For a large portion of employers, there’s no need to offer more to employees. There are still millions who are out of the labor market and whom the government has officially stopped counting as unemployed. These people aren’t sitting on personal wealth that can fund a permanent vacation. They eventually need an income, and for companies effectively looking to keep a body in place, that’s enough to continue wage depression. Labor union representation of workers has been low for years, which means that negotiations between employees and employers is always tipped in the latter’s favor.
Increasingly, there are other options, as well. Companies can outsource, as Reich argues, although that’s often more a matter of avoiding environmental and safety regulations, because, for many businesses, labor is a small portion of the cost of their goods. A bigger issue is how industries have increasingly automated operations and services. When even the work of anesthesiologists can be automated, as Johnson & Johnson JNJ +1.51% has done with its Sedasys system, how can anyone expect any job to be secure? The combination of high education, high demand, and need to administer a service locally was supposed to be the sine qua non of professional security. But it doesn’t exist.
Perhaps reality will sink in when CEOs realize that their jobs can also be sent overseas to thoroughly competent managers in a global marketplace who will cost the company less money. However, for now, the premium is still on reducing human costs and increasing profits, all the while falsely claiming that they can’t help it because there’s a legal mandate to maximize shareholder value...
As William Lazonick, professor of economics at the University of Massachusetts Lowell, wrote in the Harvard Business Review, we currently have profits without prosperity. Corporate profits are high and the stock market has never done better, but most Americans don’t partake of the benefits. As Lazonick wrote, “While the top 0.1% of income recipients—which include most of the highest-ranking corporate executives—reap almost all the income gains, good jobs keep disappearing, and new employment opportunities tend to be insecure and underpaid.”
Companies aren’t investing their capital and are even borrowing money — and keeping wages low and not hiring people for expansion — to push cash into stock buybacks...
Why? CEOs are paid largely in stock and, Lazonick argues, buybacks increase share prices and, as a result, their own compensation. Corporate boards are part of the system because they typically are filled by executives who have their own compensation to consider. It’s an incestuous economic system combined with a sense of entitlement...