Who’s Fighting for Workers?

September 3rd, 2012 at 10:12 am

It’s Labor Day so let’s talk about work and workers.  And who’s fighting for them and who isn’t.

An economy like ours is an amalgam of markets, all of which aggregate into “the market.”  That is, there’s a housing market, a stock market, a market for pork belly futures, the auto market, etc.  And then there’s one of my personal favorites, the one we’re celebrating today: the labor market.

It’s ideally the place in the economy where working-age people, having received the education and training needed to maximize their inherent skills and intelligence, produce the goods and services that the members of the society need and want.  The output they create adds to the nation’s wealth, and they are—theoretically—remunerated commensurately.  That is, they receive their share of what they added to our economic firmament.

That’s what I was taught.  But it is not what happens.

Too often, the problems start with inadequate access to the education kids need, and I’m starting with pre-school here, to realize their potential.  And, of course, this is a problem that’s strongly correlated with income.

Then there’s the demand problem.  The basic labor economics I described above reduces to a key precept: demand for labor is derived demand.  It is derived from the demand for goods and services.  If that demand lags, then the beneficent chain of events I described breaks down.

Obviously—well, it’s obvious to all but the austerians—demand  was slammed in the Great Recession and is still, slowly creeping back.  And since labor demand is derived from the economy-wide demand for goods and services, this remains the central problem of the job market.

[For the record, and because we’re in that terribly silly season where political operatives cruise the web for ways to ding the President, let me assert that he and his administration have done much to offset this weak demand and have tried to do a lot more but have been consistently blocked by Congress.  Not saying anyone’s perfect here, but let’s just get that caveat out of the way.]

But for many middle and low-wage workers, especially those displaced from the manufacturing sector, this demand problem is not isolated to the recession.  It’s been a problem in expansions as well, which is a main reason their real wage trends have been stagnant or worse for decades, especially for men.  One way I know this to be the case is because when we actually hit a full employment economy for a New-York-minute there in the latter 1990s, both employment and real wages rose quite sharply, even for the lowest wage workers (a minimum wage increase helped too).

Next, and relatedly, there the productivity/wage split, another way the chain breaks down.  The assumption of the pristine model is that workers are paid their contribution to productivity at the margin, but as folks at EPI have shown, that’s clearly not what we’ve seen over most of the last 30 years.

The figure below, forthcoming from EPI’s brand-spankin’ new State of Working America, makes the case quite forcefully.  The divergence between compensation and productivity isn’t just a problem for middle-wage workers or those with no further educational attainment beyond high-school.  Even the pay of those who’ve completed four years of college has stagnated in recent years, while productivity continues to climb.

So the chain of events that’s supposed to generate a healthy labor market has broken down in three key places: inadequate access to education, especially for the least advantage; not enough labor demand; and the benefits of productivity growth are not being fairly shared.

How can this be fixed?  Which policy initiatives can put the links of the chain back together?

That’s a lot of what I write about here at OTE and I won’t go into the details right now, other than to say it’s not at all rocket science.  The solutions are well-known and flow from the diagnoses: better access and improved quality at all levels of education/training; demand side policies (full employment!); stronger bargaining power.

But today I’d like to ask a more fundamental question, one that strikes me as at the heart of this deep problem of the broken labor market and why it hasn’t been fixed: who’s fighting for workers?

I know who’s fighting for wealthy people, for the finance industry, for the oil companies.  I can see who’s fighting for the troops and even for the poor, though the latter are surely harder to find than the rest.

But who’s fighting for working people?  For teachers, for retail clerks, for construction workers, for cab drivers, for waitpersons, for home-health aides, for social workers, for maintenance workers, for computer programmers, for drill press operators, for truckers, for nurses, and so on.

The answer is not “nobody.”  The unions, for sure.  And many other NGOs, to be sure as well, like NELP (I’m on their board), along with some venerable think tanks, like EPI and CBPP.

And in the political realm, there are many stalwarts who deserve to be recognized, including Sec’y Solis, Sherrod Brown, George Miller, Rosa DeLauro, Tom Harkin, Macy Kaptur, John Conyers, Linda Sanchez, and many others (I’ll add more names here as I think of them—I want to be sure to thank them today).

But they are outnumbered and outgunned in terms of resources.  Think of it this way.  Why does the national echo chamber resound far more with policies that allegedly help job creators, like a cut in the capital gains tax rate (which, for the record, is not at all associated with stronger job growth), than policies that help workers, like a minimum wage increase or strengthening the right to collectively bargain?

The labor market needs serious repair, but until enough powerful and well-resourced people can stand up and say we need to fix it, and until their message has the same resonance as those calling for supply-side tax cuts for “job creators,” it will remain broken.

So if you’re in the policy business, or in the business of supporting people in that business, or just in the business of desiring an economy that works better for working people, ask yourself today “who’s fighting for labor?”

Then give the answer: I am!


Source: EPI, State of Working America, forthcoming.

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9 comments in reply to "Who’s Fighting for Workers?"

  1. Kevin Rica says:

    Who’s Fighting for Workers?

    The U.S. press and the leadership of Democratic Party!

    The U.S. press and the leadership of Democratic Party (not necessarily the rank-and-file) are fighting to bring us more workers!

    They are fighting for more workers, because we don’t have enough workers to fill all the jobs.

    What does labor want? “More!” said Samuel Gompers.

    The Democratic Leadership and the Press are working to be sure that we always have “More!” workers. If we don’t, wages could rise! There might not be enough people to do every dirty job for the minimum wage. In fact, there might not be enough to pick all the crops in California for less than the minimum wage.

    Oh God! Please help the Chamber of Commerce fill all the jobs at wages that Americans don’t want. How could it be wrong if both Nancy Pelosi and the Chamber of Commerce are united on the issue?

    That is why Jerry Brown and the California State Legislature are fighting to keep our borders open to prevent a shortage of high school drop-outs! They are fighting for labor! More labor so that no job goes unfilled; Regardless of race, color or creed, or lack of health benefits, or bad pay, or no sick leave.

    America needs more labor! The Washington Post, the NY Times, and the Huffington Post tell us so. They are fighting for more workers from more countries!

  2. Jake says:

    What is keeping business from paying their workers’ more for their productivity gains and thereby stimulate demand by increasing household spending power which will grow the economy and eventually improve their top line?
    Answer: As an executive from Apple supposedly said, “My job isn’t to fix society’s problems. It’s to make the best product possible.” I would add, “and to build my personal wealth in the process.” Overall economic prosperity is the secondary effect of this self-interested focus. That’s the way it has always been. Therefore, we are going to have to assume business always will act this way and look to government and public-private partnerships that stimulate that business self-interest to keep middle-class household income from continuing to fall.

    • Kevin Rica says:

      “What is keeping business from paying their workers’ more for their productivity gains and thereby stimulate demand by increasing household spending power which will grow the economy and eventually improve their top line?”

      Answer: An abundance of workers willing to take even less. See Jared’s August 31 post on “Full Employment.” And as long as it is the policy of BOTH parties to keep it that way (guest workers and open borders), nothing will change.

  3. Fred Donaldson says:

    WalMart employes in Germany get three weeks vacation in the winter and three weeks in the summer – all paid.

    American workers for the same corporation – well, why beat a dead horse?

    Solution to this contradiction: the firm’s workers are represented by a union in Germany, and they have scary-to-job-creators organizations like “workers’ councils.”

    Less hours. Paid more. Sounds like something to anticipate, but only if you move out of this country to someplace like Germany or even Australia with its “dangerous” $15+ an hour minimum wage and no interest student loans.

    Different laws, same company, different results. Blame the lawmakers, because companies will always act only in their self interest.

  4. John Yard says:

    Who is fighting for workers ? Certainly not the Republican party. At one time there was something called the liberal-labor alliance within the Democratic party. This alliance is long dead. The Democratic party program since Bill Clinton has
    been on one hand has been to support neoliberalism in the form of free trade and deregulation – devestating to the working class – while preserving New Deal legacy programs. Ethnic minorities and women – the majority of minorities – have replaced the American worker as centerpiece of Democratic Party coalition making. This is an unstable coalition of mutally conflicting dicotomies.

    The end result has been the long erosion of Democratic party support from where it was the hegemonic party – the 1960’s – 1970’s – to its position today . The hegemonic party today is the Republican party – the Dems win only when the Republicans
    screw up , because the Republicans represent neoliberal capitalism, the church that both parties worship.

    So who is fighting for the workers ? Certainly neither major
    American political party.

  5. Bill Gatliff says:

    Just being in bed with Labor Unions isn’t necessarily fighting for The Worker, since like corporations, Union priorities must lie first with their own interests.

    Helping the electorate identify and support policy that strikes balance between competing interests is impossible so long as nobody recognizes (or worse, overtly rejects) the interests of their opponents. Open, constructive dialogue that serves initially to simply educate us is what we desperately need right now. Only from that will we even be able to agree on what our options are.

    You know, like the stuff that Jared writes. 🙂

    But that kind of copy is too functional, too pragmatic, too boring to sell ad space or clickthroughs. And those of us with the attention spans to study it don’t seem able to put it into practice or policy anyway.

    We are doomed.

    • bfuruta says:

      >> …since like corporations, Union priorities must lie first with their own interests.

      I think this is the heart of the problem: people putting their narrow self-interest above everything else. Everyone loses by taking a win-lose attitude. The only way we can win is by taking a win-win attitude.

      One aspect of that is expressed by MIT’s Thomas Kochan in an article from Harvard Magazine
      ( http://harvardmagazine.com/2012/09/the-workforce ):

      If unions want to have a future in the United States, they need to be the champions of giving workers the training, skills, and opportunities to add value to their enterprise—and then be able to negotiate a fair sharing of the returns that they help to generate. That’s how labor unions could add considerable value and discipline management—in a way that works for the benefit of the firm as well as for the workforce.

      But a larger issue is that the public does not support unions. In a series of posts in June, Doug Henwood explored this phenomenon after Walker’s victory in Wisconsin. (http://lbo-news.com/tag/unions/ ) If unions are to reverse their decline, they need to a complete overhaul. Some excerpts from Henwood:

      “But the heavy emphasis on the contract and the workplace has led to a narrowing of vision, and to a perception among the 88% of the workforce that’s not unionized that unions don’t give a damn about them.”

      “In other countries, unions are about more than contracts, and have done a lot better job fighting for broad public benefits, like pensions and health care. Our unions look too much like they’re fighting to defend their own private welfare states and not fighting to expand the public ones. They look like that because they all too often are.”

      “Unions have to shift their focus from the workplace to the community at large, from private benefits enjoyed by a few to public benefits enjoyed by everyone, or they’re doomed.”

  6. The Anarchist says:

    Professor Warren Mosler is fighting for labor and price stability and writes, My proposals remain:

    1. A full FICA suspension:

    The suspension of FICA paid by employees restores spending which supports output and employment. The suspension of FICA paid by business helps keep costs down which in a competitive environment lowers prices for consumers.

    2. $150 billion one time distribution by the federal govt to the states on a per capita basis to get them over the hump.

    3. An $8/hr federally funded transition job for anyone willing and able to work to assist in the transition from unemployment to private sector employment.

    “Call me an inflation hawk if you want. But when the fiscal drag is removed with the FICA suspension and funds for the states I see risk of what will be seen as ‘unwelcome inflation’ causing Congress to put on the brakes long before unemployment gets below 5% without the $8/hr transition job in place, even with the help of the FICA suspension in lowering costs for business.

    It’s my take that in an expansion the ‘employed labor buffer stock’ created by the $8/hr job offer will prove a superior price anchor to the current practice of using the current unemployment based buffer stock as our price anchor.

    The federal government caused this mess for allowing changing credit conditions to cause its resulting over taxation to unemploy a lot more people than the government wanted to employ. So now the corrective policy is to suspend the FICA taxes, give the states the one time assistance they need to get over the hump the federal government policy created, and provide the transition job to help get those people that federal policy is causing to be unemployed back into private sector employment in a more orderly, more ‘non inflationary’ manner.

  7. Jake in Pgh says:

    Jared, please add to your graph a line for executive compensation, particularly at the top. I think you would find that nearly all the productivity gains have been sucked into that greed-bucket by CEOs and Boards who have no interest in rewarding shareholders, much less workers. Gordon Gekko was not a satire, he was a prophet!