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.
[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.
