By BOB HERBERT
The New York Times
January 8, 2007
Robert L. Nardelli, the chairman and chief executive of Home Depot, began the new year with a pink slip and a golden parachute. The company handed him a breathtaking $210 million to take a hike. What would he have been worth if he’d done a good job?
Data recently compiled by the Center for Labor Market Studies at Northeastern University in Boston offers a startling look at just how out of whack executive compensation has become. Some of the Wall Street Christmas bonuses last month were fabulous enough to resurrect an adult’s belief in Santa Claus. Morgan Stanley’s John Mack got stock and options worth in excess of $40 million. Lloyd Blankfein at Goldman Sachs did even better — $53.4 million.
According to the center’s director, Andrew Sum, the top five Wall Street firms (Bear Stearns, Goldman Sachs, Lehman Brothers, Merrill Lynch and Morgan Stanley) were expected to award an estimated $36 billion to $44 billion worth of bonuses to their 173,000 employees, an average of between $208,000 and $254,000, “with the bulk of the gains accruing to the top 1,000 or so highest-paid managers.”
Now consider what’s been happening to the bulk of the American population, the ordinary men and women who have to work for a living somewhere below the stratosphere of the top corporate executives. Between 2000 and 2006, labor productivity in the nonfarm sector of the economy rose by an impressive 18 percent. But workers were not paid for that impressive effort. During that period, according to Mr. Sum, the inflation-adjusted weekly wages of workers increased by just 1 percent.
That’s $3.20 a week. As Mr. Sum wryly observed, that won’t even buy you a six-pack of Bud Light. Joe Six-Pack has been downsized. Three bucks ain’t what it used to be.
There are 93 million production and nonsupervisory workers (exclusive of farmworkers) in the U.S. Their combined real annual earnings from 2000 to 2006 rose by $15.4 billion, which is less than half of the combined bonuses awarded by the five Wall Street firms for just one year.
“Just these bonuses — for one year — overwhelmingly exceed all the pay increases received by these workers over the entire six-year period,” said Mr. Sum.
In a development described by Mr. Sum as “quite stark and rather bleak for the economic well-being of the average worker,” the once strong link between productivity gains and real wage increases has been severed. The mystery to me is why workers aren’t more scandalized. If your productivity increases by 18 percent and your pay goes up by 1 percent, you’ve been dealt a hand full of jokers in a game in which jokers aren’t wild.
Workers have received some modest increases in benefits over the past six years, but most of the money from their productivity gains — by far, it’s not even a close call — has gone into profits and the salaries of top executives.
Fairness plays no role in this system. The corporate elite control it, and they have turned it to their ends.
Mr. Sum, a longtime expert on the economic life of the American worker, said he is astonished at the degree to which ordinary workers have been shortchanged over the past several years. “Productivity has been exceptional,” he said. “And for most of my life, the way to get wages up was to be more productive. That’s how our economy was supposed to work.”
The productivity gains in the go-go decades that followed World War II were broadly shared, and the result was a dramatic, sustained increase in the quality of life for most Americans. Nowadays workers have to be more productive just to maintain their economic status quo. Productivity gains are no longer broadly shared. They’re barely shared at all.
The pervasive unfairness in the way the great wealth of the United States is distributed should be seen for what it is, an insidious disease eating away at the structure of the society and undermining its future. The middle class is hurting, propped up by the wobbly crutches of personal debt. The safety net, not just for the poor, but for the middle class as well, is disappearing. The savings rate has dropped to below zero, and more Americans are filing for bankruptcy than for divorce.
Your pension? Don’t ask.
There’s a reason why the power elite get bent out of shape at the merest mention of a class conflict in the U.S. The fear is that the cringing majority that has taken it on the chin for so long will wise up and begin to fight back.