Salaries Down, Prices up, Jobs Not the Only Problem

There are many theories as to why the middle class is slipping away. Some believe it is because they are taxed too much. Some say it is because Congress spent too much and we now have a huge deficit to pay for. Some say it is because we like entitlements. While all of those and some of the many other theories do contribute to the problem, perhaps there is something we have all over looked that has brought us to the brink.

We are always told how we Americans make so much money, how our salaries increase so much every year. We are always told how salaries are such a burden to business, how our salaries are destroying companies. Union employees are also taking a large part of the blame. In many instances, like in the auto workers union, many have negotiated pay reductions believing they were needed to keep their jobs.

Currently only 17.8% of all U.S. households make more than $118,200 a year. Only 2.67% make more than $200,000. The fact that only 34% make more than $65,000 is astounding given how expensive other cost of living items have gotten over the past decade. That is why the middle class is feeling squeezed from all different sides.

The Cost of living has far outpaced Median US wages. The median household income in the United States in 2011 is $46,326. The median household income in the United States in 1978 was $15,060. The salary during the 1978 to 2011 time period tripled. Now that sounds good, but was it?

If, as according to economists, we were living in a bubble, a bubble that burst when housing prices that were over inflated came crashing down. Why didn’t all prices on everything come crashing down? In fact the prices on products has rose more by percentage in the last 2 years than over the last 10 years combined. Prices have just gone wild.

Let’s compare prices on just a few items from 1978 and what they cost today.

Item 1978 Price--2011 Price

Corvette$13,800-$17,200--$75,000-$111,000

Hershey bar25 cents--$1.25

Oreo 1 lb pack79 cents-- $ 4.29

Corn Flakes 12 oz50 cents--$ 3.99

Gallon Gas52 cents--$4.35

Dozen Eggs38 cents--$1.43

Coffee lb$1.75--$11.49

The average salary in America has gone up 300% from 1978 till 2011, but the cost of products has gone up anywhere from 500% to 1200% depending on the product.

Company’s biggest complaint is that labor is what kills them, followed by regulations and then taxes. While we do show labor has increased, so did the cost of doing business outside of salaries, and that went up at a much higher rate. Cost of rent for the facility, the insurance on the facility. Cost of the materials to make the product, the equipment needed for the product, the maintenance that is involved. All of these are expenses that have nothing to do with labor and have gone up at a much faster pace, 3 to 11 times more than labor has.

So we can complain about labor, we can continue to blame it all on unions, seems to me we are blaming the wrong part of the business equation. It appears the blame lies with materials and overhead costs, and most of all, something we have not mentioned yet, GREED. A Famous line in a movie says “greed is good” well in some instances that can be true. But if your greed is to own or run a corporation and you bleed it dry, be honest and tell everyone you are greedy, do not blame everything else. If your company grosses 3 million dollars, you pay yourself one million dollars and the company does not net a good profit, do not look at the employees as the reason your company has no cash flow, look at yourself. Did you need that big bonus you gave yourself, were you even entitled to it? Corporate looting is at an all time high. Despite all the talk of outrageous salaries and perks for those at the top of the cooperate ladder, over the last 2 years they have grown by over 50%. Bonuses, large pay increases, stock options, expense accounts, and large benefit packages are among a few of the many perks enjoyed by those at the top. And they are enjoyed to the fullest. Now we are not saying those in charge should not enjoy the fruits of their labor, all we are saying is not to the detriment of the health of the company.

Not giving the middle class raises they deserved over the years has created the stronghold they now face. In the past, we were a different society. The typical home was the husband working and the wife staying home. But that was a simpler time. Bosses and employees were more loyal than today. You just do not here many people retiring by working in one place for 30 years anymore. In those times the middle class could live on one salary. As we grew as a society, the wants of the people grew. Everyone wanted something, a TV, a radio, a washing machine, a refrigerator. People would just go in and make the purchase. But salaries had already begun to not keep up with prices. So in order to keep products moving, stores had to make changes. Originally, stores would allow people to make payments and when the item was paid in full, the customer could take the item home. Lay-A-Way was born. Soon, people were anxious and wanted to take the product home right away. The local stores like Sears and the Mom and Pop stores knew their reoccurring customers. They would allow them to make payments to purchase the higher price items. Store credit was born. But the disadvantage of that was you could only get credit for what you were going to buy in that one store. As times got tougher, people did not want to keep going back and look for more store credit, plus they were being limited with what they could do. They may have seen a better deal somewhere else, but they did not shop there so they did not have store credit. One day someone decided on a way to allow a person a line of credit and they could use it in any participating store. Credit cards were born. Things were getting tougher, salaries were not going up much, all credit cards did was give temporary relief. But those bills came due. So it was time to get another job, side work.

So the men worked hard to pay those bills, but everyday prices continued to rise. Eventually, even if the man worked 24 hours per day, he could not bring home enough money to survive on. Woman then began to enter the work place. It was thought at first, it was just a short term thing. The woman would only have to work until the man’s salary could once more pay for all the expenses. But the expenses just continued to rise at a pace mush higher than the salaries did. So woman began to realize this was not temporary, and they went to collage looking for a career. IT now too society two full time professional salaries to get by. But prices did not take a break, they kept climbing. Soon the two working family’s salary did not make it. They began to work two jobs. But somewhere around 2008 to 2009 the two working salary family with sides jobs are not making it. Even if both spouses work 24 hours per day, they could not get by. We are now in an era where it will take 3 full time jobs to pay the bills and that is not possible.

So, here is the problem we face. Salaries are going down and have so for the last 3 years. Prices are climbing at an alarming rate. Wall Street and the IRS report that company profits are ant an all time high and they are sitting on wads of cash. But yet all the companies do is complain about labor. The problem is we have just run out of income and jobs. Either prices need to come down or salaries need to go way up. Or maybe business needs to do the same thing the US government needs to do to get its house in order. Get rid of the real waste, the real fraud, and the real overpayments. Perhaps if that is accomplished, salaries can increase to a level they should, and perhaps companies can lower their overhead in turn lowering prices.Ok, we know none of that will happen, but maybe one day, miracles do happen.

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