What Happens If Labor Dies?
Continued from previous page
As unions shrank, inequality grew. From 1947 through 1972, productivity in the United States rose by 102 percent, and median household income rose by an identical 102 percent. In recent decades, as economists Robert Gordon and Ian Dew-Becker have shown, all productivity gains have accrued to the wealthiest 10 percent. In 1955, near the apogee of union strength, the wealthiest 10 percent received 33 percent of the nation’s personal income. In 2007, they received 50 percent.
Today, wages and benefits make up the lowest share of America’s gross domestic product since World War II. Wages have fallen from 53 percent of GDP in 1970 to 44 percent today. Profits have been growing at wages’ expense. Michael Cembalest, J.P. Morgan’s chief investment officer, has calculated that reductions in wages and benefits were responsible for about 75 percent of the increase in corporate profits between 2000 and 2007.
What’s causing this decline in workers’ ability to claim more of the nation’s wealth? It’s not that they’re less productive. According to a Wall Street Journal survey of the S&P 500, the nation’s largest publicly traded companies, revenues per worker, which were $378,000 in 2007, grew to $420,000 in 2010. Businesses now produce more with fewer employees, but even those workers who’ve kept their jobs haven’t seen their wages rise.
Elite opinion insists that workers’ educational shortcomings are the root cause of declining incomes. In the years since 1979, however, the share of American workers with college degrees has increased from 19.7 percent to 34.3 percent, according to a new study by John Schmitt and Janelle Jones at the Center for Economic and Policy Research. Even so, the percentage of college graduates with good jobs, which Schmitt and Jones define as jobs paying at least $37,000 a year that provide health insurance and any kind of retirement plan, has fallen from 43 percent in 1979 to 41 percent in 2010.
So workers are better educated and more productive. What they lack is power.The current recovery is different from previous recoveries because few unions remain to press workers’ demands, and the unions that do remain lack the industrial or geographic density they need to win any gains or just hold the line for their members. This is most apparent in the Midwest manufacturing belt, where unions struggle to preserve at least some of the wage and benefit levels they enjoyed before they found themselves in competition with workers abroad and in the nonunion South. While veteran workers in unionized plants still make $26 to $32 an hour, new hires in companies like General Motors and Caterpillar make between $12 and $19 hourly, with contracts that lock them into these lower levels no matter how long they may work there. In 2008, average hourly wage and benefit costs in the Midwest were $7 higher than they were in the South; by 2011, they were $3.34 higher.
An entire region is downwardly mobile. An entire nation, but for the wealthiest 10 percent, is downwardly mobile. The share of jobs at the bottom of the economy grows as the jobs at the middle vanish. The United States now has the highest percentage of low-wage workers—that is, workers who make less than two-thirds of the median wage—of any developed nation. Fully 25 percent of all American workers make no more than $17,576 a year.
That’s what the disappearance of unions and the loss of worker bargaining power means to the economy.
Politically, it means that the liberal house loses its anchor tenant. Since the 19th century, and more particularly since the 1930s, unions have brought new groups into the American electorate. In the mid-1930s, as the organizers of the fledgling CIO fanned out across hundreds of mill towns, they also turned out those workers to vote for Franklin Roosevelt. That’s why Pennsylvania, which had not voted for a Democratic presidential nominee since 1856, moved into the Democratic column in 1936 and for most elections thereafter. In Southern California, beginning in 1997, labor brought so many new Latino voters to the polls that they flipped almost all of Los Angeles’s suburban congressional and legislative districts from Republican to Democratic, converting a purple state into a blue one.