Mammon Manifesto

The coronavirus has highlighted the vulnerabilities of American workers

The American economy has been squeezing blood out of turnips for a long time. Today, 4 in 10 American adults are unable to handle a $400 emergency. This is an economic indicator that the Fed has been tracking for a while.

This should have been alarming. 

Recently, we’ve seen the media giving the Trump administration an extreme amount of heat for their coronavirus response. Many argue that the federal government should have been more prepared. But why don’t we see them asking the tough questions when it comes to the American workers? 

If the economy was doing so well, then why are the millions of Americans going broke? Something that they were on the verge of before the government-induced economic shutdown to slow down the spread of the coronavirus. COVID 19 was just the tipping point for a much larger problem.

First, we need to clear up the myth of the booming American economy being good for American workers. Did you know that 84% of all stocks are owned by the wealthiest 10 percent Americans, which includes pension plans, 401(k)’s, individual retirement accounts, college savings accounts, trust funds, and mutual funds?

And when stocks are doing well, then it’s likely that wage growth is low. When wage growth is higher stocks tend to see negative returns, which makes sense. If companies are paying their workers more money, then they are making less profit, all other variables remaining the same.

Our government likes to tout a low unemployment rate and politicians run their campaigns on the platform of jobs. There may be many jobs and a low unemployment rate, but many of those jobs aren’t anything to write home about with low wages, lacking benefits, and much to be desired. But the problem is there are (or were before coronavirus) a plethora of those types of jobs and there was a huge labor pool to fill them. With 4 in 10 Americans unable to cover a $400 emergency, it’s no surprise that around 100 million Americans worked in retail, fast food, and gig economy jobs before the pandemic hit, which is roughly 47% of American adults. Do you think it’s a coincidence that those figures are so close? And now, nearly 40 million Americans are unemployed many of them losing jobs in retail, fast food, and gig economy jobs.

The average salary for retail workers is $26,000 per year for fast-food workers it’s $22,174 and for gig economy workers it falls at $7,488 per year. The federal poverty guidelines indicate that $12,760 is poverty wages for a single person and $26,200 is considered poverty for a family of four. Needless to say, many of these retail, fast food, and gig workers are hovering around poverty. 

The American taxpayers are left footing the bill for underpaid workers while businesses report record profits.

Government programs like SNAP and Medicaid help provide food and healthcare to many of these workers who are toeing the line. So many of these workers are eating up some of the approximately $70 billion spent on SNAP or the around $600 billion spent on Medicaid. Money that otherwise should have been footed by the employers, but was instead funneled back into their bottom line and redistributed as profits to investors leaving the American taxpayers with the bill. 

Not only are workers paid low and lacking benefits, but their wages also aren’t keeping up with the rising cost of living. Here are a couple of examples:

  • Then, the costs of goods and services are constantly being raised beyond the inflation rate. Back in 1967, the Big Mac was $0.45 and today it costs $3.99. In 1967, nonsupervisory restaurant employees averaged $1.37 per hour and today they average $8 per hour. An hour of work used to be able to buy three Big Macs and now it can only buy two. 
  • In 1966 in Flint, Michigan GM paid its workers a weekly average of $166.26. Then a lot of stuff happened, Reagan’s attack on unions, Clinton’s NAFTA, and the financial collapse of 2008. Now, UAW workers hired after September 2007 make around $720 per week. Back in 1967, a new car would set a GM worker back $2,750 or about 16 weeks of work. Today, a new car sets one back $37,000 or 51 weeks of work.

Those are just a couple of many examples, but the trend is widely the same across the board. Companies are raising prices on goods and services more than they are raising the wages of their employees. It comes as no surprise that people are taking on debt to help bridge the gap.

Americans are turning to debt to help bridge the gap created by low wages and a rising cost of living.

Whether it’s getting a credit card to help buy essential goods and services like food and clothing or to pay the utility bills. Or it’s financing or leasing a car to help them get to work and back. Some even finance or rent appliances, furniture, computers, electronics, smartphones, and other items because they simply don’t have enough savings to buy them outright. If someone can’t cover a $400 emergency, they definitely can’t afford to pay for a new refrigerator upfront. So it’s no surprise that businesses like Rent-A-Center are capitalizing on people’s financial distress. Sadly when Americans turn to services like these as one of their only options, they end up paying much more than list price.

People turn to education and student loans seeking upward mobility

Others in an attempt to lift themselves out of poverty seek out a college education. College is no different than a Big Mac or a new GM. College tuition today is 31x (not adjusted for inflation) and 3.5 times (adjusted for inflation) more than it was in 1969 and that doesn’t include room and board. While the American people are struggling to lift themselves by boots that they don’t even own, lenders and speculators are profiting on their debt packaged in Student loan asset-backed securities aka SLABS in a $1.52 trillion dollar market. But what happens when these borrowers begin to default on their loans? Especially in light of Coronavirus. It hearkens back to 2008 and the Mortgage-backed securities crisis.

Many modern colleges were founded to provide middle management and engineers for many of the companies that were created during the industrial revolution. That’s why so many of them bear the names of their benefactors: Vanderbilt, Stanford, Carnegie, and others like the University of Chicago and Rockefeller where the connection wasn’t so obvious. It was in the best interests of the wealthy industrialists at the time to secure their workforce. Today, we don’t see Bezos, Jobs, Zuckerberg, or Gates universities because they have an ample supply of educated workers that aren’t limited by geography. But we do see many for-profit tech Bootcamps popping up to capitalize on the age-old opportunity of selling upward mobility.

In a never-ending effort to increase profits companies have offshored jobs (and revenues) and automated positions as technology has enabled them to do so

As the United States has switched from manufacturing to a service-based economy, we have seen many US-based companies offshore their engineering and manufacturing jobs. For instance, GM offshoring their production of sedans to Mexico or Cisco and General Electric offshoring research and development jobs to India or Apple and Nike offshoring production to China. The list goes on and on. These companies create products abroad on the cheap, then ship them back to America and sell them back on the steep. For example, Apple spends less than $500 to make an iPhone, but charges over $1,000 for the gadget. Oh and if that isn’t enough, Apple posts lots of its revenues offshore in Ireland to avoid US taxes.

Increasingly with the advances in technology, we’re also seeing service-based jobs outsourced or offshored to call centers in the Philippines and India. Or supplemented and replaced by automated systems, chatbots, or even self-service kiosks at airports, grocery stores, and fast-food restaurants. As technology, machine learning, and AI get better, we’re going to undoubtedly see more jobs lost. 

Automation is particularly a threat in retail, fast food, and the gig economy where workers are already struggling. Just think about Uber’s business plan to switch from human drivers to self-driving cars or McDonald’s turning to automated kiosks. Where does that leave all its gig economy workers? Or Amazon’s goal to switch to cashier-less grocery stores? The writing is on the wall and it isn’t good.

Coronavirus has highlighted just how vulnerable American workers are today

Coronavirus is the canary in the coal mine when it comes to the struggling American people. It has underscored how American workers aren’t doing so well in this booming American economy with many barely scraping by. When will politicians stop talking about Gross Domestic Product and start talking about metrics that represent the vast majority of American people like Gross National Income per Capita and the Gini Coefficient? 

I welcome a day when politicians focus on the economic well-being of U.S. households versus touting a strong economy and diddly jobs. Wouldn’t it be great to see a government that supports employees over employers? We’ve got to find a way to help increase American’s household income, cut their expenses, and encourage saving.

Coronavirus is a wakeup call to just how much blood businesses have squeezed out of us, the American people, enabled, and at times empowered, by a government that has the employer interest at heart leaving the employees vulnerable through years of deregulation and policy favoring wealthy constituents. 

Here’s to the hopes of reopening an American economy that puts the American people and the American workers first.

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