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Last updated October 3rd, 2015

Over the last 30 years we have seen a massive transference of wealth from the working and middle classes to the top echelon of Society. An Australian on the average wage now earns 30% less in real terms than they did 30 years ago. In the USA this figure is worse, the bottom 45% of the population has gone backward by 45% in the last 30 years.

Where has this money gone? Our economy is larger than it was 30 years ago in real terms, we should be better off, not worse. 

The answer to this riddle is in the share of wealth going into the top .1% of the population. 

Here is a simple example to illustrate this.

In 1985 an adult Shop Assistant earned $14,500. The General Manager of Coles (Australia's largest supermarket chain) earned $850,000. Now lets fast forward 30 years. If the income of the boss at Coles simply kept pace with inflation his income would be $2.2 million. In 2013-14 his income was actually $5.5 million. So not only has his income kept pace with inflation, it has doubled over and above that. Now if Coles Management passed on the same wage increase to their staff as they gave themselves a Shop Assistant in 2015 would be earning $92,000 a year. They do not earn that. Those pay rises are reserved for the Aristocracy and their lapdogs, not the workers. In 2015 what would a Shop Assistant be earning if their wages just kept pace with inflation over the last 30 years? The answer - $42,500. Are they earning $42,500? No they are not. In 2015 the award for an adult Shop Assistant is  just $24,500 per annum.

That is not even taking into account the fact that housing is 3 times more expensive, university degrees were free back then and now cost 2 years salary for a shop assistant, electricity is up well ahead of inflation and so it goes.

1. Housing

Over the last 25 years the median house price in Australia has gone from 2 years salary to 4 years salary - that is a doubling of housing costs. From the Reserve Bank:

housing affordability

It is significant to note that in the United States this figure has not changed in the same time frame. There is no reason for this increase other than a reduction in housing stock caused by the massive level of Immigration caused by the Labor Government, combined with the massive degradation in the value of the median wage of the people.

The situation is even worse when you look at the last 100 years:

460846 adv house prices graphic

More on this graphic

2. Income Inequality

Partly this is housing going up, and partly this is incomes going down. From The Eureka Report:

http://www.eurekareport.com.au/graphs/list

wages growth record low

And full time, breadwinner jobs are now in the minority in the Australian Economy:

australia why income growth struggling

Combined with record low interest rates on savings, it now takes 14 years on average to save a housing deposit:

years to save deposit

Ref: http://www.businessspectator.com.au/article/2015/5/15/property/three-reasons-worry-about-rampant-house-prices

3. Unemployment

When I was young full employment was considered to be 1%. I remember the McMahon Government was heavily criticised in the media in the leadup to the 1972 election campaign because unemployment hit 2%. It was a large factor in his loss. Now it is 6%, and that figure is itself nonsense. In Australia if you work for more than 1 hour a week you are considered to be employed. One hour. The Howard/Costello Government was responsible for that piece of stat rigging.

Most economists tend to talk about full employment now as being in the 4% - 5% range. That is not derived from what is fair to workers, it is derived from what is fair to employers. At the 5% mark there is competition between workers for jobs that suppresses demands for wages and conditions. 5% is that sweet spot between workers having any power at all and social unrest. The controlled media can sell 5%, but no more. 

So the Aristocrats and their servants simply rig the stats. When someone who wants a job gives up looking they are no longer unemployed, so unemployment falls. Under this system you can have 0% of people in jobs but also 0% unemployment. Here is an article that explains it in more detail:

Why the Real unemployment rate is over 10%

How many people are really out of work? The answer is surprisingly difficult to ascertain. For reasons that are likely ideological at least in part, official unemployment figures greatly under-report the true number of people lacking necessary full-time work.

That the “reserve army of labor” is quite large goes a long way toward explaining the persistence of stagnant wages in an era of increasing productivity.

How large? Across North America, Europe and Australia, the real unemployment rate is approximately double the “official” unemployment rate.

The “official” unemployment rate in the United States, for example, was 5.5 percent for February 2015. That is the figure that is widely reported. But the U.S. Bureau of Labor Statistics keeps track of various other unemployment rates, the most pertinent being its “U-6” figure. The U-6 unemployment rate includes all who are counted as unemployed in the “official” rate, plus discouraged workers, the total of those employed part time but not able to secure full-time work and all persons marginally attached to the labor force (those who wish to work but have given up). The actual U.S. unemployment rate for February 2015, therefore, is 11 percent.

Canada makes it much more difficult to know its real unemployment rate. The official Canadian unemployment rate for February was 6.8 percent, a slight increase from January that Statistics Canada attributes to “more people search[ing] for work.” The official measurement in Canada, as in the U.S., European Union and Australia, mirrors the official standard for measuring employment defined by the International Labour Organization — those not working at all and who are “actively looking for work.” (The ILO is an agency of the United Nations.)

Statistics Canada’s closest measure toward counting full unemployment is its R8 statistic, but the R8 counts people in part-time work, including those wanting full-time work, as “full-time equivalents,” thus underestimating the number of under-employed by hundreds of thousands, according to an analysis by The Globe and Mail. There are further hundreds of thousands not counted because they do not meet the criteria for “looking for work.” Thus The Globe and Mail analysis estimates Canada’s real unemployment rate for 2012 was 14.2 percent rather than the official 7.2 percent. Thus Canada’s true current unemployment rate today is likely about 14 percent.

Everywhere you look, more are out of work

The gap is nearly as large in Europe as in North America. The official European Union unemployment rate was 9.8 percent in January 2015. The European Union’s Eurostat service requires some digging to find out the actual unemployment rate, requiring adding up different parameters. Under-employed workers and discouraged workers comprise four percent of the E.U. workforce each, and if we add the one percent of those seeking work but not immediately available, that pushes the actual unemployment rate to about 19 percent.

The same pattern holds for Australia. The Australia Bureau of Statistics revealed that its measure of “extended labour force under-utilisation” — this includes “discouraged” jobseekers, the “underemployed” and those who want to start work within a month, but cannot begin immediately — was 13.1 percent in August 2012 (the latest for which I can find), in contrast to the “official,” and far more widely reported, unemployment rate of five percent at the time.

Concomitant with these sobering statistics is the length of time people are out of work. In the European Union, for example, the long-term unemployment rate — defined as the number of people out of work for at least 12 months — doubled from 2008 to 2013. The number of U.S. workers unemployed for six months or longer more than tripled from 2007 to 2013.

Thanks to the specter of chronic high unemployment, and capitalists’ ability to transfer jobs overseas as “free trade” rules become more draconian, it comes as little surprise that the share of gross domestic income going to wages has declined steadily. In the U.S., the share has declined from 51.5 percent in 1970 to about 42 percent. But even that decline likely understates the amount of compensation going to working people because almost all gains in recent decades has gone to the top one percent.

Around the world, worker productivity has risen over the past four decades while wages have been nearly flat. Simply put, we’d all be making much more money if wages had merely kept pace with increased productivity.

Insecure work is the global norm

The increased ability of capital to move at will around the world has done much to exacerbate these trends. The desire of capitalists to depress wages to buoy profitability is a driving force behind their push for governments to adopt “free trade” deals that accelerate the movement of production to low-wage, regulation-free countries. On a global basis, those with steady employment are actually a minority of the world’s workers.

Using International Labour Organization figures as a starting point, professors John Bellamy Foster and Robert McChesney calculate that the “global reserve army of labor” — workers who are underemployed, unemployed or “vulnerably employed” (including informal workers) — totals 2.4 billion. In contrast, the world’s wage workers total 1.4 billion — far less! Writing in their book The Endless Crisis: How Monopoly-Finance Capital Produces Stagnation and Upheaval from the USA to China, they write:

“It is the existence of a reserve army that in its maximum extent is more than 70 percent larger than the active labor army that serves to restrain wages globally, and particularly in poorer countries. Indeed, most of this reserve army is located in the underdeveloped countries of the world, though its growth can be seen today in the rich countries as well.” [page 145]

The earliest countries that adopted capitalism could “export” their “excess” population though mass emigration. From 1820 to 1915, Professors Foster and McChesney write, more than 50 million people left Europe for the “new world.” But there are no longer such places for developing countries to send the people for whom capitalism at home can not supply employment. Not even a seven percent growth rate for 50 years across the entire global South could absorb more than a third of the peasantry leaving the countryside for cities, they write. Such a sustained growth rate is extremely unlikely.

As with the growing environmental crisis, these mounting economic problems are functions of the need for ceaseless growth. Once again, infinite growth is not possible on a finite planet, especially one that is approaching its limits. Worse, to keep the system functioning at all, the planned obsolescence of consumer products necessary to continually stimulate household spending accelerates the exploitation of natural resources at unsustainable rates and all this unnecessary consumption produces pollution increasingly stressing the environment.

Humanity is currently consuming the equivalent of one and a half earths, according to the non-profit group Global Footprint Network. A separate report by WWF–World Wide Fund For Nature in collaboration with the Zoological Society of London and Global Footprint Network, calculates that the Middle East/Central Asia, Asia-Pacific, North America and European Union regions are each consuming about double their regional biocapacity.

We have only one Earth. And that one Earth is in the grips of a system that takes at a pace that, unless reversed, will leave it a wrecked hulk while throwing ever more people into poverty and immiseration. That this can go on indefinitely is the biggest fantasy.

Pete Dolack writes the Systemic Disorder blog. He has been an activist with several groups. http://www.counterpunch.org/2015/03/20/why-the-real-unemployment-is-double-the-official-unemployment-rate/

 

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