The Center for Global Awareness is releasing our 6th book this summer: Connecting the Roots of a Holistic System: The Global Economy, A Brief Edition. The book is for students in grades 9-12 and non-economic major undergraduate students. To celebrate this event we are publishing a series of blogs this summer that summarize the essence of one of the chapters in the book: The Impact of Neoliberalism in the United States: Ten Consequences. We hope you follow and enjoy the blog series! The following blog is the eighth in the series.
Impact #8: Weakening of Labor
As of this writing, one of the most important debates in our political arena is about jobs, which leads us to the eighth impact of neoliberalism: labor. Unemployment since 2009 has hovered around 8 to 10 percent, although lower today. The days of fewer than 5 percent unemployment rates during the 1990s and the 2000s are gone. You probably know someone close to you who is unemployed. Two of my cousins have been unemployed in Rockford, Illinois, my former home-town, for over two years now. One of the vibrant manufacturing centers during the 1950s and 1960s, Rockford has experienced the shift from well-paying, manufacturing jobs to low-wage countries like China. The current recession has taken its toll on this former factory town.
I will be discussing two aspects of labor in this book. One is the impact of neoliberal policies on the workforce, primarily in the U.S. The second part of the labor topic is discussed in the economic globalization chapters. Since neoliberals believe that unions and minimum wages restrict the supply and demand of labor, weakening the impact of unions and minimum wage laws are part of their overall strategy. One of the first acts of this strategy was a stand-off between President Ronald Reagan and the air-traffic controllers union. PATCO vs. Reagan Most unions opposed Ronald Reagan, the Republican candidate for president in 1980. But the Professional Air Traffic Controllers Organization (PATCO) union had supported him. In August, 1981, the union rejected the federal government’s pay raise offer and sent its 16,000 members out on strike to shut down the nation’s commercial airlines. They demanded a reduction in the workweek from 40 hours to 32 hours, a doubling of wages, a $10,000 bonus and early retirement. Federal law said the strike was illegal. The strikers had 48 hours to return to work; if not, they would be fired and banned from ever working in a federal job. One-fourth of the strikers came back to work, but 13,000 did not. The strike collapsed, PATCO vanished, and the union movement as a whole suffered a major setback, causing a decline in union membership in the private sector.
After the air-traffic controllers’ strike in 1981, unions declined, and the number of strikes dropped. The year 1953 marked the height of union strength when 32.5 percent of the U.S. labor force was unionized. In the U.S. manufacturing sector in 1979, there were 21.2 million manufacturing jobs. In 1983, the union membership rate was 20.1 percent of the workforce, and there were 17.7 million union workers. By 1992, there were only 16.7 million such jobs. Total union membership in 2010 was 11.9 percent of the workforce, down from 12.3 percent a year earlier. In 2012, the unionized percentage of private-sector workers was 6.9 percent. This is due in part to increasing automation and the outsourcing of manufacturing jobs to low-wage countries.
One of the effects of the drop in union membership is that workers’ wages have not kept up with rising productivity levels. In principle, wages are supposed to rise with productivity. Labor productivity is the amount a worker produces in a unit of time, usually per hour. But whether wages actually rise with productivity depends on the bargaining power of workers and agreement by employers. In the early 1950s, there was an understanding between employers and labor, which said that worker compensation would grow at the rate that labor productivity increased. This understanding between labor and businesses continued until the crisis of the 1970s, when wages were higher than worker productivity. This period when wages were higher than hourly productivity contributed to inflation. This basic agreement made sure that workers would share in the fruits of future economic growth; however, since the crisis of the 1970s, this agreement has been broken.
If the agreement between labor and business had held, a study has estimated that $1.91 trillion over the past 40 years should have gone to non-supervisory and production workers in the form of higher wages and benefits because of higher productivity. If workers had received the value of their annual productivity increases, as they had in the past, they would have earned an average of $35.98 per hour in compensation in 2009 instead of the $23.14 they actually got. The difference is $12.84. On an annual basis each worker lost an average of $22,701. From 1972 through 2009, productivity benefits have shifted from non-supervisory workers to managers and owners. This upward redistribution of $1.91 trillion has largely remained hidden. It has taken various forms – bonuses, outsized salaries, stock options, padded consulting fees, lavish offices, expensive conferences, large staffs, private corporate dining rooms, and generous retirement benefits.
The total increase in the wages paid to all 124 million non-supervisory workers was less than $200 million in six years – a raise of $1.60 per worker – not per hour but a grand total of $1.60 in higher wages per worker over nearly six years! In contrast, during the 1990s, the reported pay of senior corporate executives increased almost fivefold. If worker’s median pay had grown at the same rate as CEO’s pay, their pay would be over $200,000 a year.
Neoliberals and the business community generally disagree with federal minimum wage laws, but these laws determine the wages paid to those at the low end of the service sector. The minimum wage in 2007 was $5.15, an hourly rate that had remained the same since 1997. But figuring in inflation, the actual value of the $5.15 minimum wage has gone down since 1997 to only $4.15 in 2006. Congress passed a law in 2007 to raise the minimum wage to $5.85 an hour; it increased to $6.55 an hour in 2008 and $7.25 an hour in 2009, where it remains in 2012. When adjusted for inflation it is at a 50 year low.
Unemployment compensation now covers relatively fewer workers and replaces a lower percentage of wages than at any time since the Great Depression in the 1930s. In 2011, there were nearly 14 million unemployed workers, and that was not counting those who have given up looking or those who are looking for full-time work but employed part-time. Meanwhile, there are a little more than 3 million job openings. The economy must produce 150,000 jobs each month just to absorb population growth. Among the 18-25 year old group, the unemployment rate is around 20 percent, and in some locations and among some socio-demographic groups, twice that rate.
- Are you currently looking for a job? If so, what is your experience in your job search?
- If you have a job, have your received a raise in the last four years? If not, how has this affected your standard of living?