One of the key aspects of human efficiency is making decisions based on facts, data, and nonideological logic. This is a critical aspect of having an efficient government and political system. In this post, we will continue to look into the issue of jobs in the U.S.
This post looks at how the wealth balance has shifted from employees to shareholders in the past two decades. Companies are wealth creators; they make a product or provide a service for which they make money. This money, in turn, goes to pay their employees or to shareholders as a function of share value due to company value or dividends.
For our parent’s generation, there were plenty of jobs, employees were well paid, benefits were generous, and employees were able to retire at a reasonable age due to pensions. This is now all changing.
Since the CEO’s of the company work for the shareholders and are paid millions of dollars by the shareholders, they are motivated to drive wealth to the shareholders, often at the expense of the employees. This is apparent as pensions have disappeared, benefits have been cut, and wages have been stagnant. At the same time, the value of the stock market has gone up dramatically.
You might think that the fact that the stock market has been going up in value is good for everyone. Unfortunately, this is not really the case. Data indicates that only about 52% of Americans own any stock at all. This may not sound too bad except that even this number is deceiving. Based on information from 2010, the wealthiest ten percent of Americans owned 81% of all directly and indirectly held stock, according to NYU economics professor Edward N. Wolff. This was reported to be much higher now given that the market has gone up in value since then. Also, an increasing part of the market, about one quarter, is now owned by foreigners. So, based on all this, the majority of Americans are getting little benefit out of stock market growth which is one of the main reasons for the widening wealth gap in this country.
This is making itself know in a number of ways. One is the growth rate of the economy. The economy has been stuck at a growth rate of less than 3% since 2005, no doubt in part because many people are just getting by and not spending much.
Another issue is the loss of motivation or engagement in employees as they realize that they are not as valued as they should be due to a number of reasons. As Herb Kelleher, the founder of Southwest Airlines said, “Your employees come first. And if you treat your employees right, guess what? Your customers come back, and that makes your shareholders happy. Start with employees and the rest follows from that.” This, unfortunately, is not the feeling that employees in the U.S. have in many cases today.
Contrary to what the politicians say, the government does not create jobs. Only about 2% of employed people work for the federal government and this number is fairly stagnant. Most of the new jobs in the U.S. are created by entrepreneurs via small companies but unfortunately this has been declining in recent years. We have to give people the opportunity to become entrepreneurs by making sure that they have the time and wealth to go out and do this.
Remember that companies are intended to create wealth for everyone, including employees. Right now, there is little holding back this shift in value from employees to shareholders. As with the issue of robots and automation and as the stress that this is causing in our society is becoming more and more apparent, the government is going to have to step in soon and do something to correct the imbalances that are occurring.
The goal of these posts is to provide the true story behind issues that we are facing in this country. We can no longer allow ideology to make decisions for us when facts and data prove that we should be doing thing differently.
Next: Poverty in the U.S.