Tags: Reich | People | Jobs | Spending

Reich: Even People With Jobs Have Stopped Spending

Monday, 22 Aug 2011 09:11 AM

Economist Robert Reich says the U.S. is slouching toward a double dip, and Wall Street is imploding, because consumers – whose spending is 70 percent of the economy – have reached their limit.

"It’s not just the jobless who can’t spend," Reich writes in his blog. "It’s mainly people with jobs."

Median wages continue to fall, says Reich. Weekly wages in July for Americans with jobs were 1.3 percent lower than eight months before. "America’s median earners are now earning less (adjusted for inflation) than they earned ten years ago," wrote Reich, now a professor of public policy at the University of California at Berkeley.

"Repeat after me: Workers are consumers. Consumers are workers."

Reich says that CEOs of companies that continue laying off workers are doing the exact reverse of what Henry Ford did back in 1914, when Ford paid his workers three times what the typical factory employee earned at the time.

“The Wall Street Journal called his action ‘an economic crime’ but Ford knew it was a cunning business move,” wrote Reich, who served in three national administrations and was a secretary of labor under President Bill Clinton.

“With higher wages, his workers became his customers, snapping up Model-Ts and generating huge profits.”

“Economic booms cannot continue without American workers participating in them,” Reich observes. “What will happen to the Dow Jones Industrial Average when corporate earnings revert to their historic average relative to American wages?” he asks.

“I’ve seen various estimates. They’re not pretty.”

Money magazine reports that corporate earnings are the highest they've been relative to worker wages (including benefits) since just before the Great Depression.

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Economist Robert Reich says the U.S. is slouching toward a double dip, and Wall Street is imploding, because consumers whose spending is 70 percent of the economy have reached their limit. It s not just the jobless who can t spend, Reich writes in his blog. It s...
Reich,People,Jobs,Spending
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2011-11-22
Monday, 22 Aug 2011 09:11 AM
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