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While much has been said about the benefits of Bernanke’s wealth effect to the asset-owning “10%”, just as much has been said about the ever deteriorating plight of the remaining debt-owning 90%, who are forced to resort to labor to provide for their families, and more specifically how their living condition has deteriorated over not only the past five years, since the start of the Fed’s great experiment, but over the past several decades as well. However, in the case of America’s “servant” class, Al Jazeera finds that their plight is now worse than it has been at any time over the past century, going back all the way to 1910!
According to Al Jazeera, “at least one class of American workers is having a much harder time today than a decade ago, than during the Great Depression and than a century ago: servants. The reason for this, surprisingly enough, is outsourcing. Let me explain. Prosperous American families have adopted the same approach to wages for servants as big successful companies, hiring freelance outside contractors for all sorts of functions from child care and handyman chores to gardening and cleaning work to reduce costs. Instead of the live-in servants, who were common in the prosperous households of America before World War II, better off families now outsource the family cook, maid and nanny. It is part of a global problem in developed countries that is getting more attention worldwide than in the U.S.”
The reality is that the modern servant is also known as the minimum-wage burger flipper, whose recent weeks have been spent in valiant, if very much futile, strikes in an attempt to increase the minimum wage their are paid. Futile, because recall that in its first “national hiring day” McDonalds hired 62,000 workers…. and turned down 938,000! Such is the sad reality of the unskilled modern day worker at the bottom the labor pyramid.
Unfortunately, we anticipate many more strikes in the future of America’s disenfranchised poorest, especially once they realize that their conditions are worse even than compared to live in servants from the turn of the century.
Al Jazeera crunches the numbers:
Consider the family cook. Many family cooks now work at family restaurants and fast food joints. This means that instead of having to meet a weekly payroll, families can hire a cook only as needed.
A household cook typically earned $10 a week in 1910, century-old books on the etiquette of hiring servants show. That is $235 per week in today’s money, while the federal minimum wage for 40 hours now comes to $290 a week.
At first blush that looks like a real raise of $55 a week, or nearly a 25-percent increase in pay. But in fact, the 2013 minimum wage cook is much worse off than the 1910 cook. Here’s why:
- The 1910 cook earned tax-free pay, while 2013 cook pays 7.65 percent of his income in Social Security taxes as well as income taxes on more than a third of his pay, assuming full-time work every week of the year. For a single person, that’s about $29 of that $55 raise deducted for taxes.
- Unless he can walk to work, today’s outsourced family cook must cover commuting costs. A monthly transit pass costs $75 in Los Angeles, $95 in Atlanta and $122 in New York City, so bus fare alone runs $17 to $25 a week, eating up a third to almost half of the seeming increase in pay, making the apparent raise pretty much vanish.
- The 1910 cook got room and board, while the 2013 cook must provide his own living space and food.
More than half of fast food workers are on some form of welfare, labor economists at the University of California, Berkeley and the University of Illinois reported in October after analyzing government economic statistics.
Data on domestic workers is scant because Congress excludes them from both regular data gathering by the Bureau of Labor Statistics and laws giving workers rights to rest periods and collective bargaining.
Nevertheless, what we do know is troubling. These days 60 percent of domestic workers spend half of their income just on housing and a fifth run out of food some time each month.
A German study found that in New York City domestic workers pay ranges broadly, from an illegal $1.43 to $40 an hour, with a quarter of workers earning less than the legal minimum wage. The U.S. median pay for domestic servants was estimated at $10 an hour.
We are falling backwards in America, back to the Gilded Age conditions a century and more ago when a few fortunate souls grew fabulously rich while a quarter of families had to take in paying boarders to make ends meet. Only back then, elites gave their servants a better deal.
Thorstein Veblen, in his classic 1899 book “The Theory of the Leisure Class,” observed that “the need of vicarious leisure, or conspicuous consumption of service, is a dominant incentive to the keeping of servants.” Nowadays, servants are just as important to elites, except that they are conspicuous in their competition to avoid paying servants decent wages.
But… but… how is that possible if the stock market is at all time highs and the wealth is US households just rose by $1.9 trillion in one short quarter. Oh wait, what they meant is “some” households.
And, of course if all else fails, America’s “free” servants, stuck in miserable lives working minimum wage jobs for corporations where the only focus in on shareholder returns and cutting overhead, can volunteer to return to a state of “semi-slavery” (while keeping the iPhones and apps of course, both paid on credit) and become live-in servants for America’s financial oligarchy and the like. We hear the numerous apartments of Wall Street’s CEOs have quite spacious servants’ quarters.
One of the biggest lies in finance is this perpetual deception that inflation is good.
Ben Bernanke, the current high priest of US monetary policy, recently remarked that it’s “important to prevent US inflation from falling too low.”
Well of course, we wouldn’t want that, would we? Just imagine the chaos and devastation that would ensue if the cost of living actually remained… you know… the same.
One shudders at the mere thought of price stability.
Of course I jest. Fact is, inflation benefits those who are in debt up to their eyeballs at the expense of people who have been financially responsible.
Yet economists have somehow managed to convince people that inflation is just and necessary. We all know inflation exists. But we’ve been programmed to shrug it off as if it’s a natural part of the system.
The even greater deceit is how they report the figures.
Governments all over the world lie about inflation; they do this because inflation has such a huge impact in monetary policy.
The playbook they all use is very simple– as long as inflation is ‘low’, then central bankers can print money. So they have a big incentive to underreport it.
Quoting a report from the US Department of Labor, for example, a recent headline from Reuters stated “U.S. consumer prices rise, but underlying inflation benign”.
I’m not entirely sure how inflation can be ‘benign’ while consumer prices are simultaneously rising.
Yet this is the modern day doublethink coming from the Ministry of Truth that we are all expected to unquestioningly believe.
Inflation does exist. I’ve seen it all over the world as I travel. In India right now, the reported inflation figure just hit 10% at a time when the economy is sagging.
In Bangladesh, workers are now rioting over rising cost of living, which far exceeds the proposed wage hikes that are on the table.
In the Land of the Free, the average price of a movie ticket is $8.38 earlier this year, another record high. Walnut farmers in California are now reaping record high prices on their crop.
And of course, McDonald’s is now killing their once popular dollar menu as they can no longer afford to sell anything at that price.
There are examples everywhere. And this also goes for asset price inflation.
We can see many stock and bond markets near their all-time highs. But then there are other asset classes… like farmland in Illinois, which is now selling for $13,600 per acre.
With an average yield of 160 bushels per acre, the net financial return after paying variable costs is less than 2%. It just doesn’t make any sense.
And in the art world, a Francis Bacon triptych just sold for a record $142 million at Christie’s in New York.
Everywhere you look, there’s overwhelming evidence of bubbles and price hikes. It’s simple. There’s too much money in the system.
Not only is this destructive, it’s the height of deceit to tell people that there’s no inflation.
Over the past year, unionized restaurant workers across numerous fast-food chains but mostly at McDonalds, expressed their dissatisfaction with compensation levels by striking at increasingly more frequent intervals – a sentiment that has been facilitated by the president himself and his ever more frequent appeals for a raise in the minimum wage. Unfortunately, as we have pointed out previously, in the context of corporations that have given up on growing the top line (as virtually all free cash goes into stock buybacks and dividends and none into growth capex), and in pursuit of a rising bottom line, employee wages are the one variable cost that corporations will touch last of all. But what’s worse, these same unionized employees have zero negotiating leverage.
Perhaps nowhere is this more visible than in the recent strategy of smoothie retailer Jamba Juice, which in order to battle a 4% drop in Q3 same store sales has decided to radically transform its entire retailing strategy by getting rid of labor, cheap, part-time or otherwise, altogether. Presenting the biggest threat to minimum-wage restaurant workers everywhere: the JambaGo self-serve machine that just made the vast majority of Jamba’s employees obsolete. Coming soon to a fast-food retailer near you.
Why did Jamba just make its retail sales force obsolete? Part of the problem is heightened competition: McDonald’s has entered the smoothie market, and others like Dairy Queen and Panera spent the summer promoting their rival drinks. Which means even less top-line growth potential. It also means that in order to push more of the top line straight to earnings, and bypass variable costs, a problem that will be faced by increasingly more corporations, Jamba’s corner office had no choice but to unleash JambaGo.
The smoothie chain is hoping to see improvement from something it calls “JambaGo,” a self-serve machine that can be installed in cafeterias, schools, and convenience stores. Jamba Juice makes money by selling the prepackaged, pre-blended smoothie ingredients to JambaGo vendors, like a soda maker selling syrup to the owner of a soda fountain. The advantages: Jamba doesn’t need to build a store and the labor costs are much lower compared with hiring staff to concoct made-to-order drinks.
The company expects this model to help expand its brand more quickly and cheaply. Last quarter, however, revenue from the JambaGo program amounted to just about $400,000. But having recently landed a deal with Target (TGT) to put JambaGo machines in 1,000 Target Cafés, the company will soon have installed more than 1,800 machines (up from only 404 at the start of 2013). By contrast, there are currently about 850 Jamba Juice stores.
Based on a goal of $2,000 in annual revenue per JambaGo, the rough math for 1,800 machines is $3.6 million—a decent boost for a company that took in $228.8 million in revenue last year. Another 1,000 are planned for 2014, which would bring in another $2 million in annual revenue.
Here’s what happens next: Jamba will do what every other company does to demonstrate that its radical strategy is successful – fudge the numbers and beat EPS for several quarters. This will happen even if JambaGo is ultimately yet another loss leader. However, its peers will watch closely and soon decide to roll out their own version of just this: a self-contained dispenser of a la carte prepared fast-food food, either liquid or solid, and in the process let go tens of thousands of their own minimum-wage employees, also known to shareholders as “costs.”
What happens after that should be clear to everyone: more unemployment, lower wages for the remaining employees, worse worker morale, but even higher profits to holders of capital. And so on. Because in a world in which technology makes the unqualified worker utterely irrelevant, this is what is known as “progress.”
- How Much Would A Big Mac Cost If McDonald’s Workers Were Paid $15 Per Hour? (forbes.com)
- Or, McDonald’s Could Double Wages For Employees, Not Raise Price Of Big Macs, And Just Make Less Money … (businessinsider.com)
- Man Arrested for Calling 911 Over McDonald’s Order (whnt.com)
- Big Macs Would Only Cost 68 Cents More If McDonald’s Payed Workers Double (alternet.org)
- David Sirota: If McDonald’s raised wages to $15 an hour, a Big Mac would go up less than 25 cents (current.com)
- Here’s How Much More A Big Mac Would Cost If McDonald’s Doubled Wages (businessinsider.com)
- Burger King and Domino’s Pizza also using zero-hours contracts (theguardian.com)
- Is your zero hours contract really a zero thought contract? (irenicon.wordpress.com)
- Does zero hours mean zero power? (socialistworker.co.uk)
- Zero hours contracts: flexible and sensible – or exploitative? (theweek.co.uk)