Define Rich V: Looking at the historical labor economy

We are taking a little side trip inthis series of defining rich based on the prior tax rate schedulesbut, this post is keeping with the process of looking at history formarkers as to the definition of rich. For any new readers, I believeas a society we knew and had definite boundaries as to what definedrich. I believe we knew how to say the word “when” as the incomeand wealth was pouring into one’s glass These boundaries producedspecific public policy that resulted in a more equal and justsociety.
In our local city there is anothertextile mill going to the grave. We have lost a couple of huge millsto fire in the last decade.  The local paper did an article on thismill known as the French Worsted Mill. It was built in two stages,1906 and then 1906. It was part of the revival of the mill industryvia specific targeting of French industrialists, post water power forthe city. A local person who was eventually governor of the state iscredited with bring $6,000,000 of foreign investment into the cityearly turn of the century. At one point they had a Uniroyal rubberplant that made soles for shoes The last pair of Keds (sneakers) went out thedoor in 1970. Nine hundred and fifty people out of work due to “FarEaster Producers”.  (See the article: Pressure growsrapidly for Congress to to clamp tariffs on foreign goods, 5/19/1970)  This was a city as industrial asanything Detroit or Pittsburgh were. This was a cultural center forthe region with 6 theaters and I don’t mean just movies. We aretalking blue collar all the way. We’re talking jobs that we considerthrow away jobs to the far east today. We’re talking jobs that are notconsidered “good” jobs anymore.
So, now that you have the picture, hereis what this mill and the jobs within it were able to do for theworkers. I think this bit of history also adds to my position thatwe have continually pushed the cost of the American Dream up theincome line such that the middle class can not afford it…even with2 college educated people in one house. This is the sub-context tothe discussion regarding the decline of the middle class or the lossof the middle class. When people say the middle class does notexist, what is being stated is that the American Dream is no longerfinancially possible for this groups of citizens. The Dream is notdead or gone, it is over priced relative to the income of the middleclass. It is just as we are not drowning in debt, we are dehydratingfrom lack of income.

The article in the paper talked about aMr. Bacon. He worked in the mill in 1956 along with 700 to 800 otherresidents. The job was not as a machine tool maker (the mill as mosthad their own machine shop) or a special machine operator thatrequired special skill. He was a laborer. The tasks mentioned werestuffing waste wool into burlap sacks or “picking up the yarn” orfetching parts from the machine shop. We’re talking menial labortasks. Starter jobs.
For this work Mr. Bacon was paid $1.80per hour. The minimum wage was $1.00 per hour. At some point he wasearning $80 per week for 40 hours work. This is $4160 per year. With this income Mr. Bacon was able to put himself through collegeand became a teacher in the local school system. It was not just anyold college he went to. It was Providence College with a tuition of$500 per year. Yes, a private college that cost only 1/8thof his annual income.
Mr. Bacon’s story is the story that notonly are the Republican presidential candidates promoting as to whatwe need to “get back” to, but the democrats are saying we needto go forward to. Mr. Bacon’s story with this mill is the proof thatthe 2 parties are not talking about a fantasy time in our history. It did exist.
Here’s the problem though with both of their directions. I’m justgoing to list them.
  1. $40,000 is the annual tuition at Providence College today.
  2. $1.80 per hour is equivalent to the following: $14.40/hour standard of living, $17.80 real value, $18.20 unskilled labor and $22.00/hour production labor.
  3. Tuition of $500 is equivalent to the following: $4010.00 standard of living, $4960 real value, $5050 unskilled labor and $6120.00 production labor
Are you seeing the problem here? It’snot just the difference of tuition going up 80 times. It’s that the wage equivalent today for what amounts to stacking shelves in Walmartis not being paid at Walmart. Not only is this Walmart job notpaying such wages, this is what the current autoworker is earning. The autoworker was one of the best compensated citizens we had. Lookup the definition of  middle class in the dictionary, and you would have seen anautoworker!
How bad is this? Considered
Thelow-wage benchmark set by the UAW has already set off a competitivestruggle in the global auto industry, with Fiat-Chrysler boss SergioMarchionne telling Italian workers they must accept American-styleconcessions or he will move production to North America for cheaperlabor.
I have read that the German automakersare here in the US for the same reason. We are now the stop for outsourcing.
Here is the other more important aspectof the story of the French Worsted Mill and it’s relationship to theAmerican Dream. All those candidates, all those legislators, allthose governors proposing programs they say will encourage people toget off welfare and join the “productive” class, programs thatwill spur job creation, programs that will grow the economy such thatwe can cut taxes JUST LIKE THE GOOD OLD DAYS have no answer for thelack of pay of $14.00 per hour for the Walmart shelf stocker. Theyhave no answer as to how they are going to return the ratio betweenthe hourly wage and the cost of college education to that of the1950’s such that an individual can accomplish what Mr. Bacon andothers from the same mill accomplished. Not only do they have noanswer, they don’t even want to consider this aspect of theirsolution.
Mr. Bacon’s story is also telling uswhy we think the public sector is so over paid. If a Walmart shelfstocker should be earning $14.00 hour comparatively but are not, ifan autoworker earning $14.00 per hour is underpaid comparatively,then certainly the higher hourly wages of the public sector lookexcessive. Everyone used to know that the public sector was alwayspaid less compared to the private sector. They did not have morebenefits than the autoworker, but they do now. The slowdeterioration of the autoworkers and all the other laborers pay andbenefits has hidden the reality of the finger pointing at the publicsector. It’s not that they are paid so much, and thus look “rich”by comparison, it’s that the autoworker has lost so much over such along time that the loss is not recognized as a loss. Instead, thepublic sector’s economic position is looked at as an unjust gain. Not only is this presented as an unjust gain, it is an injusticeperpetrated via taxation. And the stage is now set for all thearguments such as those we hear coming from governors such as Walkerand Kasich.
This is where the Keds hit the road. We, and I have to say “We” because We voted in those who made thepolicy changes, have decided that a good job is not one which allowsthe experience of Mr. Bacon or the autoworker. We upped it to be onethat required academic education. No longer would trade education orapprenticeship education be of such value that it would define themiddle class. Unfortunately, as I had suggested in 2007, evenacademic education is being defined down as to not resulting in a “goodjob”.
“The dream seems to now only be adefinite with a 2 person, college educated and working household. That combination is not far from being in the 10% group. Thus, wehave raised the dream to something beyond which a large portion ofthe population will not reach considering only 28% have a 4 yeardegree even though 64% of high school students are entering college. It looks even worse with people suggesting that you need an IQ of 110to succeed in college. I mean, can we push the dream any further outor be anymore aristocratic in our arguments? “

In 2003, the homeownership rate for upper-income families withchildren was 90.8 percent, while the rate for their low- tomoderate-income counterparts was significantly lower at 59.6 percent– yet in 1978 some 62.5 percent of low-to moderate-income workingfamilies with children owned their homes. Ultimately, had the 1978homeownership rates for working families with children prevailed in2003, an additional 2.3 million children would now be living inowner-occupied homes.

How’s this little bit of history change your ideas about what toblame for the current housing/mortgage mess? I suppose if you areall for a future that is less than what was accomplished in the pastthen blaming government for promoting housing and people for spendingbeyond there means is all right by you.

No one in the middle class of yore was rich by any means. But,what they had was a life much freer of risk than today. What theylived in was an environment that provided the means to manage therisk of life and living. When we are told by those running for or inoffice that Americans need to be more…(fill in the blank) they aresuggesting such from within their own experience of having grown upin a socially constructed via government environment that was devoidof certain risks of living based on one’s income. In other words,you would not be told that the requirement for food stamps would meanyou had to have less than $2000 in savings.

The removal of these risks allowed one to take what theypersonally had (natural ability and otherwise) and grow it into alife where economically more of life’s risks could be taken onindividually.   It was an environment which removed the concept ofluck from the social justice equation.

This environment was not all welfare. It was an environment thatassured a person of common acuity could live a life free from therisk of weather, malnourishment, illness and aging. It was anenvironment that produced an economy such that the vast majority ofthe 72% without a college education were living this minimal risklife. We had an environment which supported the economic life journeyof the autoworker, simultaneously supporting the economic life journey of Mr.Bacon’s experience, simultaneous supporting the economic life journey of anindividual such as President Obama.

It was an economic environment which produced a directrelationship between income/wealth and risk absorption. As incomeand wealth went up, so did the absorption of risk and vice versa. Today we

have a system that is completely theopposite such that we have arrived at place where the relationship iscompletely reversed. We spare those who as a group can purchase agovernment which insulates them from any risk while pushing all therisks of living on to those who can not afford any risk and then tellthose people “oh well”. The bank bailouts and theausterity plan is the realization of the reversal of the risk/income-wealth relationship.

Our past economic environment also produced a direct relationshipbetween income-wealth and luck. Again, as income-wealth increased,your success was more dependent on luck and vice versa. This too hasbeen reversed as we see with the Washington revolving door and evergreater capture of the nations wealth as one’s income-wealthincreases. The environment produces an ever stronger assurance thatincome and wealth will increase as they both increase. This isunlike the experience of the middle class including all the highly educatedpeople who find themselves under employed or unemployed do to theshear luck of having chosen wrong. Today the closer you are to zeroon the line of income-wealth, the luckier you need to be.

I’ll leave you with this, the class warfare. There is classwarfare. It has always been with us, since the writing of theConstitution. However, I believe the current theater is the mostdevious the vast majority of the US population has ever faced. Thisis because of the two parties in this seemingly perpetual human quest,one has successfully cloaked themselves in the costume worn of athird party observer effectively immunizing themselves from the pain of the fight via camouflageof a messenger.  I even suspect some aregaining a wee bit of entertainment in their ability to manipulate theircounterparts into fighting among themselves. I speak of the laborclass successfully being divided such that those who labor in theprivate sector of the economy accuses those who labor in the publicsector of the economy for their poor economic position and the publicsector laborer does not recognizing themselves in the private laborworld. I tell you, the false messenger is recognized in that theirlabor is money. It is not in their mind or body. Warren Buffet maywant to be taxed more, but Warren Buffet is not working his money asthe Kock Brothers are working theirs…and Warren Buffet isbenefiting from the productivity of the Kock’s Brother’s money.

Next up is 1936’s tax table.

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