Of Patches Paint and Ploy
Up from craft workers to those of the large industrials, by the mid-20th Century unions had grown to represent large segments of American workers (density peaked at 35% of workers in 1954, membership at 21 million in 1979). From the mid-1930s through the mid-1960s they played a huge role in the nation’s politics, social order, and economy. Unions gave us the 8-hour day, weekends off, paid holidays, …, and helped end child labor. They raised living standards for their members, for all workers, for everyone. Theirs was one of the most effective addressments of disparity in the industrial age, ever. America’s heyday, from ~1940 to ~1972, was union-made.
Less than living wages for men industrial workers during the 19th century led to child labor; to wives and mothers engaging in prostitution in an attempt to make ends meet. This during their working years; after that, nothing.
After many struggles, some historic, unions won living wages, safer working conditions, and reduced hours for their membership; for all workers. Union members were now more likely to live long enough to retire than before. Relatively modest dues collected from these large memberships accrued to become massive retirement pension funds; giving members income during their retirement. Again, effectively addressing disparity. The better wages, more hours off, and retirement pensions meant more consumption; grew the economy.
It wasn’t as if there wasn’t enough to go around before. Unions rose up in response to the abysmal working conditions and great disparities of the Gilded Age; the age of the amassing of the great fortunes of the Morgans, Carnegies, Rockefellers. … .
Though up from somewhat Republican leanings, by the mid-20th century, unions had become Democratic stalwarts. Unforgivable! When those large pension funds were being pilfered, even outright stolen, by corrupt union officials (often in cahoots with the mafia); Republican politicians said that just went to show that unions were corrupt, should be broken up; showed no interest in protecting the interests of the membership.
In the late 1970s, for numerous and diverse reasons, reasons that included political opposition, internal corruption, and labor-saving technological advances, union membership began to decline. About this same time, pilfered/stolen pension funds were beginning to come up short. Facing reduced pensions, retired and soon to be retired members voted to increase the dues from the now much-diminished number of working members, i.e., working members were being asked to supplement the retirement of retired and soon to be retired members. This at a time when the last thing the union movement needed was more negative feedback.
Up until the decline, without the losses, the original retirement model was totally workable. Via negotiations, union wages had in effect included union dues. The corporations that realized the profits from union labor indirectly paid for the members’ pensions (fair is fair, it was after all their responsibility). With the decimation of membership and associated lessening of leverage, there was no way that the diminished still-working membership could replace the stolen pension funds and provide for their own retirement. The model was broken.
Before the rise of labor unions in the late 19th and early 20th centuries, production workers could not afford to retire; most didn’t even make enough to live on, to live that long. Income stopped when they did. Then, as now, the question was: “What could be done to improve distribution and equity, to transfer a greater share to the workers so that they could have a decent living, and enough to live on in retirement should they live that long?” For their membership, the nation, unions provided a solution, a workaround, a patch. Unions made America better.
Entering the 1930s, most workers who were nearing, or at, the end of their working life had little or nothing to show for the years. What to do, “ How to get these people enough to live on when their working days ended.?” Frances Perkins, a pragmatist who knew from politics, came up with what came to be known as Social Security. Social Security was to be funded by contributions from both the employee and the employer. Half and half — half and half. Well done, good and faithful Francis!
It wasn’t as if Industrialists couldn’t afford to pay a living wage, provide for workers’ retirement. These were those of the Gilded Age, the age of Carnegie, Vanderbilt, Rockefeller, Morgan, … . These dudes had amassed great fortunes, a good portion (much?) of which should have gone toward living wages and decent retirements for workers. They were the greater beneficiaries of capitalism; the ones who should have paid more to their workers. They became unimaginably rich while their workers wound up with little or nothing to show for their working lives. A status quo often imposed with the help of local, state, and federal governments. These are those who literally had their own Senators. Their Senators who called Social Security, “Socialism!”, voted against it.
Not really a pension, not even ‘how it should be’, Social Security went a ways toward filling the big disparity gap left by ‘Capitalism’, toward patching (painting over?) one of Capitalism’s flaws?). Those who had worked for low wages (low wages themselves a subsidy of Capitalism) would get enough to get by on in their retirement. Said and done, Social Security was big step in the right direction. A temporary fix, a patch over a hole in capitalism. A compromise for sure. Always good at arithmetic, the captains of industry saw it as a relatively inexpensive way of saving their own butts.
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Another big “How should it be?” of that time — of all times — was, “How to provide for those who are unable to provide for themselves?” Followed by, “Who should pay for it?” The welfare of all of a nation’s population is chargeable to it’s economy. If that economy’s economic model is, and it most likely is, constructed to benefit one group above all others, then that group should pay in proportion to this advantage. In this case, as with workers’ retirement, welfare addresses another of the failures of capitalism as an economic model. Capitalism should have never been allowed to slough off its responsibilities; especially not onto the working class. With welfare, they are still trying to get out of paying what should be theirs alone to pay. Welfare was another patch over another hole in the ‘capitalism’ model of economics.
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During the Great Depression, food stamps were a way for the government to get money to people who were starving because they didn’t have money to buy the produce of the farmers who were starving because no one had the money to buy their produce. These days, to hear southern state politicians tell it, food stamps go to those who are too lazy to work (good old blame the victim, a regional favorite). Works for them, mostly. To say that most of food stamp recipients work for less than a living wage would be a lot closer to the truth. Low wages are the staple of these states’ economies; helping them to grow and grow and grow for years and years now. None of this was lost on the late Sam Walton of Bentonville. Low wages and food stamps grew his, and his heir’s, personal economies in $Leaps and $Bounds. Whatever Sam may have had to say about the morality of food stamps, he understood that food stamps were in reality a government subsidy to farmers and businesses, one that was theirs for the taking. Word got out. Free lunch! Like pigs to the trough, others like Amazon, Kroger, Uber, Lyft, …, came running. Yet another patch. Capitalism lived to see yet another day.
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Medicaid is another favorite government subsidy to businesses and farmers that Sam and his fellow $Billionaires have come to like a lot. Saves them $Billions in wages; on healthcare. A penny saved is a $Billion earned. As with the other patches, most of the cost of the patch is borne by the working class. For $Billionaires, a great little subsidy as long as someone else pays. The very thought of having to pay for it themselves scares the $hell out of them.
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Pensions have been around as a recruiting tools since the Revolutionary War. In 1875, The American Express Company first offered a corporate pension. By 1930, several other large corporations joined it. Pensions weren’t offered to industrial workers in general until the 1950s (another union effect). 401(k) retirement plans were around before 1974, but it was about then that they came to be seen by some as a way of privatizing (replacing) ‘socialistic’ Social Security. Along the lines of Social Security, 401(k)s split the cost of employer pension plans; a case where (for the employer) it was better to pay for a half loaf than a full loaf. 401(k)s were codified by Congress in 1978 with support based on the hope of slaying the dragon Social Security. Still it is not how it should be. 401(k)s aren’t that bad. They aren’t a step in the right direction either. 401(k)s do not provide a long-term solution to the damoclesian problem of distribution. Beyond being a bit of a ploy by the privatization crowd, 401(k)s have a significant negative economic consequence. Turns out that they put downward pressure on wages.
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Having literally screwed ourselves into a corner; we (the world) now desperately need to decrease population. But unfortunately, many (most) of our economic models demand a steady supply of younger workers.
For pensions, it is the way the funding was set up. Didn’t have to be this way. Should have been funded by the employers. Alas, we the people weren’t driving the train, weren’t even allowed to blow the whistle. Just along for the ride, we were only allowed to do those things, have those things, that we paid for in part, or in toto, from meager wages. Never mind that the train could not have run without us. Pensions should have been included in wages.
Of late, in France they have taken to the streets in opposition to a government proposed two year increase in the retirement age. The government’s proposal is meant to address shortfalls in retirement pension funding (or to redo). While the government’s proposal might help with an immediate problem, it worsens the one of employment for jeunes français. Neither of these is the reason they are protesting; nor unique to France. The protesters say that businesses, not them, should pay more toward worker retirement. That is how it should be. Macron is pro-business. It should have been that all the costs of worker retirement were borne by the industries where they worked.
All during the Industrial Age, wealth was meted out to the working classes in too meager amounts. Excepting the years from ~ 1940 – 1972, this way of distributing wealth never worked very well. Since ~1972 , we have been roaring headlong into the Technological/Digital Age. Now, more than ever, we need to find a better way of distributing wealth.
Technology seems well on the way to addressing the need to restock the workforce with younger workers. Robots will do more and more of the production work. Will do more and more of the work done by low-wage workers as these wages rise. In the next year or so, we will likely see yields from artificial intelligence (AI) exceeding those of the microprocessor. Yields doing to white-collar workers what the microprocessor did to labor. The remaining jobs will more and more be brought to the worker, not vice versa as in the past.
Most solutions are perforce specific a time. None more so than that accorded the nation by unions in the 20th Century. Coming to power at the pinnacle of the Industrial Age, unions effectively addressed the humongous issues of distribution and disparity for their members, for all workers. Union-made made America a Better-America. Though their moment was to ebb away in the face of the greatest technological advances ever, one of the greatest transitions ever, their descent from power was hastened by the concurrent actions and inactions of Republican politicians acting in the interests of business and wealthy individuals; not those of the working class, of their constituents. It is quite likely that today’s Republican politicians are every bit as corrupt as they were back in The Gilded Age; and, as then, all much under the guise of ideology.
Social Security, too, addressed the issues of distribution and disparity. Not perfect, for sure, but a big step in the right direction. Now, and for nearly 90 years, Republican politicians, at the behest of their patrons and always under the guise of ideology, rise in opposition to Social Security. Imagine an America without Social Security; one where essential workers had only the poor house to look forward to when their workdays ended. Ask ourselves, what if the nation had (had been allowed to have) addressed the question, “How should it be?” in the 1930s? What a difference would it have made? How much would longer capitalism have held reign without Social Security? It saved their butts. They knew it. It’s just not in their nature to be grateful. Disparity was a flaw in the ointment then; still is. Equitable distribution, another.
Those who lived through the worst of The Great Depression would tell us, “No one had any money,” Born within months of one another, welfare, like its sibling Social Security, helped fill in (patch) some of the gaping holes left in the social net by capitalism. Hand and glove, in partnership, they saved the capitalists’ butts. Still and yet, the ingrates continue their fight to opt out, to even kill, the both.
Food Stamps began in the 1930s as a tacit admission that the markets weren’t working. People were starving because they didn’t have any money with which to buy the farmers’ produce which left the farmers with no income. Food Stamps helped pull America out of The Great Depression mud hole. Since, there have been many iterations of the program, each a tale unto itself. In its earlier days, state politicians (most prevalently in the south) were able to use the program as a political cudgel. Your vote for food. Southern land owners and businesses saw food stamps as a government subsidy. Others have caught on. At times over the years, food stamps have subsidized the farmbelt’s collective butts.
A child of the sixties, Medicaid was the long overdo recognition that many, many Americans couldn’t afford basic healthcare. Later, as union membership declined, the need for Medicaid increased.
Medicaid was another of those ‘socialist’ government programs that businesses came to embrace as a subsidy to wages, to them.
Medicaid was yet another tacit admission of yet another flaw in the ointment. Nearly half a century later, progress was made again with the passage of The Affordable Care Act of 2010. Again, not how it should be; but it was a step in the right direction, and a patch.
Nothing wrong with individuals saving for retirement. It’s wonderful if they can afford to build up an Individual Retirement Accounts (IRAs), substantial 401(K), … . In a time of great disparity such as now, these types of plans allow some to retire at very high levels of income (with incomes equivalent those of their working years). Good on them. Except, these levels of incomes are premised on high rates of returns, rates of return that put downward pressure on wages; rates of return that are a major determinate for corporate CEOs’ salaries. Directly and indirectly, retirements at high levels exacerbate disparity. Very good at arithmetic, corporations understand that the tax breaks awarded IRAs and 401(k)s amount to an indirect subsidy to them.
Our, the world’s, aging population problem is a perfect storm of a cluster of consequences of choices made coming together at one time. We were warned at the time of the consequences of the ‘Green Revolution’ and the advances in medicine. Ignored them for all the wrong reasons. Bought into ideological economic models; models that too often for the most part benefited the wealthy few. Models that failed too many. Models too often not suited for the long term.
Instead of asking, “How should it be?” ideology has been the paint used in an attempt to cover up the flaws.
The History of Pension Plans in the U.S., thebalancemoney.com
Labor Movement, HISTORY,
Policy Basics: Understanding the Social Security Trust Funds | Center on Budget and Policy Priorities, cbpp.org
The Gilded Lily, Angry Bear, Ken Melvin
Very nice accounting of US economic history over the last 100 or so years. It can be difficult to cover such a large subject with so many topics and story lines – each of which is a potential point of disagreement. But this is well done. Thank you.
I agree with Jerry. This is an accurate depiction covering quite a few topics detailing how we arrived to today’s society. Unfortunately, none of it is perfect. And we still have the complaints from those who find fault or want to end it.
A lot of work Ken. Nicely done.
Thanks, Bill. You’ve heard the expression, “Put it on the back of a business card?”
We put you in featured also. It is well written . . . I am happy you hang around Angry Bear,