Economics News for Workers

May 20, 2023

Government Subsidizing Extravagant Retirement Plans for Top Executives

A recent report by the Institute for Policy Studies and Jobs with Justice finds that top executives at 500 of the largest companies in the U.S. have stashed away almost $9 billion in special tax-deferred retirement accounts. While they will have to pay income taxes when they withdraw the money, they can accumulate interest tax-free until they retire.

The report’s authors point out that:

Ordinary employees with access to 401(k) plans face strict limits on the amounts they can set aside, tax-free, for their golden years. Most senior executives of large corporations, on the other hand, have unlimited tax-deferred compensation accounts. … It’s especially obscene because many corporations pay their workers so little that employees can’t afford to contribute to their retirement plans in the first place.

Indeed, the survey found that many of the workers at these companies — in some case as many as half of them — have no money at all in their 401(k) plans.

Federal Reserve Board Eases Up on Rate Hikes — to Protect the Rich

Over the past year or more the Federal Reserve Board, or “Fed,” which oversees the federal government’s monetary policy, has been steadily increasing interest rates. Board chair Jerome Powell has been explicit that the Board’s primary aim is to trigger a recession, so that higher unemployment would relieve employers from the pressure to increase wages.

However, the recent failures of several high-risk banks (Silicon Valley Bank, Silvergate Bank, and Signature Bank in early March, and Republic Bank in late April) have raised the specter of a full-on financial crisis, prompting the Fed to moderate its previously aggressive action. (They raised interest rates by only a quarter of a percent in March, and an additional quarter of a percent in May.)

The immediate action by Congress and the Fed to bail out large depositors in these banks demonstrated, yet again, the degree to which our government is set up to serve corporations and the rich, rather than working people, and that politicians of both parties are more than happy to interfere in the “free market” and dole out tax dollars when it benefits the wealthy.

The failure of Republic Bank was the second-largest in U.S. history, smaller only than that of Washington Mutual in 2008. Like Washington Mutual, Republic’s assets were seized by federal regulators and sold to JP Morgan, which is now far and away the largest lender in the U.S. (JP Morgan also benefited from the bailout of Silicon Valley Bank and Signature Bank). Should JP Morgan run into trouble, it will undoubtedly be declared “too big to fail” and bailed out with tax dollars, as happened with Wells Fargo, Citigroup and others in 2008.

Child Labor is Back, Baby

Speaking of interfering in the “free market,” over the past two years ten states have proposed or passed legislation to help employers lower wages by … rolling back child labor protections. If the labor market is not working to help bosses, their friends in government are happy to simply change the rules.

Employers, however, are not waiting for legislation in order to take advantage of child workers: in just the last year, there has been a 37 percent increase in the number of children employed in violation of child labor laws.

Jen Sherer, senior state policy coordinator for the Economic Analysis and Research Network (Earn) Worker Power Project (and former president of UE Local 896-COGS), described the current situation as a “multi-industry push to really wipe out regulation of child labor.” Sherer is the author of a March 2023 report on the subject for the Economic Policy Institute.

Michigan Repeals “Right to Work”

In March, the Michigan state legislature passed legislation to repeal that state’s “right to work” law, which allows workers represented by unions to opt out of paying their fair share for representation. This is the first time a state has repealed right to work since 1947, when the anti-union Taft-Hartley Act first allowed states to enact such laws.

Michigan’s right to work legislation was passed in 2012, shortly after the Republicans took full control of the state government. In 2022, the Democrats won both chambers of the legislature, along with the governor’s office, giving them a “trifecta” for the first time in decades. However, this is the first time a Democratic trifecta in a right-to-work state has actually used that power to overturn this anti-worker legislation.

The satirical publication The Onion took aim at employers’ rationale for defending the law in their “American Voices” section, quoting various (fictional) workers who oppose the law: “This goes against everything I learned in the Walmart employee orientation video,” “According to my boss, I disapprove,” and “How dare they take away my right to be exploited by management?”


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