Wages in America:
The Rich Get Richer and the Rest Get Less

by JACK RASMUS (Copyright 2004)

Do you feel like you're working harder, longer hours, and still can't keep up with rising taxes, gasoline prices, utility bills, ballooning medical expenses, or the accelerating cost of paying for your kids' education?

Well, you're not alone! You're in good company. The company of tens of millions of American workers today on the same economic treadmill, having to walk faster and faster just to stay in the same place, or, unable even to keep up with the pace due to unemployment, loss of benefits, or wage cuts by their employers.

How would you like to be making $200,000 a year today after 25 years on the job? Well, if you started with the pay of an average worker 25 years ago that's what you'd be making today---if you got the same kind of raises that CEOs of American companies got for the past 25 years! The average compensation of a CEO in 1980 was about 40 times that of the average worker in his company. Today it is more than 500 times! If your pay had kept up with his, you would be making more than $200,000 this year. Of course, that didn't happen, did it? So let's see what actually did happen to the average American worker's pay over the past 25 years of the Reagan-Bush economic regime..

Stagnating Workers' Wages

In 1979 the American worker's average hourly wage was equal to $15.91 (adjusted for inflation in 2001 dollars). By 1989 it had reached only $16.63/hour. That's a gain of only 7 cents a year for the entire Reagan decade.

But wait. Things get worse! By 1995 it had risen to only $16.71, or virtually no gain whatsoever over the 6 years between 1989 and 1995. During the great 'boom years' between 1995 and 2000 it rose briefly to $18.33 per hour. In other words, from 1979 to 2000, even before the most recent Bush recession, after more than two decades the American worker's average wages increased on average only 11.5 cents per hour per year! With nearly all of that coming in the five so-called 'boom' years of 1995-2000, and most of that lost once again in the last three years. And that includes for all workers, even those with college degrees.

The picture is worse for workers who had no college degree. That's more than 100 million workers, or 72.1% of the workforce. For them there was no 'boom of 1995-2000' whatsoever. Their average real hourly wages were less at the end of 2000 than they were in 1979! And since 2000 their wages have continued to slide further.

The Great Productivity Swindle

Management is always quick to say in contract negotiations, 'give us more productivity and we can afford to give you a bigger raise'. But this has been a false promise from 1979 to 2000, and an even bigger lie under George Bush II.

With 1992 as base year, productivity was at 82.2 in 1979. It grew to 94.2 by 1989 and 116.6 by the year 2000. In the past year, moreover, it has exploded, putting it over 120. That's a nearly 40% increase since Ronald Reagan took office nearly 25 years ago!

The 100 million American workers without college degrees, whose real take home pay today is less than it was 25 years ago, certainly can't be said to have shared in that 40% productivity gain. And the other 20 million or so with college degrees whose pay rose modestly at best certainly shared in very little of that nearly 40% productivity gain.

So who got all the money?

CEOs & Executive Compensation

Considering just the period from 1989 to the present yields an obscene result. The median executive salary (cash pay and bonuses) of American CEOs rose by 79% from 1989 to 2000‹and has continued to accelerate right through the current Bush II recession! And that's only the median. The average CEO cash and direct compensation growth is even higher than 79%.

But wait! That's only CEO wage or 'cash' compensation. How about management incentives, stock options exercised, the value of new stock grants, special supplemental pensions, etc. etc. The growth of this 'direct compensation' of CEOs from 1989 to 2000 was no less than 342%!. 212% of that growth occurred in the 'boom years' of the late 1990s.

Put in real money terms, the median pay for an American CEO was $2,436,000 in 1989 and $10,775,000 by 2000.

The growth in CEO compensation has been unstoppable, and is accelerating faster every year. In 1965, CEO pay was 26 times that of their average worker. In 1980, as noted, 40 times. In 1989, it was 72 times. In 1999 it had risen to 310 times, and today, as per the above data from the accounting firm, Towers Perrin, survey it has reached 500 times.

The international comparisons are also interesting to note. Whereas the American worker today earns only about a third more than the average wage of the worker in 13 other industrialized countries, for those same countries the American CEO earns 300%, or three times, as much as his CEO counterpart. No average CEO compensation in any of the other 13 countries is equal to even half that of the typical American CEO's. For example, the ratio of CEO to average worker's pay ranges from a low of around 10 to 1 for Japan and Switzerland to a high of around 25 to 1 in the UK and Canada.

As one source has put it, "in 2000 a CEO earned more in one workday (there are 260 in a year) than what the average worker earned in 52 weeks. In 1965, by contrast, it took a CEO two weeks to earn a worker's annual pay".

The Falling Minimum Wage

One of the more shameful legacies of the past decades has been what has been allowed to happen to American workers at the lower end of the earnings spectrum. While workers at the top end have become fewer and fewer with the outsourcing and offshoring of high pay-good benefits union jobs, those at the lower end have been suffering their own severe hardship.

We are talking here about more than 10 million American workers who earn the minimum wage. (Contrary to corporate propaganda, only 28% of those getting paid minimum wage are teenagers. Most are single women or men as head of households). The minimum wage in America reached its high point in the late 1960s in terms of real buying power, and thereafter went into a deep and steady free fall of more than 29% decline in buying power under Reagan during the 1980s. In the early and mid 1990s the decline was slowed somewhat with modest increases in the minimum wage legislated by Congress, but has fallen sharply was again since the last increase in the federal minimum wage in 1996, now approaching almost a decade ago.

In terms of 2001 dollars, the minimum wage in 1979 was worth $6.55. It fell to $4.62 in 1989, rose modestly in the early and mid-1990s, but today in 2003 is equivalent to only $4.94 an hour. The minimum wage is 21.4% less today than it was in 1979.

The Legacy of Declining Hourly Wages in American: Working Longer And Harder

The overall picture is abundantly clear: real average hourly ages of more than 100 million of American workers' are less today than 25 years ago; real wages of college educated workers have risen only modestly in the late 1990s and fallen since under Bush II; and real wages of the 10 million lowest paid workers have declined more than 21%.

Given this irrefutable array of facts, one might ask 'how has the American worker and his or her family survived the last quarter century under Reagan and Bush'? The answer is by working longer hours‹individually and as a family unit‹and by taking on more and more household debt‹both in lieu of hourly wage gains.

Let's look at hours worked: The American worker not only works more hours in a year than his counterpart in other industrialized nations, but is the only worker in the 13 major industrialized countries whose hours worked per year actually increased since 1979.

Workers in all the other industrialized countries have enjoyed an actual decrease in their total hours worked per year in a comparable period.

For example, there are approximately 2080 hours of work in a year. In 1979 the American worker individually worked 1905 hours out of the possible 2080. But by 1998 he or she was now working 1966 hours a year. That's an increase of 61 hours. In contrast, a worker in Germany saw his working hours decline from 1764 to 1562. A worker in France from 1813 to 1634. And in the United Kingdom from 1821 to 1737. The picture is similar in all 13 industrialized countries recently surveyed.

As a family unit, while real wages of male workers as heads of households in the US have fallen, the American family has worked longer hours by adding more family members to the workforce. Since 1973 this increase in family average hours worked is the equivalent of adding 5 months of work in a year to the 2080 hours. Wives in working families have assumed the major share of this increase in total family hours worked, contributing more than 500 additional hours of work per year. But the male worker in the family has also worked more overtime hours, and both husbands and wives have taken on second part time jobs as well. All three developments add up to the 5 additional months of work American workers' families now work in order to offset declining hourly wages and just to make ends meet.

If it were not for working these longer hours worked, or adding record amounts of family debt (installment, mortgage, student loan, etc), the standard of living of the American worker and his family would have certainly collapsed.

What George Bush and Friends Want In A Second Term

Given these trends of longer hours worked, it is not surprising that Bush and corporate America are intent today on reducing overtime pay. After making sure hourly wages haven't risen for more than two decades, Bush and friends have recently implemented new rules to cut overtime pay for 8 million workers. Their other wage strategies include preventing any increase in the minimum wage; continuing pressure to make workers pay more for health insurance premiums, co-pays and deductibles; and promoting more offshoring of American jobs. Finally, of importance in particular to longshore workers, there's the additional Bush goal to eliminate industry-wide union contracts and replace them with local agreements. If Bush gets re-elected, expect a new Bush-Corporate offensive and push on all these fronts

Conclusion

While the American worker and family are working harder, with longer hours, and still falling further and further behind‹the American CEO is 500 times better off since Reagan, Bush I, and Bush II. Think about that $200,000 equivalent pay you might have gotten if you were treated as equally or fairly as the CEO of the company you work for.

—Jack Rasmus, National Writers Union, UAW 1981, AFL-CIO.


This article is an excerpt from Jack Rasmus's forthcoming book, THE WAR AT HOME: The Corporate Offensive in America From Reagan to Bush, which is available for pre-ordering along with offerings of other plays, music and videos.


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