Americans' Increasingly Bleak Labor Picture

Most people know that America's economy remains less than stellar.  But often missed in the analysis is how the prospect of good paying jobs is spirally downward even as the Republican Party continues relentless attacks on labor unions which historically brought better paying jobs and benefits such as health care insurance coverage.   A lengthy article in American Prospect looks at the bleak picture of an economy where higher paying jobs are disappearing while low wage jogs are increasing.  Some of the information on Wal-Mart is both informative and shocking - I won't be shopping at Wal-Mart any time soon.  And overall, the article is disturbing.  Welcome to the vision of the GOP and corporate vultures who long for the "good old days" of the Gilded Age.  Here are extended excerpts:

That year [1974], for the first time since the end of World War II, Americans’ wages declined. 

Since 1947, Americans at all points on the economic spectrum had become a little better off with each passing year. The economy’s rising tide, as President John F. Kennedy had famously said, was lifting all boats. Productivity had risen by 97 percent in the preceding quarter-century, and median wages had risen by 95 percent. As economist John Kenneth Galbraith noted in The Affluent Society, this newly middle-class nation had become more egalitarian. The poorest fifth had seen their incomes increase by 42 percent since the end of the war, while the wealthiest fifth had seen their incomes rise by just 8 percent. Economists have dubbed the period the “Great Compression.”

This egalitarianism, of course, was severely circumscribed. African Americans had only recently won civil equality, and economic equality remained a distant dream. Women entered the workforce in record numbers during the early 1970s to find a profoundly discriminatory labor market.

What no one grasped at the time was that this wasn’t a one-year anomaly, that 1974 would mark a fundamental breakpoint in American economic history. In the years since, the tide has continued to rise, but a growing number of boats have been chained to the bottom. Productivity has increased by 80 percent, but median compensation (that’s wages plus benefits) has risen by just 11 percent during that time. The middle-income jobs of the nation’s postwar boom years have disproportionately vanished. Low-wage jobs have disproportionately burgeoned. Employment has become less secure. Benefits have been cut.

As their incomes flat-lined, Americans struggled to maintain their standard of living. In most families, both adults entered the workforce. They worked longer hours. When paychecks stopped increasing, they tried to keep up by incurring an enormous amount of debt. The combination of skyrocketing debt and stagnating income proved predictably calamitous (though few predicted it). Since the crash of 2008, that debt has been called in. 

All the factors that had slowly been eroding Americans’ economic lives over the preceding three decades—globalization, deunionization, financialization, Wal-Martization, robotization, the whole megillah of nefarious –izations—have now descended en masse on the American people. Since 2000, even as the economy has grown by 18 percent, the median income of households headed by people under 65 has declined by 12.4 percent. Since 2001, employment in low-wage occupations has increased by 8.7 percent while employment in middle-wage occupations has decreased by 7.3 percent. Since 2003, the median wage has not grown at all. 

The economic landscape of the quarter-century following World War II has become not just unfamiliar but almost unimaginable today. . . . .  The defining practice of the day was Fordism (named after Henry Ford), under which employers paid their workers enough that they could afford to buy the goods they mass--produced. The course of Fordism never ran as smoothly as it may seem in retrospect. Winning pay increases in halcyon postwar America required a continual succession of strikes. 

[T]hroughout the 1940s, ’50s, and ’60s, many corporate executives believed that their workers’ well-being mattered. “The job of management is to maintain an equitable and working balance among the claims of the various directly affected interest groups: stockholders, employees, customers, and the public at large,” the chairman of Standard Oil of New Jersey (later Exxon) said in 1951. Once hired, a good worker became part of the family, which entitled him to certain rewards. “Maximizing employee security is a prime company goal,” Earl Willis, General Electric’s manager of employee benefits, wrote in 1962.

Although the biggest contributor to inflation was the increase in energy prices, a growing number of executives and commentators laid the blame for the economy’s troubles on the wages of American workers. “Some people will have to do with less,” Business Week editorialized. “Yet it will be a hard pill for many Americans to swallow—the idea of doing with less so that big business can have more.”

With the second oil shock, inflation surged to 13.5 percent. Volcker responded by inducing a recession. “The standard of living of the average American,” he said, “has to decline.” Raising the federal funds interest rate to nearly 20 percent throughout 1981, the Fed chairman brought much of American business—particularly the auto industry, where sales collapsed in the face of high borrowing costs—to a standstill. By 1982, unemployment had risen to a postwar high of 10.8 percent.

[In 1981] Three signal events—Federal Reserve Chairman Paul Volcker’s deliberately induced recession, President Ronald Reagan’s firing of striking air-traffic controllers, and General Electric CEO Jack Welch’s declaration that his company would reward its shareholders at the expense of its workers—made clear that the age of broadly shared prosperity was over. 

Reagan’s union busting was quickly emulated by many private-sector employers. In 1983, the nation’s second-largest copper-mining company, Phelps Dodge, ended its cost-of-living adjustment, provoking a walkout of its workers, whom it replaced with new hires who then decertified the union. The same year, Greyhound Bus cut wages, pushing its workers out on strike, then hired replacements at lower wages. Also in 1983, Louisiana Pacific, the second-largest timber company, reduced its starting hourly wage, forcing a strike that culminated in the same kind of worker defeats seen at Phelps Dodge and Greyhound. Eastern Airlines, Boise Cascade, International Paper, Hormel meatpacking—all went down the path of forcing strikes to weaken or destroy their unions.

The loss of workers’ leverage was compounded by a radical shift in corporations’ view of their mission. In August 1981, at New York’s Pierre Hotel, Jack Welch, General Electric’s new CEO, delivered a kind of inaugural address, which he titled “Growing Fast in a Slow-Growth Economy.” GE, Welch proclaimed, would henceforth shed all its divisions that weren’t No. 1 or No. 2 in their markets. If that meant shedding workers, so be it. All that mattered was pushing the company to pre-eminence, and the measure of a company’s pre-eminence was its stock price.

Between late 1980 and 1985, Welch reduced the number of GE employees from 411,000 to 299,000. He cut basic research. The company’s stock price soared. So much for balancing the interests of employees, stockholders, consumers, and the public. The new model company was answerable solely to its stockholders. 

By the end of the century, corporations acknowledged that they had downgraded workers in their calculus of concerns. In the 1980s, a Conference Board survey of corporate executives found that 56 percent agreed that “employees who are loyal to the company and further its business goals deserve an assurance of continued employment.” When the Conference Board asked the same question in the 1990s, 6 percent of executives agreed. “Loyalty to a company,” Welch once said, “it’s nonsense.”

The definitive Southern company, and the company that has done the most to subject the American job to the substandard standards of the South, has been Wal-Mart, which began as a single store in Rogers, Arkansas, in 1962. That year, the federal minimum wage, set at $1.15 an hour, was extended to retail workers, much to the dismay of Sam Walton, who was paying the employees at his fast-growing chain half that amount. Since the law initially applied to businesses with 50 or more employees, Walton argued that each of his stores was a separate entity, a claim that the Department of Labor rejected, fining Walton for his evasion of federal law.

Undaunted, Wal-Mart has carried its commitment to low wages through a subsequent half-century of relentless expansion. In 1990, it became the country’s largest retailer, and today the chain is the world’s largest private-sector employer, with 1.3 million employees in the United States and just under a million abroad. As Wal-Mart grew beyond its Ozark base, it brought Walton’s Southern standards north.

When a Wal-Mart opens in a new territory, it either drives out the higher-wage competition or compels that competition to lower its pay. David Neumark, an economist at the University of California, Irvine, has shown that eight years after Wal-Mart comes to a county, it drives down wages for all (not just retail) workers until they’re 2.5 percent to 4.8 percent below wages in comparable counties with no Wal-Mart outlets. 

Wal-Mart’s antipathy to unions and affinity for low wages merely reflects the South’s historic opposition to worker autonomy and employee rights. By coming north, though, Wal-Mart has lowered retail-sector wages throughout the U.S.

A cumulative effect of Wal-Martization is that incomes in the industrial Midwest have been dropping toward levels set in Alabama and Tennessee. According to Moody’s Analytics, the wage-and-benefit gap between Midwestern and Southern workers, which was $7 in 2008, had shrunk to just $3.34 by the end of 2011.

Today, the share of the nation’s income going to wages, which for decades was more than 50 percent, is at a record low of 43 percent, while the share of the nation’s income going to corporate profits is at a record high. The economic lives of Americans today paint a picture of mass downward mobility. According to a National Employment Law Project study in 2012, low-wage jobs (paying less than $13.83 an hour) made up 21 percent of the jobs lost during the recession but more than half of the jobs created since the recession ended. Middle-income jobs (paying between $13.84 and $21.13 hourly) made up three-fifths of the jobs lost during the recession but just 22 percent of the jobs created since.

The decline of the American job is ultimately the consequence of the decline of worker power. Beginning in the 1970s, corporate management was increasingly determined to block unions’ expansion to any regions of the country (the South and Southwest) or sectors of the economy (such as retail and restaurants) that were growing. An entire new industry—consultants who helped companies defeat workers’ efforts to unionize—sprang up.

The collapse of workers’ power to bargain helps explain one of the primary paradoxes of the current American economy: why productivity gains are not passed on to employees. . . . . the share of revenues going to wages and benefits in manufacturing has declined by 14 percent since 1970, while the share going to profits has correspondingly increased.

Only if the suppression of labor’s power is made part of the equation can the overall decline in good jobs over the past 35 years be explained. Only by considering the waning of worker power can we understand why American corporations, sitting on more than $1.5 trillion in unexpended cash, have used those funds to buy back stock and increase dividends but almost universally failed even to consider raising their workers’ wages. 

This May, a Pew poll asked respondents if they thought that today’s children would be better or worse off than their parents. Sixty-two percent said worse off, while 33 percent said better. Studies that document the decline of intergenerational mobility suggest that this newfound pessimism is well grounded.

The extinction of a large and vibrant American middle class isn’t ordained by the laws of either economics or physics. Many of the impediments to creating anew a broadly prosperous America are ultimately political creations that are susceptible to political remedy. Amassing the power to secure those remedies will require an extraordinary, sustained, and heroic political mobilization. Americans will have to transform their anxiety into indignation and direct that indignation to the task of reclaiming their stake in the nation’s future.