The Bureau of Labor Statistics for July states that 5.7% of Americans are unemployed. Percentages are sometimes difficult to visualize, so how about this number: 8.8 million people are officially out of work.
The number of the unemployed is actually higher, because the BLS only counts people who file for unemployment insurance.  However, in the official numbers, you can view the stats by certain categories to see who’s losing a lot of ground. In July, whites were unemployed at around the national average (5.1%). If you’re African American or Latino, the unemployment rates are much higher (9.7% and 7.4%, respectively).
One of the most shocking numbers is for teenagers. Yep, teens get a category, and the rate is just a little over 20%. For a bit of a comparison, the unemployment rate peaked at 25% in 1933 for all workers. Of course, that’s an average, and there were parts of the country were whole populations were unemployed because of something called the Great Depression. These days we’re not anywhere near depression levels in terms of unemployment and the economy tanking, but we are in an era where a number of factors have aligned to produce a real downward drag on sectors of the economy. The price of oil, the credit mess, war, real estate woes, decreased consumer spending, and prices for goods and services increasing mean that we’re going to languish in the economic doldrums for the next year or so. Businesses are spending less, too. If staff cuts can balance out the bottom line, then cut away — or face extinction.
Government solutions to crises like this run the gamut of tax cuts to direct cash payments to individuals to stimulate the economy back into a period of growth. The economic stimulus checks that went out did help goose the economy a bit as consumer spending slightly rose. But really, people aren’t complete fools, and most paid down their debt or saved the money if they could afford to. It seems in the “rational actor” world of economics, people know we’re in a shitstorm, and they’re battening down the hatches.
For those of you who are gainfully employed (but not in that category of “wealthiest families”), your wages are not keeping pace with the cost of living, and the measurement of your wealth (i.e., total assets) has plummeted due to the real estate bust. For most people, their homes are their biggest investment, and with home sales at a crawl, foreclosures ascending, and banks becoming more strict in the way they lend money, the ability of families to maintain their middle class dream is becoming harder and harder. From the late ‘90s to right around when the real estate bubble burst (2007), many middle class families kept their comfortable quality of life going by amassing debt to offset the sluggishness in wage increases.
Well, that’s the bad news. If you’re one of the lucky ones who are still working and have a “pretty good job,” here’s some news that might make your collective sphincters tighten up. Okay here goes: that communist rag known as The Wall Street Journal reported the other day that companies that offer pensions to their employees are now using the tax benefit of pension plans for retirement benefits of executives.
Wait. Can’t a company contribute money to pension plans regardless of the amount of money an employee makes? Not exactly. The law governing pensions say that an employer cannot discriminate in favor of higher paid employees. So most companies give their execs a pension package that is not subject to the tax break – they called these “supplemental pensions.”
Now, here comes the Three Card Monty move that is highly suspect and could result in lower paid employees losing their pensions. Ready? Companies like Intel are moving money from supplemental pensions into pension plans that offer the tax break while “freezing” and phasing out pensions for the rank and file. The benefits to these maneuvers are manifold: 1. Intel gets an immediate tax break for the “contribution” made to the pension plan. 2. Intel does not have to pay supplemental pensions out of their revenue, but rather lets the pension plan dole out the dollars on a fixed schedule – this allows Intel to book profits on these savings. 3. To get around the non-discrimination rules governing pensions, companies don’t have to compare salaries of individuals. Rather, they can use theoretical group categories that can be manipulated to show there is no discrimination going on.
Ah, but there is discrimination. What kind of discrimination, you ask? Simply put: executives drawing on pensions get a sizable amount more than the rank and file. The Wall Street Journal cited a lawsuit brought against an insurance company that awarded eight of their high level employees a nice pension package (one person got about $5200 a month for life) after the part of the company was sold and they had lay offs of over 200 people. In order to “prove” the company did not discriminate against rank and file employees who were getting a pension, small increases (anywhere from $2 to $8) were given to 100 employees. One guy who was miffed at the disparity sued in Federal court, but the company argued the pension increase was a “business decision.” Both the lower court and the Appeals court agreed –- nullifying the claim of discrimination.
Ain’t class warfare grand? It’s stories like this that reinforce the feeling of powerlessness among those whose middle class status is a tenuous one. My colleague Jon Cummings wrote an incisive post the other day chronicling the ongoing crimes committed by the Bush Administration. He wanted to know where the outrage was: Why is it that Bush and his cronies get off the hook for clear violations of law, and the collective reaction is muted? I don’t have a simple answer, but I would suggest economic fears have the effect of narrowing our focus to the sphere of individual self-interest while mitigating our collective interest in prosecuting high crimes and misdemeanors.
Tags: Pension Plans, Pop Politico, Ted Asreagdoo, The Economy, Unemployment, Unfair Tax Breaks
