Identifying the policy levers generating wage suppression and wage inequality
Lawrence Mishel and Josh Bivens at Economic Policy Institute take a look at why wages have been relatively flat compared to productivity gains in the US economy, inequality of compensation, and declining share of income between labor and capital. Broad strokes but helps with context and suggesting ideas for current government actions.
Inequalities abound in the U.S. economy, and a central driver in recent decades is the widening gap between the hourly compensation of a typical (median) worker and productivity—the income generated per hour of work. This growing divergence has been driven by two other widening gaps, that between the compensation received by the vast majority of workers and those at the top, and that between labor’s share of income and capital’s. This paper presents evidence that the divorce between the growth of median compensation and productivity, the inequality of compensation, and the erosion of labor’s share of income has been generated primarily through intentional policy decisions designed to suppress typical workers’ wage growth, the failure to improve and update existing policies, and the failure to thwart new corporate practices and structures aimed at wage suppression. Inequality will stop rising, and paychecks for typical workers will start rising robustly in line with productivity, only when we enforce labor standards and embrace policies that reestablish individual and collective bargaining power for workers.
Over 50 years ago I remember people arguing that we did not need labor unions any more because the government regulated employment well enough that workers were not exploited and had pretty decent working conditions.
It was true that many of the working condition requirements of the union contract we had were also guaranteed by either the federal or state labor laws. We had a 40 hour week, and overtime – although not so generous in the law as the contract – and breaks and lunch hours that were the same as the state labor boards regulations. Medical and pension were not covered in the law, except for Social Security or Medicare.
And virtually all of the protections we had came because unions had fought for them way back when, and made them the norm to the point that they were codified as the legal minimum.
It is also true that back when many of the unions were blatantly discriminatory, or outright racist. Minority workers didn’t see the benefits of unionizing, because they were not welcome in the unions. By the time the craft unions woke up the construction industry wasn’t unionized any more. Wage growth there is shows that very plainly.
Some of the union rules back then really were close to Luddite level backwardness. At one point my dad had to live with “no power tools”. Even his Yankee driver could not be used on the job. That did change, but not soon enough to keep the non-union construction firms from showing that they could deliver faster and cheaper.
And now the pendulum has swung to the point that unionism is becoming more desirable. With any luck the new movements will learn from the mistakes of the old ones.
This is a big deal.
More than Double productivity and get a 15% boost.
One can’t ignore the effect of corporations’ investments in plant and equipment to help generate some of those gains in productivity. Of course, one also should not ignore corporations’ abilities to hold the proverbial gun to the head of some of their employees to seize vital information needed create robotic systems intended to replace those very same workers without increasing the compensation or bonuses the workers should have received. When line workers are being forced to reveal personal practices designed to enable a particular process to actually succeed without seeing their pay be increased, then corporations commit theft. I know of at least one case where this did occur and I suspect that it’s more widespread than many might believe. Without these practices, some of those investments in P&E would have failed, forcing the corporations to increase compensation and hire more line workers.