Tracking Inequality

In a Lost Decade, We Had Big Winners

By nearly every measure, average Americans lost ground in the ‘Aughts.’ They’ve been losing ground — to the rich — for three full decades now. Will the ‘Teens’ make that four?

By Sam Pizzigati

Pawn shops always do well in recessions. CEOs of pawn shops, at least these days, do even better. At EZCorp, the Texas-based regional chain that runs over 670 pawn shops and payday loan storefronts, CEO Joseph Rotunda just picked up a 20 percent salary hike.

CEOs do better. Can any three words more aptly sum up the decade we put to rest last week? For power suits, an uninterrupted string of windfall paychecks. For everyone else, the insecurity of the worst economic times in over 70 years.

Actually, by one economic measure, the first decade of the 21st century turned out to be America’s worst ever.  The stock market ended the “Aughts” with the poorest calendar decade performance record in U.S. investment history.

Adjusted for inflation, stocks lost an average of 3.3 percent a year during the ’00s. Back during the 1930s, the previous worst-performing decade, stocks averaged an 1.8 percent annual gain.

If you have your retirement tied to a 401(k), you’re already feeling the stock market woes — and reeling from them. Most Americans working at major companies used to have pensions that tied checks to years worked. You labored 35 years, you knew exactly what your pension check would be.

Most retirement plans today, by contrast, offer workers no such guarantee, only stock. If share prices fall, you lose at retirement time.

Top executives don’t. The wheelers and dealers who populate America’s executive suites enjoy preferential retirement treatment — via “supplemental” plans that shove pay dollars into “deferred-compensation accounts.”

These accounts let executives set aside — and defer from taxes — far more than the $16,500 maximum that ordinary workers can defer into 401(k)s. But these accounts go one giant step further. They typically guarantee the executives who hold them a guaranteed investment return on their deferred dollars.

In 2008, a Wall Street Journal report has just revealed, cable giant Comcast paid its top execs a way-above-market-rate 12 percent interest on the dollars they had parked away in their deferred-compensation accounts. For Comcast VP Stephen Burke, that 12 percent guarantee generated $7.4 million.

And Comcast’s 70,000 regular employees? Over the same period, their 401(k)s, dependent on the vagaries of the stock market, dropped 28 percent in value, a collective loss of $649 million.

We don’t have figures yet for 401(k) losses in 2009. In 2008, says the Boston College Center on Retirement Research, 401(k)s overall fell at least $1 trillion.

A sizeable piece of that misfortune befell the 1.2 million workers in Wal-Mart’s 401(k). Their retirement nest-eggs took a 18 percent hit. But Wal-Mart gave CEO H. Lee Scott Jr. a guaranteed 6.6 percent return on his supplemental retirement savings. Scott’s gain: $2.3 million.

Lee Scott almost perfectly personifies our just completed decade’s CEO story. He moved into the Wal-Mart chief executive slot right at the start of the ten years, in January 2000, and retired last January 31. His predecessor, David Glass, averaged $4.5 million a year in the five years before Scott took over. Scott, in his first four years as CEO, averaged $23 million.

In his last full year at Wal-Mart’s summit, Scott took home $30.2 million, over 1,500 times the average $19,200 pay that went that year to Wal-Mart workers.

Our executive gravy train didn’t start, of course, in the Aughts. The CEO pay spiral actually began turbo charging two decades earlier, in the early 1980s, a time when top execs were still averaging only 30 to 40 times more take-home than their workers.

Forbes, the business magazine, conveniently started keeping score of Corporate America’s biggest windfall winners about that same exact time. In 1982, in the magazine’s first annual list of America’s 400 richest, Forbes reporters counted just 13 billionaires. The current count: 359.

The total top 400 today hold $1.27 trillion in wealth. Since 1982, the wealth of the Forbes top 400 has jumped an amazing 12 times faster than inflation.

How much of this good fortune has “trickled down” to average American families? Average American families with children, headed up by someone under age 50, hold less net worth today, after inflation, than they held back in 1983.

Journalist David Cay Johnston, in an analysis just published in the widely respected Tax Notes journal, is calling that finding — teased from data collected by Barry Bosworth and Rosanna Smart for the Brookings Institution — simply “stunning.”

How much longer will growing inequality in the United States continue to generate such stunning stats? Will the “Teens” turn our 30 years of rapidly growing inequality into 40?

Or will the Teens, like the Depression 1930s, set the stage for an explosion of equality that totally reinvigorates American life and labor?

We’ll see.

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5 comments for “In a Lost Decade, We Had Big Winners”

  1. The writer hints that he expects the teens to produce a resurgence of pro-union and pro-consumer laws. Don’t hold your breath.

    Posted by MikeNolan | January 6, 2010, 2:49 pm
  2. As much as I don’t want to see this happen, I only see one remedy for the inequity: the same one that wracked France in 1789.

    Similar attitudes of the elites are being expressed over the plight of the working class. If Marie Antoinette never really said “Let them eat cake”, she might as well have. We now get the same from these grossly-overpaid CEO’s: “If the poor had invested in the stock markets when we did, they wouldn’t be poor anymore!”

    Despite voting for change in 2008, those elected don’t even bother to hide their subservience to the economic elites who disdain the voters’ will. Once it’s clear to the people that the legal options for change have been corrupted, they will decide that they have no other option than to tear it all down.

    And then all that I fear will be realized, and we will have failed to keep the Republic as Franklin feared we would.

    Posted by Realist | January 7, 2010, 7:12 pm
  3. re:
    >>Or will the Teens, like the
    >>Depression 1930s, set the stage
    >>for an explosion of equality
    >>that totally reinvigorates
    >>American life and labor?

    I think it will get a lot worse before it gets better.
    The only thing that will turn this around is when Americans get angry and take to the streets.
    We’re still a long ways from that. In fact, where I live, in Texas, the only anger I ever see is from the wingnuts, who’re boiling with rage over Obama and his “socialist” policies.

    Posted by Marc McDonald | January 7, 2010, 8:22 pm
  4. OH!!!CAN I TAKE ALL IN? What is the poor man surpose to do? Suffer in silence?-or as of late, become a disgruntled employee that goes “postal”?!! I must admit that lately, a lot of indiscretions have surfaced. There is some justice!!

    Posted by Andrea Ware | January 8, 2010, 2:29 pm
  5. Oh right.Will all the pigs and thieves find Jebus and do the right thing? You can’t be serious.It will continue like this till the last dime is stolen from the people.There will be two classes,the needy and the greedy.Get over it or move to a real democracy some where.

    Posted by uncahal | January 30, 2010, 11:00 am

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