Jan. 19 (Bloomberg) -- Missile assembler Thomas Tanzillo dipped into retirement savings and worked a temporary job to support his family during a 70-day strike at Raytheon Co.'s Tucson, Arizona, plant. He may need years to recover.
His union on Jan. 14 accepted a three-year contract almost identical to the one that sparked the strike: 3 percent annual raises and higher health-care premiums. The deal came after Raytheon posted eight straight quarters of profit growth and awarded missile unit President Louise Francesconi a 19 percent raise to $1.7 million -- including restricted stock -- in 2005.
The Tucson settlement shows how workers are struggling to keep pace with growing U.S. economic wealth. Company profits as a percentage of gross domestic product are at a 40-year high, rising to 12 percent in the third quarter from 7 percent five years ago. Wages and salaries fell to 45 percent from 49 percent, government data show. Workers like Tanzillo are bitter.
``We don't mind making concessions if the company goes through a few lean years, but now that we're back to the boom years, they're not sharing,'' Tanzillo, 56, says.
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``This is one of the many battles to come in the war on the middle class,'' Martinez says. ``Companies like Raytheon are focusing on making money at any cost, instead of looking at the common good of a community.''
Almost three-quarters of Americans believe the growing gap between the rich and the poor is a serious concern, according to a Bloomberg/Los Angeles Times poll in December.
The GDP gap is widening even though wage gains began to pick up late last year. It wasn't until September that average hourly wages surpassed the year-end 2001 rate, adjusted for inflation, according to U.S. Labor Department data.
Average hourly earnings rose 1.7 percent in 2006 on an inflation-adjusted basis, the department says.
U.S. workers are only beginning to recover lost ground. After inflation, median family income of $56,643 hasn't grown since 2001, says economist Jared Bernstein of the Washington- based Economic Policy Institute, which is funded by foundations, companies and labor unions.
``The typical family could end this recovery behind where they started,'' Bernstein says. ``That's a hell of an indictment given how much income we've created.''
The U.S. economy is expanding steadily, with GDP forecast to rise 2.5 percent this year, according to a January Bloomberg News survey of economists. Yet that wealth hasn't translated into greater prosperity for many Americans.
Companies such as Waltham, Massachusetts-based Raytheon, drugmaker Eli Lilly & Co., Goodyear Tire & Rubber Co. and United Parcel Service Inc. have ratcheted up profits while containing wages and benefits like hawks since the recovery began in late 2001.
Unlike earlier expansions, more profit is going to shareholders in the form of stock buybacks than is being earmarked for capital expenditures and wage growth.
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S&P 500 companies have reported four consecutive years of profit gains, with operating earnings rising 13 percent in 2005, 24 percent in 2004, and 19 percent in both 2003 and 2002, Silverblatt says.
S&P estimates that operating profits rose 15 percent last year and will come in about 10 percent higher this year.
U.S. managers, taking advantage of new technologies and emerging economies, can better connect low-cost sources of production with buyers in affluent markets. The wage competition -- which Morgan Stanley chief economist Stephen Roach calls global labor arbitrage -- keeps many U.S. workers' pay in check, stretches their hours and shifts more benefits costs from companies to employees.
``The advent of the Asian workforce has maybe changed labor economics in the long term,'' United Technologies Corp. Chief Executive Officer George David says.
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Many employers are increasing productivity at workers' expense, says Eric Kingsley, an Encino, California, labor lawyer who wasn't involved in the UPS lawsuit.
``The 40-hour week has been completely obliterated,'' Kingsley says.
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Rising health costs also weigh on workers and retirees. The contract requires hourly workers to pay at least 88 percent more for health insurance over three years, including 19 percent in the first year......
Bush is leading the Republican party to a political Dien Bien Phu. Americans have been taking it in the pocketbook for years (including through the last "recovery"). If the economy has a long hard landing, 2008 could be 1932 all over again.
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