Trump Tax-Cut Bonuses Are A Bust For Middle Class Workers, Wages Lie In A Wasteland Of Failed Promises

As a person who has done some corporate hiring, I know that $11 per hour usually does not get you a good selection of employees. Most of what you get applying at that level and even a little higher than that are the people no one else will hire. That’s just the facts. Even in a rural area, most of what I saw at that rate were people who hadn’t held any job for longer than a year or who had a criminal record or appeared for interviews with blatantly obvious drug or acolhol problems, reeking of booze when they entered my office. (That’s not to disparage anyone who works at that level; there are some good ones of course, but not enough to staff a Walmart store. And I didn’t hire at that level by choice. I just had a tightfisted board that I had to wrestle my way up to being able to offering better pay.) Walmart’s boasted $11 per hour is about what I’d pay a high-school kid to mow my lawn in the summer!

Wells Fargo announced right after the tax cuts that it would raise its minimum wage to $15/hour as a result of the Trump Tax Cuts. However… JPMorgan had already raised its minimum wage to that same level prior to passage of the tax cuts. So, Wells may have been crediting the tax cuts for a change that was really forced by the competition. After all, does Wells want lower-grade employees than JP?

By now you’ve heard many times that the labor market, already tight by the end of the Obama era, is getting so tight that employers claim to be having a hard time getting workers. If this is true, why haven’t wages gone up? Are employers so incredibly tightfisted about sharing the tax savings that they won’t even raise wages when they are griping that same day about how hard it is to find good help? Wages have seen precious little increase for the sake of attracting “difficult to find” employees or for the sake of holding on to the ones companies already have. Yeah, it’s hard to find good help when you’re not even willing to pay what it takes to get bad help.

So, why aren’t companies putting the Trump Tax Cuts to such good use if the labor market is so tight? Even without the tax cuts, one would have expected such a tight labor market to create more wage increases than the number that have been attributed to the tax cuts. Yet, real wages (adjusted for inflation) this May went up only 0.1% (month on month) according to Trump’s own Department of Lying Statistics. In May of 2017, they went up 0.3%. In April of this year, they didn’t go up at all. In March they went up 0.3%, but that was coming off a January when they dropped 0.3% followed by a February when they dropped 0.1%. Year on year from May to May, real wages held completely flat. In fact, when narrowed down to just non-supervisory employees, real wages dropped a tick from last May to this May. Real wages didn’t even look this flat in years six and seven of the Obama epoch.

You can see it for yourself:

wage growth weekly earnings chart

Even though wages have held flat, stock buybacks due to the Trump Tax Cuts burst into full flame months ago; so, where are these much vaunted wage increases that we were promised?

Normally, when the unemployment rate stands as low as it does currently, wages rise somewhere between 3.5% and 4.5% a year. That is due to labor tightness and inflation. Now, with the supposed extra kick of the multifaceted Trump corporate tax cuts, wage growth has stalled. Even the most optimistic reports of total compensation (wages plus benefits) before factoring inflation show compensation growth at only 2.8% annually. Apparently, the tax cuts are hardly an accelerant for the wage burn.

In fact, an unusually high 14% of all workers have still not received any pay raise since the official end of the Great Recession nine years ago! Those people would have to get a 15% pay raise just to catch back up with inflation over those lost years.

Small bonuses are a smokescreen for burlier bonuses at the top

Note that the NGO that has been publicizing the bonuses through info distributed to the media — Americans for Tax Reform — has been completely silent about the size of bonuses companies are giving to their executives. (You can read a little about Norquists’ grand PR effort here.) I think the bonuses at the bottom are also a smoke screen for obscene bonuses at the top. Big bonuses to CEOs and other top execs tend to happen every year, however; while the ones down at the bottom … not so much.

In some ways, it is almost funny to read the publicity rush that went out right after the tax cuts. Michael Goodwin wrote such a puff piece in the more conservative New York Post,

Not that they needed one, but progressive wing nuts and their fellow travelers are getting another reason to hate President Trump. He’s proving that capitalism works. The president’s policies of cutting high taxes and excessive regulations are sparking a stock market surge and soaring economic confidence.

Really? Goodwin published his effluent of praise about the effectiveness of Trump’s tax policy on January 27th when stocks had been soaring throughout the month. We all know what happened the very next trading day after this was published. Stocks started to drop and then fell off a cliff for more than a month, and the stock market hasn’t recovered since. Goodwin criticized the wing nuts who don’t believe Trump’s plans would work as promised just one day too soon, making himself look like a wing nut.

You could have read (or did read) about how these pipe dreams for the Trump Tax Cuts would not materialize for 99% of America on my own blog or in many articles at Zero Hedge, or you could have even read it predicted by pro-Wall street information sources like Moody’s:

The U.S. tax bill signed into law in December will have a limited effect on the U.S. economy, as companies are unlikely to spend their tax savings on growth initiatives while the tax cut for the wealthy will not trickle down…. “We do not expect a meaningful boost to business investment because U.S. nonfinancial companies will likely prioritize share buybacks, M&A and paying down existing debt.”

That outcome is exactly what I had been predicting. These supply-side tax cuts never trickle down. It’s been a thirty-year lie that they ever will; and if you keep believing the lie (if you ever have), you either live in among the upper strata that the lie serves, or you deserve to remain poor all of your life for being tricked by it three times now. I’ve merely waited until enough information was in this year and a reasonable amount of time had passed from when I made my predictions last year to state my case that they are proven true. That’s my story, and I’ve been sticking to it ever since. The worst, according to Moody’s in the article quoted above, is certainly yet to come.

While several companies rushed in similar style to brag about what they were going to give to middle-class Joe and Josephine at year’s end, not a single one of them were as excited about announcing the size of executive bonuses this year. They wanted to keep all talk about the tax-break bonuses centered on the middle class. I’m pretty sure that for every one-thousand average souls who got a thousand bucks, there is a top-tier exec in the company who is getting a million-dollar bonus.

Jamie Dimon of JPMorgan Chase, for example, got a tidy little 4% increase on the $27.2 million he received for his services a year earlier. The Wall Street Journal listed 29 CEOs of the financial world with a total pay package of $10,000,000 or more. Median pay for bankster CEOs matched the median pay of all CEOs in the S&P 500. This year, it’s harder to find information about CEO pay increases.

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