Labor Day 2003: Nothing to Celebrate

By Mark Weisbrot, AlterNet. Posted August 28, 2003.

If ever there was a Labor Day for American workers to celebrate, this sure isn't the one. It's now 30 years since the end of the "golden era" for American labor, which by most accounting ended in 1973. Over the past 30 years the productivity of the people whose brain and muscle creates the wealth of the world's richest nation has grown by 66 percent. But the wage of the typical employee -- the median wage -- has grown by only 7 percent.

This one statistic says more than the volumes of hype and tripe that will fill the papers and the air waves on Labor Day. It encapsulates the most massive redistribution of income in American history, from the poor, from workers, from former middle classes -- to the rich and the super-rich. As billionaire Warren Buffett said to ABC's Ted Koppel last month, "If it's class warfare, my class is winning."

What these numbers mean is that while American labor has continued producing more goods and services, the vast majority of employees have barely shared at all in the fruits of their increasing productivity. Compare these past 30 years with the first half of the post World War II era (1946-1973), when the typical wage grew by nearly 80 percent, or about in line with productivity growth.

At the lower rungs of the economic ladder, the results of this "regime change" are even more pronounced. Ten million minimum wage workers -- 71 percent of whom are not teenagers -- now earn about 23 percent less, in terms of real purchasing power, than they did in 1967.

In the arena of non-wage income the story has become even more grim. Pension plans with a guaranteed benefit are now a thing of the past, and in the last few years millions of employees lost an enormous amount of their retirement savings in the stock market. Rising health care costs, along with shifting more of the cost to employees, are taking another bite out of most workers' living standards.

These changes are the result of deliberate policy decisions that have reduced the bargaining power of most workers, whether unionized or not.

One such change has occurred at the Federal Reserve, which in normal times is able to determine the national unemployment rate through its control over interest rates. When unemployment gets "too low," the Fed raises interest rates in order to slow the economy and wage growth by throwing people out of work. For most of the last quarter century, unemployment of less than 6 percent (and sometimes even more) was considered "too low."

The Fed temporarily eased up on this policy in the second half of the 1990s, and unemployment dropped drastically to 4 percent by 2000, without any upsurge in the much-feared inflation rate. America's workers saw their best wage gains -- about 2 percent annually for four years -- in decades. The gains reached down, in a break from recent decades, to lower and middle-income workers; and unemployment among African American teenagers dropped from 36 to 24 percent.

But what the Fed giveth, the Fed taketh away. The financial markets are already anticipating that the Fed will raise interest rates early next year, even though unemployment is projected to be at 6.2 percent. In other words, when the economy recovers, the Fed has no intention of allowing a repeat of that brief spate of nearly full employment.

In addition to the Fed's decisions, other intentional policy and institutional changes have contributed to American labor's 30-year nightmare. President Ronald Reagan fired 12,000 striking air traffic controllers soon after taking office in 1981, beginning an assault on organized labor that has built a bridge to the 19th century. And what is commonly called "globalization" has been a deliberate process of crafting trade and commercial agreements like NAFTA and the World Trade Organization that increasingly throw American labor into competition with workers making as little as 25 cents an hour in places like China.

Contrary to the views of most journalists and economists, these changes are not inevitable or irreversible, nor are they a result of advances in technology or communications. This is about economic and political power, and the vast majority of American labor has little of either. Until that changes, this country will continue its slide towards the economic inequality and insecurity of our much poorer neighbors, and there will be little to celebrate on Labor Day.

Mark Weisbrot is co-Director of the Center for Economic and Policy Research, in Washington, DC (www.cepr.net).

Liked this story? Get top stories in your inbox each week from AlterNet! Sign up now »