by Andrew Pollack / October 2006 issue of Socialist Action
Every Labor Day there’s a flurry of reports on the state of the working class: income and benefits, employment prospects, views on the economy, etc. This year’s reports should be a wake-up call.
Losses in wages, benefits, and jobs are happening despite the five-year-old economic recovery.
As a New York Times headline put it, “Workers’ Share of the Economy Hits Record Low as Corporate Profits Skyrocket.”
Bosses always claim they need cuts to save their company. But after they have taken enough from us to restore profit levels, they keep on taking if they sense no resistance. That’s the lesson of the news this Labor Day.
The other Times headline for its story read “Real Wages Fail to Match a Rise in Productivity.” A chart displaying this trend was titled: “Not Sharing in the Gains: While corporate profits have improved sharply in the last few years and the economy has become far more productive, the take-home pay of the typical worker has failed to keep up with inflation.”
The chart shows that “wages are at their lowest share of GDP on record,” and “corporate profits are at their highest share since the 1960s.”
As a result, “with the economy beginning to slow, the current expansion has a chance to become the first sustained period of economic growth since World War II that fails to offer a prolonged increase in real wages.” Workers have yet to see any benefit from the mild recovery of the last few years, and we may now be entering another recession.
The Washington Post reported on Labor Day that “61 percent of employed adults say they are not experiencing the benefits of an improved economy.”
A “workforce management” executive said: “Three years ago, workers told us they felt overworked, but they were patient. They realized the economy was getting better and they would share in the wealth ultimately. Last year, the work improved, but they are mad as hell. Their paychecks are no better.”
Inflation is running at an annual rate of 4.8 percent, the highest in 25 years. Last year wages and salaries fell by 1.8% for men and 1.3% for women. And since 2000 the average household has seen an annual wage decline of $2000.
There was a small increase last year in median household income, but that’s only because of rising salaries and stock dividends for the rich, and an increase in families with two wage-earners. From 2000 to 2005 the median household income fell 2.7%.
In 2005 the richest fifth of households received 50.4% of all income, the highest level since the Census Bureau began compiling such data in 1967. The poorest fifth got 3.4%.
Since our system rests on the production of value, it’s important to see how these shifts in income compare to what’s produced. In the first quarter of 2006, wages and salaries were only 45 percent of Gross Domestic Product, down from 50 percent five years before and a record 53.6 percent in 1970.
Wages and salaries now make up the lowest share of the nation’s GDP since 1947, while profits have climbed to their highest share since the 1960s. The share of total compensation—wages plus benefits—in GDP is the lowest it’s been since 1966.
No wonder investment bank UBS says this is “the golden era of profitability,” while Goldman Sachs says, “The most important contributor to higher profit margins over the past five years has been a decline in labor’s share of national income.”
“There are two economies out there,” states political analyst Charles Cook. “One has been white hot.” But workers “don’t feel like they’re getting ahead despite the fact that they’re working very hard.”
For low-paid workers the impact has been even harsher. The buying power of the minimum wage is at a 50-year low. Nearly 37 million people were under the poverty line in 2005. A quarter of low-income families with a full-time worker reported having trouble putting food on the table and missing rent or mortgage payments.
There has been a sharp increase in those living in extreme poverty. The average poor person earned $3236 less than the poverty line, the highest gap ever measured. Forty-three percent of the poor earned less than half the poverty limit, the worst rate ever recorded.
Benefits are taking a big hit as well. Guaranteed (i.e. defined benefit) pensions are fast becoming the exception rather than the norm, in favor of defined contribution pensions—i.e., the boss puts some money in stocks for you, and if those stocks are worthless when you retire, tough luck.
But the biggest benefit crunch is in health care. The number of people without health insurance rose to 46.6 million in 2005. Health-care premiums went up by 73 % from 2000 to 2004 and another 9.2 % last year.
The two-tier economy
The proliferation of second-class-status jobs is another growing problem. Several papers this Labor Day profiled workers who suffered drastic declines in their living standards despite performing the same work as always. One told of a worker rehired as a temp at the telecommunications company where he formerly was permanent. He is making $15 an hour less than before, with no vacation, no sick days, and no health care—but his job duties are more sophisticated than before.
The Los Angeles Times interviewed a former full-timer at Albertsons, one of the grocery chains struck in 2003, who, after the strike, could only find a part-time job at another union grocer, Vons. The work was the same, but she had to wait 18 months for health benefits. She had to take on two other part-time jobs, and instead of helping her parents as before, she now accepts help from them.
The number of skilled jobs being done by temps is mushrooming. The head of the world’s biggest temp firm, Kelly Services, says: “The concept of ‘permanent’ jobs is amusing. There’s nowhere in the world now that has permanent jobs.”
Even having a permanent job is no guarantee of stability, as entry-level wages fall, and only one-third of workers with high school diplomas get health coverage at their first job, down from two-thirds in 1979. Add on spiraling college costs and you’ve got a roadmap to lifelong debt.
More and more young workers live with their parents into their 20s or even 30s, and the decline in people buying first homes makes a burst of the housing bubble more likely.
New attacks and union response
In the face of all this, the same old routine Labor Day parades were carried out. Some did include workers engaged in struggle. In Detroit, striking teachers marched alongside flight attendants threatening to strike Northwest. In St. Paul, Minn,, flight attendants made common cause with immigrant workers.
“We’re all looking for fair treatment,” said Ricky Thornton of the Association of Flight Attendants. “Whether you’re legal or illegal, you shouldn’t be taken advantage of.” And immigrant workers, trying to revive the momentum of the spring upsurge, held rallies in many cities.
A report on the Detroit parade admitted that job cuts weren’t due just to competition: “By maintaining the same output with fewer workers, Detroit’s automakers are holding down labor costs.”
Soon after came news of more drastic cuts. Ford hopes to cut 30,000 wage jobs and 14,000 salaried jobs, and the UAW has agreed to let them fill those jobs with temps at $13 less an hour, mirroring deals with GM and Delphi.
The one-year anniversary of Hurricane Katrina also came Labor Day weekend, with the majority of victims remaining in dire straits. The failure of the labor, Black, and other movements to respond adequately to this catastrophe is another strike against those movements’ leaders.
And over the Labor Day weekend the Federal Aviation Administration unilaterally imposed longer hours and fewer breaks on air traffic controllers, despite the fatal Comair crash in August caused by already inhumane work schedules.
In similar periods in the past, like the 1920s, labor radicals laid the groundwork for future battles while officials sat on their hands. This paid off in the 1930s when, as historian and activist Peter Rachleff reminds us in his Labor Day article, “Welcome to the Service Economy,” workers in basic industry made huge gains benefiting the whole class.
Rachleff argues, correctly, that the same could happen with today’s service workers—especially as industries in this sector generate huge financial surpluses.
Standing in the way are conservative union officials, the poster boy for whom is the Service Employees International Union’s president, Andy Stern. His Labor Day message (“Cooperative Strategy Offers American Workers and Their Employers New Hope”) boasted of SEIU’s “unique partnerships to help employers increase their competitive advantage.”
The same class collaboration was the hallmark of union piecards in the 1920s. We pushed them aside in the 1930s, and we can do so again today!