TRUMP’S WAR ON WORKERS

Despite Trump’s rhetoric, his 2016 campaign promises, and an occasional symbolic gesture, his administration has shown a total lack of empathy or concern for the plight of American workers. He has:

  • Undermined workers’ health and safety, as well as job security,
  • Repeatedly supported employers and business interests rather than workers,
  • Depressed workers’ pay and benefits, and
  • Failed to support workers’ rights, including their ability to bargain collectively with employers through unions.

During the coronavirus pandemic, the Trump administration has consistently sided with employers and against protecting workers from the very contagious virus. It has refused to promulgate mandatory standards and safety measures to protect workers. The most notable example has been in the meat packing industry, where the Trump administration has ordered workers back to work using emergency powers meant to ensure the supply of “scarce and critical material essential to the national defense.” Local public health officials are prohibited from closing plants and workers have to obey employers’ orders to return to work or be fired and lose their eligibility for unemployment benefits. [1]

Over 200 workers in the meatpacking industry have died and tens of thousands have been infected. Nonetheless, the Trump administration’s Occupational Safety and Health Administration (OSHA) has not issued any regulations to protect these workers. Its fines for violations have been a slap-on-the-wrist few thousand dollars, despite thousands of complaints from workers about unsafe working conditions. The neglect of workers’ health and safety has undoubtedly cost many thousands of lives. [2]

Trump has consistently appointed pro-corporate, pro-employer, anti-worker officials to his cabinet and government agencies, as well as to judgeships. His Secretary of Labor, Eugene Scalia (son of the right-wing Supreme Court Justice), and all but one of his appointees to the National Labor Relations Board have spent their careers fighting for corporate employers and against workers’ rights and protections, despite the fact that they are now, supposedly, enforcing workers’ rights and protections.

On the other hand, Trump has failed to appoint anyone to head OSHA and has reduced its number of inspectors to a 50-year low. It would take these inspectors 165 years to visit every U.S. workplace once, despite an annual toll of 14 workers killed and 5 million injured on the job (not including the impact of COVID-19). [3]

Trump’s Department of Labor (DOL) has relaxed rules on overtime pay, resulting in millions of workers being denied overtime when they work over 40 hours in a week. The DOL and the Trump-appointed National Labor Relations Board (NLRB) have let McDonalds and other corporations that use a franchisee business model escape responsibility for franchisees who engage in wage theft (e.g., by failing to pay overtime, minimum wage, or for all hours at work) and other illegal practices.

The Trump administration and Republicans in Congress have worked relentlessly to weaken and repeal the Affordable Care Act (aka Obama Care), which has increased costs and denied health insurance to millions of workers, including many of those who have lost jobs during the pandemic. On the other hand, the Trump administration and Republicans in Congress have done nothing about increasing the minimum wage (which has been unchanged for a decade) or the Earned Income Tax Credit, which augments the income of low wage workers. They also have done nothing to increase the availability of paid sick time or to provide paid leave for new parents. [4]

The Trump administration has acted favorable on all ten items on an employer-friendly, anti-worker wish list from the U.S. Chamber of Commerce, the lobbying organization of large corporations. All of these items involved undermining workers’ rights and unions, such as allowing employers more opportunities to interfere in union organizing efforts. The Trump NLRB has stripped Uber drivers and other similar workers of their rights under labor laws and has also proposed a ban on union organizing by tens of thousands of graduate students who work as teaching and research assistants. [5]

Trump’s 2017 tax cut legislation gave billions of dollars in tax cuts to wealthy individuals and corporations, while neglecting workers. It also increased incentives for multi-national corporations to move jobs overseas.

The Trump administration’s mismanagement of the coronavirus pandemic has hurt the economy, increasing the number of jobs lost and the length of unemployment. The administration and Republicans in Congress have limited the amount and duration of unemployment benefits for those out of work. They provided limited pandemic relief for workers in general and have let it run out, refusing to extend it, even though the end of the pandemic is nowhere in sight, unemployment remains high, and millions of households are struggling to make ends meet.

The litany of the Trump administration’s anti-worker actions is long. Here are a few more examples:

  • Repealed the fiduciary rule that required investment advisors to act in workers’ best interests in handling their retirement savings. Instead, the advisors can select investments that pay them higher fees.
  • Relaxed or rescinded safety rules in numerous industries, such as more than a dozen rules protecting mine workers from such things as explosive coal dust and mining chemicals. However, the effort to relax safety inspections in coal mines was blocked by a federal court.
  • Made it easier to award federal contracts to companies with multiple violations of laws on fair wages, sexual harassment, racial discrimination, and workers’ rights to form a union.
  • Relaxed rules on toxic chemicals that harm farmworkers and children.
  • Relaxed requirements on reporting of workplace injuries and ended requirements for large corporations to report payroll data by race and gender, which allowed analysis of possible pay discrimination.
  • Rolled back regulations on usurious practices of payday lenders who prey on financially struggling workers.
  • Supported, both through legal arguments and court appointments, a prohibition on class action lawsuits by workers against employers (instead requiring them to submit grievances to arbitration) and a prohibition on requiring public sector workers to pay union fees or dues for the benefits they receive from union actions on their behalf.
  • Is pushing hard for blanket corporate / employer immunity from lawsuits if workers or customers get sick or die from COVID-19, regardless of any failure by the business to implement appropriate or required protection measures.

I hope America’s workers and voters are paying attention and not letting themselves be fooled by Trump’s rhetoric. Even a quick look at the actions and personnel of the Trump administration make it clear that it supports corporations and employers to the explicit detriment of workers.

[1]      Hightower, J., July 2020, “Something is rotten at Big Meat, Inc.,” The Hightower Lowdown (https://hightowerlowdown.org/article/something-is-rotten-at-big-meat-inc/)

[2]      Lee, T.M., 9/25/20, “Trump’s war on workers,” The American Prospect (https://prospect.org/labor/trump-war-on-workers/)

[3]      Hightower, J., Aug. 2020, “Behind his daily spectacle, Trump is pounding workers and their rights,” The Hightower Lowdown (https://hightowerlowdown.org/article/behind-his-daily-spectacle-trump-is-pounding-workers-and-their-rights/)

[4]      Greenhouse, S., 8/30/19, “The worker’s friend? Here’s how Trump has waged his war on workers,” The American Prospect (https://prospect.org/power/worker-s-friend-trump-waged-war-workers/)

[5]      McNicholas, C., Rhinehart, L., & Poydock, M., 9/16/1/20, “50 reasons the Trump administration is bad for workers,” Economic Policy Institute (https://www.epi.org/publication/50-reasons/)

CORONA VIRUS PANDEMIC HIGHLIGHTS ILLS OF U.S. ECONOMY AND SOCIETY

The corona virus pandemic has highlighted critical issues in the U.S. economy and society that have led to unnecessary hardship, suffering, and deaths. These include the economic inequality, insecurity, and instability of plutocratic economics, where the playing field is tilted in favor of wealthy corporations and individuals and workers struggle to survive, in some cases literally, with this pandemic.

The neglect of public infrastructure is another such issue highlighted by the pandemic, including the inability of the government to respond effectively to the crisis and the weakened safety net that is now literally leaving people at risk of dying. The pervasive racism of U.S. society has been highlighted by the disproportional rate at which Blacks, Latinos, and Native Americans have gotten ill with COVID-19 and have died from it.

Although the Trump administration’s disorganized and incompetent response to the pandemic (aided and abetted by some in Congress) bears significant responsibility for the high death rate in the U.S. (as documented in this previous post), the larger context is important and provides many lessons that should be learned.

The pandemic has highlighted the value of and risks to front-line workers who meet essential needs, such as providing food, transportation, and care services. They typically receive low pay and often limited benefits (such as paid sick leave and health insurance). They are disproportionately people of color. They interact with the public and therefore are disproportionately likely to be exposed to the virus. Increasing numbers of them are part-time or contract workers who have little if any job security and typically no benefits, including not being covered by unemployment insurance.

Over the last 40 years, safety, health, and economic protections for workers have been undermined. This includes the weakening of the Occupational Safety and Health Administration and more recently the Consumer Financial Protection Bureau (see previous posts on this here and here). Unions, which provide important protections to workers, and the ability to unionize have been weakened. This has resulted in stagnant wages, deteriorating working conditions, and increased economic insecurity for the middle- and lower-income households.

One result has been the highest level of economic inequality in the U.S. in one hundred years. Over 40% of households don’t have $400 for an emergency expense, let alone the savings to support months of self-quarantine. Furthermore, over 40% of full-time workers get no paid sick time. And, given the employer-based health insurance system, a worker (and often his or her family) has no health insurance once he or she loses a job – as over 20 million Americans have by early May 2020. [1] (By the way, the Trump administration has refused to allow these workers to enroll in health insurance through the Affordable Care Act’s insurance marketplaces.)

Plutocratic economics’ beliefs that the private sector is the best solution for all of society’s needs and that bigger businesses are better have led to policies that have benefited the private sector and corporate shareholders and executives over everyone else and over the greater public good. Examples include corporate-friendly trade treaties, the failure to enforce antitrust laws, and the relaxation of corporate regulation, or perhaps more accurately, the skewing of it to benefit large, often multi-national corporations.

Plutocratic economics have resulted in near-monopolistic corporations in everything from the food industry to medical equipment suppliers and medicine manufacturers. The pandemic has highlighted the lack of capacity in the U.S. to produce important goods, including reliance on China for medical supplies needed to respond to a pandemic, such as medical masks and ventilators. It has also highlighted dependence on a few huge corporations and their plants for key food items, such as meat.

In the health care industry, forty years of deregulation, lack of antitrust enforcement, and increasing numbers of for-profit entities have led to, among other things, mergers and closures of hospitals in search of greater profits. This has left the U.S. with some of the lowest numbers of both doctors and hospital beds per capita among countries with advanced economies. This is particularly surprising given that the U.S. spends almost twice as much per capita on health care as other wealthy nations. (The U.S. also has notably worse health outcomes than these other countries, even in good times.) Many localities now have a single provider of hospital services and many rural communities have no local hospital services. (See this previous post for more detail.)

Another example of the failure of this privatized, for-profit health care industry, is that the federal government’s plan to produce thousands of ventilators for pandemic preparedness collapsed in 2012 when the government’s contracted supplier was purchased by a large manufacturer that shut the supplier because it didn’t produce sufficient profit.

Another industry where the vulnerability of our dependence on large, dominant corporations has been exposed is meat processing. The presence of a few dominant meat processors and weak regulation has created the conditions for the inability to supply meat that we are now experiencing. The spread of COVID-19 in the huge processing plants is forcing them to shut down. Fourteen major slaughterhouses, each of which may process 10,000 animals a day, have had to close at least temporarily. The huge Smithfield Foods pork processing plant in South Dakota, which had to close, produces about 4% of the country’s supply of pork. [2]

In pork processing, after decades of mergers that receive little or no antitrust scrutiny, the four largest corporations control at least 70% of the market. This is bad for producers and consumers. Pig farmers often face a single local purchaser for their pigs, leaving them vulnerable to monopolistic business practices. Furthermore, U.S. Department of Agriculture (USDA) regulation favors large slaughterhouses over small ones. The USDA inspection regime for large slaughterhouses has been relaxed to the point that most health and safety inspections are self-performed. The regulation of speed on production lines has been rescinded and workers now report they must move so fast that they can’t stop to cover their faces if they cough or sneeze. In addition, it means they are working shoulder to shoulder, conditions that make it impossible to stop the transmission of disease, such as COVID-19. In the beef market similar concentration has occurred. As a result, the large slaughterhouses are now making a profit of about $550 per cow, while the ranchers make only about $25.

My next posts will discuss the neglect of public infrastructure and the pervasive racism in the U.S. and how they have been exposed by this pandemic.

[1]      Hanauer, N., 4/14/20, “Our uniquely American virus,” The American Prospect (https://prospect.org/coronavirus/our-uniquely-american-virus/)

[2]      Knox, R., 5/4/20, “Monopolies in meat: Endangering workers, farmers, and consumers,” The American Prospect (https://prospect.org/economy/meat-monopolies-endanger-workers-farmers-consumers/)

WORKERS’ PAY NOT GROWING AND INEQUALITY STILL HIGH

Despite what President Trump said in his State of the Union speech, workers’ pay is still not growing. While the January 2020 monthly data on the dollar amount of earnings showed an increase from a year earlier, when adjusted for inflation and fringe benefits, workers’ overall compensation has declined.

The detailed quarterly data released in December 2019 showed that the dollar amount of average wages had increased 6.8% over the last three years, but that total compensation had declined after adjusting for inflation and fringe benefits. Over the three-year period from 2016 to 2019, the average dollar amount of wages (i.e., “nominal” wages) had increased from $22.83 to $24.38 per hour (i.e., $45,660 to $48,760 per year).

After adjusting for inflation (i.e., the decline in the purchasing power of a dollar), “real” wages had increased only 0.4% over the three years from 2016 to 2019. [1]

Total compensation (including fringe benefits such as health insurance, retirement contributions, and bonuses) declined 0.2% over the three years. The inflation-adjusted value of fringe benefits declined 1.7%. Since fringe benefits are almost one-third of total compensation, their decline wiped out the small increase in wages.

Meanwhile, income inequality continues to grow as compensation for high income individuals grows substantially while the average workers’ compensation is declining.

For workers with the lowest 10% of wages, increases in the minimum wage have boosted pay. Between 2013 and 2019, 26 states and D.C. (but not the federal government) have increased their minimum wages. This led to wage growth of 17.6% over this six-year period for low-wage workers in these areas, as compared to only 9.3% growth in states that did not increase their minimum wages. [2]

The black-white wage gap is growing and is substantially larger now than it was in 2000. After adjusting for differences in education, age, and other relevant worker characteristics, the black-white wage gap as-of 2019 is 14.9%, up from 10.2% in 2000. (The gap is 26.5% without the adjustment for worker characteristics.) Meanwhile, the Hispanic-white wage gap narrowed to 10.8% in 2019, down from 12.3% in 2000 (adjusted for worker characteristics). [3]

The gender pay gap is still substantial. A woman earns 77 cents for each $1 a man earns: a 23% gap after adjusting for differences in education, age, and other relevant worker characteristics. (The gap is 15% without the adjustment for worker characteristics.) The gender wage gap narrowed slightly from 2000 to 2019.

The defining features of the U.S. labor market over the last 40 years have been slow growth in wages and rising inequality, despite steady increases in worker productivity. The median hourly wage is $19.33, less than $40,000 a year. (The median wage is the point in the distribution of wages where half of workers get less and half of workers get more. The average wage is higher than the median wage because of the very high wages at the top of the distribution.)

The slow growth of wages, despite growing productivity, cannot be explained by education levels, increases in fringe benefits, or factors other than the decreasing clout of workers and the increasing power of employers and corporate executives. This is the result of policy decisions, largely by the federal government, that have reduced the power of workers, mainly by making it harder to organize unions and more difficult for unions to bargain collectively on behalf of workers. [4]

[1]      Salkever, D., 3/1/20, “Blue collar bust,” The Boston Globe

[2]      Gould, E., 2/20/20, “State of working America wages 2019,” Economic Policy Institute (https://www.epi.org/publication/swa-wages-2019/)

[3]      Gould, E., 2/27/20, “Black-white wage gaps are worse today than in 2000,” Economic Policy Institute (https://www.epi.org/blog/black-white-wage-gaps-are-worse-today-than-in-2000/)

[4]      Gould, E., 2/20/20, see above

HOW TO REIN IN MONOPOLISTIC BUSINESSES

The failure to enforce antitrust laws during forty years of plutocratic economics has produced dominant businesses in numerous sectors. The resultant concentration of economic power, and, along with it, political power, has undermined our democracy both economically and politically. It has also led to rapidly growing income and wealth inequality. (See my previous post for details.)

The monopolistic, unregulated markets created by plutocratic economics since the late 1970s have made it clear that well-managed markets, where real competition thrives, are more efficient and equitable. There is a stark contrast between the economy of well-managed competition from the 1950s through mid-1970s and today’s plutocratic economy. In the post-World War II period, income and wealth were much more evenly distributed and workers’ compensation rose with their increases in productivity. In the latter period, economic inequality has grown tremendously and workers’ compensation has been stagnant, despite increasing productivity.

The economic security of the middle class has disappeared, in part because of increased economic and financial instability. After a period of over 30 years without an economic crash or major economic scandal, from 1980 on there have been three major economic crashes or scandals: the Savings and Loan crisis, the bursting of the dot com bubble, and the 2008 financial collapse and Great Recession.

There are a variety of solutions that would reverse the trend toward greater industry concentration, [1] [2] [3] as well as steps that can be taken to reduce the power of monopolistic firms. [4] There is much the U.S. can learn from Europe where more vigorous antitrust enforcement has produced more competitive markets, lower economic inequality, and more equitable sharing of corporate earnings. [5]

  • Reviving vigorous use of antitrust laws to block mergers and acquisitions, including:
    • Declaring a moratorium on approvals of large mergers and acquisitions (e.g., those above $6 billion in value or ones creating firms with over 10% of local market share)
    • Banning mergers or acquisitions that would reduce the number of major firms in a local market to less than four
    • Expanding the antitrust judgment criteria from the simplistic focus on lower prices for consumers and “productive efficiency” to include a broader interpretation of the public’s interests
    • Reinvigorating enforcement of laws limiting predatory pricing, and
    • Considering monopsony power (i.e., a dominant buyer) as well as monopoly power (i.e., a dominant seller)
  • Using antitrust laws to break up companies with monopolistic power
  • Imposing much bigger fines for violations of antitrust laws
  • Making the merger and acquisition review process more public and transparent
  • Banning “exclusive dealing” where dominant firms require customers, wholesalers, and suppliers to sign contracts banning them from doing business with rivals or rewarding them for not doing so
  • Banning pharmaceutical companies from paying potential competitors not to introduce generic versions of drugs
  • Stopping pharmaceutical companies from extending their patents on drugs through trivial changes in a drug, erroneous patent filings, and outright patent fraud
  • Restoring consumers’ ability to repair durable products (e.g., smartphones, computers, cars, and tractors and other farm machinery) themselves or at independent repair servicers by banning product designs intended to prevent servicing and prohibiting restrictions on the availability of spare parts, repair tools, and detailed owners’ manuals

There are also a variety of solutions that would ameliorate some of the negative effects of industry concentration:

  • Making the formation of a union easier and less susceptible to employers’ efforts to block and delay unionization
  • Allowing workers of franchisees or ones in the gig economy to unionize
  • Banning non-compete agreements for low-paid, low-skill workers and ban non-poaching agreements for franchisees
  • Increasing the minimum wage

Recognition of the importance of antitrust enforcement is growing. It is being discussed in the presidential campaign for the first time in many years. Congress is holding hearings on monopolistic practices by businesses for the first time in decades. This included a hearing in May where a military spare parts supplier was called to task for charging over 40 times its costs for some parts and where a bipartisan group of legislators called for the company to return over $16 million in excess profits. [6]

Democratic society is threatened by dominant, market-controlling businesses. Huge monopolistic corporations can transcend the power of elected government to effectively control them. Every entrepreneur and businessperson should have the opportunity to compete without unfair competition and domination by monopolistic firms. Regional-level businesses should be able to thrive without being throttled by giant, national, monopolistic companies.

A functioning democracy relies on citizens who are free from domination by employers and sellers of goods and services. I encourage you to listen to what candidates for public office have to say about reducing the presence and power of monopolistic businesses and to ask them questions about what they would do to restore a vibrant, competitive economy in the U.S. – an economy that is fair for consumers, workers, small businesses, and entrepreneurs.

[1]      MacGillis, A., Jan./Feb./March 2019, “Taking the monopoly threat seriously,” Washington Monthly (https://washingtonmonthly.com/magazine/january-february-march-2019/taking-the-monopoly-threat-seriously/)

[2]      Cortellessa, E., April/May/June 2019, “Meet the new trustbusters,” Washington Monthly (https://washingtonmonthly.com/magazine/april-may-june-2019/meet-the-new-trustbusters/)

[3]      Sussman, S., July/Aug. 2019, “Superpredators: How Amazon and other cash-burning giants may be illegally cornering the market,” Washington Monthly (https://washingtonmonthly.com/magazine/july-august-2019/superpredators/)

[4]      Vaheesan, S., 9/24/19, “Unleash the existing anti-monopoly arsenal,” The American Prospect (https://prospect.org/day-one-agenda/unleash-anti-monopoly-arsenal/)

[5]      Horowitz, E., 7/30/16, “Europe may do capitalism better than US,” The Boston Globe

[6]      Dayen, D., 6/24/19, “In the land of the giants,” The American Prospect (https://prospect.org/article/land-giants)

PLUTOCRATIC ECONOMICS HAS FAILED WORKERS

Forty years of right-wing, plutocratic economics (see this previous post for background) has produced stagnant worker compensation, decimating the middle class and leaving growing numbers of low-wage workers struggling to survive. The plutocratic economics of wealthy, elite members of society has intentionally and dramatically weakened public policies that provide support for workers and an economic safety net (including the minimum wage, unemployment benefits, and the right to join a union).

After adjusting for inflation, workers’ compensation has barely increased since 1980, in large part because:

  • The minimum wage’s value has been eroded by inflation and
  • Workers’ negotiating power with their employers has been decimated by concerted attacks on unionization and by the growing size and economic power of employers.

Currently, we are in the longest period since the establishment of the minimum wage, 12 years, without an increase in it. The $7.25 per hour federal minimum wage (about $15,000 per year for a full-time worker) has lost 17% of its purchasing power (or more than $3,000) over those 12 years. Since its peak value in February 1968 at about $22,000 per year for full-time work (adjusted for inflation), the federal minimum wage has lost 31%, or almost one-third, of its purchasing power ($6,800). [1]

As a result, minimum wage workers at Wal Mart, fast food outlets, and elsewhere do not earn enough to survive without public benefits such as food stamps, housing subsidies, subsidized health insurance, and the Earned Income Tax Credit. These public benefits for workers mean that the government and we as taxpayers are subsidizing large, very profitable companies when they pay their workers too little to live on. This is one example of government welfare for companies.

The proponents of plutocratic economics claim that raising the minimum wage will reduce the number of jobs and, therefore, hurt workers, but this ignores the obvious benefits for workers. A high estimate is that 1.3 million jobs might be lost – half of them for teenagers and many of those for adults being part-time jobs. On the other hand, wages would increase for over 27 million workers (roughly one out of every six workers). With an increase to $15 per hour (up from the current $7.25), workers would receive an overall increase in income of $44 billion. This would lift 1.3 million Americans out of poverty and significantly increase consumer spending in local economies. On the downside, companies would raise prices by an estimated 0.3% and business owners would lose $14 billion of profits (a small amount [0.07%] in a $21 trillion economy).

A study of the actual experiences in states and cities that have recently raised their minimum wages found no reductions in the number of jobs or hours at work. It did find that workers’ incomes increased and that poverty declined. [2]

Unionization is important because it allows workers to band together and increase their negotiating power when bargaining with employers for pay and benefits. The rate of unionization in the United States today is 10.5% overall (down from over 25% in the 1950s) and only 6.4% of private-sector workers are unionized. In the early 1950s, unions included over 40% of workers in manufacturing, over 60% in mining, and over 80% in the construction, transportation, communications, and utilities sectors. The attacks on unions have been very successful, to say the least, in reducing unionization and workers’ negotiating strength. By way of comparison, the rates of unionization in Scandinavia range from 81% in Iceland to 71% in Sweden to 52% in Norway. Under pressure from global trade, these rates have come down in recent years; for most of the postwar period the rate in Sweden was in the mid-80s, for example.

The disparity in unionization rates between the U.S. and the Scandinavian countries has produced a dramatic difference in economic inequality. The best measure of economic inequality is a nation’s Gini Coefficient, where a higher number indicates greater economic inequality. The scale is from zero to one with zero indicating complete economic equality (everyone has the same income) and one indicating that all of a nation’s income goes to just one person. In Denmark and Sweden, the Gini Coefficient is 0.25; in Finland and Norway, it’s 0.27; and in Iceland, it’s 0.28. However, in the United States, it’s 0.47. [3]

Employers’ power over workers has grown, not only due to reduced unionization, but also due to the growing economic power in the marketplace of fewer, larger employers. Overall, workers’ compensation has grown less than their increases in productivity since 1979 (productivity has grown 69.3% while compensation has grown only 11.6%). Previously, compensation tracked productivity growth quite closely (from 1948 to 1979 productivity grew 108.1% while compensation grew 93.2%). [4] In other words, workers are not receiving increases in pay despite increases in the value of their output per hour of work.

Instead of paying workers more for their increased output, companies have increased profits and, therefore, returns to shareholders, owners, and executives –  in other words, they have increased income and wealth for plutocrats. As a result, income and wealth inequality have increased dramatically. Just three white men ‒ Jeff Bezos of Amazon, investor Warren Buffett, and Microsoft’s Bill Gates ‒ now own more wealth (a combined total of $248 billion) than the least wealthy half of all Americans (160 million people with combined wealth of $245 billion). The wealthiest 1% of Americans own 40% of all wealth. This is the highest level in at least 50 years and is higher than in any other country with an advanced economy. (Germany is closest with 25% of wealth in the hands of the top 1%). The 400 wealthiest Americans own an astonishing $2.9 trillion. [5]

Government policies set the rules for our economic markets and balance the power and interests of various parties. For 40 years, plutocratic economic policies have put returns to owners (i.e., wealthy investors including executives) ahead of the interests of workers. The result of these policies has been a dramatic growth in income and wealth inequality; the U.S. has the most unequal income distribution of any well-off democracy. [6] Economic security and the standard of living for many in the middle class has fallen dramatically, while many low-income workers are struggling just to make ends meet.

Future posts will review the politics of plutocratic economics and how it has damaged our democracy. They will also identify progressive policies that are needed to reverse its harmful effects.

[1]      Economic Policy Institute, 7/15/19, “Minimum wage,” (https://www.epi.org/research/minimum-wage/)

[2]      Dayen, D., 7/9/19, “Conservatives grasp at straws after CBO minimum wage analysis shows clear benefits,” The American Prospect (https://prospect.org/article/conservatives-grasp-straws-after-cbo-minimum-wage-analysis-shows-clear-benefits)

[3]      Meyerson, H. 7/2/19, “How centrists misread Scandinavia when attacking Bernie and Elizabeth,” The American Prospect Today (https://prospect.org/article/how-centrists-misread-scandinavia-when-attacking-bernie-and-elizabeth)

[4]      Economic Policy Institute, 8/27/19, “How well is the American economy working for working people?” (https://www.epi.org/files/pdf/174081.pdf)

[5]      Anapol, A., 12/6/17, “Study: Wealthiest 1 percent owns 40 percent of country’s wealth,” The Hill (https://thehill.com/news-by-subject/finance-economy/363536-study-wealthiest-1-percent-own-40-percent-of-countrys-wealth)

[6]      Tyler, G., 1/10/19, “The codetermination difference,” The American Prospect (https://prospect.org/article/codetermination-difference)

IS THE DEMOCRATS’ “BETTER DEAL” A GOOD DEAL?

Congressional Democrats recently announced a package of policy proposals they are calling “A Better Deal.” It is apparently their policy platform for the 2018 Congressional elections and it seeks to re-establish Democrats as the party that stands up for working people. There is much in it for workers to like. (See my previous post here for a summary of it.)

However, some important pieces are missing from A Better Deal. [1] For example, it doesn’t clearly address:

  • Making it easier for workers to unionize and harder for employers to eliminate or prevent unionization. This would strengthen the collective bargaining power of workers so they could better balance the growing power of employers in negotiations over pay and benefits.
  • Creating a more progressive, fairer tax system to address economic inequality and provide the revenue needed for A Better Deal’s programs.
  • Reducing the power of the huge Wall Street financial corporations and the threat they represent to our economy. [2]
  • Reforming the health care system and its out-of-control costs. It doesn’t call for a Medicare-for-All type single-payer insurance system, despite strong evidence that this is the only way to both control costs and improve quality, and despite broad support for Medicare-for-All among the public and from over 100 members of Congress. (See my post here for why single-payer is the only way to address the problems with our health insurance system.)
  • Increasing the transparency of the process for developing trade agreements and eliminating the trade dispute resolution system that favors multi-national corporations and undermines workers, the public, and even national sovereignty. [3]

A Better Deal is viewed by many as timid and underwhelming. It doesn’t clearly renounce growing economic inequality and the greed of corporate executives. It could, for example, propose penalties and/or taxes on corporations where executive pay is over 20 times that of a corporation’s lowest-paid worker or over 20 times the national median wage. This is what the Labour Party in the United Kingdom has proposed. [4] In the US, this would mean penalties or taxes on corporations where an executive is paid over $290,000 and the corporation has a minimum wage employee, or where any executive is paid was over $605,000 (based on 20 times the national median personal income of $30,240). [5]

A Better Deal is a step toward counteracting the frustration of workers and the middle class and the resultant losses Democrats have sustained in recent state and national elections. However, it is not generating much grassroots enthusiasm. Although it is clearly targeting some of the issues raised by Senator Bernie Sanders in his presidential campaign, it is not generating anywhere near the groundswell of grassroots support that Senator Sanders, or for that matter President Trump’s campaign, stimulated. Part of the lack of excitement about A Better Deal has to do with the shortcomings of its policy content and part of it has to do with its presentation.

Calling the proposal “A Better Deal” is not inspiring or visionary, which is what the Democratic Party needs to be if it wants to win elections. Simply saying that its proposal is better than what the Republicans are proposing or than the current status quo is not saying much. “Better” is not enough to get voters excited and enthusiastic enough to turn out and vote. Hillary Clinton lost the presidency because she did not inspire and excite voters. Turnout in the 2016 presidential election was only 53% of eligible voters! If it wants to win the 2018 or subsequent elections, the Democratic Party needs a strong, inspiring message and a good media strategy that will energize people to get out and vote for its candidates.

I’m surprised the Democratic Party didn’t build A Better Deal and its 2018 election strategy on the People’s Budget that has been developed by its Progressive Caucus in the US House. (See my posts on the People’s Budget here and here.) The People’s Budget includes specific proposals for reforming our tax system to increase fairness and to generate the revenue needed to fund the programs it and A Better Deal recommend. The People’s Budget includes a larger program to build the infrastructure America needs and is specific about increases in domestic spending that are needed to support workers and the middle class, as well as to mend our safety net for people who fall on hard times. It also is specific about the need to strengthen workers’ ability to unionize and negotiate with employers for better pay and benefits.

On the other hand, A Better Deal has more specific proposals than the People’s Budget for rolling back provisions in trade treaties that favor multi-national corporations and undermine workers. It also is more specific about the need to restrict foreign countries’ currency manipulation and monopolistic behavior by large corporations (by strengthening anti-trust laws and their enforcement).

If the Democrats could unify in support of a proposal that combined the best elements of A Better Deal and the People’s Budget, and added an unequivocal call for a Medicare-for-All type, single-payer health insurance system, they would have a policy and election agenda that would be truly visionary and inspiring. The country needs leadership focused on a clear commitment to supporting workers and the middle class. The Democrats have a golden opportunity to provide it, but it isn’t yet clear whether they will seize the opportunity.

Clear, consistent promotion of A Better Deal is not yet evident. And actions will speak louder than its words. However, no action on its promises is yet evident in Washington. Its impact, both practically and politically, will depend on:

  • Clearly spelling out the details of its policy proposals and adding missing pieces,
  • Developing a strong message promoting its goals,
  • Taking definitive actions to move its agenda forward, and
  • Generating consistent and enthusiastic support for it from all Democratic members of Congress and the Party leadership.

[1]      Reich, R., 7/28/17, “How much better is the Democrats’ ‘Better Deal’?” Yahoo! News (2 min. video) (https://www.yahoo.com/news/robert-reich-democrats-better-deal-211752649.html)

[2]      Carney, E.N., 7/27/17, “Is the Democratic Party’s ‘Better Deal’ good enough?” The American Prospect (http://prospect.org/article/democratic-party%E2%80%99s-better-deal-good-enough)

[3]      Bernstein, J., & Spielberg, B., 8/17/17, “Democrats’ ‘Better Deal’ on trade is better than what we have now,” The American Prospect (http://prospect.org/article/democrats-better-deal-trade-better-what-we-have-now)

[4]      Pizzigati, S., 7/26/17, “Will Democrats in Congress go bolder or backwards?” Inequality.org (https://inequality.org/great-divide/democrats-congress-need-go-bolder-not-backwards/)

[5]      Wikipedia, retrieved 9/7/17, “Personal income in the United States” (https://en.wikipedia.org/wiki/Personal_income_in_the_United_States)

TO REGULATE OR DEREGULATE? THAT IS THE QUESTION

Regulations put in place after the financial collapse of 1929 and the resultant Great Depression served the country well. The current push for deregulation began with the deregulation of the railroad and trucking industries in the late 1970s. The consensus at the time was that regulations in these industries were not serving the public interest. Initial deregulation efforts worked to eliminate regulations that favored existing corporations and prevented competition from start-ups and innovators.

In 1982, anti-trust laws were used to break-up the AT&T monopoly on telephone service and introduce competition into the long-distance phone market. This reflected both strong regulation – the breaking up of a large corporation using anti-trust laws – and a belief that deregulation of the long-distance phone market coupled with the introduction of competition would best serve consumers.

During the late 1980s, the focus shifted to deregulation that benefited corporations rather than the public interest. Deregulation became “a mantra that can be translated to mean: let corporate America do more of whatever corporate America wants to do.” [1]

A telling example of this change in attitude is seen in the Consumer Product Safety Commission’s (CPSC) history. It was created in 1972 to protect consumers from dangerous products. It is responsible for the safety of all consumer goods except vehicles, guns, food, drugs, and cosmetics. Initially, it had 786 employees. However, as the regulatory focus shifted to benefiting corporations, it fell out of favor. In 2016, before Trump’s election, it was down to 567 employees, despite significant growth in the economy and in imports. Many imported products come from low wage countries with minimal safety standards. Therefore, the need for the CPSC to inspect and regulate goods has increased, while its capacity to do so has decreased. [2]

In a glaring example of its failure to live up to its initial promise and goals, in 2007, imported toys for young children that had lead paint (a neurotoxin) were not detected until well after the fact. For example, 1.5 million Thomas the Train components that had been imported and sold had to be recalled. [3] The weakening of the CPSC is occurring even though it reports that deaths, injuries, and property damage from consumer product incidents cost more the $1 trillion each year.

Since the late 1980s, the push for deregulation has reduced product safety standards; relaxed regulation of mergers, acquisitions, and financial practices (including allowing virtual monopolies); reduced on-the-job protections for workers; and weakened enforcement in many areas. Simultaneously, deregulation of the labor market has weakened workers’ bargaining power. The regulations that supported workers’ ability to bargain collectively with employers, largely through unions, have been undermined and weakened repeatedly since the 1980s. The formation of a union is now more difficult, while the ability to eliminate unions by outsourcing jobs overseas or hiring “replacement” workers has been made easier. As a result, union membership for private sector workers has declined from 25% in 1972 to 6% today.

Weak labor market regulation has allowed dramatic growth in the number of part-time, temporary, contracted, and consultant workers. This has undermined the economic security of the middle and working class, which was based on a full-time job with benefits. The explosive growth of the “gig” economy reflects this trend. Corporate employers have used the weak regulation of the labor market to restructure the workforce and reduce workers’ pay and benefits. As a result, fewer and fewer workers have employer provided health insurance, and when they do have it, they are typically paying a greater share of the cost and/or are footing the bill for higher co-payments for seeing doctors or getting prescription drugs. The guaranteed retirement incomes of pensions are largely a thing of the past. Workers are now much more likely to have to self-fund retirement through contributions to retirement savings accounts (sometimes with employer matching contributions). Furthermore, the investment decisions and risk fall on the worker. This decreases economic security for workers and gives financial corporations and advisors opportunities to charge fees and make commissions that often undermine the return on investment for workers, who typically are not sophisticated investors. As a result, workers are much less likely to be able to afford to retire at normal retirement age and are less likely to be financially secure in retirement.

The financial collapse of 2008, which was caused by the deregulation of the financial industry, robbed many in the working and middle class of their living standard and the last vestiges of their economic security. It destroyed many of their middle-class jobs and also their equity in their homes. Over 60% of U.S. households experienced a decline in wealth and many of those who didn’t lose wealth simply didn’t have any savings or assets to lose (e.g., the young and the poor). Although the high unemployment of the Great Recession has now finally declined after 8 years, high under-employment remains. Many workers are now in lower paying jobs for which they are over-qualified or are working part-time or in the “gig” economy instead of in full-time jobs, let alone ones with benefits.

Simultaneously, these workers watched the federal government bailout the Wall Street corporations and allow their executives not only to avoid penalties or jail, but to continue to enjoy huge paydays. There was no bailout for homeowners or laid off workers.

Although Republicans have typically been the politicians leading the charge on deregulation for the benefit of big corporations, many Democrats have not been far behind in their support of the deregulation agenda. Somewhat surprisingly, big corporations themselves have largely escaped the wrath of workers and the public, at least to-date. [4] This is partly because neither of our major political parties or any other powerful group has pointed the finger in their direction. Conversely, there are well-funded media, think tanks, public relations, and other initiatives that have promoted the deregulation and pro-corporate message.

My next post will link deregulation and its effects with the election of President Trump.

[1]      Warren, E., 2017, “This fight is our fight: The battle to save America’s middle class,” Metropolitan Books, NY, NY. p. 79

[2]      Steinzor, R., 4/17/17, “The war on regulation,” The American Prospect (http://prospect.org/article/war-regulation-0)

[3]      Lipton, E., & Barboza, D., 6/19/07, “As More Toys Are Recalled, Trail Ends in China,” The New York Times

[4]      Kuttner, R., 4/7/17, “Corporate America and Donald Trump,” The American Prospect (http://prospect.org/article/corporate-america-and-donald-trump)

COUNTERACTING THE LOW-WAGE BUSINESS MODEL OF PARASITIC CORPORATIONS

The low-wage business model of Walmart and McDonald’s, for example, is a choice, both of corporations and of our policy makers. In the restaurant industry, there are restaurants in Seattle and San Francisco that are paying their servers $13 per hour and are doing fine. Costco successfully competes with Walmart and In-N-Out-Burger with McDonald’s even though the former eschew the low-wage business model of their competitor. [1]

Economists have a label for the behavior of corporations that rely on a low-wage business model where employees need public assistance to survive: it’s called “free riding.” It’s a free ride for the employer, as public assistance programs are subsidizing their payrolls. It’s anything but a free ride for taxpayers and the workers.

In the fast food industry, over half of employees are enrolled in at least one public assistance program. The estimated cost to taxpayers is $76 billion per year. Ironically, the taxes paid by high-wage businesses and their employees, including those competing with the likes of McDonald’s and Walmart, help to pay for the public benefits that subsidize the low wages of these parasitic corporations. Until recently, McDonald’s actually assisted its employees in signing up for public benefits – to the tune of $1.2 billion per year. Walmart employees are estimated to receive $6 billion per year in public assistance. By the way, in 2015 McDonald’s profit was $4.53 billion and Walmart’s was $130.2 billion.

Economic theory states that workers get paid what they are worth. Clearly, this is an over simplification given the variations in pay that exist among employers within an industry, such as within the fast food or restaurant industries. It is more accurate to say that workers get paid what they negotiate, and that some employers are friendlier negotiators than others. At the top end of the pay spectrum, some CEOs negotiate to get paid far more than they’re worth, while many ordinary workers get paid far less than they are worth because they don’t have the power to negotiate better pay.

The U.S. labor market has a dramatic imbalance of power. Unless a worker is a member of a union, he or she has little or no power to negotiate with an employer. The rate of union membership has fallen from roughly 1 in 3 private sector workers in 1979 to only about 1 in 10 workers today. Unions negotiate higher wages and benefits for union members and also, indirectly, for nonunion workers. This occurs for several reasons: union contracts set wage standards across whole industries and strong unions prompt employers to keep wages high in order to reduce turnover and discourage unionizing at non-union employers. The decline in union membership has resulted in reduced wages for both union and nonunion workers. It is estimated that this decline is costing non-union workers $133 billion a year in lost wages. [2]

Individual workers lack bargaining power because there are relatively few employers and job openings but lots of workers looking for a job. Furthermore, a worker has an immediate need for income to pay for food and shelter, while most employers can leave a job unfilled for a while without suffering any great hardship. They can take the time to search for someone willing to take the job at whatever pay they offer.

Since 1980, employers have aggressively exploited this imbalance of power, while our federal government has stood aside and, in many ways, supported them in doing so. As a result, $1 trillion per year that used to go to workers now goes to executives and profits. Workers’ rewards for their contributions to our economic output (gross domestic product [GDP]) has dropped from 50% of GDP to 43%.

There is truth to the argument that in very competitive, price-sensitive industries producers have to squeeze workers’ wages to remain in business. However, this is where the role of government and public policy is critical. If every producer in the industry is required to pay a minimum wage, then a floor is set and all producers are on a level playing field, but with workers getting better pay. Without a good minimum wage, the competition drives wages down to the point where workers are suffering and public subsidies are required.

Public policies and laws, as well as collective action (such as unions negotiating on workers’ behalf), regulate the marketplace and affect the balance of power among competing economic interests. A market economy cannot operate effectively without the rules put in place by policies and laws. They are not antithetical to capitalism; rather, they are essential for markets to function.

Rules are necessary to prevent cheating, such as regulation of weights and measures of goods sold, and to protect the health and safety of consumers and workers. Laws and court systems enforce contracts between parties for the exchange of goods and services for money. Rules are needed to prevent companies from gaining an unfair advantage by being a free rider or externalizing costs (i.e., shifting the costs to others such as by polluting public air and water or by paying such low wages that employees need taxpayer-funded support).

Our low-wage, parasite economy is a collective choice, made by corporations but allowed and abetted – and subsidized – by public polices enacted by elected officials. We, as voters, can change this by electing representatives who support:

  • Increasing the minimum wage,
  • Enforcing and strengthening laws that allow workers to bargain collectively through unions, and
  • Stopping the free riding and externalizing of costs by large, profitable corporations.

Increasing the minimum wage and strengthening unions are two key policies that would strengthen our economy and the middle class by reducing the prevalence of the low-wage business model of parasitic corporations. I encourage you to ask candidates where they stand on these issues and to vote for ones who support fair wages and bargaining power for workers.

[1]       Hanauer, N., Summer 2016, “Confronting the parasite economy,” The American Prospect

[2]       Rosenfeld, J., Denice, P., & Laird, J., 8/30/16, “Union decline lowers wages for nonunion workers,” Economic Policy Institute (http://www.epi.org/publication/union-decline-lowers-wages-of-nonunion-workers-the-overlooked-reason-why-wages-are-stuck-and-inequality-is-growing/)

THE TRUTH ABOUT RAISING THE MINIMUM WAGE

 Whenever a proposal to raise the minimum wage is put forth, especially one for a significant increase such as to $15 per hour (the current federal minimum wage is $7.25), the business community and its allies among elected officials immediately warn that there would be dramatic negative effects on the number of jobs and the growth of the economy.

However, there is no actual evidence that raising the minimum wage to $15 over the course of a few years would reduce the number of jobs or slow economic growth. These assertions by the business sector are pure speculation based on the economic theory of ideal markets (which don’t exist in reality). The warnings are meant to create fear among voters and elected officials, and therefore foster opposition to increasing the minimum wage.

Past increases in the minimum wage have not led to increases in unemployment. In January 1950, the minimum wage was increased 87.5% (from $.40 to $.75). Over the next 15 months, the unemployment rate fell from 7.9% to 3.1%. A similar result occurred after a 33.3% increase in the minimum wage in March 1956. A study by the NY Department of Labor found that after six of eight increases in New York’s minimum wage between 1991 and 2015 employment increased.

When San Jose increased its minimum wage by $2 in 2013, the business community and particularly restaurants and small businesses predicted disaster. However, new business registrations grew and unemployment fell, including in the restaurant and hospitality sector where 4,000 jobs were added over the next year. [1]

Washington State has the highest minimum wage in the country at $9.47, and it applies to tipped workers. (This is four and a half times the federal minimum wage for tipped workers of $2.13.) And yet Seattle has the second highest concentration of restaurants per capita in the country (behind only San Francisco, where the city’s minimum wage is even higher). Washington State also boasts the highest rate of small-business job growth in the country.

In 2014, when Seattle raised its city minimum wage to $15, the restaurant industry and the business sector predictably claimed that disaster would follow. But six months later, Seattle’s restaurant industry was growing faster than ever. And in early 2016, Washington State was first in the country in job and wage growth.

International comparisons demonstrate that a high minimum wage does not reduce the number of low paying jobs or increase the unemployment rate of low-education workers. Among 18 countries with advanced economies, the U.S. has the highest proportion of low-wage jobs (25%) but only an average employment rate for low-education workers (57%). In other words, having lots of low-wage jobs in the U.S. has not led to high employment among workers with low levels of education.

It is the presence of a high minimum wage and collective bargaining for workers that explains the presence of jobs with good wages in other countries. Furthermore, most of the 18 other countries have stronger social supports for workers and families than the U.S. in areas such as health care, housing, education, and especially child care. The lower minimum wage and weaker social supports in the U.S. reflect the lack of political power of ordinary workers in America. [2]

It has been seven years since the federal minimum wage was raised to $7.25. That’s seven years without a raise for many workers, while housing, food, and health care costs have risen. Not since the 1930s has the American workforce experienced such a low-wage and insecure labor market. Relatively high unemployment and very high under-employment, as well as the rise of part-time and contingent jobs with their uncertain incomes, are the symptoms of insecure jobs.

Today’s low wages (which have been declining with inflation) and job insecurity are largely the result of decreased union membership and weakened government regulation of the labor market. As Adam Smith wrote over 200 years ago, if workers negotiate wages and working conditions individually with employers, employers will always have the upper hand.

In competitive markets for goods and services, without government regulation (such as a strong minimum wage law) and collective bargaining for workers, the job market becomes a race to the bottom. Employers will drive down wages, benefits, and working conditions to maximize competitiveness and profits.

This is what has happened in the U.S. since 1968 as government regulation and union membership have declined. Using 1968 as the reference point, today’s current federal minimum wage of $7.25 would be:

  • $9.63 if it had kept up with inflation; (In other words, the minimum wage today has roughly 25% less purchasing power than it had in 1968.)
  • $11.35 if it had kept up with the average wage in the economy; or
  • $18.85 if it had kept up with the improvement in workers’ productivity. [3] (In other words, the value of the increased production of today’s workers over those of 1968 is not getting paid to the workers but is going to managers and investors or shareholders.)

So, the truth about increasing the minimum wage is that it doesn’t increase unemployment and slow economic growth. In fact, the opposite may occur. Furthermore, there are many benefits to increasing the minimum wage (which I’ll discuss in my next post) that outweigh any possible negative effects.

[1]       Hanauer, N., Summer 2016, “Confronting the parasite economy,” The American Prospect

[2]       Howell, D.R., Summer 2016, “Reframing the minimum-wage debate,” The American Prospect

[3]       Cooper, D., 7/25/16, “The federal minimum wage has been eroded by decades of inaction,” The Economic Policy Institute (http://www.epi.org/publication/the-federal-minimum-wage-has-been-eroded-by-decades-of-inaction/)

THE TRANS-PACIFIC PARTNERSHIP: CORPORATE POWER GRAB Part 2

With the full text of the Trans-Pacific Partnership (TPP) treaty now available, groups espousing environmental and workers’ interests state that the actual text is even worse than what they had expected. Environmental groups note that climate change is not even mentioned in the treaty. Workers’ groups note that the TPP will continue the experience under past treaties of US jobs moving overseas to lower wage countries and, therefore, reducing jobs and wages here in the US. This pattern will continue to undermine the middle class. Furthermore, on issues ranging from access to affordable medicines to the open Internet to food safety and labeling (e.g., country of origin and presence of genetically modified organisms [GMOs]), the TPP furthers corporate interests while undermining the interests of the public. [1]

Labor and environmental groups also note that there is no dispute resolution process focused on workers’ rights or environmental protection that parallels the Investor-State Dispute Resolution (ISDS) tribunals for multi-national corporations. If a state or country tries, for example, to ban or limit fracking or stop a coal mine, the fossil fuel corporation can sue the state or national government in the ISDS tribunal to overturn the action or get compensation. There is no similar mechanism for protecting workers or the environment.

The TPP also provides unjustified expansions of intellectual property protections in ways that benefit corporations. It extends and expands patents on drugs so that it will be longer before cheaper, generic versions of drugs are on the market and so that it will be harder for health care insurers to negotiate lower drug prices with the pharmaceutical corporations.

It requires Internet Service Providers (ISPs) to protect copyrights on corporate products such as movies and music. The TPP threatens ISPs with substantial penalties if they fail to shut down or remove protected content from a website that shares copyrighted material. Therefore, ISPs are likely to act in favor corporate copyright holders as soon as a copyright violation is alleged. [2]

The fact that the TPP enshrines corporate power is not a surprise. Corporate executives have been involved in the negotiating process from the beginning while everyone else was locked out. Furthermore, the process of drafting the TPP and now of approving it has been the target of substantial lobbying by multi-national corporations. Over the eight years of negotiations, 487 clients paid lobbyists to meet with or contact lawmakers and administration officials to discuss the TPP. Clients who reported lobbying on the TPP accounted for nearly thirty percent of all reported lobbying expenditures. The TPP has been mentioned 4,875 times in lobbying reports since 2008, when the US began negotiations. Corporations and other groups, such as the US Chamber of Commerce, paid lobbyists $2.6 billion during this period, although that figure includes lobbying expenditures on other issues listed along with the TPP on lobbying reports. The lobbying increased each year as the negotiations continued. Just two organizations mentioned the TPP in their 2008 lobbying reports but that number exploded to 1,317 in 2014. [3]

In a future post, I’ll discuss TPP’s failure to address currency manipulation and its ineffectiveness as a geopolitical response to the growing power of China.

[1]       Fulton, D., 11/5/15, “’Worse than we thought’: TPP a total corporate power grab nightmare,” Common Dreams (http://www.commondreams.org/news/2015/11/05/worse-we-thought-tpp-total-corporate-power-grab-nightmare)

[2]       Popular Resistance Newsletter, 11/8/15, “The secretly negotiated TPP will impact your life in many ways; together we can stop it,” (https://www.popularresistance.org/newsletter-10-shocking-realities-of-the-tpp-join-the-revolt/)

[3]       Tucker, W., 10/6/15, “Millions spent by 487 organizations to influence TPP outcome,” Center for Responsive Politics (http://www.opensecrets.org/news/2015/10/millions-spent-by-487-organizations-to-influence-tpp-outcome/?utm_source=CRP+Mail+List&utm_campaign=3570922ae8-Newsletter_9_24_15&utm_medium=email&utm_term=0_9df8578d78-3570922ae8-210762457)

THE TRANS-PACIFIC PARTNERSHIP: CORPORATE POWER GRAB

The full text of the Trans-Pacific Partnership (TPP) – a trade treaty and much more – was recently released. It was negotiated over 8 years in secret from the public and even Congress, although corporate executives were routinely involved. The treaty includes 12 countries: the US, Japan, Canada, Mexico, Australia, New Zealand, Peru, Chile, Singapore, Brunei, Malaysia, and Vietnam. Although the countries in the TPP represent over 40% of the global economy, the impact on trade per se – trade volume, tariffs, and quotas – will be small because the US already has a trade treaties with most of these countries, including all of the larger ones. [1]

Now that the full text has been released, at least 60 days have to pass before Congress can act on it. The Obama administration asked for and Congress agreed to consider this treaty under Fast Track rules. These rules require Congress to vote yes or no on the treaty with no amendments and in a limited time window. However, in the negotiations over approval of Fast Track rules, due to strong push back against them and against the treaty itself, the Obama administration agreed to release the full text of the treaty to Congress and the public for at least 60 days before a Congressional vote.

President Obama says that the TPP includes the strongest provisions of any trade treaty for protecting workers and the environment. [2] However, this is not saying much as past trade treaties have done almost nothing to protect workers and the environment. In addition, the TPP provisions for enforcing the labor and environmental provisions are quite weak. [3]

On the other hand, there are strong protections and enforcement mechanisms for corporate and investor interests. The “set of regulations governing investor rights, intellectual property, and … key service sectors, including financial services, telecommunications, e-commerce, and pharmaceuticals … enshrine the power of corporate capital above all … including labor and even governments.” [4]

Corporations and investors are allowed to sue governments if they feel their ability to make future profits is harmed by a country’s laws, rules, or regulations. They can take these claims to private Investor-State Dispute Settlement (ISDS) tribunals that make final, binding decisions and that bypass a country’s own courts and legal system. There is significant experience based on similar provisions in previous treaties that the ISDS process can undermine countries’ environmental and public health laws, as well as require governments to pay hundreds of millions of dollars in compensation to multi-national corporations. [5]

Senator Elizabeth Warren has criticized the TPP for giving multinational corporations too much power, in particular by allowing them to settle disputes through the ISDS tribunals and by expanding the ability of the large Wall St. financial corporations to challenge country’s financial rules and regulations. She has also stated that the TPP doesn’t go far enough in enforcing labor, public health, and environmental standards. [6]

Some conservatives are joining Senator Warren and others in expressing concern about the ISDS tribunals because they undermine US sovereignty by giving foreign corporations the right to challenge US laws and regulations. In addition to laws on safety, public health, and environmental standards, any US government law or regulation giving preference to the use of US companies in fulfilling government contracts would be subject to challenge by a foreign corporation under the TPP.

I’ll share more concerns about the TPP in subsequent posts.

My previous posts on the TPP and related matters include:

STOP “TRADE” TREATIES THAT FAVOR BIG MULTINATIONAL CORPORATIONS, 3/9/15, https://lippittpolicyandpolitics.org/2015/03/09/stop-trade-treaties-that-favor-big-multinational-corporations/

HISTORY AND LEAKS MAKE CASE AGAINST “TRADE” TREATIES, 1/20/14, https://lippittpolicyandpolitics.org/2014/01/20/history-and-leaks-make-case-against-trade-treaties/

STOP FAST TRACK FOR CORPORATE POWER GRAB, 1/13/14, https://lippittpolicyandpolitics.org/2014/01/13/stop-fast-track-for-corporate-power-grab/

TRADE TREATIES NEED OPEN DEBATE, NOT FAST TRACK, 1/8/14, https://lippittpolicyandpolitics.org/2014/01/08/trade-treaties-need-open-debate-not-fast-track/

“TRADE” AGREEMENTS & CORPORATE POWER, 9/13/13, https://lippittpolicyandpolitics.org/2013/09/13/trade-agreements-corporate-power/

“TRADE” AGREEMENT SUPERSIZES CORPORATE POWER, 9/10/13, https://lippittpolicyandpolitics.org/2013/09/10/trade-agreement-supersizes-corporate-power/

CORPORATE RIGHTS IN TRADE TREATIES, 7/22/12, https://lippittpolicyandpolitics.org/2012/07/22/corporate-rights-in-trade-treaties/

TRADE AGREEMENTS PAST AND PRESENT, 7/17/12, https://lippittpolicyandpolitics.org/2012/07/17/trade-agreements-past-and-present/

[1]       For more details and background on the TPP and related issues see previous posts that are listed at the end of this post.

[2]       Nakamura, D., 11/6 /15, “Release of text of Pacific trade pact does not quiet critics,” The Boston Globe from The Washington Post

[3]       Sachs, J.D., 11/10/15, “TPP is too flawed for a simple ‘yes’ vote,” The Boston Globe

[4]       Sachs, J.D., 11/1015, see above

[5]       Sachs, J.D., 11/1015, see above

[6]       Jan, T., 11/6/15, “Warren steps up criticism of the deal,” The Boston Globe

GOOD NEWS FOR US WORKERS

ABSTRACT: This Labor Day workers were able to celebrate falling unemployment, increased hiring, improved access to health insurance, and increases in the minimum wage. Expanded eligibility for overtime pay is also in the works. And the US Labor Department has proposed a new regulation that would cover home care workers under minimum wage and overtime rules. (They are currently exempted.) Policies could also be changed that would require more contingent or gig workers to be treated as employees under some or all of our labor laws and/or to require part-time employees to get pro-rated benefits.

Laws that support the right to unionize and bargain collectively could be strengthened, as could the enforcement of existing laws. Higher unionization correlates with lower inequality and a greater portion of national income going to the middle class.

Our public policies need to change, both to reinstitute workers’ bargaining power and to better serve workers in the gig economy. Workers in the US have been getting the short end of the stick for 40 years. Changes in public policies to address these issues are long overdue.

FULL POST: This Labor Day workers were able to celebrate falling unemployment and increased hiring. They could also celebrate improved access to health insurance through the Affordable Care Act (aka Obama Care). Increases in the minimum wage in a number of states and cities are more good news, along with the growing momentum behind the Fight for 15, which is pushing for a $15 minimum wage. Grassroots activism in support of workers specifically, and the middle and working class in general, is on the rise. [1] A number of political leaders have taken on this fight as well, including Senators Bernie Sanders (who is running for President), Elizabeth Warren, Jeff Merkley, Al Franken, Tammy Baldwin, Brian Schatz, Mazie Hirono, and Sherrod Brown. Pope Francis is also advocating for fairer treatment of workers and a reduction in economic inequality.

The momentum for increases in the minimum wage is supported by examples like San Jose, CA, which are refuting the scare-tactic claims of the business community and its political supporters in opposing any increases in the minimum wage. In San Jose, the minimum wage has gone from $8.00 per hour to $10.15. As a result, 70,000 of the city’s 370,000 workers directly or indirectly got a raise. But rather than costing jobs as opponents always assert minimum wage increases will do, unemployment has fallen to 5.4% from 7.4% in March 2013. The hardest hit industry – the restaurant business – has seen a 20% increase in the number of restaurants in the last 18 months. Although restaurants raised prices by an average of 1.75%, business is good and most customers don’t seem to notice that prices went up by a bit. [2]

Expanded eligibility for overtime pay is also in the works. Currently, most hourly workers are required to be paid time and a half for overtime work, i.e., work beyond 40 hours per week. However, employers are not required to pay overtime to salaried workers who are classified as managers or supervisors and are paid over $23,660 per year. (This is below the federal poverty line for a family of 4 people.) This $23,660 cutoff was established in 1975 and has not been updated since. In 1975, 60% of salaried workers qualified for overtime pay; today, less than 10% do. The US Department of Labor is proposing to raise the cutoff to $50,440, which is roughly adjusting it for the inflation of the last 40 years. If implemented, this change in regulations would mean that over 10 million additional US workers would qualify for overtime pay when they work over 40 hours per week. [3]

When the Fair Labor Standards Act was passed in 1938, it excluded domestic services workers and farm labor from its standards, such as the minimum wage and overtime pay. Many believe this happened because these workers were largely black and/or female. Amazingly, this exclusion remains in place today. Partly because of sub-minimum wages for their domestic services workers, the publicly-traded, national home-care corporations are very profitable – gross profits range from 30% to 40%. Furthermore, their CEOs’ compensation has risen 150% since 2004 (after adjusting for inflation), while their workers’ pay has declined 6%. [4]

In 2013, the US Labor Department proposed a new regulation that would cover home care workers under minimum wage and overtime rules. The coverage was supposed to take effect in January 2015, however the home care industry has been vehement in its opposition and has delayed the change by challenging the new regulation in court.

Policies could also be changed that would require more contingent or gig workers to be treated as employees under some or all of our labor laws, such as minimum wage, overtime pay, Social Security, workers’ compensation, and unemployment insurance laws. Rules could be changed to require part-time employees to get pro-rated benefits under many of these laws. Or employers could be required to make contributions to “individual security accounts” for gig workers to help them pay for benefits. [5] [6] Workers would also benefit from laws that regulate their schedules so they have more predictable hours and incomes. (See my post Supporting families is an investment in human capital Part 2 for more detail.)

Laws that support the right to unionize and bargain collectively could be strengthened, as could the enforcement of existing laws. For example, laws could be changed to make it easier for workers in franchised businesses and gig work to form unions and bargain collectively. [7] Enhanced workers’ bargaining power and workplace precedents based on union contracts would benefit all workers and support the revitalization of the middle class. Data over the last 100 years document a strong correlation between higher unionization and lower income inequality. Data from the last 50 years show a strong correlation between higher union membership and a greater portion of national income going to the middle class. [8]

Our public policies need to change, both to reinstitute workers’ bargaining power and to better serve workers in the gig economy. Our policies need to reflect the change from an industrial to a knowledge-based economy. Many current labor market standards, regulations, and economic security provisions were put in place around the Great Depression and responded to the transition from an agrarian economy to an industrial one. They need to be updated and adjusted to better align with current economic realities. [9]

Workers in the US have been getting the short end of the stick for 40 years. The results are stagnant wages, growing economic insecurity for most workers and families, a dramatic increase in economic inequality, and a declining middle class that lacks the purchasing power to keep our consumer-based economy humming. Changes in public policies to address these issues are long overdue.

[1]       Hightower, J., Sept. 2015, “The rebellious spirit of Matthew Maguire’s first Labor Day is spreading again across our country. Join the parade,” The Hightower Lowdown

[2]       Clawson, L., 6/16/14, “In San Jose, a minimum wage increase and falling unemployment,” Daily Kos (https://www.dailykos.com/story/2014/06/16/1307351/-In-San-Jose-a-minimum-wage-increase-and-falling-unemployment?detail=emailclassic)

[3]       Wise, K., 9/3/15, “Labor Day 2015: Important gains, many challenges for MA workers,” Massachusetts Budget and Policy Center (http://www.massbudget.org/report_window.php?loc=Labor_Day_2015.html)

[4]       Rogers, H., Summer 2015, “A decent living for home caregivers – and their clients,” The American Prospect (http://prospect.org/article/decent-living-home-caregivers%E2%80%94and-their-clients)

[5]       Ramos, D., 9/6/15, “The sharing revolution and the uncertain future of work,” The Boston Globe

[6]       Chen, M., 9/14/15, “This is how bad the sharing economy is for workers,” The Nation (http://www.thenation.com/article/this-is-how-bad-the-sharing-economy-is-for-workers/)

[7]       Johnston, K., 9/6/15, “Work’s dark future,” The Boston Globe

[8]       Clawson, L., 5/26/14, “The tight link between unions, the middle class and inequality in two charts,” Daily Kos (https://www.dailykos.com/story/2014/05/27/1301209/-The-tight-link-between-unions-the-middle-class-and-inequality-in-two-charts?detail=emailclassic)

[9]       Goodman, M.D., 9/6/15, “Public policies fail to keep pace with changing economy,” The Boston Globe

WORKING HARD, GAINING LITTLE

FULL POST: We recently celebrated the Labor Day holiday and workers in the US do have some things to celebrate, but in general the outlook is bleak. First, the bad news, and then in my next post the good news.

Wages (adjusted for inflation) fell 4% between 2009 (when the recovery officially started) and 2014. The fall was the greatest for low income workers – even in industries where hiring was strong – such as restaurant cooks (down 8.9%), home health aides (down 6.2%), and retail workers. Many workers are worse off than they were 20 years ago. [1]

Hourly wages for the typical worker have been basically stagnant since 1970, despite significant increases in worker productivity. From 2000 to 2014, for example, productivity grew by 21.6% while hourly compensation grew by just 1.8%. The value of the increased productivity has primarily gone to highly paid managers, business owners, and shareholders. Workers are not getting the fruits of their increased productivity because the rules of our economy have changed over the last 40 years to the benefit of employers. Workers’ power, through collective bargaining and other means, has been intentionally eroded by policy decisions by federal and state governments at the behest of powerful corporations. [2]

An important factor in these stagnant and falling wages is the growth of the number of workers who are not full-time employees; those who are temporary, part-time, or contract workers. This reflects the growth of what is called the gig economy. Roughly 40% of US workers were contingent or gig workers in 2010, up from 35% in 2006. [3] Roughly 27 million Americans are working as independent contractors or temporary workers, while another 24 million work at a mix of traditional and freelance work. These workers not only suffer from low wages, they also typically do not receive benefits and are not protected by labor laws covering health, safety, and working conditions, such as minimum wage and overtime pay laws. Furthermore, much of the safety net for workers in the US depends on being a regular, full-time employee: health insurance, retirement benefits, unemployment insurance, and workers’ compensation and disability insurance (for being unable to work due to an injury or a health issue). [4]

Our current employee-focused policies provide perverse incentives for employers because costs and administrative burdens are lower with non-employees than employees. As a result, employers actively work to maximize the use of contingent workers and minimize the number of full-time employees. They also misclassify workers as contractors to avoid paying payroll and unemployment taxes.

The gig economy means less economic security for workers now and in the future. Their jobs can disappear at any moment with no unemployment benefits to tide them over to the next job. Their weekly hours and income fluctuate. And typically they have no retirement benefits and no health insurance. If they buy health insurance on their own, they may have caps and high deductibles that could leave them in a financial crisis if a serious accident or illness were to occur. The risk of economic changes and recessions now falls primarily on employees, with little support from employers or our public safety net.

My next post will review good news for workers, including policy changes that would recapture workers’ bargaining power and better serve workers in the gig economy.

[1]       Schwartz, N.D., 9/3/15, “Pay has fallen for many, study says,” The Boston Globe from The New York Times

[2]       Economic Policy Institute, 9/2/15, “Gap between productivity and typical workers’ pay continues to widen,” Economic Policy Institute (http://www.epi.org/press/gap-between-productivity-and-typical-workers-pay-continues-to-widen/)

[3]       Johnston, K., 9/6/15, “Work’s dark future,” The Boston Globe

[4]       Ramos, D., 9/6/15, “The sharing revolution and the uncertain future of work,” The Boston Globe

A VOICE FOR WORKERS

Workers need to have a strong voice in the workplace and in our democracy to maintain an equitable balance of power with large, corporate employers. As the voice of labor has weakened over the last 35 years, workers’ pay has barely kept up with the cost of living and has fallen far behind workers’ growing productivity. In addition, the minimum wage has fallen substantially relative to the cost of living and workers’ benefits have been cut – many fewer workers have pensions and workers are paying more and more for their health insurance, if they have it.

Without a strong voice and bargaining power, workers do not get their fair share of economic growth and prosperity. (See my previous post, The Undermining of the Middle Class, for more detail.) For example, as workers’ pay and benefits have fallen in recent years, corporate profits and executives’ pay and benefits have risen dramatically.

The primary vehicle for providing a voice and bargaining power to workers is a labor union. Over the last 35 years, large corporations and their allies in government have engaged in a concerted campaign to weaken unions and workers’ bargaining power. Corporate employers have voided union contracts by declaring bankruptcy (e.g., many airlines), employers have been allowed to hire replacement workers when unionized workers engage in a strike (e.g., the air traffic controllers), employers have closed factories and moved jobs overseas, it has been made harder to organize workers and form a union, labor laws have been only weakly enforced, and penalties on employers who break labor laws are minimal.

This campaign to weaken unions has succeeded in reducing union membership among corporate employees from over 1 in 3 workers in the 1950s to 1 in 14 workers today. It has also undermined all workers’ bargaining power and throughout our economy has caused wages to stagnate and benefits to decline. The result has been a decline in the middle class’s share of national income.

Three key policy changes are needed to strengthen unions and the voices of workers:

  • Make it easier to form a union. Eliminate the ability of employers to delay and put up procedural hurdles to workers organizing a union.
  • Implement meaningful penalties for labor law violations. For example, the current penalty for firing a worker who is working to form a union (which is illegal), is simply to give him or her a job back, possibly with back pay. There is no fine or other penalty for having broken the law. Often these cases take so long to resolve (often it’s over a year) that the worker has had to find employment elsewhere.
  • Overturn, through federal law, states’ “right to work” laws. These laws allow employees in a unionized workplace to benefit from union-negotiated pay and benefits without having to pay union dues. This is a backdoor way to weaken and destroy unions by reducing their membership and revenue.

Wages and benefits are better in states (and countries) with higher levels of union membership. For example, in states with “right to work” laws, wages are $6,000 per year lower than in states without such laws and workers have weaker health and pension benefits as well. This applies not just to unionized workers but to all workers; all workers’ wages and benefits are better when unions are stronger.

Workers deserve fair pay and benefits for a hard day’s work. Unions provide the voice and bargaining power for workers; they establish a countervailing power to that of large, corporate employers. They improve pay and benefits, as well as working conditions, such as limiting the standard work week to 40 hours. Strong unions lead to a strong and fair economy, as well as a strong middle class. We need to strengthen labor unions to bring back a thriving middle class, as well as the fairness and shared prosperity that our economy produced in the 1950s through 1970s.

Strengthening labor unions is the seventh of Ten Ideas to Save the Economy: The Big Picture presented by Robert Reich and MoveOn.org. (You can watch the 3 minute video at: https://www.facebook.com/moveon/videos/vb.7292655492/10152780314000493/?type=1&theater.)

WHY ECONOMIC INEQUALITY CONTINUES TO GROW AND WHAT YOU CAN DO ABOUT IT

ABSTRACT: Despite many indicators that our economy is strong, most Americans are experiencing economic insecurity. Over half of US households have less than one month’s income in regular savings and median household income continues to decline. Low-wage workers at Walmart, McDonalds, and elsewhere are so poor they are receiving $45 billion in public assistance. This translates into the average US household paying $400 a year in taxes to support these workers.

So why are the majority of Americans falling behind economically? And why were things so different in the post-World War II period? The US job market has changed dramatically. Many full-time jobs have been replaced part-time jobs, contract work, and temporary work. Many large employers and some politicians have engaged in a conscious effort to undermine the bargaining power of workers and weaken the enforcement of labor laws. Policies that allow outsourcing of jobs overseas and high unemployment further undermine the availability of good jobs at good wages.

The ability of the public and voters to demand policies that support the middle class and workers has also been undermined. Wealthy individuals and corporations are now allowed to make huge contributions and expenditures in our elections, drowning out the voices of average voters. This means that economic inequality translates into political inequality and policies that favor the well-off. Furthermore, new barriers to voting and a strategy of paralyzing and denigrating government has fostered voter cynicism, which leads to “a downward spiral [of] depressed expectations and diminished participation.”

A genuine mass movement is needed to restore economic security and opportunity for the typical American worker. An opportunity to participate in building such a movement is available right now in the election of the Mayor of Chicago. Jesus “Chuy” Garcia is unexpectedly giving incumbent Mayor Rahm Emanuel, a crony of wealthy business interests, a run for his money. You can learn more about Garcia and contribute to his campaign at http://www.chicagoforchuy.com/index.html. The success of candidates like Garcia is critical to turning around the direction of our politics and policies, and to re-establishing government of, by, and for the people.

FULL POST: As the stock market sets record highs, as unemployment falls, and as the economy grows, most Americans are experiencing economic insecurity. Since 2007, US wealth as grown by over $30 trillion, but the number of children in families receiving public assistance to buy food has grown by 6.5 million to 16 million children (20% of all kids). Over half of public school students are poor enough to qualify for lunch subsidies and over half of US households have less than one month’s income in regular savings (as opposed to retirement accounts or home equity). Median household income has continued to decline in the 5 years since the official recession ended; 95% of income growth since 2009 has gone to the richest 1%. The jobs that are being created pay, on average, 23% less than the jobs that were lost. [1]

Low-wage workers (those earning less than $10.10 per hour) at Walmart, McDonalds, and elsewhere are so poor they are receiving $45 billion in public assistance. This translates into the average US household paying $400 a year in taxes to support these workers. Walmart’s highly publicized $1 raise for its lowest paid workers will cost the company about $1 billion per year. Its profits last year were $25 billion and it spent about $6.5 billion to buy back its own stock, enriching its investors. It’s estimated that taxpayers spent about $6 billion providing public assistance to Walmart employees last year. [2]

So why are the majority of Americans falling behind economically when many measures indicate that our economy is doing well and when the wealthy are doing very well? And why were things so different in the post-World War II period when our economy was doing well and the majority of Americans were getting ahead? Bob Kuttner offers seven reasons, which I summarize below. [3]

The US job market has changed dramatically. Many full-time jobs with career opportunities have been replaced part-time jobs, contract work, temporary work, and so forth. Many large employers and some politicians have engaged in a conscious effort to undermine the bargaining power of workers and weaken the enforcement of labor laws. Policies that allow outsourcing of jobs overseas and high unemployment (while limiting unemployment benefits) further undermine market forces that would provide good jobs at good wages – and with benefits.

Pro-business Republicans and Democrats have supported these policies. Furthermore, the ability of the public and voters to demand policies that support the middle class and workers has been undermined. Laws and court decisions have allowed wealthy individuals and corporations to make huge contributions and expenditures in our elections, drowning out the voices of average voters. This means that economic inequality translates into political inequality, and wealthy special interests can promote their own good at the expense of the public.

Similarly, laws and court decisions have made it more difficult for many voters to vote. And finally, a strategy of paralyzing and denigrating government, particularly at the national level, has fostered voter cynicism. This leads to passivity and lack of involvement in political activity including voting – “a downward spiral [of] depressed expectations and diminished participation.”

Kuttner says a genuine mass movement is needed to restore economic security and opportunity for the typical American worker, as well as democracy to our political process. He notes that the Roosevelt Revolution and New Deal of the 1930s accomplished this. The Civil Rights Movement of the 1960s also made major changes in economic justice and democratic processes. So it’s time again to throw off cynicism and apathy, and to activate and organize.

An opportunity to do so is available right now in the election of the Mayor of Chicago. Jesus “Chuy” Garcia is polling within 4 percentage points of incumbent Mayor, Rahm Emanuel, a crony of wealthy business interests (and former Chief of Staff for President Obama and former US Representative). As Mayor, Emanuel closed 50 public schools, attacked teachers, and engaged in privatizing schools, parking meters, transit fare collection, and other public sector functions and jobs. He has focused on downtown development while ignoring the neighborhoods. He has raised taxes and fees on working people while providing sweetheart deals for business people, many of whom have contributed to his election campaign. Emanuel has raised over $13 million, ten times what Garcia has raised, and has a super PAC backing him as well. He is receiving substantial support from wealthy business people who are active Republicans. [4]

Garcia shocked everyone in the primary by keeping Emanuel from getting a majority of the vote, thereby forcing the run-off election on April 7. If you would like to contribute to the movement to restore democracy, reduce inequality, and support workers and the middle class, supporting Garcia is a good opportunity. You can learn more about him and contribute to his campaign at http://www.chicagoforchuy.com/index.html. Even if you contribute just a few dollars, the number of donors is an important indication of the breadth of support. You can sign-up to make calls from your home encouraging Chicago residents to get out and vote for him here: http://pol.moveon.org/2015/garcia_calls.html?rc=kos.

The success of candidates like Garcia is critical to turning around the direction of our politics and policies, and to re-establishing government of, by, and for the people. Even if they don’t ultimately win, they change the issues and policies that are discussed, and help build the movement for change.

P.S. I think it’s noteworthy that there hasn’t been much coverage by the mainstream (corporate) media of this unexpectedly contested mayoral race in our 3rd largest city.

[1]       Buchheit, P., 2/9/15, “New evidence that half of America is broke,” Common Dreams

[2]       Buchheit, P., 3/16/15, “Four numbers that show the beating down of middle America,” Common Dreams

[3]       Kuttner, R., 3/23/15, “Why the 99 percent keeps losing,” Huffington Post

[4]       Perlstein, R., Feb. 2015, “How to sell off a city,” In These Times (http://inthesetimes.com/article/17533/how_to_sell_off_a_city)

RECLAIMING AN ECONOMY THAT WORKS FOR EVERYONE, NOT JUST THE WEALTHY

ABSTRACT: We need to reclaim our economy so it works for everyone, not just the wealthy. With different choices and policies that reflect a different set of values, our economy can once again be one where a rising tide lifts all boats, not just the yachts of the wealthiest.

The policy changes that are needed to support the middle and working class include:

  • Raise the minimum wage
  • Strengthen laws on equal pay for equal work
  • Strengthen labor laws and enforcement, including workers’ right to bargain collectively
  • Strengthen Social Security while protecting and encouraging pensions
  • Close corporate and individual income tax loopholes, and raise tax rates on unearned income
  • Ensure that trade treaties are fair to workers and citizens
  • Strengthen the Dodd-Frank financial reforms and reinstitute a small financial transaction tax
  • Create jobs and make needed investments in our infrastructure

We need new policies and programs that reflect values and choices that put the average citizen and worker first, rather than wealthy individuals and corporations. If some of these proposals resonate with you, contact your elected officials and tell them. A grassroots movement is needed to shift our economy from the current one that is working only for the wealthiest 10% to the one we used to have where everyone benefited from economic growth.

FULL POST: In my last post, I summarized policy choices that have undermined the middle and working class, largely based on a great speech Senator Elizabeth Warren gave recently. She states that it doesn’t have to be this way and spells out what we need to do to reclaim our economy so it works for everyone, not just the wealthy. [1] With different choices and policies that reflect a different set of values, our economy can once again be one where a rising tide lifts all boats, not just the yachts of the wealthiest.

The policies that undermined the middle and working class were justified by the theory of “trickle-down” or “supply-side” economics. It was used to justify large tax cuts for wealthy individuals and corporations because the theory said that the country could count on the biggest and richest corporations and the wealthiest individuals to share their growing wealth and create an economy that worked for everyone. The experience of the last 30 years has shown that President George H.W. Bush was right when he called this “voodoo economics.” Nonetheless, there are politicians today who still pledge allegiance to “trickle-down” economics, despite the fact, as Senator Warren states, that it has been shown to be the politics of helping the rich and powerful get more, while cutting off the legs of the middle class.

The set of values that should drive our policies include the following:

  • A person shouldn’t work full-time and be in poverty.
  • Women should receive equal pay for equal work.
  • Labor laws should be strengthened and enforced so that workers are
    • paid what they are due,
    • able to retire with dignity, and
    • able to bargain together as a group with employers for fair pay, benefits, and working conditions.
  • Our tax system should be fair and require wealthy individuals and corporation to pay their fair share. Workers shouldn’t pay higher income tax rates on their hard-earned income than the wealthy pay on their unearned income from investment gains and dividends.
  • The burden of student debt should be reduced.
  • Our trade policies should be fair for workers, creating jobs and raising wages in the U.S.
  • Big banks and financial corporations should not be too-big-to-fail, allowed to make risky investments with government insured deposits, or bailed out by taxpayers if they get into trouble.
  • Regulation and oversight should be enhanced, particularly of the big financial corporations, so consumers and our economy are protected from speculation and fraud.

The policy changes that are needed to support the middle and working class based on these values include:

  • Raise the minimum wage nationally. (Many states and cities are already doing this.)
  • Strengthen laws requiring and enforcing equal pay for equal work.
  • Strengthen labor laws and their enforcement, including workers’ right to form unions and bargain collectively so there is a balance of power between the workers and the employer during negotiations.
  • Strengthen Social Security while protecting and encouraging pensions, as well as personal and employer supported savings, such as 401(k)s.
  • Close corporate and individual income tax loopholes. For example, stop corporations and individuals from hiding income overseas to avoid paying taxes.
  • Raise tax rates on unearned income, including capital gains, dividends, and hedge fund mangers’ investment gains.
  • Allow students to refinance college loans at reduced interest rates and allow relief from student debt in bankruptcy.
  • Ensure that trade treaties are thoroughly debated in public and are fair to workers and citizens, balancing their interests with those of multi-national corporations.
  • Strengthen the Dodd-Frank financial reforms, as well as oversight and enforcement. Prevent financial corporations from gambling on risky investments with taxpayer insured deposits. Require too-big-to-fail corporations to split up into smaller entities.
  • Reinstitute a small financial transaction tax (for example, 0.5%) to discourage speculative trading and generate needed revenue.
  • Create jobs and make needed investments in our infrastructure by building roads, bridges, and schools; and investing in education and research.

While workers suffered after the 2008 economic collapse caused by out-of-control financial corporations, our politicians bailed out the corporations, often with no or few strings attached. Our politicians have also signed trade treaties and currently are negotiating new ones that are highly beneficial to multi-national corporations. Yet workers harmed by past policy changes and trade treaties, as well as homeowners who lost their homes and workers who lost their jobs in the 2008 collapse, have received little help and certainly have not been bailed out the way Wall Street was.

We need new policies and programs that reflect values and choices that put the average citizen and worker first, rather than wealthy individuals and corporations. I encourage you to listen to Warren’s speech if you haven’t already (just 23 minutes) or to read the press release. If some of these concerns or proposals resonate with you, contact your elected officials and tell them. A grassroots movement is needed to shift our economy from the current one that is working only for the wealthiest 10% to the one we used to have where everyone benefited from economic growth.

[1]     You can listen to and watch Warren’s 23 minute speech at: https://www.youtube.com/watch?v=mY4uJJoQHEQ&noredirect=1. Or you can read the text in the press release her office put out at: http://www.warren.senate.gov/?p=press_release&id=696.

THE UNDERMINING OF THE MIDDLE CLASS

ABSTRACT: Senator Elizabeth Warren gave a great speech recently in which she laid out how actions taken by corporations and related policy changes have undermined the middle and working class. She also spelled out what we need to do to change the rules of our economy so it works for everyone, not just the wealthiest. Up until the 1980s, our economy and the wages of the middle and working class grew together. But since the 1980s, all the growth of the economy has gone to the wealthiest 10%. Wages for the 90% of us with the lowest incomes have been flat, while our living expenses for housing, health care, and college have grown significantly.

This change in our economy, where all the benefits of growth go to the wealthiest 10%, represents a huge structural economic shift. It occurred because of cutting taxes; trade treaties; financial manipulation via leveraged buyouts and bankruptcies; minimum wage erosion with inflation; reductions in health care, unemployment, sick time, and overtime benefits; cutting of pensions and retiree benefits; and restrictions on employees’ rights to negotiate pay and working conditions as a group. Furthermore, corporations have been allowed to turn full-time employees into independent contractors or part-time workers who get no benefits and no job security.

These changes affect all workers, those in the private and public sectors, as well as both union and non-union employees. The changes were promoted by corporations and their lobbyists. Senator Warren states that it doesn’t have to be this way. We can make different choices and enact different policies that reflect different values. More on that next time.

FULL POST: Senator Elizabeth Warren gave a great speech recently in which she laid out how actions taken by corporations and related policy changes have undermined the middle and working class. She also spelled out what we need to do to change the rules of our economy so it works for everyone, not just the wealthiest. [1] She notes that up until the 1980s our economy and the wages of the middle and working class grew together. The rising tide of our growing economy did lift all boats. While the wealthiest 10% got more than their share of the growth (about 30%) in those years, the other 90% of us got 70% of the money generated by the growing economy.

But since the 1980s, all the growth of the economy has gone to the wealthiest 10%. The pay for Chief Executive Officers (CEOs) of corporations was 30 times that of average workers in the 1980s; today it is 296 times that of workers. And in the last 25 years, corporate profits have doubled as a portion of our economy, while the portion going to workers has declined. [2]

Wages for the 90% of us with the lowest incomes have been flat, while our living expenses for housing, health care, and college have grown significantly. Mothers have gone to work and parents are working more hours but this has not been enough to maintain a middle class standard of living. It certainly looks like today’s young people will be the first generation in America to be worse off than their parents.

Since 1980, the wages of the wealthiest 1% have grown by 138% (adjusted for inflation) while wages for the 90% with the lowest wages have received only a 15% increase (less than half of one percent per year). Workers have not received the benefit of their increased productivity, as was the case up until 1980. Since 1980, productivity has increased 8 times faster than workers’ compensation. If the federal minimum wage had kept up with productivity, it would be $18.42 instead of $7.25. And if it had kept up with inflation since 1968, it would be $19.58. [3]

This change in our economy, where all the benefits of growth go to the wealthiest 10%, represents a huge structural economic shift. So how did the economy get rigged so the top 10% get all the rewards of economic growth?

In the 1980s, government was vilified by politicians who were supported by corporate money. The supposed evils of big government were used to argue for deregulation and cutting taxes. This turned Wall Street’s financial corporations and other large multi-national corporations loose to maximize profits with no holds barred. Furthermore, trade treaties allowed corporations to manufacture goods overseas and bring them back into the U.S. with low or no tariffs, few U.S. regulations, and no regulations on how foreign labor was paid or treated. In addition, the U.S. corporations were allowed to cut benefits and pay for U.S. employees, including by undermining workers’ bargaining power in multiple ways, and through financial manipulation via leveraged buyouts and bankruptcies, as well as changes in tax laws.

Middle class workers have been undermined by corporations moving (or threatening to move) their jobs overseas and by changes in state and federal laws. The minimum wage has been eroded by inflation; workplace safety and legal protections have been weakened; health care, unemployment, sick time, and overtime benefits have been reduced; restrictions on child labor have been lifted; and it has become harder to sue an employer for discrimination. Pensions and retiree health benefits have been cut or eliminated. Just 34 of the Fortune 500 list of the largest corporations offered traditional pensions to new workers in 2013, down from 251 in 1998. [4] And wage theft through failure to pay the minimum wage or overtime wages, or through manipulation of time cards and other means, has spread. Meanwhile, enforcement of labor laws has been weak.

Employees’ rights to negotiate pay and working conditions as a group have been restricted. In addition, the middle class has been hammered by labor laws that allow corporations to turn full-time employees into independent contractors or part-time workers who get no benefits and no job security.

These changes affect all workers, those in the private and public sectors, as well as union and non-union employees. The changes were promoted by corporations and their lobbyists, along with corporate-funded think tanks, the Chamber of Commerce, the National Federation of Independent Business, the National Restaurant Association, the National Association of Manufactures, and other business groups. These efforts were also advanced by corporate-funded advocacy organizations such as the American Legislative Exchange Council (ALEC), Americans for Tax Reform, and Americans for Prosperity. [5]

Senator Warren states that it doesn’t have to be this way. We can make different choices and enact different policies that reflect different values. My next post will discuss those values and policies. In the meantime, I encourage you to listen to Warren’s speech (just 23 minutes while you’re doing something else) or to read the press release. (See footnote 1 for links to them.)

[1]     You can listen to and watch Warren’s 23 minute speech at: https://www.youtube.com/watch?v=mY4uJJoQHEQ&noredirect=1. Or you can read the text in the press release her office put out at: http://www.warren.senate.gov/?p=press_release&id=696.

[2]       Tankersley, J., 12/25/14, “Amid gain, middle class wages get no lift,” The Boston Globe from the Washington Post

[3]       Economic Policy Institute, 12/24/14, “The 10 most important econ charts of 2014 show ongoing looting by the top 1 percent,” The American Prospect

[4]       McFarland, B., 9/3/14, “Retirement in transition for the Fortune 500: 1998 to 2013,” Towers Watson (http://www.towerswatson.com/en/Insights/Newsletters/Americas/Insider/2014/retirement-in-transition-for-the-fortune-500-1998-to-2013)

[5]       Lafer, G., 10/31/13, “The legislative attack on American wages and labor standards, 2011-2012,” Economic Policy Institute (http://www.epi.org/publication/attack-on-american-labor-standards/)

THE CORPORATE EDUCATION INVASION Part 1

ABSTRACT: Corporations covet public funding streams, especially large and consistent ones. A relatively recent example of a focused effort by corporations to capture public funding is evident in our public schools. These efforts have included an extensive public relations campaign aimed at convincing the public and elected officials that our public schools are failing. This is a standard corporate strategy: create a real or imagined crisis in a public service and push privatization as the solution.

This attack on our public schools is not only inaccurate, it diverts attention from the real issues underlying poor educational outcomes, which are poverty and inequality. Another key component of the PR strategy is to blame teachers for the supposed failure of our public schools. This undermines teachers and their unions, who are the most likely constituency that would stand up and oppose these privatization efforts.

The PR strategy has worked and privatized public education and testing are now multi-billion dollar corporate revenue streams. Charter schools, despite the promises of privatizers to produce better results, are no better on average than public schools with comparable populations of students.

Corporate efforts to profit off of public funding streams are not new. Eisenhower warned of the military-industrial complex back in the 1950s. The flow of money to private corporations, privatization in the broad sense, threatens to distort public services, decisions, and spending, because the interests and priorities of the corporations receiving the public funds are different from those of the public.

FULL POST: Corporations covet public funding streams, especially large and consistent ones. A relatively recent example of a focused effort by corporations to capture public funding is evident in our public schools. Although corporations have long sold textbooks and other curriculum materials to public schools, a lucrative business with a large and reliable funding stream, recent efforts have focused on privatizing the actual delivery of education, as well as designing and implementing testing.

These efforts have included an extensive public relations campaign aimed at making the public receptive to privatized spending in these areas. A major focus of this public relations (PR) campaign has been to convince the public and elected officials that our public schools are failing, that alternatives are necessary, and that the private sector is by definition more effective and efficient than the public sector. This is a standard strategy straight out of the playbook of corporate America and their political allies: create a real or imagined crisis in a public service and push privatization as the solution. (For more on this strategy, see my blog post, “Find a crisis, demand privatization,” of 6/5/14 [https://lippittpolicyandpolitics.org/2014/06/05/find-a-crisis-demand-privatization/].)

The PR campaign makes the case that our schools are failing by comparing US students to those from other countries. Although average scores indicate that US students perform worse than others, white children from well-off families do just fine in international comparisons. It is the gap between those students and less affluent and minority students that drags the average down. In actuality, a reliable nationwide test of student performance, the National Assessment of Educational Progress (NAEP), finds that US students’ performance is at the highest level on record. [1] So this attack on our public schools is not only inaccurate, it diverts attention from the real issues underlying poor educational outcomes, which are poverty and inequality in the US.

A second component of the PR strategy is the assertion that standardized, high stakes testing is necessary to measure the performance of US students and to establish accountability for improving results. Although testing is presented as part of a “no child left behind” goal, the commitment and funding to improve schools and education (including preschool education) for the students identified as being behind has never materialized. Meanwhile, policies and the funding to address poverty and inequality more broadly are not even on the radar screen.

A final component of the PR strategy is to blame teachers for the supposed failure of our public schools. This again diverts attention from the real underlying issues of poverty and inequality in the US. It also undermines teachers and their unions, who are the most likely constituency that would stand up and oppose these privatization efforts. Undermining unions (and the bargaining power and rights of workers in general) is an overarching goal of large corporations, so this kills two birds with and one stone from their perspective.

The PR strategy has worked and privatized public education and testing are now multi-billion dollar corporate revenue streams. Testing alone is a $2.7 billion a year industry in the US and the new Common Core standards will grow the testing business further. Wall Street investors, including private equity and hedge fund managers, are investing in for-profit corporations in the student testing and charter school industries because they are seen as opportunities for high profits and growth.

Charter schools, despite the promises of privatizers to produce better results, are no better on average than public schools with comparable populations of students. Many of the charter schools that show good results achieve them by attracting motivated students from motivated families. And they also cull students along the way, forcing or pushing out students who aren’t performing well, thereby improving testing results and other statistics. They also typically serve fewer students with special needs and with English as a second language than the public schools. [2]

Corporate efforts to profit off of public funding streams are not new. Eisenhower warned of the military-industrial complex back in the 1950s, when private corporations’ receipt of Defense Department funds was already distorting public policy making and spending. The corporate effort to tap into health care funding from Medicare and Medicaid is another example. For-profit prisons, water and sewer systems, and public education are more recent examples.

In all these cases, the flow of money to private corporations, privatization in the broad sense, threatens to distort public services, decisions, and spending, because the interests and priorities of the corporations receiving the public funds are different from those of the public. Most notably, the corporations are primarily interested in increased revenue and profit, while public goals such as quality and effectiveness of services, public health and safety, and equitable treatment of all service recipients, are typically secondary, at best, to the corporation. Furthermore, there is substantial evidence that private delivery of these services is NOT more effective or more efficient. Nonetheless, the advocates of privatization continue to assert that they are. (For more detail, see my previous posts on privatization, especially the ones on 10/16/12 and 10/23/12.)

[1]       Ravitch, D., 2/17/14, “Reign of error: The hoax of the privatization movement and the danger to America’s public schools,” as reviewed by Featherstone, J., in The Nation

[2]       Ravitch, D., 2/17/14, see above

CEO PAY: THE RACE TO THE TOP FOR THOSE AT THE TOP

ABSTRACT: CEO pay has increased over 50% in the last 4 years while pay for workers has barely increased. The typical CEO’s pay in 2013 was $10.5 million. The industry with the fastest growth in pay was the banking industry where CEO pay grew 22% in 2013 – on top of 22% growth the year before. While the economy remains weak and unemployment is high, the executives in the banking sector – that we as taxpayers bailed out after they crashed our economy – are making money hand over fist.

CEO pay has increased dramatically over not only the last 4 years but over the last 35 years for a variety of reasons. There also are a variety of reasons that the average workers’ pay has barely increased over the last 4 years and over the last 35 years as well. (See below for more detail.)

As income and wealth inequality have grown dramatically in the US over both the last 4 years and the last 35 years, the wealthy have re-invested part of their windfall in buying influence in our political system through campaign spending and lobbying. They have succeeded in tilting government policies to favor them and their large, typically multi-national, corporations.

Our elected representatives can and should change government policies and actions so that the growing inequality in the US is reduced. We, as the voters in a democratic political system, need to – and can – make them do so.

FULL POST: CEO pay has increased over 50% in the last 4 years while pay for workers has barely increased. CEO pay is now 257 times that of the average worker, up sharply from 181 times workers’ pay in 2009. The typical CEO’s pay in 2013 was $10.5 million – topping the $10 million mark for the first time. The highest paid CEO got over $68 million and the top 10 were all over $31 million. [1] CEO pay was up 8.8% last year while the average workers’ pay rose only 1.3%. [2] And CEO’s wealth is increasing dramatically too, in part because over 40% of their pay is in stock, where gains are taxed at a lower rate than regular cash income.

The industry with the fastest growth in pay was the banking industry where CEO pay grew 22% in 2013 – on top of 22% growth the year before. While the economy remains weak and unemployment is high, the executives in the banking sector – that we as taxpayers bailed out after they crashed our economyare making money hand over fist.

CEO pay has increased dramatically over not only the last 4 years but over the last 35 years for a variety of reasons. One reason is that CEO pay is set by corporate Boards of Directors that include many current and former CEOs of other corporations and often include members hand-picked by the CEO him or herself. When friends and peers set your pay level, is it any surprise you get big increases? Furthermore, every corporation and board want to tout their CEO as the best and the brightest – and, of course, therefore, the highest paid. Hence, it becomes a race to the top for those at the top. [3] If shareholder approval were required for CEO pay, perhaps things would be different.

There also are a variety of reasons that the average workers’ pay has barely increased over the last 4 years and over the last 35 years as well. Over the last 4 years, high unemployment has meant that workers have little leverage to ask for pay raises and corporations don’t need to reward workers because there is little opportunity for workers to quit and find another job. Workers’ negotiating power has also been eroded over the last 35 years by the decline of union membership and power. In 1983, over 20% of workers were members of unions compared to 11% in 2013. Globalization and technology have played a role by reducing the number of middle class jobs in the US, which tends to increase unemployment and reduce workers’ bargaining power and wages. However, their effects could have been ameliorated through rules governing trade that better protect workers both at home and abroad, as well as by policies and programs for job retraining and retention. [4]

As income and wealth inequality have grown dramatically in the US over both the last 4 years and the last 35 years, the wealthy have re-invested part of their windfall in buying influence in our political system through campaign spending and lobbying. They have succeeded in tilting government policies to favor them and their large, typically multi-national, corporations. These policies include:

  • Tax laws that a) have dramatically reduced the income tax rate on high incomes, b) have even lower rates for unearned income (i.e., income from investments), and c) favor corporations;
  • Government spending priorities, that include bailouts for financial and banking corporations but not for homeowners and workers who were devastated by the recession caused by the financial and banking industry; and
  • Labor and other laws that weaken workers’ bargaining power and fail to increase the minimum wage to keep up with inflation.

Our elected representatives can and should change government policies and actions so that the growing inequality in the US is reduced. We, as the voters in a democratic political system, need to – and can – make them do so.

[1]       Sweet, K., 5/28/14, “Median pay for CEOs rises sharply to $10.5m,” The Boston Globe from the Associated Press

[2]       Boak, J., 5/28/14, “Why executives get lavish compensation as rank-and-file wages lag,” The Boston Globe from the Associated Press

[3]       Boak, J., 5/28/14, see above

[4]       Boak, J., 5/28/14, see above

HISTORY AND LEAKS MAKE CASE AGAINST “TRADE” TREATIES

ABSTRACT: Twenty years of experience with previous “trade” treaties and the recent leaks of draft language for the Trans-Pacific Partnership (TPP) make the case that the “trade” treaties currently in negotiation will not benefit the US economy, our workers, or our middle class. These treaties focus on and benefit multi-national corporations and investors, rather than trade and the public interest. (See my previous posts of 1/13, 1/8, 9/13/13, and 9/10/13 for more detail.)

The growing resistance to Fast Track authority and these new “trade” agreements in Congress and the public is fueled by growing data on the damaging impacts of the 20 year history of the North American Free Trade Agreement (NAFTA). The same claims are being made for the current trade treaties as were made for NAFTA: that they will promote economic growth, increase jobs, and reduce trade deficits or increase trade surpluses. However, the Mexican trade surplus ($2 billion in 1993) quickly turned into growing deficits, totaling $1 trillion over the 20 year life of NAFTA. With Canada, the other country in NAFTA, the story is similar.

It is estimated that NAFTA has eliminated almost 700,000 jobs in the US. NAFTA established the principle that US corporations could move production out of the US but import the goods produced back into the US without any tariffs or other disincentives. This undermines the wages and benefits of American workers and the middle class. In all three NAFTA countries, wages and benefits for workers have not kept up with increased worker productivity over the last 20 years.

Since NAFTA, the US has entered into trade agreements with Korea, China, and others. While the promise has always been growth in US jobs, our economy, and our trade balance, the result has typically been the opposite. The trade agreements of the past 20 years have cost our economy more than $1 trillion through increased trade deficits and close to a million jobs.

I urge you to contact your elected officials in Washington and tell them you have serious concerns about the “trade” agreements being negotiated. And that these “trade” agreements are too important and too far reaching to be approved quickly and quietly.

FULL POST: Twenty years of experience with previous “trade” treaties and the recent leaks of draft language for the Trans-Pacific Partnership (TPP) make the case that the “trade” treaties currently in negotiation will not benefit the US economy, our workers, or our middle class. These treaties focus on and benefit multi-national corporations and investors, rather than trade and the public interest. (See my previous posts of 1/13, 1/8, 9/13/13, and 9/10/13 for more detail.)

The latest leak has been of the environmental provisions of the TPP. They lack mandated standards and have weak enforcement provisions. They are even weaker than the provisions in previous trade agreements, such as the North American Free Trade Agreement (NAFTA). [1]

Those arguing for Fast Track consideration of the TPP and other treaties by Congress (i.e., short timeframe, no amendments, and no filibuster) argue that treaties should be negotiated by the President and the Executive Branch (and not fiddled with by Congress) and that treaties are generally negotiated behind closed doors. [2] However, the current trade negotiations have included extensive involvement and input from corporate interests but virtually no input from the public; from advocates for workers, the environment, or ordinary citizens; or from Congress and other elected officials (other than the President). Furthermore, the Fast Track process is not necessary to pass trade agreements. President Clinton implemented more than 130 trade agreements without the Fast Track process. [3]

The growing resistance to Fast Track authority and these new “trade” agreements in Congress and among the public is fueled by growing data on the damaging impacts of the 20 year history of the North American Free Trade Agreement (NAFTA). The same claims are being made for the current trade treaties as were made for NAFTA: that they will promote economic growth, increase jobs, and reduce trade deficits or increase trade surpluses. And TPP has specifically been described as NAFTA on steroids.

When NAFTA was being promoted for approval by Congress in 1993, it was stated that it would expand our trade surplus with Mexico, thereby creating 200,000 US jobs in two years and a million in 5 years. However, the Mexican trade surplus ($2 billion in 1993) quickly turned into growing deficits (of $16 billion in 1995, $65 billion in 2008, and $50 billion in 2013). Our trade deficit with Mexico has totaled $1 trillion over the 20 year life of NAFTA.

With Canada, the other country in NAFTA, the story is similar: our trade deficit of $11 billion in 1993 grew to $78 billion in 2008 and $28 billion in 2013. (The dramatic drop in the deficit after 2008 is due to reduced imports because of our Great Recession.) [4]

It is estimated that NAFTA has eliminated almost 700,000 jobs in the US, with 60% of them being in manufacturing. Most of the workers who lost jobs have experienced a permanent loss of income; if they have found other jobs, they pay significantly less. [5] Many workers have experienced long-term unemployment (more than 6 months), which is at historically high levels. Numerous other workers have simply dropped out of the labor force. All of this has led to increases in the costs of government assistance programs, including unemployment benefits and food assistance. [6]

NAFTA established the principle that US corporations could move production out of the US but import the goods produced back into the US without any tariffs or other disincentives. This undermines the wages and benefits of American workers and the middle class. It increases job insecurity and weakens labor unions’ ability to negotiate because of the threat that jobs will be moved out of the US. The result has been stagnant wages for all but the richest Americans and, therefore, growing income inequality. In all three NAFTA countries, the US, Canada, and Mexico, wages and benefits for workers have not kept up with increased worker productivity over the last 20 years. [7]

Even Mexican workers have not experienced any significant increase in wages. An important reason for this is that the export of cheap, subsidized corn from the US to Mexico undermined the livelihoods of an estimated 2.4 million Mexican farmers. This displaced Mexican farmers and led to increased immigration (legal and illegal) to the US. Due to the abundant supply of desperate workers, it also pushed down wages in the maquiladora factory zone (the area just south of the US border). [8]

Although Mexico has experienced increased trade and some job growth under NAFTA, the jobs, even those in manufacturing, have been at low wages. The average Mexican manufacturing wage is only 18% of the US wage and that percentage has grown only slightly. The poverty rate in Mexico is 51%, down only slightly from the 52% when NAFTA went into effect. There has been an increase in the availability of consumer goods, but environmental protections have had mixed results at best. Disposal of US waste in Mexico has increased, including, for example, a 500% increase in US exports of highly toxic, spent lead-acid car batteries, with minimal control to ensure environmentally safe handling of them. [9]

Under NAFTA, US corporations have attempted to weaken Canadian regulations on a range of issues, including offshore oil drilling, fracking, pesticides, and drug patents. [10] Mexico and Canada have paid $350 million to foreign corporations for claims that their laws, rules, regulations, or other actions reduce current and expected profits.

Since NAFTA, the US has entered into trade agreements with Korea, China, and others. While the promise has always been growth in US jobs, our economy, and our trade balance, the result has typically been the opposite. Since the 2012 agreement with Korea, the US trade deficit with Korea has increased by $8.5 billion and an estimated 40,000 jobs have been lost. Our trade deficit with China has soared to $294 billion in 2013 from $83 billion in 2001 when China was permitted to join the World Trade Organization. [11]

The trade agreements of the past 20 years have cost our economy more than $1 trillion through increased trade deficits and close to a million jobs. They are key reasons that unemployment is high and the economic recovery is so weak. Furthermore, the mitigation provisions for these past trade agreements, such as retraining for workers who lost their jobs, have been woefully inadequate and ineffective.

I urge you to contact your elected officials in Washington and tell them you have serious concerns about the “trade” agreements being negotiated. And that these “trade” agreements are too important and too far reaching to be approved quickly and quietly. Full disclosure and debate of their provisions is what democracy requires.


[1]       Queally, J., 1/15/14, “Leaked TPP ‘Environment Chapter’ shows ‘Corporate Agenda Wins,’” Common Dreams (http://www.commondreams.org/headline/2014/01/15)

[2]       Boston Globe Editorial, 1/19/14, “Pacific, EU trade deals need up-or-down votes,” The Boston Globe

[3]       Johnson, D., 1/10/14, “New Fast-Track bill means higher trade deficits and lost jobs,” Campaign for America’s Future

[4]       US Census Bureau, retrieved 1/7/14, “U.S. trade in goods by country,” http://www.census.gov/foreign-trade/balance/

[5]       Johnson, D., 12/18/13, “Will we fast-track past the lessons of the NAFTA trade debacle?” Campaign for America’s Future (http://ourfuture.org/20131218/obama-administration-to-push-fast-track)

[6]       Folbre, N., 8/5/13, “The free-trade blues,” The New York Times

[7]       Faux, J., 1/1/14, “NAFTA, twenty years after: A disaster,” Huffington Post

[8]       Wallach, L., 12/30/13, “NAFTA at 20: ‘Record of damage’ to widen with ‘NAFTA-on-steroids’ TPP,” Global Trade Watch, Public citizen

[9]       Stevenson, M., 1/3/14, “20 years after NAFTA, a changed Mexico,” The Boston Globe from the Associated Press

[10]     Carter, Z., 12/8/13, , “Obama faces backlash over new corporate powers in secret trade deal,” The Huffington Post

[11]     Johnson, D., 12/18/13, see above

TRADE TREATIES NEED OPEN DEBATE, NOT FAST TRACK

ABSTRACT: Action in Congress on requiring Fast Track consideration of trade treaties is likely to happen soon. Two broad “trade” agreements are scheduled for Congressional action this year: the Trans-Pacific Partnership (TPP) with a dozen Pacific Rim countries and the Trans-Atlantic Free Trade Agreement (TAFTA) with the European Union (EU). Fast Track authority requires that Congress consider and act on a treaty in a short timeframe with no amendments or changes allowed and with no filibustering.

I urge you to email, call, write, and, if you can, meet with your member of Congress and your Senators and tell them you do not want them to approve Fast Track authority. These “trade” agreements are too important and too far reaching to be approved quickly and quietly.

Business groups are pushing hard for Fast Track consideration in Congress. They are supporters of the treaties, which are widely viewed as very favorable to corporate interests. The growing resistance to Fast Track authority is fueled in large part by:

  • Secrecy on the negotiations and agreement provisions, which breeds suspicion;
  • Concern that they benefit multi-national corporations at the expense of others; and
  • Growing data on the damaging impacts of 20 years with the North American Free Trade Agreement (NAFTA), on which these treaties are modeled.

The indirect effects of the past and these possible new “trade” agreements on the balance of power in employer-employee relations and in our political system, as well as on economic inequality, may be more significant than the direct effects, such as job losses. The TPP and the TAFTA, based on what is known about them, will likely benefit corporations and investors, while hurting US workers and citizens. Moreover, if approved, these treaties will be very difficult to change, as the consent of all the parties is required. At the least, a full discussion of their provisions, based on full disclosure, is warranted.

FULL POST: Action in Congress on requiring Fast Track consideration of trade treaties is likely to happen soon. President Obama would like to have Fast Track authority, formally known as Trade Promotion Authority, for two broad “trade” agreements that are scheduled for Congressional action this year: the Trans-Pacific Partnership (TPP) with a dozen Pacific Rim countries and the Trans-Atlantic Free Trade Agreement (TAFTA) [1] with the European Union (EU). (I put trade in quotes because these “trade” agreements, like NAFTA, go well beyond trade issues and cover a broad range of legal and regulatory issues. The provisions for reducing trade barriers and increasing trade are only a small part of the agreements.)

Fast Track authority requires that Congress consider and act on a treaty in a short timeframe with no amendments or changes allowed and with no filibustering. Fast Track authority was first used in 1974 and has been used on a number of occasions since then.

I urge you to email, call, write, and, if you can, meet with your member of Congress and your Senators and tell them you do not want them to approve Fast Track authority. [2] These “trade” agreements are too important and too far reaching to be approved quickly and quietly. Full disclosure and debate of the provisions of “trade” agreements is what democracy requires.

The Democratic and Republican leaders of the Senate Finance Committee, along with the Republican chairman of the House Ways and Means Committee, have reportedly reached an agreement on a Fast Track authority bill, although they have not yet released its details. The argument for Fast Track consideration of trade treaties is that it means other countries will be more likely to make concessions and reach agreement on the treaty if they are confident that the US Congress can’t change it.

Business groups, including the US Chamber of Commerce and the Business Roundtable, are pushing hard for Fast Track consideration in Congress. They are supporters of the treaties, which are widely viewed as very favorable to corporate interests, [3] and are presumably worried that debate in Congress and the public on the treaties would reduce their chances for approval.

There is significant opposition to granting Fast Track authority in Congress and outside of it. Nearly 200 members of the US House, mostly Democrats but some Republicans, have signed letters strongly questioning the granting of Fast Track authority for these treaties. [4]

The growing resistance to Fast Track authority for these new “trade” agreements in Congress and the public is fueled in large part by:

  • Secrecy on the negotiations and agreement provisions, which breeds suspicion;
  • Concern that they benefit multi-national corporations at the expense of local businesses, workers and citizens, and national sovereignty; and
  • Growing data on the damaging impacts of 20 years with the North American Free Trade Agreement (NAFTA), on which these treaties are modeled.

Both treaties are being negotiated in great secrecy. For the TPP, the Obama administration has deemed the negotiations classified information, restricting Congressional access to documents and banning discussion of the negotiations and treaty provisions with the press or the public. [5] In 2013, Senator Elizabeth Warren opposed the confirmation of the US Trade Representative because he refused to share any of TPP’s provisions. She noted the important need for transparency and public debate on the treaty. [6]

These treaties are seen by many advocates for health, labor, safety, environmental, and financial industry standards and regulations as a masquerade for a corporate power grab, designed to weaken regulation and run roughshod over workers’ and citizens’ interests. [7] These “trade” agreements would enable multi-national corporations to operate with weakened oversight by national governments, free of nations’ court systems, and with reduced consumer and citizen protections. Corporations would become supra-national entities and would answer only to a separate system of rules and courts, administered by new international tribunals. In essence, an international system, parallel to the United Nations system of international governance for nations, would be created for international governance of corporations – a United Multi-national Corporations system, if you will. (More on this in a subsequent post.)

The same claims are being made for these two trade treaties that were made for NAFTA: they will promote economic growth, reduce trade deficits or increase trade surpluses, and increase jobs. The actual experience with NAFTA is that it has done none of these things, which is probably the best indicator of the likely effects of these new trade treaties. And the TPP has specifically been described as NAFTA on steroids. (More on this in a subsequent post.)

The indirect effects of the past and these possible new “trade” agreements on the balance of power in employer-employee relations and in our political system, as well as on economic inequality, may be more significant than the direct effects, such as job losses. The corporations and investors who have been the winners in this globalization of trade and commerce can invest their winnings (i.e., profits) in campaign contributions, lobbying, and political strategies that ensure they are the victors in next round of “trade” agreements. [8]

Although President Obama recently described growing economic inequality in the US as a major issue, NAFTA has increased inequality and the new trade treaties are likely to as well. NAFTA and other recent “trade” agreements have provided benefits to corporations and investors globally, while hurting workers and the middle class in the US, and sometimes hurting workers in other countries. The TPP and the TAFTA, based on what is known about them, will similarly benefit corporations and investors, while hurting US workers and citizens. Moreover, if approved, these treaties will be very difficult to change, as the consent of all the parties is required. At the least, a full discussion of their provisions, based on full disclosure, is warranted.


 

[1]       Also known as the Trans-Atlantic Trade and Investment Partnership.

[2]       You can find contact information for your US Representative at http://www.house.gov/representatives/find/ and for your US Senators at http://www.senate.gov/general/contact_information/senators_cfm.cfm.

[3]       For more information see my previous posts, “Trade” Agreement Supersizes Corporate Power, 9/10/13, (https://lippittpolicyandpolitics.org/2013/09/10/trade-agreement-supersizes-corporate-power/) and “Trade” Agreements & Corporate Power, 9/13/13 (https://lippittpolicyandpolitics.org/2013/09/13/trade-agreements-corporate-power/).

[4]       Politi, J., 12/13/13, “US Senate deal sets up fierce trade battle,” Financial Times

[5]       Carter, Z., 12/8/13, , “Obama faces backlash over new corporate powers in secret trade deal,” The Huffington Post

[6]       Loth, R., 12/21/13, “Take trade agreement off fast track,” The Boston Globe

[7]       Todhunter, C., 10/4/13, “The US-EU Transatlantic Free Trade Agreement (TAFTA): Big business corporate power grab,” Global Research (http://www.globalresearch.ca/the-us-eu-transatlantic-free-trade-agreement-tafta-big-business-corporate-power-grab/5352885)

[8]       Folbre, N., 8/5/13, “The free-trade blues,” The New York Times

LACK OF GOOD JOBS IS OUR MOST URGENT PROBLEM

ABSTRACT: The most urgent problem facing the US right now is a lack of jobs, especially jobs that pay middle class wages and provide benefits. Unemployment is high and long-term. The jobs being created during our 4 year old economic recovery are disproportionately low-wage, low skill jobs.

Fast food workers are emblematic of the low wage, low skill jobs being created. The typical fast food worker makes $8.69 per hour. As a result, over half of fast food workers rely on public, taxpayer funded benefits to make ends meet. The cost to taxpayers is estimated to be $7 billion per year. Meanwhile, the fast food corporations make billions of dollars in profits and pay tens of millions of dollars to their senior executives. Workers at Walmart, the largest employer in the US, are in a similar situation. These very profitable corporations can afford to raise their workers’ wages to $15 an hour – a wage they could live on without public assistance. In the meantime, taxpayers are subsidizing these corporations.

It used to be that unions and government provided workers with a voice and the power to balance that of the large employers. Today, that voice and power are largely gone. Therefore, wages, benefits, and job security have been eroding. Starting in the late 1970s, the historic link between growth in the economy and productivity on the one hand, and growth in workers’ wages on the other hand, was severed. We undid or failed to adopt rules for our economy that ensure the gains of economic and productivity growth are widely and fairly distributed.

The failure of our policy makers in Washington to focus on creating jobs, let alone good jobs, and on spurring economic growth is the clear and tragic result of the ascendancy of politics over rational policy making.

FULL POST: The most urgent problem facing the US right now is a lack of jobs, especially jobs that pay middle class wages and provide benefits. Unemployment is high and long-term – since 2010 roughly 40% of those unemployed and actively looking for work have been unemployed for more than 6 months. This is triple the rate of long-term unemployment in the period from 2000 – 2007. [1]

The official unemployment rate is 7.2% based on those who are actively looking for a job. It would be significantly higher, well over 10%, if those who have given up looking were included. And higher still if the under-employed were included – those working part-time who would like to be working full-time and those who are working at jobs for which they are over-qualified.

The jobs being created during our 4 year old economic recovery are disproportionately low-wage, low skill jobs. (See post of 9/27/13 for more detail.) High unemployment and low wage jobs are key factors in our slow economic recovery (consumers’ lack purchasing power), in the government’s budget deficit (reduced tax revenues), and in growing inequality (95% of the economic gains during the recovery have gone to the richest 1%). As a result, income and wealth inequality have increased to levels not seen since the 1920s.

Fast food workers are emblematic of the low wage, low skill jobs being created. The typical fast food worker makes $8.69 per hour. Two-thirds of them are adults, most of them bring home at least half of the family’s income, and a quarter of them have children. Only 13% get health insurance through their employers.

As a result, over half of fast food workers rely on public, taxpayer funded benefits to make ends meet. The cost to taxpayers is estimated to be $7 billion per year; much of it is for health care, but also food assistance and other economic supports. [2] You can watch a 2 minute video about this, which includes a recording of the McDonald’s help line telling a 10-year employee with 2 children to access food stamps and Medicaid, at
http://lowpayisnotok.org/mcvideo/?utm_campaign=LowPay&utm_medium=email&utm_source=mcvideo-r.

Meanwhile, the fast food corporations make billions of dollars in profits and pay tens of millions of dollars to their senior executives. For example, McDonald’s has 700,000 employees. They are estimated to get $1.2 billion a year in taxpayer funded benefits. McDonald’s is very profitable, making $5.5 billion a year and paying its CEO $13.8 million. It has just purchased a $35 million luxury jet for its executives, which costs at least $2,400 an hour to operate.

Workers at Walmart, the largest employer in the US, are in a similar situation. They make an average of $8.80 an hour. When General Motors was the largest employer in the 1950s, it paid its workers about $50 to $60 an hour (adjusted for inflation). As with the fast food workers, we taxpayers are supporting Walmart workers with multiple types of public assistance. [3]

These big, profitable corporations operate with a business model that uses low paid and part-time workers, typically without benefits, who are, therefore, unable to afford the necessities of life. This leaves taxpayers to pick up the tab for the public benefits they need. These very profitable corporations can afford to raise their workers’ wages to $15 an hour (see post of 9/8/13 for more detail)  – a wage they could live on without public assistance. In the meantime, taxpayers are subsidizing these corporations.

Nationally, the typical workers’ wages, adjusted for inflation, have barely increased over the last 30 years. (See post of 9/2/13 for more detail.) The typical male worker in 1978 was making around $48,000 (adjusted for inflation), while the average person in the top 1% earned $390,000. By 2010, the typical male workers’ pay had gone down, while the person in the 1% had their pay more than double. Today, the richest 400 Americans have more wealth than the bottom half of the country, 150 million people, combined.

It used to be that unions and government provided workers with a voice and the power to balance that of the large employers. Today, that voice and power are largely gone. Therefore, wages, benefits, and job security have been eroding. Workers are not even receiving the benefits of their increased productivity. As a result, we are losing the middle class, equal opportunity, and upward mobility. This is undermining our economy and our democracy.

In the first 4 years of the current recovery, the richest 1% of Americans took home 95% of the income gains. In stark contrast, between 1946 and 1978, as the economy doubled in size, everyone’s income doubled as well.

Starting in the late 1970s, the historic link between growth in the economy and productivity on the one hand, and growth in workers’ wages on the other hand, was severed. Income gains started going to the richest Americans and people in the middle, the typical worker, saw their wages stagnate. Part of the problem is that we didn’t adapt to globalization and technological change. We didn’t change public policies. We didn’t change the rules of our economy to continue to provide opportunity, upward mobility, and ensure that economic and productivity growth were broadly shared. We could have done so, but we didn’t. [4]

Among other things, we let the minimum wage fall behind inflation. If it had kept up with inflation, the national minimum wage would be $10.40 today instead of $7.25. If productivity improvement was included, it would be at least $15 an hour. We deregulated the financial system, both domestically and internationally, favoring investors and corporations over workers. And we didn’t include labor standards in trade treaties. Meanwhile, we cut tax rates on high incomes and wealth substantially.

If we had a democracy that was working for the people, the average citizen and worker would have the voice and power to see that their interests and the greater good were served. Instead, we undid or failed to adopt rules for our economy that ensure the gains of economic and productivity growth are widely and fairly distributed – without sacrificing efficiency or innovation. The failure of our policy makers in Washington to focus on creating jobs, let alone good jobs, and on spurring economic growth is the clear and tragic result of the ascendancy of politics over rational policy making. This failure may put their political careers at risk because every poll shows that the public is much more concerned about jobs and the economy than any other issue, including the deficit.


[1]       Woolhouse, M., 10/22/13, “Long search finally ends,” The Boston Globe

[2]       Johnston, K., 10/16/13, “Public aid crucial to fastfood workers,” The Boston Globe

[3]       Moyers, B. with Reich, R., 9/20/13, “Inequality for all,” http://billmoyers.com/episode/full-show-inequality-for-all/

[4]       Moyers, B. with Reich, R., 9/20/13, see above

LABOR DAY AND THE MIDDLE CLASS

ABSTRACT: Labor Day is a time to celebrate the contributions working people make to our country. But with unemployment still high, inequality on the uptick, and the middle class shrinking and under serious financial strain, many working families just don’t have much to celebrate. For 30 years, wages for the middle and lower income workers have barely kept up with inflation and have not kept up with their significant productivity increases. This means that they aren’t being paid fairly for what they produce. From 1979 to 2012, a typical worker’s wages grew only 5.0% despite a 74.5% increase in productivity.

Efforts are building at the federal level and in a number of states to raise the minimum wage, which has not kept pace with inflation or productivity growth. Low wage workers at fast food chains, big box retailers, and elsewhere have been organizing rallies and strikes to protest low wages and poor working conditions.

President Bill Clinton’s Labor Secretary, Robert Reich, has put together a short video (under 3 minutes) that explains how we can turn things around. (http://front.moveon.org/how-workers-can-get-a-fair-shake-a-labor-day-message-from-robert-reich/#.UiSXAknD_IU)

Jobs with wages that support a middle class life are essential to the well-being of individuals, families, our economy, and our country. Such jobs have been disappearing for 30 years. We need to reverse this trend. And we can, through our actions as citizens and through the policies of our government.

FULL POST: Labor Day is a time to celebrate the contributions working people make to our country. They power our economy both through what they produce and what they consume. (Consumer spending is about two-thirds of economic activity.)

But with unemployment still high, inequality on the uptick, and the middle class shrinking and under serious financial strain, many working families just don’t have much to celebrate. The recovery is weak and the jobs that are being created are largely low wage jobs. So far in 2013, 61% of new jobs have been in low-wage industries and 77% have been part-time. [1] Many of the laid off workers who are getting jobs are earning much less than they used to and many are only working part-time; many of them, especially older workers, are experiencing long-term unemployment with unemployment benefits running out and the loss of health insurance. [2]

For 30 years, wages for the middle and lower income workers have barely kept up with inflation and have not kept up with their significant productivity increases. This means that they aren’t being paid fairly for what they produce. Their increases in productivity are not rewarding them, but instead are going to corporate profits, executive pay, and shareholders. Between 2007 and 2012, wages fell for the 70% of workers at the bottom of the income distribution, despite productivity growth of 7.7%. From 1979 to 2012, a typical worker’s wages grew only 5.0% despite a 74.5% increase in productivity. [3] If the minimum wage had kept pace with productivity growth since the 1960s, it would be $16.54 instead of $7.25. [4]

Since 2008, corporate profits are up 25% – 30% while wages have fallen to their lowest portion of corporate revenue since the 1940s. Part of this is due to the continuing trend of employers changing full-time jobs with benefits into part-time or contracted jobs, typically without benefits. [5]

Efforts are building at the federal level and in a number of states to raise the minimum wage, which has not kept pace with inflation or productivity growth. More than 7 million children live in homes whose income would increase if we raised the minimum wage and more than 10 million Americans, including 4% of full-time workers, qualify as the “working poor.” That means they spent at least half the year working yet still live below the poverty line ($19,530 for a family of three, which might be a single parent and two children). [6]

Low wage workers at fast food chains, big box retailers, and elsewhere have been organizing rallies and strikes to protest low wages and poor working conditions.[7] If you didn’t see The Daily Show’s piece on fast food workers and the minimum wage (with John Oliver subbing for Jon Stewart) it’s, as usual, both informative and entertaining. It’s at: http://www.thedailyshow.com/watch/thu-august-1-2013/can-t-you-at-least-wait-until-jon-stewart-gets-back. (It’s 10 minutes long with short ads at the beginning and in two breaks.)

President Bill Clinton’s Labor Secretary, Robert Reich, has put together a short video (under 3 minutes) that explains how we can turn things around. It lists 6 policies that are needed to make sure workers’ get a fair return for their labor and that would support the middle class. It’s at: http://front.moveon.org/how-workers-can-get-a-fair-shake-a-labor-day-message-from-robert-reich/#.UiSXAknD_IU.

As an initial step, the site includes a petition you can sign that calls on two very profitable companies – McDonald’s and Walmart – to pay their workers fair wages. Walmart, for example, pays its typical employee less than $9 an hour and many of its jobs are part-time, while its profits in 2013 were $28 billion. Most people who work for big-box retailers like Walmart, as well as those who work in the fast-food industry, are adults, not teenagers. They are responsible for bringing home a significant share of their family’s income and they should be paid enough to lift them and their families out of poverty.

When Martin Luther King, Jr., led the March to Washington for Jobs and Justice fifty years ago, one of the objectives was to raise the minimum wage to $2 an hour. $2 an hour in 1963, adjusted for inflation, comes to over $15 an hour today. (You can read more on this and many other topics at Bob Reich’s excellent blog at: http://robertreich.org.)

Jobs with wages that support a middle class life are essential to the well-being of individuals, families, our economy, and our country. Such jobs have been disappearing for 30 years. We need to reverse this trend. Increasing the minimum wage is one step. Increasing investments in human capital are another, including high quality, affordable early care and education, good schools, and affordable, quality post-secondary education. Universal access to good health care and steps to increase compensation and conditions for workers here in the U.S., as well as around the globalized world (for example, through trade treaties), are essential. We can affect these matters through our actions as citizens and through the policies of our government.


[1]       Wiseman, P., 8/5/13, “Most new jobs in July were low paying, part time,” The Boston Globe (from the Associated Press)

[2]       Winerip, M., 8/26/13, “Set back by recession, shut out of rebound,” The New York Times

[3]       Mishel, L., & Shierholz, H., 8/21/13, “A decade of flat wages: The key barrier to shared prosperity and a rising middle class,” Economic Policy Institute

[5]       Garson, B., 8/20/13, “How corporate America used the Great Recession to turn good jobs into bad ones,” TomDispatch

[6]       Eskow, R.J., 8/26/13, see above

[7]       Johnston, K., 8/27/13, “Local rally part of nationwide call,” The Boston Globe

WHY THE DECLINE IN LABOR UNIONS

Here’s issue #38 of my Policy and Politics Newsletter, written 7/3/12. The previous newsletter described the role of unions. This newsletter outlines the reasons for the decline in private sector union membership.

Private sector union membership has dropped from 34% of the workforce in 1954 to 7% today. (Public sector union membership has grown from 10% to 37%, so that’s a different story for another day.) [1]

The Wagner Act of 1935 (also know as the National Labor Relations Act) created the basis for current labor unions. It was part of President Roosevelt’s New Deal. It gave workers rights and protections in organizing unions and bargaining collectively. [2]

Employers, especially large corporations, have been pushing back ever since. Initial efforts to weaken the Act failed, until the Taft-Hartley Act was passed in 1947. It was vetoed by President Truman but the Republican Congress overrode his veto. Previously, employers were expected to remain neutral during union organizing efforts. Now employers were allowed to actively oppose unionization. Taft-Hartley also gave flexibility to states to regulate unions and prohibited secondary boycotts (where a union encourages customers not to buy the employers products). Requiring all employees of a unionized workplace to become union members was outlawed. It made union organizing much more difficult and is generally seen as the turning point in unionization in the US [3] (although membership continued to increase for 8 more years before beginning its long decline). In the last 30 years, labor laws have been weakened and the ones that remain are often not vigilantly enforced. [4]

Since the early 1980s, large employers have increasingly aggressively opposed unions. One strategy has been to increase competition among workers for jobs, particularly in the manufacturing and industrial sector that was the heart of middle class union jobs. For example:

  • Trade agreements, developed with corporate input, have few if any worker protections, which means US workers must compete against much cheaper labor in other countries
  • Differences in state labor laws and practices are used to make workers compete against workers in other states where unions are weaker, the standard of living and pay is lower, and state and local governments provide financial incentives for relocation of jobs
  • Threats to replace workers if they strike pit current workers against non-union and unemployed workers. Employers were emboldened in the use of this tactic by President Reagan’s firing and replacing of air traffic controllers when they went on strike [5]

Wal-Mart in particular is well known for it aggressive anti-union tactics, both in attacking any efforts to unionize (including eliminating business components where unionization seemed likely) and using part-time workers that are harder to unionize. [6] The widespread, increased use of part-time workers, contractors, and consultants effectively undermines the use of full-time, potentially union workers. The presence and hiring of immigrant workers, often undocumented ones, also weakens unions.

Weakened labor laws and weak enforcement undermines unions. For example, workers who engage in organizing efforts are not infrequently, illegally fired. However, the enforcement process typically takes many months if not years and if the firing is found to be illegal, typically the company is ordered to reinstate the worker with back pay. This provides only a small financial penalty to the employer and means the worker has to subsist for an extended period of time without the job. Under current law, there is a 45 to 90 day waiting period between the request for and occurrence of the secret ballot voting by employees for a union, and employers work to delay this even longer. In that time, the some employers retaliate against, fire, harass, and generally make life miserable for the pro-union employees, while actively campaigning against the union in mandatory meetings with employees, intimidating them into rejecting the union. [7] [8]

Finally, employers lobby and make campaign contributions to encourage public policies that weaken labor laws, unions, and their power. They band together for these activities and for media campaigns against unions through groups such as the US Chamber of Commerce, the National Federation of Independent Business, Associated Builders and Contractors, The Center for Union Facts, and the National Right to Work Committee and Foundation. [9]

There are other factors, including unions’ internal problems (e.g., corruption and lack of democracy) and unions suffering from their success. For example, their success in improving pay, benefits, and working conditions left some workers feeling that union membership was not necessary, and through their success in advocacy and standard setting, government policies have addressed many of the issues that unions originally tackled, such as limits on working hours, overtime pay requirements, and health and safety issues. [10] [11]

In the US, since 1947, our politics and policies have given employers more clout in the balance of power between employers and employees. One of the effects has been the decline of private sector union membership from 34% to 7%. It doesn’t have to be this way. In Europe, although there has been some decline in union membership, it has been nowhere near as great as in the US and union membership currently ranges between 20% and 71% (in Sweden). [12] Corporations are more likely to work with their unions than to be aggressively anti-union as they are in theUS.


[1]       Bureau of LaborStatistics,US Dept. of Labor, 1/27/12, “Union members – 2011,” http://www.bls.gov

[2]       Wikipedia, retrieved 7/1/12, “National Labor Relations Act,” en.wikipedia.org/wiki/Nation_Labor_Relations_Act

[3]      Clark, B., retrieved 7/1/12, “The decline of unions – Why?” http://www.old-yankee.com/blog/decline-of-unions

[4]       Cassidy, J., 6/8/12, “America’s class war,” The New Yorker

[5]       About.com Economics, retrieved 7/1/12, “The decline of union power,” economics.about.com/od/laborinamerica/a/union_decline.htm

[6]       Wikipedia, retrieved 7/2/12, “Criticism of Walmart,” en.wikipedia.org/wiki/Criticism_of_Walmart

[7]       Wikipedia, retrieved 4/23/12, “Labor unions in the United Sates,” en.wikipedia.org/wiki/Labor_unions_in_the_United_States

[8]       Reich, R., 6/14/11, “Why the Republican war on workers’ rights undermines the American economy,” robertreaich.org

[9]       Johnson, D., 9/1/10, “How companies turn people against unions,” Campaign forAmerica’s Future

[10]     Macaray, D., 1/10/08, “Three big reasons for the decline of labor unions,” CounterPunch

[11]     Hunter, R.P., 8/24/99, “Four reasons for the decrease in union membership,” http://www.mackinac.org

[12]     Fischer, C., 9/11/10, “Why has union membership declined?’ Economist’s View

THE ROLE OF LABOR UNIONS

Here’s issue #37 of my Policy and Politics Newsletter, written 6/28/12. Labor unions have been in the news quite a bit lately. This issue focuses on the role of unions in our society and economy.

Labor unions allow workers to approach employers as a group to discuss working conditions, pay, benefits, and other workplace issues. This affects the balance of power between workers and employers.

If you as an individual employee approach your employer about any of these issues, for example, receiving paid sick days if you currently had none, where does the balance of power lie? With the employer, of course. But if workers as a group approach the employer about such issues the balance of power is quite different.

Pay is probably the first item that comes to mind when thinking about employer – employee issues. There is lots of evidence that when employees are members of unions and bargain collectively on pay, they average 10 – 30% higher pay after controlling for other important variables. [1]

Employee pay is ultimately about how the profits of a business are divvied up among front-line or on-the-floor workers, senior executives and managers, and owners (which may be senior executives or stockholders). The balance of power among these groups affects how the rewards of the business are split. If workers participate in the discussion as a group, i.e., as members of a union, the result will be different, as indicated by hard evidence, common sense, and economic theory. Highly visible examples of this have been the negotiations between professional athletes and team owners in basketball most recently, but also in football, baseball, and hockey.

Therefore, it’s not surprising that as union membership in the private sector has dropped dramatically (from 34%in 1954 to 7% today [2]), income inequality has widened. Senior executives and stockholders have gotten much richer, while the rest of us have barely maintained our standard of living. The share of profits going to workers’ pay is the smallest it’s been since tracking began in 1947. [3]

This has not just increased in income inequality, but has undermined the middle class broadly. Union members’ pay and benefits used to set a standard in many sectors of the economy and to some extent for the economy as a whole. Non-union workers would receive similar compensation because there was competition in the job market, so companies with non-union workforces had to pay competitively to attract good workers. As union membership has declined, this is less of a factor in the job market and therefore there is downward pressure on wages and benefits.

The erosion in benefits has been very visible. Fewer and fewer workers have company managed pension plans, which were standard for union workers. And workers are paying more and more for their health care. Reductions in job security and increasing use of part-time workers are also partially the result of decreased union membership. Other issues that unions over the years have had an impact on are the length of the work week, overtime rules, availability of paid vacation and sick time, safety in the workplace (there are an estimated 58,000 workplace related deaths each year [4]), the minimum wage, unemployment and workplace injury compensation, how layoffs are handled, unfair or arbitrary actions by supervisors, and discrimination in hiring, pay, and promotions in the workplace.

Without or with weakened unions, union and non-union employees have less power and employers have more power. As a result, workers are likely to receive less pay, fewer benefits, and experience less desirable working conditions.

The next issue of the newsletter will address the reasons for the decline in private sector union membership.


[1]       Wikipedia, retrieved 4/23/12, “Labor unions in theUS,” en.wikipedia.org/wiki/Labor_unions_in_the_Unitede_States

[2]       Bureau of LaborStatistics,US Dept. of Labor, 1/27/12, “Union members – 2011”

[3]       Reich, R., 3/2/12, “Bye bye American pie: The challenge of the productivity revolution,” retrieved on 3/3/12 from www.commondreams.org/view/2012/03/02-6

[4]       Nader, R., 3/30/12, “If big labor would fight millions would join them on the ramparts,” retrieved at http://www.commondreams.org/view/2012/03/30-5