40 Years of Declining Wages & Living Conditions

Huck/Konopacki Labor Cartoons

Increased productivity (i.e., goods and services produced per hour worked) is the theoretical basis for improved living standards under capitalism. This is because with increased productivity employees can work fewer hours to accomplish more and/or earn more money per hour worked since they are producing more. However, it is only in theory that their living standards improve since their compensation and working conditions (including the length of the workday and the amount of work they must complete each day) are determined by the bosses who could increase their wages as a reward for their increased productivity or, as is almost always the case, force them to work just as hard or harder for the same or less pay and pocket the extra profits themselves.

A new report from the Economic Policy Institute (EPI) analyzes how living standards have declined over the past 40 years as a result of increasing productivity combined with stagnant wages.

Between World War II and 1973, worker productivity and compensation increased in parallel (with both increasing roughly 100% during this period). Though the bosses took the lion’s share of the profits from their employees’ increased productivity, workers did see wages and living conditions rise significantly. However, starting in the 1970s, worker productivity grew at a much faster rate than their compensation. Between 1973 and 2010, productivity increased more than 150%, while the median hourly compensation increased only 10.7%. If the mid- to late ‘90s are excluded, the median hourly compensation went up less than 5% between 1973 and 2011.

This has contributed to a rapidly growing wealth gap, as employers reaped the benefits of increased productivity and profits without having to pay for it. It has also led to a deteriorating standard of living for the majority of Americans, as they are forced to work longer and harder without any commensurate increase in their incomes. Furthermore, the income increases they have seen have barely kept up with inflation. In many cases, the costs of consumer goods and services have far outpaced wage increases (e.g., higher education, housing and healthcare). This has led to a situation in which many Americans now have much more precarious and uncertain financial statuses than their parents and grandparents.

The decline of union power is a major reason why workers are now working longer and harder at equal or lower pay. According to Equal Times, unionized workers earn an average of 13.6% more than non-union employees, and they are 28.2% more likely to receive employer-provided health insurance and 53.9% more likely to have employer-provided pensions. Yet, between 1973 and 2011, union membership declined from 26.7% of the workforce to 13.1%. This has been responsible for roughly one-third of the entire growth of wage inequality among men and nearly one-fifth of the wage gap among women.

Yet it is not just that fewer workers have unions to defend them against wage cuts and longer hours. The unions that have survived have increased their willingness to cut onerous deals with the bosses in exchange for labor “peace.” The unions’ continued existence depends on having a critical mass of unionized workers. When the bosses threaten to down size or outsource, they are not just slashing jobs and throwing workers into the unemployment line, they are also threatening the existence of the unions themselves by eliminating dues-paying members. Therefore, a deal that reduces layoffs, like the one recently made by the UAW to help keep the auto industry solvent (see here, here and here) helps keep the unions solvent, too, even though these deals often include wage and benefits cuts and longer working hours and thus contribute to workers’ declining living standards.

Ultimately, if we want to reverse this trend and see improvements in our living conditions we need to stop focusing on saving or creating jobs and start demanding material security, more time and energy to spend with our families and friends and the ability to contribute to our communities in a way that is meaningful, empowering and not degrading. We need to recognize that the boss is not our friend or ally because he provides jobs. He is an adversary because he pays us only a fraction of the value of our labor and pockets the rest as profit, even though we do the work. We also need to realize that, despite the attacks by the right, the trade unions are essentially accepted  by the bosses because they fulfill the necessary role of helping to enforce labor peace and maintain the continuity of profits. As long as the unions continue in this role, workers’ living standards will continue to decline and the wealth gap will continue to widen.

California Democrats Robbing Kids to Enrich the Wealthy

Huck/Konopacki Labor Cartoons

Friends and colleagues often assume I’m a Democrat based on my criticisms of the Ed Deform movement or the political system. I try not to feel insulted by this name-calling, but then feel bad that my arguments were weak enough to lead them to this embarrassing conclusion.

When I’m feeling masochistic, I’ll correct them by saying that I do not support either party, and end up having to list recent “betrayals” by popular Democrats. Of course, they are not really betrayals. Anyone who is really paying attention can see that the Democrats, like the Republicans, are members of the same class of bosses, bankers, lawyers and landlords who monopolize all the wealth and social power. While the Democrats may pay lip service to the concerns of unions, women, the LGBT community and other “interest” groups, their policies never threaten (and general bolster) the ability of the capitalist class to increase their profits and wealth.

Thus it should be no surprise that California’s Democratic leaders in the legislature are preparing to vote this week on a Pension Deform bill for public sector employees that was proposed 10 months ago by Democratic Governor Jerry Brown. The revised plan includes raising the retirement age to 62 and increasing employee contributions to 50%, according to the SF Chronicle. It would also cap pensions at $132,000 per year.

The $132k cap might seem reasonable. After all, who makes this kind of money? The cap wouldn’t affect teachers, bus drivers, nurses or the vast majority of public sector employees, at least not for now. However, while a $132k annual salary might seem large by today’s standards, it will become a relatively low salary within a few years due to inflation. Also, even calculated in today’s dollars, a $132k salary would only yield $66,000 per year in benefits for a retiree—(salary multiplied by 0.02 multiplied by 25 years of service)—a decent income if your home is paid off or if you are living in an inexpensive community. In San Francisco, however, a retiree could easily spend more than one-third of this just on housing costs.

Union Busting 101

This pension “reform” legislation is a dual purpose bill. It not only forces workers to pay for the greed of Wall Street (the pension “crisis” is primarily due to investment losses caused by the economic meltdown), but it also drives a wedge into the unions by dividing veteran workers, who will retain most of their current pension benefits, and younger workers who will pay more out of pocket and receive fewer benefits and have to work longer to earn them.

Indeed, the legislation can be seen as an attack on our children, making it much harder and riskier for them to retire, while also lowering their standards of living prior to retirement by sapping more of their take home pay to cover their increased pension contributions. By forcing them to work longer and capping their benefits, they will have fewer healthy years to enjoy their retirements and less to live on. Gov. Brown proudly declared that the changes would make public employee pension benefits for future hires lower than when he took office in 1975, the SF Chronicle reported. 

The unions are arguing that any changes to pensions must be collectively bargained. Many are already preparing lawsuits and ballot initiatives to oppose the legislation, since it undermines existing contract agreements and usurps unions’ power to negotiate this important benefit. I have not heard of any that are asking their members to prepare for a strike action, which will likely be necessary to reverse this juggernaut.

If they fail to halt this legislation, there a two-tiered system will be created, with new hires getting a worse pension plan imposed on them by the state and veteran employees maintaining a better pension plan and the right to collectively bargain any future changes. When younger workers recognize that they are getting a raw deal compared with their veteran colleagues, they may see their unions as impotent or biased against them, especially if the unions do not take aggressive job actions to halt the legislation. This would make it harder to organize and mobilize them for other workplace struggles, thus weakening the overall strength of the unions.

The legislation could also lead to future collective bargaining problems for current employees. For example, even though the legislation allows current employees to negotiate increases in their contributions, this “privilege” implies that legislators intend to ask for increased contributions. Current employees may therefore find themselves in the position of having to choose between raises or pay cuts, increased health care contributions and/or increased pension contributions in future contract negotiations.

A Gift to Wall Street and the Wealthy

Ultimately, any cuts to public employee pensions will be made not to save the program, as legislators and pundits are fond of saying, but to preserve record low tax rates for the wealthy. As long as unfunded pension liabilities can be covered through increased employee contributions and through reduced and delayed benefits, there is no need to raise taxes on the wealthy or to threaten state spending that benefits their businesses.

None of the political parties are friends of working people. Lesser evil, perhaps, but at what cost? Real wages and living standards have been steadily declining for the majority of Americans for the past 40 years. During this time the Democrats have either sat idly by and enjoyed the ride or voted for policies that have hastened the trend.