Worst Idea Of The Year? Economist Says: Let's Just Cut Salaries By 10% To Fix Unemployment!
If we were having an actual national emergency, rather than corporations happily sitting on piles of cash and handing out record bonuses and dividends, this might --- might make sense. But since the only "emergency" here is corporate greed, I can only speculate as to why it only makes sense to take money from workers.
I think it would make a lot more sense to take 95% from CEOs:
With 9.5 percent unemployment and millions more underemployed, it seems like a daunting, almost impossible, task to find jobs for everyone. But Ken Maryland, president of ClearView Economics, has an idea: Cut everyone's pay by 10 percent.
"EVERYBODY -- from the president down to the chambermaid -- takes a 10% cut in compensation," writes Marlyand for Marketwatch. "This freed-up compensation expense is then used to re-employ the 8% (12.3 million) of the unemployed. Net-net, the nation's compensation bill has remained unchanged, and the unemployment rate is now 4.5%! Voila!"
The 4.5 percent Maryland refers to, is the optimal unemployment rate, which allows for employee turnover and doesn't risk inflation. While his idea may seem crazy, companies have begun to do it in small fashion, as Maryland points out, by having furloughs and pay cuts.
Maryland says this has a chance because there's an "inherent fairness" to the idea since everyone will be receiving the pay cut. But not really, since the employed would have to take the pay cut, while the unemployed will receive a significant increase in pay by suddenly having a paycheck.
Not to mention, the drop in pay doesn't mean a mortgage that's locked in will suddenly be cheaper or a car payment miraculously fall 10 percent. Maryland also says an issue with the idea would be making sure everyone falls in line, pointing out that unions would have a fit (although I'm not sure that CEO, whose pay increased more than anyone in business over the past 30 years, would be too happy with the idea as well).
Not to mention the biggest flaw in this proposal: Namely, why would you trust executives to hire people after they cut salaries?
cut pay for people that spend the most of their income and drive the economy further into toilet. Obviously Maryland is not the brightest bulb on the chandralier.
haven't magic wand economic policies that took 5 minutes to dream up always worked out great in the past?
Here's one...fire all the economists, shred their degrees. Then they have to go back to school if they want to stay employed (helping the economy) and we can spend it on hookers and blow (helping the economy).
Oh and yeah, I and all my union brothers and sisters already took our pay cut as well.
How about just reducing everyone's mortgage to reflect the actual home value post bubble burst?
Then, have all economists' salaries slashed to $6 an hour - except for Krugman and a few others who actually know what the hell they are talking about.
Krugman could be paid through a grant for economists' whose predictions are actually a reflection of reality.
Rush Limbaugh is what a smart person thinks a stupid bigot sounds like.
Let's all work for FREE! We can barter chickens for healthcare. And food and energy don't cost anything..they're not even in the inflation numbers!
Let's eliminate doctors and healthcare! Save a ton of money that way...there'd be no more disease...everyone's death would be by natural causes...only contingent on the innate viability of an individual's body.
The perfect Randian world!
We can all go Galt! BRILLIANT!
"Anyone that makes less than $150K in this country, has no business voting Republican."
Cut pay? Haven't we already done that? How's that working out for you? I know I'm only able to make half of what I did in 2001 as a network engineer. I think a 50% cut should satisfy you. Let's see, as a millwright I was making $12.50 an hour in 1983. Now it's 2010 and I can't even get a job as a Helpdesk technician for $12.50. My wife's company hasn't given out raises in over 3 years! Time for someone else to give. We've given enough!
..haven't even had a COLA pay raise in two years. I feel luckier than most to have a job but I try not to get my stomach in a knot every day that "today's the day" it all ends.
Mickey: "It was an epiphany. Do you know what an epipany is?"
Keoni: "NOT NOW MICKEY!"
Where my son works he hasn't had a raise in 2 years either and his company stopped contributing to his 401K. I say that amounts to more than a 10% pay cut. But like you he at least has a job.
that's the statement I hate the most.... and everyone in the herd repeats, and regurgitates the same passive idea over and over again.
i've got great work ethic, the office in america is a backstabbing battle ground (especially so in a poor economy).
I get paid for the work I do... its not a gift from my benevolent (sarcasm) boss.
That is the great tragedy now...the American Dream has been rendered down to "I'm lucky...I have a job".
Sad. Truly sad, and NONE of our so-called representatives really give a shit.
"Anyone that makes less than $150K in this country, has no business voting Republican."
I actually just got a COLA after four years in which our user-base has increased 500%. I got 3%. For four years. And five times the work.
Want to guess what the boss just bought? An SL-63 AMG Mercedes. So I get to walk by a $200,000 car every morning on my way into my despicably underpaid job. Well, when he's not vacationing in Spain.
And I'm the sysadmin! Inventory control? That's me. Data security (and we are a data provider)? That's me. Purchasing? That's me. I could save this company my 3% raise EVERY WEEK if I felt like it.
I no longer feel like it. I feel like COSTING this company my 3% raise every week. And I most certainly can.
And, as a card carrying member of the IWW, I believe sabotage is a perfectly legitimate form of labour protest.
It reminds of a co. I worked for where all the senior VP's had back door deals with their vendors that were costing us tons of profit, to the point we were in the usually in the red. They were all happily skimming along and giving me shit because my dept. was only moderatly profitable - and I was always getting dressed down.
So, one weekend I identified all the malefeasance and put it in a report, complete with graphics, binding the whole deal. I identified the problems, what it was costing us, the solution, how to implement and the positive results of enactment.
I made a dozen copies and put them on each VP's desk, the CEO, CFO etc... I was promptly offered a severance package to leave.
Which I took.
We've been cutting wages for one sector after another for 30 years. All that's gotten us is lower wages and the greatest unemployment since the Great Depression. His idea has already been tested and it failed miserably.
Republican economic policies can be summed up in three words - cut workers wages. That's their solution to everything, cut workers wages.
Maryland's doing his colonoscopy with his cranium. Hourly wage workers routinely have their hours cut, and Ken, that's by more than 10%. Salaried workers are being subjected to rotating layoffs and are being forced to take unpaid leave--also more than 10%. The guys at the top are lining their pockets and are increasing their perks and bonuses far more than 10%--because they Ken. Because they abuse their authority.
Henry Ford raised workers' wages so they could afford his product, and spearheaded America's rise to top place in world economies. Can't anyone figure this out?
..froze salaries? Worked out good for my employer at the time; not so good for me.
Mickey: "It was an epiphany. Do you know what an epipany is?"
Keoni: "NOT NOW MICKEY!"
salary isn't fair and equitable for you to give up 10% of your 25k? I don't understand.
_Always_ look at the underlying assumptions being pushed by some "economist." _French_ economists, I believe, tried reducing unemployment by paying people the same weekly wage for _fewer_ hours so that more people _had_ to be hired.
Same problem. Totally different "economic" solution.
..lousy estate penalties (if you own a home and pass away, transferring to the next generation is costly for them).
Mickey: "It was an epiphany. Do you know what an epipany is?"
Keoni: "NOT NOW MICKEY!"
So, if we pass a law raising everyone's taxes 10 percentage points and requiring the government to use that money to create jobs, that's a terrible idea.
If we pass a law that gives 10% of our salary back to employers IN HOPES that they might hire someone new, that's a good idea.
Sounds suspect to me.
..si/no?
Mickey: "It was an epiphany. Do you know what an epipany is?"
Keoni: "NOT NOW MICKEY!"
... of the rich ($1,000.000) or more by 10%, wouldn't that be enough?
If you need funds to pay for essentials, you have a revenue problem
If you need funds to pay for frivolity, you have a spending problem
How about just making the tax rates more progressive?
Oh nooooos, we can't do that! It's UNFAIR!
"Anyone that makes less than $150K in this country, has no business voting Republican."
...lop off the heads of 10% of the idiots who come up with these ideas and the greedy, criminal, corpora-fascists who are working hard to ensure the 'great middle class' never recovers?!?
"Egotism is the anesthetic that dulls the pain of Stupidity" - Frank Leahy
How can we string them up from lamp-posts with their own intestines if we've decapitated them?
Don't tempt me to wrap 'em around the armpits.
This is just part of the ongoing efforts to shift income and wealth away from the productive working members of society to the parasitic rentier (investor) class. This has been going on now for over 30 years. They are just getting more blatant about it. They really do want to institute a kind of corporate feudalism.
Did this economist really say that this is what we should do, or was he talking about both the pros and cons of a "what if" scenario? Seems like there's a lot of emotion in this post that may be a little over the top. This whole discussion (this post included) does touch on the economic idea of sticky wages. In principle, it may be true that if wages were more dynamic and purely demand driven, all of our pay would go down and unemployment would be diminished. But there are a lot of structural impediments to this, as the economist and both authors were keen to point out. What everyone seems to be saying is that wages are sticky. That's not a new nor controversial idea. But it's important to keep in mind because there's that possibility that the high unemployment rate has something to do with downward pressure on wages. Maybe it's not just banks that need to be reformed, but unions have to be strengthened, minimum wages raised, stricter windfall profit rules applied, etc. The point is, find where the downward pressure coming from and fix it. That could have the same effect on unemployment as everyone taking a 10% paycut.
Another example of some corporate weeny who thinks profit comes from their own employees' paychecks.
Another way to redistribute wealth to the rich by a Cheap Labor Conservative.
that covers every worker in the united states, and trade laws stating that all imports must be union made, could be a way to stop job outsourcing.
http://www.iww.org/
http://en.wikipedia.org/wiki/One_Big_Union_%2...
How about this instead?
95% marginal tax rate after $5 million.
2% wealth tax on net worth of over $20 million. 5% over $100 million, and 10% on over $500 million.
Tax multi-national corporations up the ying-yang! Time for their free lunch to end.
Hefty fines for media corporations who lie and misinform on the public airwaves. So-long Fox!
This plan would help everyone except for the richest 2%, and they will still have mountains of cash around. Absolutely brilliant I tell ya'.
Get a real democrat in the White House to implement this.
Rush Limbaugh is what a smart person thinks a stupid bigot sounds like.
tax laws or any other law. Congress has to pass the bills and the president can sign them into law or veto them.
Oh I see?
So it wasn't Bush and Reagan's tax cuts for the wealthy, it was congresses' tax cuts for the wealthy.
Get real.
Rush Limbaugh is what a smart person thinks a stupid bigot sounds like.
economies have been globalized for a long time, witness the colonial era, but not to the extent we have seen in the last 30 years. the squeeze on workers cannot be alleviated without a holistic solution which engages the entire planet.
taxing profits only addresses one end of the money machine, leaving the field open to wage discrepancies, money supply inflation, and job outsourcing. we are dealing with a many headed hydra, one could cut off it's head, the pure communism model, or attempt to put it in a cage, which is my preferred solution.
in any case, i really do think that for whatever reason, the old time labor activists nailed it when they said "workers of the world, unite!"
No economist I, but in exchange for a 10% wage decrease there should be 10% less productivity from employees, yes?
I can see the conservative logic and to some degree I totally agree. Why raise taxes and give more power to the idiots who run the government? They only throw it into the MI complex (ie their own pockets) anyway. Obama's stimulus was one tenth of what it should have been. Roosevelt he ain't. But the proposal made in the article is just another greedy, insane power grab by the aristocracy.
WASF.
The people of privilege will always risk their complete destruction rather than surrender any material part of their advantage." J.K. Galbraith
All those families living paycheck to paycheck with just barely enough money to pay their mortgage...cut their pay 10% and suddenly they're 10% short on their mortgage payment. Think the banks will just say, "aw, heck, just forget that part of your payment, you're good"?
Of course that would create a lot of jobs in the foreclosure departments of banks.
Therein lies the problem.
They will want to drop EVERY dollar saved to the bottom line to increase 'shareholder value'. Same thing happens when they outsource jobs to China. They reduce wages from $10 /hr to $10 /day; but do you see the sell price getting lower..........no.
We're not addressing the problem of GREED.
This is what's been happening for the past 15 years at the company I was recently laid off from. They've gone from ~8,500 employees to <2,000, but the CEO and BoD continue to rake in huge salaries while cutting pay and laying off more workers. Every quarter when the
lossfinancial statement comes out, the explanations and plans are always geared towards maximizing dividends for shareholders in the upcoming quarter.Corporations are nowadays only geared towards looking three months ahead, and the goal is to provide for the shareholders. Customers come 2nd, and employees? Dead last, of course.
Yah, let give our 10% to the rich like we are now.
I don't know how much corporate or politico money Clearview Economics is deriving from this economic gobbledygook -- probably a pile from those cheap-labor conservatives. Too bad it doesn't actually make any sense, particularly common sense. There has been no "trickle-down" from Wall Street and TBTF Bankers to Main Street -- that is the crux of the problem with any economic expansion today, not the cost of labor. Lines of credit for small and mid-cap corporations have been frozen. And corporations with capital reserves are sitting on over $1.8 Trillion USD, apparently waiting for more government/taxpayer bailout largesse.
Considering that consumer spending amounts to about 65% of GDP, cutting into that spending with an across-the-boards wage cut of 10% amounts to economic fratricide of the Middle Class, AND the economy. Here's a couple of better ideas, which I am willing to release to corporations and politicians alike as shareware ($5,000 / corporate adoption or 3% of new business generated, whichever is larger):
(1) reduce contracted corporate executive compensation by 90%, with bonuses actually tied to 4 straight fiscal quarters of economic expansion rather than quarterly profit. Then use that saved monies 50% for raises for all hourly workers and 50% for new hourly hires;
OR (my favorite)
(2) replace recalcitrant over-compensated corporate executives with imported executives from China and India, for an over all savings in executive compensation of 80% to shareholders, and like (1) use that saved monies 50% for raises for all hourly workers and 50% for new hourly hires;
Actually, I think I may actually be on to something here regarding replacing our over-compensated politicians as well -- I would be willing to bet that their Chinese and Indian replacements would not only work for 50% of the current compensation given these incumbent toadys, but that these replacements might finally be more responsive to the needs of the majority of their constituents as well. This idea I definitely want to try out, and soon ...
David
eom
"Those who make peaceful revolution impossible will make violent revolution inevitable."
-- John F. Kennedy
Corporations are awash in cash to employee people. They just choose not to.
this is what employers want..........."cheap labor"..not only that they want full control. they want desperate
workers and a large worker demand so to keep wages/benefits low. that way we can compete with foreign workers abroad. be prepared for INflation of everything you want and DEflation of everything you have. people are deleveraging so "consumerism" is way down.......never to be anything like the last 15 yrs. especially like the last 10yrs. the phony housing appreciation/flipping/"get rich" scheme economy is over. unless the foreclosures slow way down it's going to get worse. corporations are making/have money because they're cutting costs/employees. our economy has moved OFF-shore while people rolled around in money from the phony economy during the Bush administration.
since make that come true would involve...
1. Seeing a lot of CEOs, especially those at places like Goldman Sachs and JP Morgan, doing the perp walk on the teebee in orange jumpsuits, and
2. The execs taking their pay cuts first, and in a transparent way, so we can be sure that they don't take back with stock options and bonuses and perks and private planes and houses and personal servants and hookers and blow what they "lost" from their paychecks.
Just saying.
DISemployment.
At this point, is there anybody who thinks that Versailles is busily normalizing 10% nominal (20% real) joblessness accidentally? And not as a matter of policy? The transparent agenda behind this guy's proposal should make the answer to that question clear to a child of six.
New Study Identifies Revenues for Doubling of Social Security Payout
Democracy is too important to be entrusted to politicians.
Rise Up!
Protest!
in this study.
.
Companies are not hiring because of a lack of demand for their products, or a lack of available credit. How does this address either problem?
If salaries dropped 10% then everyone would be more tightly strapped financially and demand would go down making things even worse. Even if prices dropped 10% to match the salary drop (not likely), debt payments would stay the same.
Incredibly stupid idea.
... do you imagine this guy is thinking about "everyone?"
From the standpoint of somebody who wants the cheapest labor possible, it's a smart proposal dressed up in the language of compromise.
let's go back to letting anyone over 55 buy into Medicare. This would greatly improve job mobility for us older folks and make early retirement possible for many more. As stated by many before this would open up jobs for the young and unemployed. It may make a hit on early SS but that is currently happening anyway.
Soc Sec or Medicare?
REQUIRE everybody to buy into Medicare
If you need funds to pay for essentials, you have a revenue problem
If you need funds to pay for frivolity, you have a spending problem
who wants to can call themselves an economist. Sort of like artist. This may be the most farcical idea I've ever heard. I'm not sure why you think the biggest flaw is that executives can't be compelled to make new hires. That isn't close to being the biggest flaw. They'd be foolish to make new hires in any event because demand would be even lower than it is now. You can't reduce disposable income overnight and expect to somehow stimulate demand.
Hasa Diga Eebowai
Progressives are so antagonistic towards economics. I majored in economics and virtually none of the other students or professors were conservative. We took a survey one time and practically the only Republican students were business majors who were compelled to take a basic-level economics course. Why do liberals think that every economist is from the Chicago school? It's like saying that biologists deny global warming because the Heritage Foundation says so. Economic consensus around the world is that the Chicago School is bogus and unscientific - these economists don't like to update their theories in the face of contradictory evidence, like everyone else does. They won't give up their ideas even after it's proven time and again that in practice, other theories work better. It's just trickle-down all the way - always has and always will. And don't even get me started on the Austrian School they brainwash kids with at fundie Christian schools. But instead of supporting good economics, so many people I know just hate all economists and make broad, generalizing statements and latch onto anything that sounds stupid and attribute it to what economists think.
Because all of the economists' on t.v. and radio are CONservative. They are the same arseholes who were talking about our great economy right up until September 18,2008.
And they are still the same arseholes on the television today, spewing the same complete and utter bulls**t!
Rush Limbaugh is what a smart person thinks a stupid bigot sounds like.
For an example of an economist who is definitely NOT conservative/right wing, check out Jim Stanford; he's the CAW's in-house economist and writes for the Globe and Mail here in Canada.
Google doubled revenue, more than doubled cash-on-hand Google 'Google Revenue'
Is unregulated capitalism sucking the life-blood out of the economy?
What stops company directors from looking at competitors and saying that if the CEO over there makes $x millions, there is no reason I can't raise my salary and perks to $x.1 millions, and so it goes. Isn't that what prima donna sports figures do?
We need some regulation to attempt to hold greed in check.
Establish a system where CEO's of Automobile Industries can earn no more than the median or the average of all workers or the dominant classification, multiplied by a factor specific to that industry.
This way a rising tide lifts all boats. Raising CEO's remuneration forces employees' raises, and raising employees' salaries, allows CEO raises. CEO's includes all major company officers.
If the assembly workers earns $50,000, and the factor for the Automobile industry is 25, CEOs are limited to $1,250,000 in total salary and perks.
There may be, or maybe should be, factors specific for Banking, Insurance, Marketing, etc.
If you need funds to pay for essentials, you have a revenue problem
If you need funds to pay for frivolity, you have a spending problem
Increase salaries by 10% for anyone paid less than 100K per year. Decrease salaries by 10% for anyone paid over 125K per year.
Not much additional expense to most employers. Instant nation-wide stimulous will increase employment . . economy fixed!
(Oh yeah, and I agree that economists like Ken should be fired post haste.)
If only someone in Washington understood how simple are the solutions?
You gotta love these republicans. After worker wages have been stagnating for at least decade due to factory closures and off-shoring jobs, and while the executives of these same company's pay has gone through the roof, right wing economists now say its now time to make those "tough" decisions and cut workers pay? I have a much simpler idea: raise the tax rate 10% on the richest 2.5% of Americans (the ones who benefited the most from the Bush tax cuts)AND raise the cap on the social security tax earnings and VOILA, a balanced budget and solvency for social security through 2075.....Maybe I ought to run for Congress on THAT platform!!
re-education.
Raise the tax rates 50% on the basta**ds! Apparently the billions they have isn't enough. So while they are still miserable, let's have a little, no, make that a lot of class warfare. They started it.
No we just need to get a democratic president to lead the people.
Rush Limbaugh is what a smart person thinks a stupid bigot sounds like.
I was watching CNBC this morning and Mark Haines had Grover Norquist and Howard Dean as guests to discuss tax rates. Grover was up first and ran with the usual battery of talking points about corporate and personal tax rates, but what happened next was completely unexpected. Mark Haines completely DESTROYED every single one of Grover's points with the simple truth and made him look like a complete TOOL.
Howard Dean just stood there and smiled. Howard did get to speak for a few seconds, but it wasn't even neccessary. I hope some Youtube channels and websites pick this up and rebroadcast it. It was a thing of beauty.
I saw that too and had to do a double take when Haines went after Norquist. All Dean had to do was sit back. Norquist is a danger to our society.
The people of privilege will always risk their complete destruction rather than surrender any material part of their advantage." J.K. Galbraith
http://www.youtube.com/watch?v=D22TlYA8F2E
The economy of the U.S. is in a deflationary spiral. Nothing can stop it -- except monetary reform.
1. No more national debt. Nations should not be allowed to borrow. If they want to spend, they have to take the political heat right away by taxing.
2. No more fractional reserve lending. Banks can only lend money they actually have.
3. Gold money is NOT the answer. Historically gold ALWAYS works against a thriving middle class and ALWAYS works to create a plutocracy.
4. The total quantity of money + credit in a national system must be fixed, varying only with the population.
It's called the American Dream because you have to be asleep to believe it.
-George Carlin
Didn't work with the bailout of the banks....
“The greatest evildoers are those who don’t remember because they have never given thought to the matter, and, without remembrance, nothing can hold them back,”
Wouldn't that just be a ten percent tax increase to the working class? It does help in that it cuts out the middle man, government, and gives the money back to the corporations. The government was going to give it to them anyway.
Whatthe Fuck?
Cut labor costs and that money will used to create more speculative bubbles.
I work for the largest PC manufacturer in the world and I already did take a pay cut. Twice in fact. Having a third one would suck immensely.
Worst idea ever thank you.
Or, better, a 95% tax on wealth?
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