Less Money, More Problems
The working-class squeeze pushed inequality through the roof. Today the top 5 percent of American families -- those with household incomes over $150,000 -- now claim 35 percent of national income. Thirty years ago the top 5 percent took home 21 percent.
With wages flat-lined for over three decades, families scrambled to prop up their living standards, first with more women entering the workforce and then by working more hours.
But there is a limit to how many earners each family can have, or how much overtime workers can schedule, so debt became the solution to anemic paychecks. Workers turned to credit cards or used their homes as ATM machines.
Once the housing bubble burst, the system finally caved in on itself. Bad home loans were the spark, but the fuel for this financial wildfire was a generation of stagnant incomes and overstretched consumers.
Addicted to Debt
It wasn't just consumers who leaned heavily on credit. In recent years corporate debt skyrocketed, and as long as short-term loans were plentiful, companies were happy to operate with a thin cushion. Now that the credit markets are clenched up, businesses are feeling the pinch.
The Hawaii Medical Center was an early victim, for example, forced into bankruptcy in September when its creditors refused to roll over $5 million in short-term loans.
More than a third of its 900 workers have been laid off. Companies that survive today's frozen financial markets will continue to struggle with the rising cost of debt, raising the possibility of concessions and bankruptcies to come.
On the watchlist is FairPoint Communications, the company that took over Verizon's landline operations in northern New England earlier this year. The company borrowed heavily to close the $2.5 billion deal, and the Communications Workers (CWA) argued at the time that workers and consumers would bear the burden if FairPoint's plans went awry.
That risk is growing, as the handover from Verizon is months behind schedule and millions of dollars over-budget. FairPoint's customers are cutting back or switching to lower-cost competitors.
"What's going to happen to our pension?" asks Darlene Stone, chief steward at CWA Local 1400 in Burlington, Vermont.
The Minneapolis Star Tribune's next step is also uncertain. Pressure on the paper's owner, private equity firm Avista Capital Partners, is mounting. Two other Teamster locals have followed the pressmen and cancelled givebacks. Bialon, the pressman, reports that on October 1 the company laid off 18 union members.
"They said they needed to save $20 million to fend off bankruptcy," he said. "But they've already gotten rid of a third of the workforce and no one from management has been let go. They wanted the world from us and were offering nothing in return."
(Note: You can view every article as one long page if you sign up as an Advocate Member, or higher).
