The Crisis for American Labor

“American labor is in crisis. This is no news to people who have been paying attention—the passage of Michigan’s ‘right to work’ bill last week makes it the 24th state to join the race to the bottom. What appears to be less well understood is how poorly the broad workforce is doing relative to the corporate economy. Private employers—corporations, are seeing rapidly rising profits and the share of corporate revenues that shows up as profits is the highest in history. This is coincident with labor seeing its lowest share in history. As the Economic Policy Institute (EPI) illustrates, this trend dates back to the 1970s.

To be clear, there is no shortage of corporate revenues behind the decline in labor’s share. Corporations and the plutocrats who own them are taking the profits for themselves. The richest 1% of Americans own 40% of the stock market and the richest 10% owns 80%. The same concentration can be seen in the ownership of ‘non-public’ corporations (those that don’t issue stock). Federal, state and local policies that have benefited corporations and diminished the economic power of labor, such as ‘right to work’ laws, are redistributing wealth from labor to capital. This has been bi-partisan political practice in the U.S. since the 1970s.

Western mythology has it that capitalism works because entrepreneurs take economic risk to build corporations from nothing. The second order mythology is that highly educated managers keep business competitive through innovation—the development and adoption of new processes and technologies, while keeping labor at the minimum levels consistent with maximum productivity. The facts are that large, connected corporations that have existed for decades earn most of the profits in dispute. And corporate executives—paid managers, have helped themselves to ownership in these corporations through the granting of stock options. Contrary to both mythology and capitalist theory, labor now takes nearly all of the economic risk while benefits accrue to executives.

The question making the rounds in the economic mainstream at present—Robots or Robber Barons?, requires strict adherence to the utterly irrelevant for some decades now to even be a question—is technology or the diminishment of labors’ power responsible for rising corporate profits and wealth concentration? And while I do have some sympathy for the complexities, one ‘model’ I put forward is the unrelenting, systematic effort by connected capitalists and their servants in Federal, state and local government to boost the power of capital while diminishing that of labor, broadly defined. If one were to begin with this set of facts and infer the likely consequences they might be—rapidly rising corporate profits, increasing concentration of wealth, rising insecurity amongst workers and increasing corporate / plutocrat control of government.

But simply asserting these outcomes is isn’t enough. The explanation circling official Washington, and coincidentally the party line of the Mergers and Acquisitions (M&A) folks on Wall Street for the last thirty years, is that the miserable state of American labor is due to workers being replaced with technology—either allowing fewer workers to do work formerly done by many or through ‘robotics’ that replaces human beings in manufacturing with machines. Evidence of this trend is provided in the difference between ‘productivity,’ total output divided by the quantity of labor that went into producing it, and what labor is paid. Since the 1970s productivity has increased in a near straight line (see EPI graphs, link above), while the compensation paid to labor has stagnated….”

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