Ravengate
Partners - Stock market, economic and political commentary by Patricia Chadwick

Paris is arguably the most sensually appealing city in the world, and that’s probably damning it with faint praise. Walking the streets of the Left Bank is like being treated to an afternoon massage. All the tension evaporates from one’s shoulders and neck.

Entering a restaurant — fancy or simple — puts a smile on one’s face. And enjoying the meal that has been prepared with exquisite attention to both flavor and presentation slows the pulse and lowers the blood pressure. Foie gras, steak tartar, escargot — in Paris they enhance good health rather than clog the arteries.

The pace of life in Paris is conducive to longevity, even though smoking is rampant. There seem to be far more cigarettes than cell phones. Cigarettes are the symbol of pleasure; cell phones of pressure.

Paris is art — its bridges, gardens, shops and ateliers; its architecture, designed to allow the sun to grace the sidewalks along its wide boulevards all day long. And, of course, its myriad museums — best enjoyed in small doses and unrushed. Support for the arts is manifest everywhere, paid for by a steep tax rate that doesn’t seem to ruffle French feathers.

That’s the glorious side of Paris, a cultural paradise — a heaven on earth that makes one want never to leave.

But there’s another Paris, and it’s a puzzling one, so seemingly incongruous in the atmosphere of elegance and sophistication that defines the city and makes you breathe deeply and say, “Oui, this is what life is all about.”

The other Paris is the city that says, “Non!”

“Non”, we will not serve you and your friends at the café until the last person in your party of twelve has arrived.

“Non”, you may not check your coat in the cloakroom at the museum, even though I am on duty and being paid, the museum is open and the coat closet is empty.

“Non”, you may not evict the stranger who has broken into your apartment while you were away and is now living there as a squatter. What? Isn’t one’s home sacrosanct from invaders? “Non”, not in Paris.

As a visitor, I find myself at a loss to understand this paradox. I wonder about its origin, since this attitude seems to have been a part of the city for ages. Could it date as far back as the French Revolution? Is this the way an oppressed people rose up and showed that they too could have a voice?

Interestingly, the Paris of “Non” is unaffected by the political party in power; it is neither left-wing or right-wing; it’s beyond politics.

When one discusses this puzzling anomaly with Parisian friends, they simply shake their heads and groan. They too experience it; it’s not reserved for foreigners.

Fortunately, experiencing the elegance and sophistication of the Paris of “Oui” is such a delight that the Paris of “Non” acts like a mere footnote. As it should be.

Last Friday’s employment figures sounded like good news. Total employment increased by 295,000 during February, and the U.S. unemployment rate declined to 5.5%. But there’s another side to the employment story, and it has to do with middle-class workers’ wages.

During the Great Recession of 2008 and in the several years following, many corporations — large and small, public and private — found it necessary to pare their employment costs through layoffs, as well as by cutting benefits to their remaining workforce. For some companies, the measures taken were essential to survive; for others, it helped to alleviate significant declines in profits. That’s the real world of business.

The cost-cutting measures included slashing or eliminating bonuses. I’m not referring to C-suite bonuses that run in the seven figures, but the small ones — the $500, $1000 and maybe $2,500 given to the rank and file employees as a goodwill gesture.

Another money-saving tactic utilized during that period was to reduce, or even do away with, the corporate match for employees’ retirement plans. That “free” return on employees’ 401(k) plans was a valuable asset in building a nest egg for later years.

Health care costs also came under sharp scrutiny. Companies were able to negotiate lower premiums with insurers by raising deductibles and co-pays for employees. In many cases, both the employer and the insurer benefited from reduced costs, while the employee was saddled with higher out-of-pocket expenses.

Now, nearly eight years later, the economy has improved significantly. GDP is at an all-time high, as are corporate profits. That should be great news for workers — solid, profitable growth ought to imply that salaries are increasing, previously cut benefits have been restored and bonuses are once again being paid.

But in fact, it seems that many companies have conveniently forgotten the fact that they took benefits away from their employees when times were tough.

From 2000 through 2013, (a period that includes both a robust economy and the Great Recession) corporate profits increased by 132% (a 6.7% annualized growth rate), while wages and salaries grew by only 47%, or the equivalent of 3% per year. The graph below shows how profits (blue line) are becoming a larger share of the economic pie at the expense of wages (red line).

Source: U.S. Bureau of Economic Analysis

To some extent, the divergence in those two lines is a function of cheap capital replacing more expensive labor. But importantly, it is also the result of productivity gains, and one of the advantages of productivity is that it allows employers to increase wages and benefits without an inflationary impact. Unfortunately, that doesn’t seem to be happening to any major degree in the U.S.

With a mere 3% annual increase in salaries and wages barely outpacing inflation, together with rising out-of-pocket expenditures for health care, it is no wonder that the middle class feels trapped.

Good corporate stewardship entails dealing fairly with all stakeholders — owners, employees, customers and vendors. Many companies in this country embrace that responsibility; however, many more tend to act as though the only stakeholder that matters is the owner (private or public).

Now is the time for companies that are thriving to restore to their employees the benefits that were curtailed or eliminated during the recession. The goodwill created among the workforce should be reward enough, but we all know that the reason for the anemic recovery from the Great Recession has been weak consumer spending. A robust expansion depends on strong consumer expenditures. We need higher real wages to take the economy to the next level.