Dean Baker wants to ADD this to your post titled - How Superstars' Pay Stifles Everyone Else
The Superstar Effect: It Ain't Just Technology
Sunday, 26 December 2010 05:06
The NYT has a lengthy piece that notes the sharp rise in inequality in the last three decades due to the "superstar effect." This is attributed in part to the fact that technology allows a top athlete or entertainer to be seen by far more people in 2010 than in 1960.
It is important to recognize that it was not technology alone that allowed superstars to profit from this change. The U.S. government has gone to great lengths to strengthen the reach and enforcement of copyright law, in many cases leading to serious restrictions on individual behavior. For example, it was briefly illegal to sell digital recorders because they were not encoded to protect copyrighted material.
This fact it is important because it means that policy decisions, not just technology, was central to the rise in inequality. This is also the case with the soaring pay of top corporate executives. This is attributed to their growing responsibilities as the size of the largest corporations increases. However, companies in Europe and Japan expanded as well without a corresponding increase in CEO pay. This suggests that the difference in compensation is more likely attributable to differences in laws and norms surrounding corporate governance than any increase in the value of effective leadership to corporate profitability.
F6 .. "Executives and politicians must find new ways to link value creation and job creation. If they don’t, business leaders will continue to lose legitimacy in society, especially if they keep prospering while people around them are struggling. Instead of a virtuous circle, the relationship between business and society will become a vicious circle."
Yeah, repeat .. I went off sport when the first US athlete was paid a million dollars. It didn't feel or smell right then. Course, my action didn't help anybody. And you can't stay away from all of it forever.
This is always worth repeating ..
"In 1977, an elite chief executive working at one of America’s top 100 companies earned about 50 times the wage of its average worker. Three decades later, the nation’s best-paid C.E.O.’s made about 1,100 times the pay of a worker on the production line." [...]
"in the 1970s found that executives in the top 10 percent made about twice as much as those in the middle of the pack. By the early 2000s, the top suits made more than four times the pay of the executives in the middle." [...]
"Xavier Gabaix and Augustin Landier, published a study [ http://papers.ssrn.com/sol3/papers.cfm?abstract_id=890829 ] in 2006 estimating that the sixfold rise in the pay of chief executives in the United States over the last quarter century or so was attributable entirely to the sixfold rise in the market size of large American companies.
And therein lies a big problem for American capitalism.
CAPITALISM relies on inequality. Like differences in other prices, pay disparities steer resources — in this case, people — to where they would be most productively employed." [..]
"Other experiments have found that winner-take-all games tend to elicit much less player effort — and more cheating — than those in which rewards are distributed more smoothly according to performance."
Ultimately, the question is this: How much inequality is necessary?"
It is true that the nation grew quite fast as inequality soared over the last three decades. Since 1980, the country’s gross domestic product per person has increased about 69 percent, even as the share of income accruing to the richest 1 percent of the population jumped to 36 percent from 22 percent. But the economy grew even faster — 83 percent per capita — from 1951 to 1980, when inequality declined when measured as the share of national income going to the very top of the population.
One study concluded that each percentage-point increase in the share of national income channeled to the top 10 percent of Americans since 1960 led to an increase of 0.12 percentage points in the annual rate of economic growth — hardly an enormous boost. The cost for this tonic seems to be a drastic decline in Americans’ economic mobility. Since 1980, the weekly wage of the average worker on the factory floor has increased little more than 3 percent, after inflation.
The United States is the rich country with the most skewed income distribution." According to the Organization for Economic Cooperation and Development [ http://www.oecd.org/document/53/0,3746,en_2649_33933_41460917_1_1_1_1,00.html ], the average earnings of the richest 10 percent of Americans are 16 times those for the 10 percent at the bottom of the pile. That compares with a multiple of 8 in Britain and 5 in Sweden.
US workers are less mobile, yet the TeaParty trogs who CRY FREEDOM seem to be happy with that
Banks were 'under control until Reagan, and the 'best and brightest, eager to become richer flocked back to the finance industry where they could play to their hearts content making .. .
"A third of the 2009 Princeton graduates who got jobs after graduation went into finance; 6.3 percent took jobs in government."
CATCHY, but UGH! The financial industry became the wave of the times, still cruising, despite the odd dump or two.
The financial industry ballooned, cuz it's get rich, baby, get rich, even though ..
"bankers’ pay could be structured to discourage wanton risk taking."
US companies hire top people to spend ALL their day working out how to dodge American taxes. Great job if it interests you.
This stuff will do me for now ..
"At the White House on Dec. 15, business executives asked President Obama for a tax holiday that would help them tap more than $1 trillion of offshore earnings, much of it sitting in island tax havens.
The money -- including hundreds of billions in profits that U.S. companies attribute to overseas subsidiaries to avoid taxes -- is supposed to be taxed at up to 35 percent when it’s brought home, or “repatriated.” Executives including John T. Chambers of Cisco Systems Inc. say a tax break would return a flood of cash and boost the economy.
What nobody’s saying publicly is that U.S. multinationals are already finding legal ways to avoid that tax. [...]
Merck & Co Inc., the second-largest drugmaker in the U.S., last year brought more than $9 billion from abroad without paying any U.S. tax to help finance its acquisition of Schering-Plough Corp., securities filings show. Merck is also appealing a federal judge’s 2009 finding that Schering-Plough owed taxes on $690 million it had earlier brought home from overseas tax-free.
The largest drugmaker, Pfizer Inc., imported more than $30 billion from offshore in connection with its acquisition of Wyeth last year, while taking steps to minimize the tax hit on its publicly reported profit.
Disclosures in Switzerland and Delaware by Eli Lilly & Co. show the Indianapolis-based pharmaceutical company carried out many of the steps for a tax-free importation of foreign cash after its roughly $6 billion purchase of ImClone Systems Inc. in 2008.
‘Trivially Small Taxes’
“Sophisticated U.S. companies are routinely repatriating hundreds of billions of dollars in foreign earnings and paying trivially small U.S. taxes on those repatriations,” said Edward D. Kleinbard, a law professor at the University of Southern California in Los Angeles. “They devote enormous resources first to moving income to tax havens, and then to bringing those profits back to the U.S. at the lowest possible tax cost.”
With the exception of the Schering-Plough case, no authority has accused Merck or Pfizer or Lilly of paying less tax than they should have. [...]
U.S. companies overall use various repatriation strategies to avoid about $25 billion a year in federal income taxes, he said. [...]
“The current U.S. international tax system is the best of all worlds for U.S. multinationals,” said David S. Miller, a partner at Cadwalader, Wickersham & Taft LLP in New York. That’s because the companies can defer federal income taxes by shifting profits into low-tax jurisdictions abroad, and then use foreign tax credits to shelter those earnings from U.S. tax when they repatriate them, he said."
Business is the cat, the people represented by government regulators the mouse in the "Cat and Mouse" game.
Good work .. “Some of the best minds in the country are spent all day, every day, wheedling nickels and dimes out of the tax system,” .. if it interests and satisfies you
Ouch, read it ALL LOL before, but now only 1 cm down .. just thought to isolate some bits .. plenty enough on it for now.
HAPPY NEW YEAR .. to liberals particularly .. to the 'money making only guys' on condition, you look in the mirror, and consider the American society you are creating. Buffett, Gates and others are.
Many Low-Wage Jobs Seen as Failing to Meet Basic Needs
A study on economic stability says many jobs today are unlikely to cover fundamentals like housing, utilities and food. Justin Lane/European Pressphoto Agency
People rely on food banks, like the Community Food and Outreach Center in Orlando, Fla. Todd Anderson for The New York Times
By MOTOKO RICH Published: March 31, 2011
Hard as it can be to land a job these days, getting one may not be nearly enough for basic economic security.
The Labor Department will release its monthly snapshot of the job market on Friday, and economists expect it to show that the nation’s employers added about 190,000 jobs in March [see http://investorshub.advfn.com/boards/read_msg.aspx?message_id=61604392 ]. With an unemployment rate that has been stubbornly stuck near 9 percent, those workers could be considered lucky.
But many of the jobs being added in retail, hospitality and home health care, to name a few categories, are unlikely to pay enough for workers to cover the cost of fundamentals like housing, utilities, food, health care, transportation and, in the case of working parents, child care.
A separate report being released Friday tries to go beyond traditional measurements like the poverty line and minimum wage to show what people need to earn to achieve a basic standard of living.
The study, commissioned by Wider Opportunities for Women, a nonprofit group, builds on an analysis the group and some state and local partners have been conducting since 1995 on how much income it takes to meet basic needs without relying on public subsidies. The new study aims to set thresholds for economic stability rather than mere survival, and takes into account saving for retirement and emergencies.
“We wanted to recognize that there was a cumulative impact that would affect one’s lifelong economic security,” said Joan A. Kuriansky, executive director of Wider Opportunities, whose report is called “The Basic Economic Security Tables for the United States.” “And we’ve all seen how often we have emergencies that we are unprepared for,” she said, especially during the recession. Layoffs or other health crises “can definitely begin to draw us into poverty.”
According to the report, a single worker needs an income of $30,012 a year — or just above $14 an hour — to cover basic expenses and save for retirement and emergencies. That is close to three times the 2010 national poverty level of $10,830 for a single person, and nearly twice the federal minimum wage of $7.25 an hour.
A single worker with two young children needs an annual income of $57,756, or just over $27 an hour, to attain economic stability, and a family with two working parents and two young children needs to earn $67,920 a year, or about $16 an hour per worker.
That compares with the national poverty level of $22,050 for a family of four. The most recent data from the Census Bureau [ http://www.nytimes.com/2010/09/17/us/17poverty.html ] found that 14.3 percent of Americans were living below the poverty line in 2009.
Wider Opportunities and its consulting partners saw a need for an index that would indicate how much families need to earn if, for example, they want to save for their children’s college education or for a down payment on a home.
“It’s an index that asks how can a family have a little grasp at the middle class,” said Michael Sherraden, director of the Center for Social Development at Washington University in St. Louis, who consulted on the project and helped develop projections for how much income families need to devote to savings. “If we’re interested in families being able to be stable and not have their lives disrupted and have a little protection and backup and be able to educate their children, then this is the way we have to think.”
The numbers will not come as a surprise to working families who are struggling. Tara, a medical biller who declined to give her last name, said that she earns $15 an hour, while her husband, who works in building maintenance, makes $11.50 an hour. The couple, who live in Jamaica, Queens, have three sons, aged 9, 8 and 6.
“We tried to cut back on a lot of things,” she said. But the couple has been unable to make ends meet on their wages, and visit the River Fund food pantry in Richmond Hill every Saturday. With no money for savings, “I’m hoping that I will hit the lotto soon,” she said.
To develop its income assessments, the report’s authors examined government and other publicly available data to determine basic costs of living. For housing, which along with utilities is usually a family’s largest expense, the authors came up with “a decent standard of shelter which is accessible to those with limited income” by averaging data from the Department of Housing and Urban Development that identified a monthly cost equivalent for rent at the fortieth percentile among all rents paid in each metropolitan area across the country.
They chose a “low cost” food plan from the nutritional guidelines of the Department of Agriculture, and calculated commuting costs “assuming the ownership of a small sedan.” For health care, they calculated expenses for workers both with and without employer-based benefits.
Ms. Kuriansky said that the income projections do not take into account frills like gifts or meals out. “It’s a very bare-bones budget,” she said.
Obviously, the income needs change drastically depending on where a family lives. Ms. Kuriansky said the group was working on developing data for states and metropolitan areas.
The report compares its standards against national median incomes derived from the census, and finds that both single parents and workers who have only a high school diploma or only some college earn median wages that fall well below the amount needed to ensure economic security.
Workers who only finished high school have fared badly in the recession and the nascent recovery. According to an analysis of Labor Department data by Cliff Waldman, the economist at the Manufacturers Alliance, a trade group, the gap in unemployment rates more than doubled between those with just a high school diploma and those with at least a four-year college degree from the start of 2008 through February.
For some of the least educated, Mr. Waldman fears that even low wages are out of reach. “Given the needs of a more cognitive and more versatile labor force,” he said, “I’m afraid that those that don’t have the education are going to be part of a structural unemployment story.”
Even for those who do get jobs, it may be hard to live without public services, say nonprofit groups that assist low-income workers. “Politicians are so worried about fraud and abuse,” said Carol Goertzel, president of PathWays PA, a nonprofit that serves families in the Philadelphia region. “But they are not seeing the picture of families who are working but simply not making enough money to support their families, and need public support.”
In New York, Áine Duggan, vice president for research, policy and education at the Food Bank for New York City, estimates that about a third of the group’s clients are working but not earning enough to cover basic needs, much less saving for retirement or an emergency. She said that among households with children and annual incomes of less than $25,000, 83 percent of them would not be able to afford food within three months of losing the family income. That is up from 68 percent in 2008 at the height of the recession.
As the nation’s employers add jobs, it is not yet clear how many of them are low wage jobs, especially those that do not come with benefits, like health care. Manufacturing, for example, has been relatively strong and tends to pay higher wages.
Over the last year, wages adjusted for inflation have been essentially flat. “If we were creating more low-paid jobs,” said John Ryding, chief economist at RDQ Economics, “we would expect more of a decline in real wages.”
The president of the American Bankers Association was railing against excessive regulation in a speech at the Waldorf Astoria. The banking reform bill, he complained, “would destroy a substantial part of our bond-distributing machinery.” He added, “Can anyone expect that a step of this kind will improve the quality of our long-term investments?”
Modern echoes, for sure. But I read about the speech in a Jan. 27, 1933, article culled from the wonderful archives of The American Banker, the bankers’ bible now celebrating its 175th birthday [ http://www.americanbanker.com/175/ ]. The speaker, one Francis H. Sisson, was complaining about an early version of the Glass-Steagall Act, the most famous of all Depression-era bank laws, and the one that, in retrospect, probably did the most good. Less than six months after Sisson’s speech, President Franklin Roosevelt signed it into law.
From my vantage point here in 2011, Glass-Steagall seems miraculous. It was amazingly radical, not just for its time, but for any time; it didn’t so much reform banking as upend it. Most notably, it ordered banks to get out of the securities business. As Sisson complained: “The effect of the proposed banking reform is to renounce investment banking rather than regulate it.” Because investment banking was then the chief activity of the big banks, this was a very big deal.
Glass-Steagall also created the Federal Deposit Insurance Corporation, which insured customer deposits for the first time, and outlawed branch banking by national banks, among other things. It is impossible to imagine anything like it passing today; although the modern reform bill, Dodd-Frank [ http://dealbook.nytimes.com/2010/06/28/the-dodd-frank-bill-up-close/ ], surely does some good, it’s not even comparable.
I’d long wondered how Senator Carter Glass [ http://www.minneapolisfed.org/publications_papers/pub_display.cfm?id=3621 ], the powerful Virginia Democrat, and his House counterpart, the Alabama congressman Henry Steagall [ http://bioguide.congress.gov/scripts/biodisplay.pl?index=s000820 ], managed to get it passed. What were the politics like? What did they fight over? Why didn’t people like Sisson have better luck pushing back against it, the way bank lobbyists do today? So I asked the editors at American Banker if they would send me some articles from the era that would shed some light on the question. Happily, they obliged.
The first thing I realized is that all the horse-trading over the bill’s provision was done by Democrats. The Republicans, having been badly defeated in the 1932 election, had no ability to block it or even amend it. For instance, Republicans tended to view the creation of deposit insurance as “socialism.” (Sound familiar?) But it didn’t matter: Steagall cared deeply about deposit insurance. Many community bankers — as strong a force back then as today — also supported the idea because they believed it would renew customers’ faith in the banks, and bring back deposits. (This turned out to be true.) Glass, though skeptical, went along so he could get things he cared about, mainly a stronger Federal Reserve with more power over the banks.
The second thing I realized was that, the Sisson speech notwithstanding, there was surprisingly little controversy over what we now think of as the law’s primary achievement: splitting commercial and investment banking. The fights were all over issues that seem inconsequential by today’s lights. It’s as if the notion of breaking the banking business into two was always a foregone conclusion.
And, for the most part, it was. Partly, this was because, unlike today, bank failures in the 1930s were often ruinous to customers. So reform was more pressing. But it was also because, for the entire time the legislation was under consideration, the Pecora hearings [ http://thecaucus.blogs.nytimes.com/2009/05/06/financial-inquiries-and-the-pecora-legacy/ ] were going on — in which Ferdinand Pecora [ http://www.nytimes.com/2009/01/06/opinion/06chernow.html ], the flamboyant chief counsel of the Senate Banking Committee, dragged one well-known banker after another before the committee and grilled them mercilessly, exposing how they had abused their investment banking roles, sometimes to the point of criminality. The Pecora hearings serve as a steady drumbeat in the American Banker articles.
Those hearings infuriated the country, and made it unthinkable that banks would continue to be allowed to sell securities. In fact, some banks, seeing which way the wind was blowing, applauded: “The spirit of speculation should be eradicated from the management of commercial banks,” declared Winthrop Aldrich, the chairman of Chase National Bank, according to Michael Perino, Pecora’s biographer. Ironically, Glass loathed the Pecora hearings, deriding them as “a circus, and the only thing lacking now are peanuts and colored lemonade.” But the hearings made his bill — which had been filibustered by Huey Long just 18 months earlier — not just possible but inevitable.
How inevitable? Charles Geisst [ http://www.manhattan.edu/academics/business/econ_fin/faculty/charles.geisst.shtml ], a finance professor at Manhattan College and an expert on the law, says that the House and Senate didn’t even bother with a roll-call vote for final passage. This seminal piece of legislation, which helped keep the banks out of trouble for the next 70-plus years, flew through on a voice vote. On Friday, June 16, 1933, when Roosevelt signed it into law, The American Banker gave the news all of three paragraphs. There was nothing left to say.
Mary Thompson | @MThompsonCNBC Friday, 21 Nov 2014 | 6:00 AM ETCNBC.com
Adam Jeffery | CNBC
AIG headquarters in New York City.
The last witness in an eight-week trial over the government's role in AIG's bailout is expected to be called Friday, but a verdict is still months away.
The trial, being heard in federal claims court in Washington, D.C., is a bench trial. Overseen by Judge Thomas Wheeler, it has pitted the government against a high-powered team of lawyers representing former AIG CEO Hank Greenberg and other current and former shareholders of the insurance giant.
The plaintiffs claim the Federal Reserve overstepped its powers by imposing unusually high interest rates on AIG, and taking what became a 92 percent stake in the company as part of a $182 billion bailout of AIG. During the trial, financial luminaries including former Treasury secretaries Hank Paulson and Timothy Geithner, along with former Fed Chairman Ben Bernanke, were called to testify.
In an opening statement at the trial, a lawyer from the Department of Justice, Kenneth Dintzer, said AIG received assistance only because of the potential global consequences of the company filing for bankruptcy, and that the loan terms made sense given market conditions. "The goal was not to save AIG, it was to save the world from AIG," Dintzer said.
VIDEO
A ruling in the plaintiffs' favor could significantly change the government's response to future financial crises, but a decision by Wheeler is not expected until at least the first quarter of next year. Whatever his decision, the losing side is expected to appeal, meaning the case will be in the legal system for years to come.
Read MoreBernanke comes alive at AIG bailout trial
In the interim though, the plaintiffs, represented by superstar attorney David Boies, are expected to ask for a rebuttal on Friday. This means the government will then have a chance to respond.
The public proceedings are likely to wind up Monday, and after that Wheeler will outline a post-trial briefing schedule. This allows him to ask for and review various files and other evidence that was submitted during the course of the trial.
Read MoreAIG bailout trial may be good therapy!
Once Wheeler reviews the information, both sides will present their closing arguments. These are likely to take place in January, after which the wait for Wheeler's decision begins, and it could last for months.
The case is Starr International Co. v. U.S., 11-cv-00779 U.S. Court of Federal Claims
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