Bank Transfer Day and What's Changed Since 1960

The main focus of today's post is identifying what has changed over the past fifty years that makes it nearly impossible for a skilled laborer in America to support a family of five at a comfortable working class level. Before getting into that, November 5th is tomorrow and it's important enough that any couch potato activist worth their salt should understand the what and why of it.

Bank Transfer Day

Image by thinkprogress.org

The Occupy movement has declared November 5th to be Bank Transfer Day. For some time now that has been an arbitrary target date for those who no longer wish to support an institution involved in the near collapse of our economy to transfer their money to a credit union or community bank where it won't be used to buy legislation. There is a fair amount of misinformation floating around the cyber universe. Here are a few important facts.



1) This action is not intended to create "a run" on the banking system or to "take it down". Banks and credit unions in the U.S., large and small, are all part of the same system, so unless millions withdraw funds and put them in a tin can under the porch, this shifting of funds poses no threat to the system. It does however send a message to those "too big to fail" banks that we know what they are up to and we don't like it.

2) This action was never a protest against the $5 fee BofA announced on debit card transactions, with the other big guys suggesting that they were working on a similar gouge. As things worked out all banks, BofA included, have backed off of the attempted rip off. This only illustrates the power of a united populace, it does not mean that you should give up your right to send a message by moving your money.

3) Except in a few isolated metro areas it is not difficult to find a suitable credit union or community bank that will open an account and help you make the switch. This article reports that over 650,000 new credit union accounts were opened in October, more than in all of 2010. A recent television report found that if you do your homework and take the required documents with you, making the switch can be done in under twenty minutes.

4) Finally, the November 5th date (N5 in Occupy speak) is not magical. If you read this months from now or two days from now and realize you no longer want to support the opposition, be an activist, make the switch.


What's Changed Since 1960

Graph by data360.org

As you learned in the previous post, my father worked his way up over the years to become a skilled machinist. While I don't know the details of his benefit package at the locally owned machine shop where he worked, I do recall his pride in a raise that put him over $5 per hour, $5.10 to be exact. That sticks in my mind because at the time (summer 1962) I was washing dishes at a Howard Johnson for 72 cents per hour (below the minimum of $1.00 because I got a free meal at the end of my four hour shift).

According to this inflation calculator, $5.10 in 1962 is the equivalent of $37.26 now or $77,873 per year based on 40 hours per week, 52.25 weeks per year. The average annual income for a skilled laborer today is $39,000. To be more specific, salary.com shows that a machine tool cutting operator with up to two years experience can expect to earn from $20,000 per year to $46,000 per year based on location and experience. The high number is for the the top 10% and is not likely to be representative of eastern Oklahoma. Was my father's extra experience worth an extra thirty or forty thousand (2010) dollars per year?

Based on a 2010 Bureau of Labor Statistics report the value of goods and services produced in our country (GDP) rose from over 3 trillion to over 14 trillion inflation adjusted dollars from 1960 to 2010. Part of that increase is due to increased efficiency and part is due to population growth and multiple family members working. The per worker amount stated in 2010 dollars has increased from $45,970 to $103,229. Clearly the working class has not benefited from from their increased productivity. Who has benefited?

Table 3 below contains a big clue. The inflation rate from 1960 to now has averaged 4.14% per year. Notice that from 1960 to 1980 executive pay rose at a comparable rate. Even allowing for the runaway inflation of the late 1970s and early 1980s, a 7.59% per year rate of increase during the 1980s is clearly out of line. Finally, there can be no free market economy explanation for the 14.6% per year increase in the 1990s. The booming economy didn't float all boats equally. Working class Americans were left treading water. The table only takes us to 2003. A report in USA today this past April 4th reveals that in 2010 compensation for CEOs jumped an incredible 27 percent!

Another clue comes from the fact that average CEO pay has jumped to 753 times minimum wage in 2010 which translates to (753 * $7.25) $5,459.25 per hour. Compare that to 2003 where the chart stops when that ratio was about 450:1 with the minimum wage at $5.15 per hour or (450 * $5.15) $2,317.50 per hour for CEOs on average. In other words in seven years CEO pay more than doubled. If we just call it a double that translates to over 10% per year, well over twice the average rate of inflation.

Save for another day the fact that in other successful, industrialized countries the ratio of CEO pay to worker pay is below 20:1 while the U.S. ratio is several hundred to one depending on how it's calculated. Any way you slice it, beginning in the 1980s we see a clear disparity in the distribution of wealth that can't be explained given a well regulated free market economy. Next time we'll have a look at the interaction between those on the receiving end of that disparity and our government. Until then, que le vaya bien...Steve

Historical Trends in Executive Compensation1936-2003 by Carola Frydman and Raven E. Saks

Updated November 13th, 2011 to use Bureau of Labor Statistics tables to eliminate problems accessing tables on data360.