The Fayette Tribune, Oak Hill, W.Va.

December 25, 2013

Guest Column

Is there a Santa Claus for West Virginians?

Dr. John P. David

— It is the time to wear the mask of joy and happiness as the Winter Solstice seeks to bring wishes of cheer, compassion, peace, and sharing for the holiday season.

The mask hides the reality that for many it is the time of darkness, despair, coldness, sadness, and death.

Charles Dickens penned the Christmas Carol in the mid-1800s, which clearly depicted the contradiction of the season. Ironically, Dickens was greatly influenced by his visit a year prior to the Western Penitentiary near Pittsburgh. This visit shaped his message of hope for political transformation, economic fairness, and social justice.

That challenge is directly in focus this season, as unemployment and underemployment continue to plague us. The problem is worse than commonly revealed, since decent jobs have morphed into part-time and minimum wage jobs. Furthermore, the unemployment rate for young people is more than triple the overall rate, thereby causing other survival problems that are apparent in the news daily.

No matter how data is sliced, it is obvious that the employment and worker pay issues are creating instability in our society. According to the Economic Policy Institute, the top 1% in the country had their annual earnings increase 156% over the last several decades. For the very super rich, the growth was 362%. During the same period, worker pay increased only 5.7%. Last year, according to the Bureau of Labor Statistics, real wages even fell 2% while corporate profits were at an all time high, largely due to off-shore tax avoidance. Even the minimum wage is worth less. According to the Center for Economic and Policy Research, the 1968 minimum wage should be $9.42 today in order to be at the same value in purchasing power.

An interesting caveat to the compensation distribution issue is the fact that those who have experienced most income growth are largely those employed in the financial sector. These are the folks who benefited greatly by the financial bail-out policies at institutions deemed too big to fail even though those at the helm caused the financial crisis. Furthermore, as recent massive settlements totaling billions are reached with JP Morgan Chase and Household (HSBC) International, it has become apparent that they made their money by engaging in securities fraud of enticing high-risk borrowers into dangerous mortgages and refinance deals.

It is no secret that workers are in a very weak bargaining position. Businesses are able to squeeze more out of every worker by box-store efficiencies, competition with cheap overseas labor, or taking advantage of the vast reservoir of unemployed people who are forced to work for less in order to survive. Tax loopholes are many, such as the one that permits firms to deduct the cost of performance-based executive pay increases. In addition, as noted by the National Employment Law Project, many do not realize that low wages cost taxpayers $3.8 billion annually in various subsidy payments — an amount that is in essence shifted from the employers to society as a whole.

Unless addressed in a significant way, an economic crisis is looming. Those who are low paid and unemployed will not be able to retire with a pension that provides a livable existence, thereby creating the need for increased subsidies in the future. They also will not be contributing as much as before to tax revenues at all levels, thereby creating increased shortfalls in projected revenues. Basically, a hunkered down economy creates a complete change in the quality of life for most. More people will be in prison, more will be hungry, and more will be into drugs.

There is no question that we have entered a special season of the year. It is the time to reflect on Sustainable Life, Economic Justice, Peace on Earth, and Goodwill to All. At the same time, it is important to realize that many are less well off and many are not at peace. Nationally, we face difficult times. Locally, we face tough needs. Personally, we are challenged to practice what we say in our seasonal messages.

(David is professor of economics at WVU Tech and director of the Southern Appalachian Labor School.)