Wednesday, November 01, 2006

Update on the Downturn

NPR's Morning Edition brought us an item yesterday (October 31) further refining the truth millions of Americans are living: "the rich get richer, and the poor get poorer." "Economy: Imports, Technology Hurt Low-Skilled Workers' Pay," NPR Morning Edition, October 31, 2006.

It involved an interview with, and drew upon an article by, the Wall Street Journal's reporter, David Wessel. David Wessel, "Why It Takes a Doctorate to Beat Inflation," Wall Street Journal, October 19, 2006.

I won't repeat all the stats here; you can get them from the text and charts in Wessel's story. But here are some of the highlights:

Between 2000 and 2005 those who didn't finish high school, high school grads, "some college," and college grads, together, constituted nearly 90% of the American work force. All suffered a decline in pay (adjusted for inflation). For college grads it was a 3.1% pay cut. Even those with masters degrees (an additional 7.9% of the work force) saw their wages decline 1.8%.

It's only when you get to those with advanced degrees beyond the masters that there is any increase at all. Ph.D.s saw a 2.9% wage boost, and those with an M.B.A., J.D. or M.D. enjoyed the biggest boost: 10.6%.

And of course these trends have benefited most of all the superstars at the top -- corporate CEOs, TV anchors, athletes, musicians. The top 1% of wage earners got 9% of all income in 1984, and 16% of all income 20 years later, in 2004.

As Wessel points out, this is not just a matter of "the more education you get the more you'll earn." He notes, "the world has changed in ways that make the No. 1 or No. 2 -- whether a trial lawyer or a rock star -- much more valuable than No. 19 and 20. As technology has helped create superstars, the gap between Oprah's paycheck and those of local talk-show hosts is larger than ever."

Ironically, given that his article appeared in the Wall Street Journal, there is no mention of what else has "helped create superstars."

We know about the pressures on a business that goes from family held to publicly traded. Products that were once the creation of workers proud of their craft become just another commodity. Those workers, once a part of the owners' "family," are now "human resources." Their care becomes a cost that, once cut, pleases Wall Street and increases stock prices.

What has received less attention is the impact of the mergers that consolidate not just sub-sets of "media," such as newspapers or radio stations, but "multi-media": book publishers, movie studios, television networks and stations, cable television companies, newspaper and magazine publishers, movie theaters, video and DVD sale and rental, satellite distribution systems, and so forth.

Such conglomerations have the kinds of conventional antitrust implications for marketplace competition that one would expect.

Much more significant, in my view, are their implications in terms of the "marketplace of ideas," the barriers to entry for new talent -- and the wages earned throughout the "creative community."

These are profit-maximizing businesses with the opportunity for enormous profits from the "synergy" their mutli-media and global hype apparatus make possible: the $5 million book advance for the latest novel of a popular writer, made into a feature film at their studio, shown in their movie theaters, and then on their TV networks and cable systems, with the stars placed as guests on their late night shows, and written up in their fan magazines and newspapers, before goiing to DVD and sold and rented through their nationwide outlets. The athletic stars on the teams that they own can become the sports commentators for the networks they own. And with that kind of media power we must not forget the benefits they receive from the politicians that they own who are, among other things, able to prevent the public outrage they create from taking the form of meaningful regulation of their overreaching.

No longer is there time, inclination or motive to promote a new author, just because the book publisher thinks she's really good and deserves promotion, knowing that he will probably lose money on her first novel.

Super big media, with super hype apparatus, and super pressure to cut costs and drive up stock prices, require super stars.

And super stars can earn super pay -- especially if their employers' economic market power is such that they can hold, or drive down, the pay of everyone else.

And therein lies what Paul Harvey used to call "the rest of the story."

P.S. I read somewhere, years ago, that there is a sort of formula for how far out of whack the disparity between the rich and the poor can be before a revolution breaks out. At that time America was already well beyond that point -- since which time it has only become much worse. I know I need to find the research that supports this assertion -- if such exists. The NPR site reports, "Last year, the average CEO made about 370 times what the average worker did, Wessel notes. Other winners include hedge-fund managers, baseball players and rock stars." I'd heard it was a disparity of 450:1; but with those differentials who's counting.

And see my earlier, Nicholas Johnson, "Pricey Presidents' Added Cost," The Daily Iowan, March 7, 2006.

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