Labor

You're Likely to Be a Lot Poorer Than You Were a Few Years Ago—And It's All By Design

Other developed societies have a much stronger social contract to protect themselves from the finance industry.

The typical American is even poorer than his or her equivalent in Greece. The median Australian is four times wealthier. The Canadians are twice as wealthy. The U.S. continues to lead the world in billionaires (571 in 2014, with China a distant second at 190). But after decades of financial deregulation and attacks on employee rights, Americans rank 26th in median wealth (defined as assets owned, minus debts owed for the person on the middle rung of the wealth ladder).

All by Design

During the Cold War, our working class was the envy of the world. We argued that our free-enterprise system, not communism, created the best conditions for a rising standard of living for all. Indeed, there was much to boast about. Real wages were increasing year after year. American workers were free to go on strike and did. Most importantly, the children of working people could climb the economic ladder—upward mobility was real.

Today, by almost every measure, none of this is true. Not only do we rank 26th in median wealth, we also are the most anti-employee country in the developed world. Actually, the two go together, because rising inequality results from our pro-Wall Street and anti-worker policies.

The Organization for Economic Cooperation and Development (OECD) ranks 43 nations by the degree of employee protection provided by government. The 21 indicators used include such items as laws and regulations governing unfair dismissals, notifications and protections during mass layoffs, the use and abuse of temporary workers, and the provision of severance based on seniority. Countries are ranked on a scale of 0 to 6 with 6 going to those who provide the most legal protections for employees and zero for those with the least. As the chart below reveals, we're second to last, meaning that we have among the fewest regulations to protect employees—union, non-union, management, full-time and temporary workers alike.

During the late 1970s, pro-business policy makers, pundits and academics came up with the "Better Business Climate" model. They said we could get out of the 1970s period of high unemployment and inflation (stagflation) if we unleashed business by cutting taxes and regulations. In particular, the theory held that businesses need maximum "labor flexibility" —that there should be virtually no legal restrictions on employer-employee relations. The more flexibility, the more economic efficiency, and therefore the more economic growth. The pie would grow bigger and there would be more for everyone.   

Here's what happened instead. Virtually all the "growth" went to the top fraction of one percent. The bottom 90 percent stagnated.

But What About Upward Mobility?

Many argue that America has never been about income equality. Rather we're about equal opportunity so that everyone has a fighting chance to move up the income ladder. This is supposed to be the land of opportunity, not aristocracy. Surely we are still the envy of the world when it comes to upward mobility.

Not anymore.

Today, in the U.S., the odds are about 50/50 that you'll be stuck in the same class as your parents. But in Denmark the odds are greater than 4 to 1 that you'll improve your economic position. 

Eliminating Unions, Eliminating Strikes

The most important regulations business wants to eliminate are those that support unionization. They have done a masterful job, according to OECD data. American has nearly the lowest union density rate (the number of union members, both public and private divided by the total number in the workforce).

It's amazing how many factors come together around 1980. The Better Business Climate model became public policy. Finance was deregulated. The income gap took off. Private and public debt mushroomed. And Wall Street and CEO compensation skyrocketed. Worker strikes also fit this picture, as the chart above shows. Mass strikes virtually disappeared, making it extremely hard for workers to collectively press for higher wages and set higher wage patterns for non-union workers as well.

Fork in the Road

Each day we try to patch together a decent existence. It's hard, even painful, to step back to examine the big picture. But when we do, it's easy to see that we've been had. The Better Business Climate model has failed the average American. We have few rights on the job and fewer unions to protect us. Upward mobility is dwindling for our families.

The Tea Party offers a path forward full of vitriol and hate. They blame the government, not Wall Street. They blame immigrants, not CEOs. They vilify the "takers," while allowing the "makers" to rob us blind. They want more war against global terrorism, not war against global warming. This general psychology has a very strong electoral appeal that is thriving politically. It exists outside the boundaries of reason, and self-interest. And there's currently no solution for rebutting this general mindset. 

But we do know the solutions to the economic problems themselves: We need to take on our elite financiers and CEOs. Cut their compensation. Raise their taxes. Close their loopholes. Encourage workers rights, unions and full citizenship for the millions who live here in the shadows. And dramatically curtail CO2 emissions.

In yesteryear, we would expect the Democrats to lead the way. But except for a very few, that won't happen as the party tries to endear itself with the  rich and famous. They want Wall Street donations, not confrontations.

We're on our own. We'll need to piece together a new movement that challenges elite financial power. It took a generation to rob us of fundamental economic justice. It may take even longer to get it back.

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