Lawrence Mishel is the president of the Economic Policy Institute and the senior co-author of The State of Working..
Update: the strike has been suspended. No one won- yet. The economics of the post continue to be excellent.
Update: the strike has been suspended. No one won- yet. The economics of the post continue to be excellent.
The Verizon Corporation is asking its workforce to accept wage and benefit reductions—despite being a very profitable company. Morgan Stanley’s recent analysis shows Verizon’s net income from ongoing operations was $13.9 billion in 2010, up more than 16 percent from 2007. No wonder Verizon’s stock has outpaced that of the S&P index and other telecommunication’s firms, something Verizon itself brags about in its last annual report. How, then, can Verizon freeze current workers’ pensions and eliminate pensions for new workers? Ask their workers to accept reductions in holidays (to seven), reduced sick pay and the substitution of the current health plan with one having high deductibles and contributions? The unions involved estimate that benefit and wage reductions would total $20,000 per worker each year.
About the Author
Understandably, the workers have gone on strike. This labor conflict, however, is a microcosm of a broader trend in our economy, one that is not healthy for overall growth and certainly not conducive to improved living standards for America’s working families.
American workers are beset by a deep recession that continues with no end in sight. Unemployment has been roughly 9 percent or above each month for over two years and underemployment has correspondingly remained at 16 percent or more. At some point over the course of the year, one out of three workers (four out of 10 Hispanic or black workers) will be unemployed or underemployed. Simply put, we have been stuck for a long time with unemployment that is worse than even the worst moments of the last two recessions. The consequence is that a June poll showed that 43 percent of adults have been either unemployed or have an unemployed family member. Some 61 percent of respondents knew a family member or friend (or themselves) who personally experienced a reduction in wages, benefits, or hours worked. The misery from persistent high unemployment is widely shared. Unfortunately, the consensus of forecasters expects unemployment to still be 8.5 percent at the end of 2012, so the misery will continue.
In stark contrast, businesses are doing exceedingly well. The Commerce Department has recently reported that corporate profits have increased by a third since the start of the recession: this is a very impressive gain since the economy is still smaller than it was before the recession began.
