lazonick_Executive_Pay_White_Paper_Roosevelt_Institute.pdf

THE WASHINGTON POST: MSV – The Goal that Changed Corporate America
http://www.washingtonpost.com/business/economy/maximizing-shareholder-value-the-goal-that-changed-corporate-america/2013/08/26/26e9ca8e-ed74-11e2-9008-61e94a7ea20d_story.html

THE ECONOMIST: The Repurchase Revolution
http://www.economist.com/news/business/21616968-companies-have-been-gobbling-up-their-own-shares-exceptional-rate-there-are-good-reasons

THE ECONOMIST: Corporate Cocaine
http://www.economist.com/news/leaders/21616950-companies-are-spending-record-amounts-buying-back-their-own-shares-investors-should-be

FORBES: The Unanticipated Risk of Maximizng Shareholder Value
http://www.forbes.com/sites/stevedenning/2014/10/14/the-unanticipated-risks-of-maximizing-shareholder-value/

FORBES: How CEOs Became Takers, Not Makers
http://www.forbes.com/sites/stevedenning/2014/08/18/hbr-how-ceos-became-takers-not-makers/

FORBES: The Financial Times Slams “The World’s Dumbest Idea’
http://www.forbes.com/sites/stevedenning/2014/09/02/the-financial-times-slams-the-worlds-dumbest-idea/
· “It is unhelpful to promote the existence of a trade-off between shareholder value maximization and benefit to society, and then plead with managers to trade the former off for the latter. This simply entrenches the self-fulfilling prophecy and makes it harder to dispel. Instead, proponents of inclusive capitalism should argue that the trade-off is not inherent; it is a product of the model in people’s heads. The core task of management is not to choose between shareholder value maximization and benefit to society; it is to seek creative resolutions that enhance both.”

DEADALUS: The American Corporation
https://www.amacad.org/publications/daedalus/spring2013/13_spring_daedalus_GomorySylla.pdf
· “Corporations have a responsibility, first of all, to make available to the public quality goods and services at fair prices, thereby earning a profit that attracts ­investment to continue and enhance the enterprise, provide jobs, and build the economy. The long-term viability of the corporation depends upon its responsibility to the society of which it is a part. And the well-being of society depends upon profitable and responsible business enterprises.”

THE ASPEN INSTITUTE: Reopening the Quesiton of Corporate Purpose
http://www.aspeninstitute.org/sites/default/files/content/upload/Unpacking_Corporate_Purpose_May_2014_0.pdf

11

Business Bad

Government Good

For my education, please go beyond the ideology and let me know what you actually disagree with in this article. I know we will get the usual concerns about small business owners, but perhaps those concerns must be balanced against many of the points in this article? I don’t know the answer, but you seem to have a view, so that would be helpful to understand more about it.

Thanks.

I was just summarizing the OP.

Tell me what you think is so great about the article and specifically how Walmart is “costing” us billions.

While you are at it could you tell me how many people they employ, how much they pay in SS just the employers half, how much it costs Walmart to comply with the ADA, EECO, ACA and the US Tax code?

I saw an article a while back slamming them for their obscene profits, according to the #'s in the article they made 3.5% on sales. Do you think 3.5% is an obscene profit?

12

Short answer = stock buybacks.
Over the past 10 years, …Wal-Mart has spent more than $65.4 billion on stock buybacks—about 47 percent of its profits.

Sounds like middle class investors were able to realize gains in Wal-Mart stock. Anyone who bought stock in 2004 nearly doubled their money in the last 10 years.

.

13

Maximizing Shareholder Value (MSV) has become the go-to strategy for many top executives and its comes at the expense of 1) customers, 2) innovation and 3) employees.

Let’s assume for a second that companies that are maximizing share holder value are in fact harming their customers, putting out less innovative ideas and products and at the same time at the expense of their employees, this seems to me to open a HUGE opportunity for anyone else to jump into the same market and kick ass and take names.

Say company “A” is providing a poorer quality more expensive product that could be significantly improved and at the same time paying their employees less and less with less benefits. Company “B” opens up and can somehow get the necessary capital to operate and they manage to put our a better quality cheaper product, that is more innovative while paying their employees more how is it that company “B” would not literally run company “A” out of the market?

Fact is however that it is a balancing game. You can’t innovate, pay employees more and provide a better quality product while also returning a profit to the investors. Pay the employees more and the profit goes down or the quality goes down or the investment in innovation goes down. Lower the price and increase the quality for the customer you and you have less profit, less wages and less innovation. It’s one HUGE massive balancing game that is easy to look at and say “Wow look at all that profit that could be used better doing “X””. The problem is that if you do “X” then you can’t do a number of other things and or it will effect a number of other things. Business is not static, it’s very dynamic. Spend that money on wages and in short order people are pulling their capital and placing it someplace else to get better returns. No capital, no funds and lots of things fall apart.

~Matt

14

Do you think 3.5% is an obscene profit?

You’re missing the point that someone else made earlier. Business bad. That means ANY profit is bad. That is made off the backs of those poor people working at Walmart and they deserve it far more then some rich bastard investing in Walmart. Doesn’t matter that without those investors Walmart fires a whole boat load of people and they get nothing. Doesn’t matter that those investors make it possible for Walmart to grow…those investors don’t deserve a profit.

I think most of these points tend to lean toward a staggering lack of understanding of economics and how one move in the model effects everything else. You can’t simply take profits and apply them to wages and other aspects of the business without some sort of reaction to that elsewhere in the business model.

What good would it be to have all the companies in the stock market raise wages while lowering profits if the net result was a major slump in the stock market?

~Matt

15

Do you think 3.5% is an obscene profit?

**You’re missing the point that someone else made earlier. Business bad. **

~Matt

Who was the idiot that said that?

16

Who was the idiot that said that?

Ok you’re missing your own point that you made earlier :slight_smile:

I know you meant it in jest but quite literally after decades of deomonizing business, specifically large business, this is the same knee jerk reaction that we see all over in many areas like “IT must be racism” etc. Business is bad.

~Matt

17

Walmart doesn’t directly cost the US taxpayer anything. The phrase generally refers to the fact that Walmart’s low wages and lack of benefits leaves full time employees to live in a manner that the government (society?) deems to be below some minimum standard such that the US taxpayers have to pick up the bill on assistance.

The other argument is also that Walmart tends to drive out competitors that hypothetically could have paid higher wages.

I’m not saying that any of this is true or not. I’m just letting you know what the argument is.

18

Who was the idiot that said that?

Ok you’re missing your own point that you made earlier :slight_smile:

I know you meant it in jest but quite literally after decades of deomonizing business, specifically large business, this is the same knee jerk reaction that we see all over in many areas like “IT must be racism” etc. Business is bad.

~Matt

As I said to Guardian, and I guess tongue in cheek sort of, I was pretty much summarizing the article.

Where the fuck do they think the billions the government gets every year comes from? I mean other than the money the Fed prints which is spiking up the Stock market bubble at the moment.

19

For my education, please go beyond the ideology and let me know what you actually disagree with in this article.

Have not rad it in detail but the assumption seems to be that if the law was changed to force companies to spend more in wages that they middle class would make more money. Sorry, but in a global economy that doesn’t happen. Rich guys, like the author of the article, merely looks to see if they can get it done someplace else cheaper. If they can, that’s where the work goes.

Look at manufacturing. Gone, also one of the highest percentages of overtime payments of any sectors. In fact it’s nearly standard for machinists etc to work overtime because it’s cheaper to work a guy 45-50 hours when you have a lot of work and 40 hours a week when you don’t because they are relatively skilled and you can’t have people standing around doing nothing when there’s no work.

That of course is still happening, but not in the US, in cheaper labor markets where the law allows the owner to not pay overtime at all and make people work 20 hours a day.

Like it or not the shrinking middle class is a result of the Wests shrinking ability to be competitive globally, that’s it, end of story.

~MAtt

Your argument against the article is that anything that makes outsourcable jobs more expensive will kill those jobs. And you believe that all jobs that can be done cheaper are always outsourced. So, according to your theory, the only jobs we have left in America are the ones that can’t be outsourced. On that basis, can we apply the author’s overtime solution to the current jobs in America and at least some workers will benefit?

20

For my education, please go beyond the ideology and let me know what you actually disagree with in this article.

Have not rad it in detail but the assumption seems to be that if the law was changed to force companies to spend more in wages that they middle class would make more money. Sorry, but in a global economy that doesn’t happen. Rich guys, like the author of the article, merely looks to see if they can get it done someplace else cheaper. If they can, that’s where the work goes.

Look at manufacturing. Gone, also one of the highest percentages of overtime payments of any sectors. In fact it’s nearly standard for machinists etc to work overtime because it’s cheaper to work a guy 45-50 hours when you have a lot of work and 40 hours a week when you don’t because they are relatively skilled and you can’t have people standing around doing nothing when there’s no work.

That of course is still happening, but not in the US, in cheaper labor markets where the law allows the owner to not pay overtime at all and make people work 20 hours a day.

Like it or not the shrinking middle class is a result of the Wests shrinking ability to be competitive globally, that’s it, end of story.

~MAtt

Your argument against the article is that anything that makes outsourcable jobs more expensive will kill those jobs. And you believe that all jobs that can be done cheaper are always outsourced. So, according to your theory, the only jobs we have left in America are the ones that can’t be outsourced.** On that basis, can we apply the author’s overtime solution to the current jobs in America and at least some workers will benefit?**

Which business will that have a more negative affect on the Walmart’s and McDonald’s or the small business employing only a few people?

Do you have any concern or do you not care about small family owned business?

Do you think that anyone working 40 hours a week should be able to support a family of four on minimum wage?

Do you think minimum wage should be a living wage for a single breadwinner or should it be a wage that a business can afford to pay and then train and move a good employee up the ranks?

Where do you think the government gets the Billions they hand out to the nearly 50,000,000 people receiving government assistance?

Do you think a 3.5% profit is absurdly high?