In the 1970s, the position of the typical worker in America had been improving for 40 years—inflation-adjusted wages climbed, retirement income was at its most secure, and the typical worker had come to enjoy a range of employee benefits that most workers entering the workforce today will never see. Congress enacted the Employee Retirement Income Security Act in 1974 to protect pensions: in 1979, 57% of men had employer-provided pensions, at a time when a “pension” meant guaranteed income in retirement, rather than the do-it-yourself (and possibly lose-it-yourself) 401(k) that is common today.
But progress slowed in the 1980s and in some cases, came to a stop or reversed. By almost any measure, the economy is not working as well for the average worker as it used to:
Less than 44% of employees today have any kind of employer-provided pension, and less than 20% have a traditional defined benefit pension.
From 1979 to 2007, household income for the typical household grew only 19%, while growing 240% for the top 1%.
Average annual hours worked increased from 1,703 in 1979 to 1,883 in 2007. Households worked more hours per year in 2007 than in 1979—5.5 extra weeks a year.
Among large private-sector employers (with 200 or more employers) that provided health benefits, only 29% offered retiree health benefits in 2009, down from 66% in 1988.
Workers lost their voice in the workplace as union representation declined from 27% in 1979 to 13% in 2012.
The typical family’s household wealth was 22% lower in 2010 than in 1983, even though overall household wealth had grown 63% and the wealth of the top 5% grew by 83.1%.
This economic bad news for the typical worker and her family was not inevitable or accidental. As my colleague, Josh Bivens [research and policy director at the Economic Policy Institute], says, it was “failure by design.” An economy that had created rising incomes and a better economic life for everyone from the 1940s till the late 1970s was taken over by corporate leaders and the politicians they supported. They set out to change the income distribution from shared prosperity to a few winners take all, and they succeeded.
Starting in the 1980s, top income tax rates on the wealthy fell from 70% to 28%, with even lower rates on income from selling stocks, bonds, and other capital assets. That helped set off a spending spree on CEO pay, which rose 759% from 1978 to 2011. Tax rules favoring grants of stock options as compensation for executives made matters worse. Raising the stock price became the dominant goal, pushing aside concerns for workers and communities, not to mention national interest. To pay for this huge pay raise at the top, corporations aggressively cut labor costs by breaking unions, moving operations offshore to low-wage countries, raiding and terminating pension plans. Workers resisted at first, but as corporate-backed politicians rewrote the laws to weaken the safety net, “reform” welfare, cut and tighten eligibility for unemployment insurance benefits, they lowered their expectations and accepted that they were on their own and that the corporations called the shots.
Today, few workers expect their employer to provide a real pension. Pay for 70% of the workforce has been stagnant or fallen since 2000, yet few complain, and strikes are so rare that when a few hundred fast food workers protest their poverty-level pay it makes national news. Occupy Wall Street did an amazing job last year of bringing attention to the wealth and income divide in America, but it had no policy program and no workplace organization, and it didn’t survive the winter. Employers were momentarily alarmed, but they eventually shrugged it off without changing their compensation practices.
Corporate America has gotten so used to holding down labor costs they resist raising pay even in the face of severe labor shortages. Recent media reports quote trucking industry executives who admit they have turned down business for want of drivers but still haven’t offered wage increases. Most workers are so beaten down after five years of high unemployment that they don’t even ask for higher pay. They assume they have no bargaining power and are just grateful to have a job—even a lousy one. One of the most amazing sights of recent years was uncomplaining, poorly paid Walmart workers encouraged by the company to line up for food stamps at Thanksgiving and get their health care from public assistance while the six principal owners of the corporation share a net worth of $144 billion.
The corporations don’t much care whether Americans have those jobs, either. NAFTA made it easy and cheaper for U.S. automakers to assemble a car in Mexico than in Michigan. Corporations feel no obligation to provide new workers the kind of training that was commonplace 40 years ago (wanting, rather, taxpayers to pay for it themselves) or to raise wages enough to attract a quality workforce. The Chamber of Commerce even had the gall to ask Congress for an unlimited supply of foreign guest workers right in the middle of the Great Recession, the worst unemployment crisis since the Great Depression in the 1930s.
Corporate lobbying will only get bolder and more demanding in the future. The Supreme Court recently granted corporations constitutional rights permitting unprecedented influence over politics and government. Perhaps nothing better exemplifies their new sense of entitlement than the widespread practice of hiring workers but not paying them. Hundreds of thousands of so-called interns—even college graduates—are working without pay, doing real work for employers who take advantage of their job market fears and weak labor standards enforcement. Forty years ago, even the lowliest office workers who ran the copy machine or delivered messages and coffee were paid for their work. I know; I was one of them.
A huge part of the problem we face is cultural and psychological: workers no longer think of themselves as workers, let alone as members of the working class. Americans have bought into the notion that we’re all the same, each of us is on his own, and everyone can be a millionaire. We identify first and foremost as consumers and have internalized the idea that our happiness depends on low prices. We might not be able to take on the employment practices of Walmart or Burger King or GE (who has the courage to join a union and risk being fired and blacklisted?), but we can control what we buy and have the satisfaction of saving money with “everyday low prices.” And of course, low prices depend on low wages, not on unions or political activity to improve labor standards. As individuals, we’re helpless to change globalization and offshoring of our jobs; but look on the bright side: low prices come from low wage workers in Bangladesh and China and Mexico. We can exercise at least of semblance of control over our financial lives by shopping carefully, so we end up paying far more attention to rising gas prices than the fact that wages for the typical worker have fallen over the past 14 years. We think a 401(k) gives us control over our financial future, despite the lessons of two stock market crashes in eight years and the fact that the health (the size) of a 401(k) depends on getting enough in wages to put money aside.
Finally, workplace culture in 2014 is also characterized by corporate lawlessness. Most employers respond to union organizing with unlawful threats, intimidation, firings, or other discriminatory acts. But labor standards violations, including various kinds of wage theft, are even more common. A three-city study of low wage industries found that, in any given week, two-thirds of the workers were victims of some kind of wage and hour violation, such as failure to pay minimum wage, to pay for all hours worked, or to pay time and a half for overtime work. Based on that study, I estimate that total wage theft in the U.S. exceeds $40 billion a year, costing the victims more than all the robberies, larceny, burglaries, and motor vehicle thefts combined.
Corporate profits are at all-time highs, so I have to give them credit. They’ve made our workplace culture successful, if not for America, at least for themselves.
Infographics: Gena Larson at GenaLarson.com.