Profits Soar at Workers’ Expense

According to most mainstream economists, the worst of the recession is over, and in the most superficially possible way, they’re right—the U.S. economy is no longer hemorrhaging jobs the way it was at its worst point in December 2008, when nearly three quarters of a million jobs were lost in a single month.  Given this fact in isolation, it becomes possible to comprehend the current yet wavering optimism of economists and their accompanying pronouncements of a seemingly near-off recovery. 

As we go to print, it remains accurate to say that even with three previous quarters of GDP growth momentum itself has lost considerable steam.  The recovery appears flagging.  Now, a specter hovers over the horizon, one offering the possibility of a painful “double-dip” recession due in large measure to the jobless nature of the present economic resurgence and long-term, structural unemployment becoming the norm.

As we approach the 4^th quarter of 2010, the official measures of non-farm unemployment continue to remain high, hovering around 9.5% as reported by the Bureau of Labor Statistics.  Simply taken as rough metric of economic prosperity, it fails to capture the sheer severity of the job situation facing the working class.

When the number of underemployed and discouraged workers—those that have given up looking for any employment altogether—are factored into the national statistic, the rate shoots up to near 17%.  Indeed, if a stable, pronounced recovery were underway, it would be reasonable to expect the number of those who would be categorized part of the long-term unemployed to diminish substantially, yet nearly 1.2 million people can currently be counted as such.  To put that number into perspective, in December 2008, 363,000 of the unemployed were considered “discouraged,” and those that were still seeking employment could expect to wait at least 4 months before the next job came around.  Since then, the number of discouraged workers has tripled, and the average amount of time a worker spends unemployed has more than doubled.

Despite the doom and gloom surrounding the published BLS figures and overall the sluggish GDP growth this past fiscal quarter, corporations seem to not only be weathering the storm but also posting a significant profit in the process—sometimes even reaching record-setting quarterly levels.  In fact, the adjusted profits for corporations listed in Standard & Poor’s index not only recovered to pre-recession levels but also in many cases were actually higher than they were prior to the recession.  All indicators point to the fact that corporate America is now sitting on veritable mountains of cash holdings. 

Even with billions in profits rolling in, falling sales revenues brought on by depressed market demand leaves both investors and bosses cautious and unsure of what the future holds for the fate of any future investments, products, and services.  Sensing a period of slumping sales, corporations tend to set their sights on our avenues or methods to keep profit rates up when greater expansion for an already sluggish market is not an option.  One way of achieving this task is to focus on potential mergers and acquisitions.

Larger firms typically have the ability to survive market contractions thanks to their sizable cash reserves and are able to leverage existing capital to buy out smaller firms that were once competition but now struggling to survive.  Acquisition of the assets of other firms serve to pump up the bottom line of the larger purchasing firm without having to resort to increased production.  As a result, recessions have a tendency to produce concentration of capital within certain industry segments, especially ones where there are lots of small to mid-sized firms clustered around a few large players (like in the information-technology industry, for instance).

Another strategy employed to sustain a relatively high level of output—a necessary component of investor confidence—involves keeping production moving along at a steady clip even as sales gradually slow.  In the case of durable or finished goods, like cars or electrical equipment, rather than producing with the intention of bringing said goods straight to market, businesses opt to rebuild inventories and “sit on” what is produced until demand picks back up.  Although in practice such an approach has a temporary character, it serves to shore up output and, therefore, GDP for a time.

Then, of course, there are the old cash saving, profit-creating staples of the capitalist class: furloughs, slashed benefits, pay cuts, longer working hours, and layoffs.  Those that are fortunate to remain employed during periods of euphemistically named “downsizing,” have the distinct displeasure of looking forward to working longer hours at a reduced rate of pay, all the while straining to keep productivity levels high enough to buoy profits.  In many cases, each individual worker must now complete the tasks typically assigned to multiple workers.  Such a practice has resulted not only in a lack of general hiring but greater profits for the capitalists as they intensify levels of exploitation on their already overworked employees.

Companies realized that one could maintain and even accelerate profits with investments in new laborsaving technologies, as was evidenced by recent spikes in the purchases of computers, factory equipment, and software by firms.  To businesses, the hopeful result of such expenditures would enable the same or fewer numbers of workers to reproduce comparable or even greater profits that would otherwise require a much healthier market and a larger group of workers employed to produce and meet demand.

Countless millions are now either unemployed or underemployed. The private sector has revealed itself incapable of generating the numbers of jobs needed to put millions back to work. We’ve all been witness to a veritable surge of profit accumulation by getting more out of those already working. And it is here that we see a contradiction right before our eyes: one between workers who need stable, long-term employment and capitalists who generally do not need them at this time to increase their profits. This antagonism is bound to magnify as the bosses continue on with their productivity drives.