The New Physics of Inequality: Compounding Advantage for the Rich and Accelerating Disadvantage for the Bottom 60 Percent
Researchers examine how inequality is becoming more durable and intractable.
Bits and bytes would be doing a lot more to help make our lives less nasty, brutish, and short if we shared wealth as routinely as bandwidth. From San Francisco, a new lesson in that reality.
Better living through chemistry. So promised the flacks for DuPont over a generation ago. Our corporate flacks today have a much jazzier message. Better living through gadgets — the smart phones and tablets and whatevers that almost all of us obsess over.[pullquote]Imagine no more wasted minutes waiting endlessly at bus stops.[/pullquote]
These gadgets certainly can perform wonders. In San Francisco, for instance, a small band of volunteers last summer created an Apple iPad app that can track the whereabouts of every city bus in “real time.”
Imagine that. No more wasted minutes waiting endlessly at bus stops. Smoother commutes for passengers, easier trouble-shooting for bus system managers. Better living indeed.
The folks at San Francisco’s Municipal Transportation Agency couldn’t agree more. They can’t wait to put the new app into operation. Unfortunately, they can’t afford to put the new app into operation. The agency, an official explains, is running millions over budget and can’t come up with enough dollars “to buy the iPads required to run the software.”
Why the shortfall? The short answer you’ll never hear a bureaucrat give: class war. The long answer: Our world’s incredibly unequal distribution of wealth and power is keeping us from enjoying better lives through gadgets, chemistry, and just about everything else that ought to be improving our human condition.
Let’s start our San Francisco transit backstory with that Apple iPad. At the end of last year, notes Economic Policy Institute analyst Ross Eisenbrey, Apple was selling the iPad to wireless carriers for an average $630 per unit.[pullquote]Most all high-tech giants are exploiting workers and fleecing consumers — and handsomely rewarding those execs who exploit and fleece.[/pullquote]
What made the gadget so costly? Not labor costs. Apple’s Chinese manufacturing supplier, the notorious Foxconn high-tech factory colossus, was shelling out only $15 per unit to the workers who were actually making the iPads. An additional $296 per unit was going for components and other costs.
That left Apple, back in the United States, with a profit of $319 per every $630 iPad sold. Profits this ample have made Apple’s executive brass enormously rich.
Apple top dog Steve Jobs passed away last year with a fortune estimated at $8.3 billion. His successor, Timothy Cook, inked a pay deal last summer worth $378 million. Cook “makes in 2 hours and 12 minutes,” the Pittsburgh Post-Gazette noted last week, “what the president of the United States makes in a year.”
Apple, of course, hardly stands alone in the high-tech world. Most all America’s high-tech giants are exploiting workers and fleecing consumers — and handsomely rewarding those execs who do the exploiting and fleecing.
We don’t have overall high-tech industry executive pay figures in yet for 2011. In 2010, Silicon Valley’s top execs pocketed paychecks up an average 37 percent.
But exploiting and fleecing, we need to keep in mind, haven’t just made high-tech execs exceedingly rich. The wealth this exploiting and fleecing have generated has left high-tech movers and shakers extraordinarily powerful in the political sphere as well, powerful enough to carve mammoth loopholes into the tax code.[pullquote]America’s top 30 tech companies paid on average only 16 percent of their 2011 profits in income tax.[/pullquote]
How deep do those loopholes go? The California-based Greenlining Institute last week revealed that America’s top 30 tech companies paid on average only 16 percent of their 2011 profits in federal income tax, less than half the 35 percent tax rate that corporations are supposed to be paying.
Apple paid out even less. The company pulled in over $34 billion in 2011 profits and paid federal corporate income tax at just a 9.8 percent rate.
High-tech giants are doggedly dodging local taxes as well. In San Francisco last May, elected officials saw fit to exempt the city’s big high-tech players — Twitter and gaming giant Zynga among them — from the full bite of a 1.5 payroll tax supposed to apply to all income, windfall cashouts from stock options included.
Under the new tax exemption enacted in San Francisco last year, individual high-tech powerhouse corporations need not pay more than $750,000 in payroll tax on stock-based compensation.
The impact of that decision? Zynga’s initial public stock sale took place last December and made the company’s CEO a billionaire two times over. On the Zynga stock compensation windfall alone, the high-tech tax break adopted last year cost the San Francisco city treasury at least $6 million.
The revenue this tax break is costing San Francisco’s treasury will rise appreciably higher next year. Twitter, an online goliath that dwarfs Zynga in size, will likely start hawking shares on Wall Street in 2012. The resulting stock option windfalls will be immense.
And that brings us all the way back to the San Francisco Municipal Transportation Agency, the underfunded public transit operation that can’t afford to buy enough iPads to start using that nifty app that would make life so much easier for every city bus rider.
Sam Pizzigati, the co-editor of Inequality.Org, also edits Too Much, the online weekly on excess and inequality published by the Washington, D.C.-based Institute for Policy Studies. Read the current issue or sign up here to receive Too Much in your email inbox.