In the United States, corporate bonuses are booming yet unemployment is way up. Robert Reich, writing in Salon, explains why:
How can the stock market hit new highs at the same time unemployment is hitting new highs? Simple. The market is up because corporate earnings are up. Corporate earnings are up because companies are cutting costs. And the biggest single cost they’re cutting is their payrolls. So they let people go and, presto, their balance sheets look better and their stock prices rise.
Reich was secretary of labour under the Clinton administration, so his credentials are unimpeachable. He’s also a very funny guy; I highly recommend this podcast from ABC’s Big Ideas programme. It’s a couple of years old now, but what’s not to love about someone who opens their lecture by saying:
I am an economist. And, as some of you may know, an economist is someone who did not have the personality to become an accountant.
