Monday, September 5, 2011

Labor Day- needed more than ever in America

The attempts to downplay Labor Day and the need and importance of unions (as illustrated by this J-S article today) ignore the simple truth in this country. As we have deindustrialized, deunionized, and cut taxes for the rich, the average American worker has had their money taken from them, and sent upward.

First of all, workers produce more than ever over the last 20+ years, and have gotten nothing for it. Check out this picture.

In other words, productivity has gone up 3 times the amount of wages. So much for that Econ 101 theory that people are paid increased real wages at the same amount that they increase productivity.

This is one of the many findings in an excellent article from the Economic Policy Institute earlier this year. Here are the two real kicker parts.
This two decades worth of low pay growth is part of an even longer trend of wage stagnation for the typical worker: median hourly wages only grew 10.1% in real terms from 1979 to 2009, even though productivity grew 80% in those 30 years. Since virtually all of this real wage growth occurred in the six years from 1996 to 2002, reflecting the wage momentum of the strong economic recovery in the late-1990s, it is fair to say that there has been no real wage growth for the typical worker for most of the last 30 years. Analyses of total compensation that factor in the value of employee benefits yield the same result because nonwage benefits as a share of total compensation also have failed to grow since 1979, meaning benefits did not grow faster than wages....

The Bureau of Labor Statistics also has recently noted the failure of compensation to keep pace with productivity (they grew in tandem from 1947-73). That productivity-pay gap is the bigger story here than any public-private pay gap: The ability of the economy to produce more goods and services has not translated into greater compensation for workers.

Hmmm, why did things change in the last 30+ years vs. the post-World War II period? You know, the period where a huge amount of Americans joined the middle class, had millions of "first generation in college" members, and America became the Western world's clear economic and military superpower.

Think it might have something to do with the fact that the top income tax rates from 1947-1973 were between 70 and 91 percent while they were dropped from 70% to 50% in 1981, and have been between 28% and 39.6% since 1988 (the time shown on the graph)? And as the EPI article brings up, the only time we've had real wage growth is in 1996 to 2002- a time that had the highest tax rates on the rich over the last 25 years.

Know what else we had back then? High levels of unionization. In post-World War II America, unionization was between 25 and 30 percent until the early 1970s, and stayed over 20% until Reagan. (See figure 1) Not coincidentally, as real wages have slacked productivity in the last 3 decades union membership has fallen from 20.1 % to 11.9% since 1983. Amazing how not having a voice in the workplace allows you to have the worth of your work stolen from you and given to the owners, isn't it?

And in this case, I will say correlation = causation. 65 years of correlation isn't an anomaly, because it isn't very worthwhile to hoard profits and pay CEO's and executives absurd salaries at the detriment of your workers if you're going to be taxed at high rates for doing so. This is what happened in America in the 1940s to the 1970s, when we had mobility that 95% of us can only dream of nowadays. And unless we have a real labor movement and a government willing to counteract the power of corporations and big-money greed, we will never get it back.

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