This trend (described in “Wage Growth Goes Flat…”) is responsible for creating many problems in American Society as well as the American Economy. In certain sectors of the high-tech world during the 1990′s these issues were taken care of because stock options made it possible for workers / employees to receive often more than their fair share and, importantly, more than they feel they deserve and much more than they expected – AND the same equity based compensation made those in power rich or much richer so they didn’t need to basically steal value from those workers to feed their own greed (or whatever is their motivation – greed seems to simple an answer).
When stock and stock options were no longer viable as the primary means of compensation and economic advancement for those workers, things went back to where things had always been for other industries: the workers creating the value were not paid their fair share for such value-creation because the Owners and Executives were skimming (sometimes deeply) into workers / employee compensation. With a limited amount available for compensation something has to give. I don’t know why this trend started, but once it did it was inexorable as a steam locomotive rolling down the track.
Sure, the Owners and Executives deserve more, proportionately, because they made it all possible and then made it all happen – they created the actual Enterprise responsible for all those jobs. That deserves rich reward. However, once that Enterprise is truly a ‘going concern’ it is the workers who are creating most of the value and wealth.
And for a long time workers were paid more or less fairly in exchange for that value and wealth creation, but somewhere along the line those with the sole power to set compensation policy and scale seemed to have a ‘Dawn breaks on Marblehead’ moments whereby they realized they could simply set compensation so it favored them far more than it already did and really the only power workers had to resist was voting with their feet.
Of course that only works if the worker is in high demand or the like. In a market where people were more or less grateful for a decent-paying job, Owners and Execs smelled the blood in the water and started to violate what had been a working, unwritten Social Contract – a contract between value creators regarding how to equitably divide the wealth created by their collective work and regarding rules of fairness whereby good behavior was rewarded according to it’s merit and economic advancement was readily available to those who played by the rules of fairness and who increased their relative output of value within the Enterprise.
So how did it come to this? Those on the other end have always had the power and it seems that as they obtained more and more such power (due more to Recession and other external forces and conditions than anything they did) they decided to use it straightaway by skimming more and more wealth away from workers / employees. Soon enough the proportion of compensation paid to these workers was out of whack with the relative amount of value they created – they were forced to continue creating as much or more value, but were compensated less and less (I know, this is repetitive).
Why did they do it? Is it simple greed? There has to be something else going on here because of the way it all seems like a comprehensive pattern – the same behavior was and is exhibited by the ‘Owners & Executives’ (quotes denote the inclusion of politics and politicians now) across-the-board. Nearly ALL of those in power behaved the same way, which is to utilize every ounce of new-found power they acquired because of the Recession and other factors and used such power to acquire more wealth in any number of ways – the simplest and easiest is to pay workers less (or cease to increase their pay as they increase value output) and to pocket that wealth freed-up thereby.
They decided on new rules of Fairness and threw the old Fairness rules out the window. The result, of course, is a completely unfair situation illustrated above. So in addition to asking why they did it, we can’t help but ask ‘How do we fight it? How do we turn it around, reverse the trend and get back to truly Fair and Equitable Social Contract with regard to the proportion of wealth / compensation workers are given in exchange for the relative value they create?
Because that Social Contract relies on the honor, honesty and fairness of participants, once one side basically throws those things out the window we are left with no basis for such a Contract. That seems to be where we are today – living in a post-Social Contract employment environment where only those in power can actually affect the outcome and affect how much economic advancement (if any) they can achieve by their own actions. Workers have had that power taken from them and have become passive participants who are told what they will receive and who have severely limited, if any, power to affect the outcome or to advance economically based on their own actions and level of value creation.