Krugman: Always Low Wages. Always. - New York Times

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Thu, 12 May 2005 21:45:47 -0700

[Zepps_News] Krugman: Always Low Wages. Always. - New York Times

 

 

 

 

<http://www.nytimes.com/2005/05/13/opinion/13krugman.html?hp>

Always Low Wages. Always.

 

 

By PAUL KRUGMAN

Published: May 13, 2005

 

Last week Standard and Poor's, a bond rating agency, downgraded both

Ford and General Motors bonds to junk status. That is, it sees a

significant risk that the companies won't be able to pay their debts.

Fred R. Conrad/The New York Times

 

More Columns by Paul Krugman

Forum: Paul Krugman's Columns

 

Don't cry for the bondholders, but do cry for the workers.

 

Standard and Poor's downgraded GM and Ford sooner rather than later

because it believes that the public is losing interest in S.U.V.'s. But

the companies were vulnerable because they still pay decent wages and

offer good benefits, in an age when taking care of employees has gone

out of style. In particular, they are weighed down by health care costs

for current and retired workers, which run to about $1,500 per vehicle

at G.M.

 

So the downgrade was a reminder of how far we have come from the days

when hard-working Americans could count on a reasonable degree of

economic security.

 

In 1968, when General Motors was a widely emulated icon of American

business, many of its workers were lifetime employees. On average, they

earned about $29,000 a year in today's dollars, a solidly middle-class

income at the time. They also had generous health and retirement benefits.

 

Since then, America has grown much richer, but American workers have

become far less secure.

 

Today, Wal-Mart is America's largest corporation. Like G.M. in its

prime, it has become a widely emulated business icon. But there the

resemblance ends.

 

The average full-time Wal-Mart employee is paid only about $17,000 a

year. The company's health care plan covers fewer than half of its

workers.

 

True, not everyone is badly paid. In 1968, the head of General Motors

received about $4 million in today's dollars - and that was considered

extravagant. But last year Scott Lee Jr., Wal-Mart's chief executive,

was paid $17.5 million. That is, every two weeks Mr. Lee was paid about

as much as his average employee will earn in a lifetime.

 

Not that many of them will actually spend a lifetime at Wal-Mart: more

than 40 percent of the company's workers leave every year.

 

I'm not trying either to romanticize the General Motors of yore or to

portray Wal-Mart as the root of all evil. GM was , and Wal-Mart is, a

product of its time. And there's no easy way to reverse the changes.

 

What should be clear, however, is that the public safety net F.D.R. and

L.B.J. created is more important than ever, now that workers in the

world's richest nation can no longer count on the private sector to

provide them with economic security.

 

When they reach 65, most Wal-Mart employees will rely heavily on Social

Security - if the privatizers don't kill it. And many Wal-Mart employees

already rely on Medicaid to pay for health care, especially for their

children.

 

Indeed, a growing number of working Americans have turned to Medicaid.

As the Kaiser Family Foundation points out, that's why children have for

the most part have retained health coverage, despite a sharp decline in

employer-based health insurance since 2000.

 

Yet our current political leaders are trying to privatize Social

Security and reduce benefits. And they are slashing funds for Medicaid

even as they give big tax cuts to people like Mr. Lee.

 

The attack on the safety net is motivated by ideology, not popular

demand. The public isn't taken with the vision of an " ownership

society " ; it seems to want more, not less, social insurance. According

to a poll cited in a recent Business Week article titled " Safety Net

Nation, " 67 percent of Americans think we should guarantee health care

to all citizens; just 27 percent disagree.

 

The question is whether the public's desire for a stronger safety net

will finally be seconded by corporations that haven't yet adopted the

Wal-Mart model of minimal benefits and always low wages.

 

Last year Richard Wagoner Jr., G.M.'s chief executive, gave a speech

about the costs of America's " Kafkaesque " health care system that

sounded a lot like my recent columns. And his company has made it clear

that it likes Canada's system: in 2002 the president of General Motors

of Canada and the head of the Canadian Auto Workers signed a joint

letter declaring that " it is vitally important that the publicly funded

health care system be preserved and renewed. "

 

But according to The Journal Register News Service, which covered Mr.

Wagoner's speech, he " stressed later to reporters that he was not

proposing a national health care plan. " Why not?

--

 

 

" As democracy is perfected, the office of president

represents, more and more closely, the inner soul

of the people. On some great and glorious day the

plain folks of the land will reach their heart's

desire at last and the White House will be adorned

by a downright moron. " --- H.L. Mencken (1880 - 1956)

 

 

Not dead, in jail, or a slave? Thank a liberal!

Pay your taxes so the rich don't have to.

 

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