Sunday, September 2, 2012

Labor Day and unions- still needed more than ever

With Labor Day upon us, now is a good time to remind folks of this country's economic history, and why things have turned against the average worker in recent years.

First, let's look at the incomes of a middle-of-the-road household in America. As the most recently-released Census survey on the subject shows, Americans still haven't recovered to the levels they were at near the end of the Clinton presidency.
Real median household income has not yet recovered to pre-2001 recession all-time highs. Household income in 2010 was 7.1 percent lower for all races combined (from $53,252 in 1999), 5.5 percent lower for non-Hispanic Whites (from $57,781 in 1999), 14.6 percent lower for Blacks (from $37,562 in 2000), 8.9 percent lower for Asians (from $70,595 in 2000), and 10.1 percent lower for Hispanics (from $41,994 in 2000).
In fact, median household income has never gotten back to where it was in 1999, even at the height of the housing/debt bubble in 2007. Since that bubble popped and the Great Recession began, real median household incomes have gone down by 6.3%. The 2010 median household income of $49,445 is the lowest since 1996, a stat that should stun anyone.

And it's not like workers aren't working harder or better in that time. In fact, hourly worker productivity went up more 46% in that time. So where did all the money go? After all, the marginal revenue productivity theory of wages says that workers higher wages due to better producitivity. So why hasn't this happened?

Going back in time is a good way to find out why. Let's compare the 14-year period of 1996-2010 with the 12-year period of 1967-1979. From '67-'79, worker producitivity went up just under 25%, yet that Census Bureau report shows that real median household incomes went up 13%, from $40,770 to $46,074 in today's dollars. And Business Insider shows us that wages as a percentage of GDP were at its highest level ever in '67, at nearly 54%.

You can see that this figure generally dropped in the 1970s and early 1980s due to recessions, but never recovered from the drop during the alleged expansion of the rest of the 1980s and 2000s. (The only time that didn't happen was from 1992-2000, which I'll explain in a second) And now it sits at 44% of GDP instead of the 54% it was at 45 years ago. Think average Americans would be doing better if they had another $1.5 trillion in their pockets (and that's what that 10% of GDP signifies, $1.5 TRILLION).

And a look at top marginal tax rates tells the story. From 1967-1979, the top tax rate on the rich was 70%, and the average worker grabbed half of the productivity gains of the era. From 1979-1992, the top tax rates were dropped from 70% down to 31%. Per-hour productivity went up 23% (much like it did from '67-'79), but real median incomes barely budged- up only 1.2%, showing that the gains did not trickle down to workers with the lower tax rates.

From 1992-2000, productivity went up 20%, and real median income went up nearly 14%, meaning nearly 70% of the productivity gains went to workers. The difference in the '90s vs. the '80s and 2000s? A top marginal tax rate of 39% under Clinton, instead of the lower tax rates under Bush and Reagan. See, when tax rates on the rich and corporate are reduced, it means that the rich have a much larger incentive to use money on legalized gambling such as stocks and real estate instead of investing in their companies, and, you know, PAYING PEOPLE TO MAKE STUFF. A look at a similar Business Insider chart on corporate profits bears this out.

Corporate profits have gone from just over 3% of GDP in the mid-'80s to nearly 11% today. That's money that could be getting sent back down to workers, if trickle-down really worked, but the reality of the last 30 years tells you that hasn't happened (except again for the '90s, when tax rates on the rich were higher). It also illustrates the damaging impact of outsourcing, as free trade policies have become dominant in that time period for both Democrats and Republicans, including Clinton's approval of NAFTA and Most Favored Nation status for China, along with Bush's chief economic advisor claiming "outsourcing is good for America." I think after 25-30 years of this question, the jury is back. It might be good for profits and the 1%, but it isn't any good for the average American who has had to compete with Third World slave-wage labor.

ANd the last piece in this puzzle? The decline of labor unions. Now, I have my own issues with some in union leadership (I argued 2 months ago that public sector unions should emphasize their civil service independence instead of constantly talking about money), but there is no question to me that this country is better off with a strong labor movement. In the mid-'50s, over 1 in 3 workers in the U.S. were in labor unions, and in 1983, it was still over 20%. Now, union membership is at its lowest amount since the Depression, at less than 12%, and it's less than 7% in the private sector. But for those remaining in unions, there is a great economic advantage. Just this last week, the Economic Policy Institute released a paper showing that being in a union greatly helps when it comes to workers' wages and benefits.
Researchers at the Economic Policy Institute (EPI) determined that union workers in 2011 still earn significantly more than non-union workers, with men gaining a union premium wage that’s 17.3 percent more than non-union peers. Women see a smaller but still significant benefit from union membership as well, tending to earn 9.1 percent more than non-union counterparts.

The study also found that unions have a profound impact on whether workers have health insurance and pensions, noting that a full 83.5 percent of unionized workers had health insurance, versus 62 percent of non-union workers. Additionally, 71.9 percent of union members had pensions in 2011, though just 43.8 percent of non-union workers shared that privilege.

Another interesting caveat: EPI said that not only do unions raise wages, pensions and the number of people with health insurance, they also reduce inequality among ethnic minorities. Hispanic and black men were the two groups to benefit most from union membership in 2011, with black men seeing a 17.3 percent premium over non-union peers and hispanic men seeing a 23.1 percent premium.
It is quite clear that as unionization rates have gone down, and as tax rates have gone down, the rich and corporate have kept a much larger percentage of their profits to themselves, instead of giving it to the people who made their fortune possible. So why are so many people tricked into blaming unions for the decline in their working standards and wages, when they're clearly working harder and better than ever? It's time for people to be forcefully told the truth that unions are the check on total corporate and management power that allows for a growing economy to reach all citizens, not just the 1%ers that do nothing but trade paper. Sitting back and hoping for those CEOs to benevolently have their great wealth trickle down has failed, and thinking that one day you will win the lottery and be a 1%er yourself has failed, and blaming the people smart enough to see through it and unionize is not the way to make your life better.

So why not go back to the way that worked for 30 years after World War II, which led to the U.S. having the greatest middle class, social mobility and economic power the world had ever known. It is no coincidence that as we have cut taxes for the rich and corporate, taken power from unions and other workers, and encouraged trade deals that put profit over people, that our country has left behind hundreds of millions of people who deserve more than what they have gotten since 1980, and especially in the last dozen years.

So on this Labor Day, more than ever, we need to stand up and proclaim:

And we need to make damn sure we have politicians of all parties respect workers, instead of taking their efforts for granted.

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