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Imperium Watch: Money, Trapped at the Top

A jobless recovery is no recovery for the U.S. economy.

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Thursday, September 17, 2009

A recovery that may soon show the Gross Domestic Product (GDP) on the upswing without a commensurate increase in new jobs: how is that possible?

Tight credit is partly responsible, but so is the fact that the top layers of the economy are soaking up the money, not letting it flow down to workers at other levels. In 1980, according to researchers at the Institute for Policy Studies, the average Fortune 500 executive made 42 times as much as the average worker. Now he makes 319 times as much. The effects of the economy's failure to create jobs spread out into foreclosure, bankruptcy, low consumption creating cycles of job loss, and inability to afford health insurance.

High compensation and the current disconnect between performance and remuneration—astronomical salaries and benefits paid to executives who manage their companies poorly—protect people at the highest-paid levels from the disasters their workers must cope with. In a new report, "America's Bailout Barons," ISP researchers point out, "At 10 of the financial firms that are among the top recipients of bailout money, executives were awarded stock options early this year when the market was at the bottom. Now that taxpayer support has helped lift the price of their stock, the executives who brought the global economy to the brink of disaster have seen their portfolios increase in value by $90 million."

While federal laws to cap executive pay would likely never go down well with the American public, there are other ways of approaching this problem. Rep. Jan Schakowsky (D-Ill.) has proposed legislation (H.R. 1874) that would give companies tax breaks and preference for government contracts if they meet several eligibility guidelines, one being that they may not pay their top executives more than 100 times as much as the wages of their lowest-paid workers (still a very high ratio). And, to ensure that they're doing their part to create and save jobs, they must "produce at least 90 percent of their goods and services" in the United States, and carry on at least 50 percent of their research and development here."

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