Over the past four decades, American workers have suffered a
devastating loss of economic power, manifest in their wages, benefits and
working conditions. The annual economic output of the United States has almost
tripled, but, with the help of policymakers from both political parties, the
wealthy hoarded the fruits. In the nation’s slaughterhouses, the average worker
in 1982 made $24 an hour in inflation-adjusted dollars, or
$50,000 a year. Today the average meatpacker processes significantly more meat
— and makes less than $14 an hour.
The hundreds of thousands of home health care aides, often female, often minorities, who care
for a nation of aging baby boomers rarely receive paid time to care for their
own families. Even in the high-flying technology sector, companies have found
ways to leave their workers behind. More than half of the people who work for Google do not actually
work for Google. They are classified as contractors, which means they do not
need to be treated as employees. Picture the nation as a pirate crew: In recent decades, the
owners of the ship have gradually claimed a larger share of booty at the
expense of the crew. The annual sum that has shifted from workers to owners now
tops $1 trillion. Or consider the power shift from the perspective of an
individual worker. If income had kept pace with overall economic growth since
1970, Americans in the bottom 90 percent of the income distribution would be
making an extra $12,000 per year, on average. In effect, every American worker
in the bottom 90 percent of the income distribution is sending an annual check
for $12,000 to a richer person in the top 10 percent. American workers need a raise. But it is not enough to transfer
wealth from the rich to the desperate. In confronting the Great Depression,
President Franklin Delano Roosevelt understood that a sustainable improvement
in the quality of most American lives required an overhaul of the institutions
of government. “These economic royalists complain that we seek to overthrow the
institutions of America,” Roosevelt said in 1936. “What they really complain of is
that we seek to take away their power.”
Now as then, the profound inequities of American life are
the result of laws written at the behest of the wealthy and public institutions
managed in their interest. Now as then, the nation’s economic problems are
rooted in political problems. And now as then, the revival of broad prosperity
— and the stability of American democracy — require the imposition of limits on
the political influence of the wealthy. It requires the government to serve the
interests of the governed. Americans especially need to confront the fact that
minorities are disproportionately the victims of economic inequality — the
people most often denied the dignity of a decent wage. That inequity is the
result of historic and continuing racism, and it should be addressed with the
same sense of fierce urgency that has motivated the wave of protests against
overt displays of racism.
The Rev. Dr. William Barber II, a civil-rights leader who
emphasizes the foundational importance of economic justice, has pointed to the
constitution that North Carolina adopted after the Civil War. The document
affirms the rights of life, liberty and the pursuit of happiness. But
African-Americans were among the state’s legislators for the first time, and
the former slaves got another principle enshrined as well: that workers
are entitled to “the fruits of their own labor.” They understood that economic
security makes other freedoms meaningful. It is time to ensure that all
Americans can share in the nation’s prosperity. In February 1970,
student protesters broke into a Bank of America branch near the University of
California, Santa Barbara. They scattered the bank’s files and pushed a burning
dumpster into the lobby, setting the building on fire.
One protester explained, “It was the biggest capitalist
thing around.” California’s governor, Ronald Reagan, condemning the protesters
as “cowardly little bums,” sent in the National Guard. For Reagan and others,
the bank fire was more than an isolated act of vandalism. Lewis F. Powell, a
prominent corporate lawyer, described it as part of a larger assault on the
business of America in a 1971 memo for the U.S. Chamber of Commerce. Powell
listed threats including Ralph Nader’s campaign for consumer safety
regulations, the rise of the environmental movement and the expansion of social
welfare programs. Warning that “business and the enterprise system
are in deep trouble, and the hour is late,” he urged businesses to fight. Corporations began to invest in politics on an unprecedented
scale. The beer magnate Joseph Coors said Powell’s memo prompted him to create
the Heritage Foundation, a conservative think tank that greatly influenced
Reagan’s presidential policy agenda. The National Association of Manufacturers
moved to Washington from New York. Blue chips including General Electric, Exxon
and IBM funded a “boot camp” where economists lectured federal judges on free
enterprise. By 1990, 40 percent of the judiciary had been re-educated.
Powell continued his corporate advocacy as a member of the
Supreme Court, which he joined in 1972, writing important decisions removing
restraints on corporate concentration and campaign spending. The
counterrevolutionaries embraced a radical view of the role of corporations:
“The social responsibility of business is to increase its profits,” as the
economist Milton Friedman wrote in an influential 1970 essay in The New York
Times Magazine. During the first three years of Mr. Welch’s tenure,
G.E. recorded $6.5 billion in profits and didn’t pay the federal government a
single penny in corporate income taxes. Instead of boasting about paying
workers, Mr. Welch boasted about layoffs. This unapologetic pursuit of profit reached new heights with
the deregulation of financial markets. Lending surged as the federal government
lifted strict limits on interest rates and on foreign investment in the United
States. Investors bought companies and squeezed them like lemons, while
surviving firms scrambled to keep shareholders happy. In 1982, the Securities
and Exchange Commission — led by a Wall Street banker for the first time since the Great
Depression — provided a new way for corporations to shovel money to
shareholders by voting to let companies buy back shares of their own stock.
Companies also began to compensate executives primarily with
options to purchase stock. The chief executives of large American corporations
made about 20 times more than the median worker at those companies in the
mid-1960s. By 2018, the gap was some 278 times. Meanwhile, the union movement declined, removing an
important counterweight to corporate power. Unions lost traction partly under
the weight of their own shortcomings, including endemic corruption and a focus
on preserving employment in declining industries rather than expanding
membership in growing industries. Companies also became more militant in their opposition to
unions. Kate Bronfenbrenner, a professor at Cornell University, surveyed workers who had participated in
unionization drives between 1999 and 2003 and found 57 percent of their
employers had threatened to close the business if a union was formed; 47
percent threatened to cut wages or benefits; and 34 percent fired workers who
supported unionization. To sustain the goals of the private sector at the
expense of the public interest, corporations poured money into lobbying. They
told policymakers that the decline in the fortunes of American workers was the
tough-but-fair result of market forces.
“People will get paid on how valuable they are to the
enterprise,” John Snow, an economist then serving as Treasury secretary under
President George W. Bush, explained in 2006. On this theory, thanks to new
technologies and increased foreign competition, most Americans just weren’t
worth what they used to be. Politicians didn’t pay much attention to the flaws
in that logic: that U.S. workers have fared more poorly than those in other
nations, and that wage growth also has lagged far behind the rising value of
the average worker’s output. In a recent study, the Harvard economists Anna
Stansbury and Lawrence Summers tied those trends to the shift in political
power from workers to employers.
Wages are substantially determined by a tug of war between
workers and employers and, with the help of government, employers have been
winning. The hostility of the Republican Party was nothing new, but Democrats
also parted ways with workers. As Americans moved from thinking of themselves
primarily as workers to thinking of themselves primarily as consumers, the
Democratic Party recast itself. “I’d love the Teamsters to be worse off,” said
Alfred Kahn, an economic adviser to President Jimmy Carter. “I’d love the
automobile workers to be worse off.” Kahn and other economists insisted that
reducing union wages would benefit everyone else. And as unions faded, the
government demurred from championing the rights of workers. The purchasing power
of the federal minimum wage peaked in 1968; it’s been falling ever since. The
Economic Policy Institute estimates that employers illegally deprive
workers of more than $50 billion in wages each year by underpaying them or
requiring unpaid work; violators are rarely punished.
Workers could track the loss of power in their paychecks:
Weekly wages have stagnated since the late 1970s. Newer employers, like mobile
phone companies, simply refused to treat workers in the same way as older
employers like the landline telephone companies. And old-line companies that
survived, like the heavy equipment maker Caterpillar, gradually forced workers
to accept less compensation. “Working on
the railroad is a mentally taxing and challenging job; I would say it has
gotten harder and the compensation is now less than it once was,” said Daniel
Lyon, a 63-year-old locomotive engineer from Cheyenne, Wyo. “And the cost of
everything has gone up all these years.” Employers also took advantage of the
growing number of women in the work force. As the share of female workers in a
given industry increased, wages fell for employees of both sexes. Over the past decade, as
the gilded class enjoyed the longest period of uninterrupted economic growth in
American history, many middle- and lower-income Americans borrowed to maintain
their standard of living. Household debt as a share of the economy has roughly
doubled since 1980. Many less affluent Americans effectively are paying
wealthier Americans for the money that they once were paid in wages.
In recent months, the government has reinforced those
patterns, responding to the coronavirus pandemic by pumping into the economy
trillions of dollars aimed mostly at preserving wealth rather than jobs. The
government has backstopped corporate borrowing while allowing companies to lay
off millions of workers. As a result, stock prices have soared even as people
stand in long lines at unemployment offices and food pantries.
And those who waited longest for new opportunities after the
2008 financial crisis have often been among the first to lose their jobs. Black
people and women have been especially hard-hit. Astonishingly, just 54 percent
of black men in America were employed in May, up slightly from a modern low of
53 percent in April. The coronavirus recession has driven unemployment
in America to the highest levels since the Great Depression. For many workers,
for many years to come, the limits of the political horizon may seem to be
defined by the bitter truth that a poorly paid job is better than none. Yet
this is the moment to insist that workers deserve more.
The nation has ample resources to ensure that every worker
is paid enough to afford housing, food and other necessities of daily life.
Anything less is intolerable. Yet in 2017, more than 17 million workers — disproportionately
minorities and women — labored for wages too meager to lift their households
above the federal poverty line. The Queens subway station Parmjit Shnau uses to
get to work at a nursing home was closed when she got there at 4:45 a.m., because
of service changes related to the pandemic. When people are deprived of means and opportunity, society
is deprived of their potential contributions. In June 1933, President Roosevelt
called on employers to embrace an “industrial covenant” — a commitment to
provide “living wages and sustained employment.” He argued this was greatly in
the interest of industry, because well-paid workers would become customers, too.
Almost a century later, employers continue to resist that basic logic, seeking
short-term savings at the expense of their own long-term prosperity.
Change is possible. A government more inclined to help
workers would have ample opportunity. But as in the early 1930s, political
change must proceed economic change. For the voices of workers to be heard, the
influence of the wealthy must be curbed. The power of the wealthy also has been
amplified by the willingness of many Americans to accept cheap goods as a
substitute for good jobs. A more equitable society requires a willingness to
pay a little more for the burger or the bicycle — and for the welfare of the
Americans who make and sell those products.
Americans need robust minimum standards for employee compensation
and benefits, and the revitalization of institutions to safeguard those
guarantees. The federal minimum wage needs to be raised to $15 an hour, with
regular adjustments for inflation. Corporations have long warned that raising
the minimum, now $7.25 an hour, will force companies to get rid of workers. But
a growing number of state and local governments have made the leap, with no
evidence of dire consequences. If McDonald’s can turn a profit in Denmark,
where even the most junior workers earn the equivalent of more than $20 an hour, it can turn a profit paying $15 an hour
in America.
Lyndon Johnson fought for the creation of a federal minimum
wage as a first-term congressman in 1938. Three decades later, as president, he
signed an increase in the minimum wage to what remains the highest level on
record, after adjusting for inflation. The purpose, Johnson said, was “to bring
a larger piece of this country’s prosperity, and a greater share of personal
dignity, to millions of our workers, their wives and their children. And for
me, frankly, that is what being president is all about.”
Americans also need the government to restrain the power of
corporations. The dominance of a few large companies in a growing number of
industries limits wage growth because workers have fewer alternatives, a
problem that could be checked by a revival of antitrust enforcement. Companies
also have made a mockery of legal protections for employees by classifying a
growing share of workers as contractors, a farce embodied by Uber’s fierce insistence that Uber drivers are not Uber drivers. The
government can also make it easier for workers to switch jobs, which is often
the best route upward. Ensuring that workers are not dependent on employers for
affordable health insurance would make a big difference.
The government also should prohibit noncompete clauses,
which impose contractual limitations on job-hopping. Once reserved for
executives and other highly paid employees, the practice has become widespread,
binding an estimated 30 million workers. One measure of the madness: A
recent survey found 30 percent of the nation’s hair salons require noncompete clauses. There are
signs that some corporate leaders recognize the need for change. The Business
Roundtable, a trade group for some of the nation’s largest companies, issued a new version of its mission statement last year acknowledging
that corporations have responsibilities beyond making money. It is a purely
symbolic gesture, but it points in the necessary direction.
Policymakers can encourage that new direction, for example
by reversing the legalization of share buybacks and policing the classification
of workers as independent contractors. And workers who want to join unions
should be able to do so without the fear of reprisals. The jobs that Americans
do will continue to change as technology improves and tastes drift. But the
need to work will not change, nor will the basic imperative to ensure that
workers are compensated fairly and treated with dignity. We live in an era of
profits without broad prosperity, but the power to rewrite the rules of the
market is in our hands. In 2016, Dr. Barber was arrested in Durham, N.C., while protesting for a
$15 minimum wage. He said that he was pursuing the fulfillment of the language
written into the state’s constitution by freed slaves more than 150 years ago.
The injustice remains. So does the opportunity.
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