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U.S. Wages Continue Falling Despite Economic Boom

The average wage earner in the United States (especially manufacturing and production workers) took home a smaller paycheck over the last 12 months despite a surging economy that only benefits the rich.

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Arthur J. Villasanta – Fourth Estate Contributor

Washington, DC, United States (4E) – The average wage earner in the United States (especially manufacturing and production workers) took home a smaller paycheck over the last 12 months despite a surging economy that only benefits the rich.

The Bureau of Labor Statistics (BLS) on Aug. 10 reported real average hourly earnings throughout the country fell 0.4 percent over the past year despite a resurgent economy, That figure takes into account seasonal differences and the effects of rising prices.

More distressing for American wage earners, is that an increase in the length of the average workweek wasn’t enough to compensate for the drop in wages. This caused average weekly earnings to fall 0.1 percent in the same period. In July alone, real hourly wages remained flat, while real weekly earnings dropped 0.2 percent.

The disheartening “rise” in wages comes amid an economy that grew by 4.2 percent in the second quarter. Unemployment nationwide was below four percent in July.

A study by the Economic Policy Institute (EPI) in 2013 found that middle-wage workers have seen their hourly earnings stagnate since 1979. Earning rose by a paltry 0.2% annually. This is way below the 3.5% average annual rate of inflation for the same period.

Low-wage workers suffered even more as their wages have plummeted by 5% between 1979 and 2013. EPI found that in 2013, young college graduates’ real hourly wages were lower than they were in the 1990s. The average real hourly wage of a young college graduate (regardless of gender) was $18.00 in 1998, while it was $16.99 in 2013. Manufacturing and production workers have been hit the hardest by low wages.

Wage stagnation is a problem for broad swathes of the U.S. population, not just those workers without a post-secondary education. And why are American wages so low? It’s because of globalization.

To remain competitive, American companies must either sell their products at cheaper prices while maintaining quality, or move their operations overseas. Firms that kept their base of operations in the United States are forced to streamline their production process, a tactic that means either firing workers or paying workers lower wages.

In both scenarios, American workers have seen their wages fall or stagnate due to globalization.

This exploitation of American workers by Republicans, which proves the Democrats’ point the GOP’s tax cuts only benefit the rich, will rattle Republicans hoping the positive economy will boost them in November’s midterm elections.

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Finance

PG&E will File for Bankruptcy to Avoid $30 Billion in Lawsuit Damages

Pacific Gas & Electric Corporation (PG&E), parent company of the utility that provides electricity and gas to most of Northern California, has announced its intention to file for Chapter 11 bankruptcy protection to stay alive amidst billions of dollars worth of lawsuits associated with the catastrophic wildfires that occurred in 2017 and 2018.

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Arthur J. Villasanta – Fourth Estate Contributor

San Francisco, CA, United States (4E) – Pacific Gas & Electric Corporation (PG&E), parent company of the utility that provides electricity and gas to most of Northern California, has announced its intention to file for Chapter 11 bankruptcy protection to stay alive amidst billions of dollars worth of lawsuits associated with the catastrophic wildfires that occurred in 2017 and 2018.

PG&E’s liability could exceed $30 billion should it be found legally responsible for some or all of the costs connected with the 2017 and 2018 Northern California wildfires. These catastrophes include the Camp Fire in November 2018, which is the deadliest and most destructive wildfire in California history to date.

PG&E stands on precarious legal grounds. Cal Fire, California’s fire agency, determined in June that PG&E equipment ignited 17 wildfires across Northern California in 2017. In 12 of these fires, the agency’s findings were referred to the appropriate county District Attorney’s offices for potential violations of state law.

California law says utility companies can be held liable for fire damage caused by their equipment, even if they weren’t negligent in maintenance.

State regulators are also investigating PG&E’s potential culpability in the Camp Fire that killed some 86 people; destroyed more than 18,000 structures and inflicted damage worth over $16.5 billion.

“We believe a court-supervised process under Chapter 11 will best enable PG&E to resolve its potential liabilities in an orderly, fair and expeditious fashion,” said interim CEO John Simon. “We expect this process also will enable PG&E to access the capital and resources we need to continue providing our customers with safe service and investing in our systems and infrastructure.”

Shares of PG&E Corporation plummeted more than 51 percent on Monday afternoon. The company has lost more than two-thirds of its market value since the Camp Fire.

The Calaifornia Legislature, however, might still take action to protect the company from 2018 fire liabilities between now and when PG&E actually files for Chapter 11.

Democratic state Sen. Jerry Hill, a longtime critic of PG&E, said that if Monday’s bankruptcy announcement is a company tactic to pressure the Legislature for a bailout, it won’t work.

The company’s already considrable financial problems only worsened following the Camp Fire. This would be the company’s second bankruptcy since it first filed for bankruptcy in 2001.

The company was convicted of felonies in a deadly gas line explosion, and now faces those potentially crippling wildfire liabilities and safety lawsuits.

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Ford, Jaguar Slash Thousands of Jobs in Europe; Weak Sales to Blame

Ford of Europe A.G. and Jaguar Land Rover Ltd (JLR) will slash thousands of jobs across Europe as they cope with dramatically weaker sales and an unmistakeable global economic slowdown.

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Arthur J. Villasanta – Fourth Estate Contributor

Cologne, Germany (4E) – Ford of Europe A.G. and Jaguar Land Rover Ltd (JLR) will slash thousands of jobs across Europe as they cope with dramatically weaker sales and an unmistakeable global economic slowdown.

JLR, which is based in Coventry, England, said it will cut 4,500 out of 42,500 jobs at its facilities in the United Kingdom. In the same vein, Cologne-based Ford of Europe confirmed it will slash “thousands” of jobs as part of an overhaul that might result in plant closures and kill-off weaker selling Ford models.

Ford will likely close some plants in Europe, as well. It employs 53,000 people.

The job cuts for both Ford and JLR were triggered by a fall in demand for diesel-engined cars. Another reason: European policymakers in December agreed stricter pollution limits, forcing carmakers to speed-up investments in developing all-electric cars.

Ford will exit the family vans or MPV segment. It will review its operations in Russia, and combine the headquarters of Ford U.K. and Ford Credit to a site in Dunton, Essex to achieve a six percent operating margin in Europe.

Analysts noted that profits of JLR and Ford’s have lagged behind those of competitors BMW, Volkswagen and Peugeot. The weaker operating results has seen investor pile on the pressure on managers to stanch mounting losses.

Ford of Europe reported a $282 million loss before interest and taxes in the third. For its part, JLR reported a 4.6 percent drop in full-year sales to just under 600,000 vehicles. It lost $450 million between April and September 2018.

“We are taking decisive action to transform the Ford business in Europe,” said Steven Armstrong, group vice president, Europe, Middle East and Africa.

Ford of has been bleeding money for years and pressure to restructure its operations has risen since arch-rival General Motors raised profits by selling its European Opel and Vauxhall brands to France’s Peugeot.

On the other hand, JLR is being best by much weaker sales in China, its biggest overseas market. JLR said demand in China plunged 21.6 percent in 2018, the biggest drop in any of its markets.

“The economic slowdown in China along with ongoing trade tensions is continuing to influence consumer confidence,” said JLR Chief Commercial Officer Felix Brautigam.

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Powell Bewails Rising U.S. Debt Despite Strong Economy

Federal Reserve Chairman Jerome Powell expressed extreme worry about the burgeoning U.S. debt along with the overall budget deficit.

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Arthur J. Villasanta – Fourth Estate Contributor

Washington, DC, United States (4E) – Federal Reserve Chairman Jerome Powell expressed extreme worry about the burgeoning U.S. debt along with the overall budget deficit.

The annual debt in 2018 exceeded $1 trillion and is balooning every minute of everyday. On the other hand, the overall deficit hit $21.9 trillion as of January 8, said the Department of the Treasury. Of this massive amount, $16 trillion is owed by the public.

“I’m very worried about it,” said Powell about the national debt during a meeting of The Economic Club of Washington, DC yesterday. “From the Fed’s standpoint, we’re really looking at a business cycle length: that’s our frame of reference.”

“The long-run fiscal, non-sustainability of the U.S. federal government isn’t really something that plays into the medium term that is relevant for our policy decisions,” according to Powell. “It’s a long-run issue that we definitely need to face, and ultimately, will have no choice but to face.”

While the U.S. has had sustained annual debts higher than 2018’s, the debts in 2009 and 2010 occurred when the economy was recovering from the Great Recession of 2008. Currently, the annual national debt is growing despite a strong economy.

Part of the reason for the rising deficit, was the first year of President Donald Trump’s tax bill. Tax revenue today is nearly flat while government spending has risen with the bipartisan budget bill. And because of the corporate tax cuts in the Republican’s Tax Cuts and Jobs Act, corporate tax receipts fell 30 percent.

All these are largely the result of Trump’s unwise tax cut.

“So what we’re seeing — you would expect at a time like this revenues rising faster than spending, because the economy is strong, more people working, paying taxes, fewer people collecting unemployment benefits and such, and the deficit would shrink,” said David Wessel, director of the Hutchins Center on Fiscal and Monetary Policy at the Brookings Institution.

“We see the opposite, and that’s largely because of the tax cut.”

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