Rising Tide, Sinking Boats
This is one of my favorite movie scenes. It’s from the 1991 film "Grand Canyon" where the car of the character played by Kevin Kline breaks down in a crime-ridden neighborhood in L.A. The tow truck, driven by Simon (Danny Glover) arrives, but not before they’re visited by the neighborhood gang members, one of whom draws a gun. Simon asks the head Gangbanger to just let them go:
Gangbanger: I’m gonna grant you that favor, and I’m gonna expect you to remember it if we ever meet again. But tell me this, are you asking me as a sign of respect, or are you asking because I’ve got the gun?
Simon: Man, the world ain’t supposed to work like this. I mean, maybe you don’t know that yet. I’m supposed to be able to do my job without having to ask you if I can. That dude is supposed to be able to wait with his car without you ripping him off. Everything is supposed to be different than it is.
Gangbanger: So what’s your answer?
Simon: You ain’t got the gun, we ain’t having this conversation.
Gangbanger: That’s what I thought, no gun, no respect. That’s why I always got the gun.
Now, suppose Simon is the employer and the Gangbanger is the employee, and then replace the word "gun" with the word "union." I was reminded of this scene yesterday when I read a New York Times article by Steven Greenhouse and David Leonhardt that describes how
With the economy beginning to slow, the current expansion has a chance to become the first sustained period of economic growth since World War II that fails to offer a prolonged increase in real wages for most workers.
Meanwhile, in a related development, the Census Department released a report today showing that In 2005, 46.6 million people were without health insurance coverage, up from 45.3 million people in 2004, and 37.0 million people were in poverty, about the same as in 2004, but up from 31.6 million in 2000. Who could have imagined, but it turns out that a rising tide does not raise all boats, what’s good for General Motors (or Wal-Mart) is not good for America, and that even if you feed and nurture the goose that lays the golden egg, you may not be able to enjoy any of the benefits of those eggs. Because even though workers have been working harder, producing more and increasing productivity, they haven’t been reaping the rewards:
The median hourly wage for American workers has declined 2 percent since 2003, after factoring in inflation. The drop has been especially notable, economists say, because productivity — the amount that an average worker produces in an hour and the basic wellspring of a nation’s living standards — has risen steadily over the same period. As a result, wages and salaries now make up the lowest share of the nation’s gross domestic product since the government began recording the data in 1947, while corporate profits have climbed to their highest share since the 1960’s. UBS, the investment bank, recently described the current period as “the golden era of profitability.”
Why, the authors ask, is “the golden era of profitability” bypassing most of us? Which brings me back to my "Grand Canyon" scene.
Economists offer various reasons for the stagnation of wages. Although the economy continues to add jobs, global trade, immigration, layoffs and technology — as well as the insecurity caused by them — appear to have eroded workers’ bargaining power. Trade unions are much weaker than they once were, while the buying power of the minimum wage is at a 50-year low. And health care is far more expensive than it was a decade ago, causing companies to spend more on benefits at the expense of wages. Together, these forces have caused a growing share of the economy to go to companies instead of workers’ paychecks.
The key there, of course, is the weakness of trade union — which is largely why you have the "insecurity" as well as the health care costs crowding out wages. Ezra Klein puts it as well as I could have:
The culprit here is a simple lack of bargaining power on the part of employees. The pernicious fiction that corporations will happily redirect their profits into appropriate raises and benefit increases has been widely adopted — we’re now supposed to assume that whatever Wal-Mart or UBI is paying is exactly what they should be paying, and the willingness of workers to take those jobs is proof that the compensation is adequate. That, of course, is nuts. The balance of power between worker and employer has shifted radically in the employer’s favor, and while folks still need jobs, the decline of unions and the rise of conservative (and neoliberal) regimes in government have allowed corporations to set the terms. Those terms, as you’d expect, prioritize executive salaries, corporate profits, and share prices, while seeking to keep labor costs as dirt low as possible. They’ve succeeded.
I have never ceased to be surprised by the strength and staying power of the "rising tide raises all boats" crowd, those who believe that a strong economy and high profits are the only ingredients needed to ensure high wages, benefits and a happy working and middle class. What they’re missing is the role of relative bargaining power in the workplace; in effect, workplace politics — the process by which power in the workplace (or in the economy) determines who benefits and who loses.
I’ve spend most of my working life addressing the workplace safety and health problems, and I find similar blindness there as well. Even before I started Confined Space, I used to write pieces for my health and safety friends, and often contributed pieces to various "professional" health and safety listserves that dealt with the politics of workplace safety. Every once in a while, someone would respond by asking the listserve operator to "get this socialist tripe off of this listserve!" A few other, slightly more moderate voices would then chime in pleading with me to stick to the technical subject (safety programs, medical protocols, etc) instead of bringing in all of that ugly, irrelevant, divisive politics. What they didn’t understand, of course, was that if you don’t understand the politics of workplace safety — both on a workplace and national level, you can’t really understand why people keep getting hurt and dying.
The current administration, for example, operates under the assumption that if you give employers good workplace safety information, they’ll automatically do the right thing. Some, of course, will. But generally, it takes a strong, knowledgeable organized workforce to ensure safe working conditions, just as it has always taken a strong, knowledgeable organized workforce to ensure decent wages and benefits (not to mention an 8-hour day, pensions and weekends.) In other words, every gain that workers have achieved throughout history is a reflection of the relative power workers have in relation to management, not how much "extra" management can afford to bestow upon its subjects through the goodness of their hearts. And the NY Times article shows what happens when labor power declines while wages and benefits are left to depend on the content of corporate America’s character:
In another recent report on the boom in profits, economists at Goldman Sachs wrote, “The most important contributor to higher profit margins over the past five years has been a decline in labor’s share of national income.” Low interest rates and the moderate cost of capital goods, like computers, have also played a role, though economists note that an economic slowdown could hurt profits in coming months. For most of the last century, wages and productivity — the key measure of the economy’s efficiency — have risen together, increasing rapidly through the 1950’s and 60’s and far more slowly in the 1970’s and 80’s. But in recent years, the productivity gains have continued while the pay increases have not kept up.
The potentially good news is that all of this bad news comes just before an election where voters are registering high anxiety of the economy and the future of the country. Political analyst Charlie Cook thinks the Republicans may be in trouble:
“There are two economies out there,” Mr. Cook, the political analyst, said. “One has been just white hot, going great guns. Those are the people who have benefited from globalization, technology, greater productivity and higher corporate earnings. “And then there’s the working stiffs," he added, “who just don’t feel like they’re getting ahead despite the fact that they’re working very hard. And there are a lot more people in that group than the other group.” In 2004, the top 1 percent of earners — a group that includes many chief executives — received 11.2 percent of all wage income, up from 8.7 percent a decade earlier and less than 6 percent three decades ago, according to Emmanuel Saez and Thomas Piketty, economists who analyzed the tax data.
I said above that this is potentially good news, because the political implications of these findings may ultimately depend on what the Democrats do with them. Peter Laarman at the Huffington Post is skeptical that the Dems can come up with big enough ideas to show voters that they have effective solutions. And we’ve saw in the last election, Republicans are very talented at diverting voters from their stomachs and sick children to more important issues like gay marriage and shampoo bombs.
Personally, I’m optimistic. Not necessarily that the Democrats will come up with some "big ideas," but that people are so disgusted that they’ll toss out the current crowd of 21st Century Robber Barons. My piece last week explains why in more detail. In short, lots of people are upset about the economy, and the recently divided labor movement is working together on the upcoming election.
In order to keep himself from kicking holes in the wall, Jordan Barab normally blogs at Confined Space.