Raw Deal for Workers
Why have U.S. workers experienced
a long-term decline in pay, benefits, and working conditions?
by Chris Tilly
Dollars and Sense magazine,
July / August 2003
Few people have seen the inside of a "secondary
meat processor"-a factory where large cuts of beef are turned
into hamburger patties, roast beef, and other beef products. The
workers who process beef do not have it easy. Many stand for long
hours on wet floors. They are in constant contact with raw meat.
In a typical plant the temperature ranges from 50° down to
3°F. Some workers rake 30-pound beef slabs from a huge bin
onto a scale. Others heave giant roasts from one transmission
belt to another. The work is repetitive and boring, but at the
same time requires extreme attention to detail because of the
potential for injury as well as food safety regulations. At one
typical plant, entry-level pay is $7.75 an hour, or $16,000 a
year- a poverty-level wage. There is no question that meat processors
are getting a raw deal.
But the raw deal for workers is not limited
to those workers who deal with raw meat. Pay, opportunities, and
job quality have gotten worse for most workers in the United States
over the past 30 years, across most sectors of the economy.
Obviously, the 2001 recession and the
current jobless recovery have meant two-plus years of severe job
shortages. But the deterioration of U.S. Iabor market conditions
is a longer-term phenomenon. The spread of second-class jobs in
the past three decades relates to fundamental changes in the economy
and society, including sluggish productivity growth and employer
assaults on workers' rights and protections.
The strongest evidence for the raw deal
comes from looking at how workers were doing at the peak of the
1990s boom, three years ago. It was the longest boom in recorded
U.S. history (lasting from March 1991 to March 2001). The expansion
drove unemployment down to its lowest level in 30 years and spurred
talk about a "new economy" that would turn productivity
growth into endless prosperity. It should have been the best of
times. But as a glance at the numbers reveals (see "Best
of times?" p. 43), it was not the best of times for working
WHY THE RAW DEAL?
Why are workers getting such a raw deal?
First, the economic pie is growing more slowly. Productivity growth
during the "new economy" 1990s was only two-thirds as
fast as in the "old economy" 1960s. That reflects the
fact that companies have not invested as much in upgrading their
equipment and training their workers as they once did-although
the numbers are up compared to the 1980s, when productivity growth
was even slower.
Why are these investments down? Businesses
make an investment when they expect a payoff. But total global
demand for goods and services grew only about half as fast in
the 1980s and 1990s as it did in the 1960s and 1970s, and the
increasing globalization of trade and investment meant that businesses
were much more likely to face new competitors.
Second, over the last 20 years, businesses
have aggressively attacked the protections that workers had built
up for themselves. They have busted and blocked unions, shredded
the unspoken agreements that governed many non-union workplaces,
and lobbied to weaken pro-worker legislation. One consequence
of these efforts: private sector workers are now less than one-third
as likely to belong to a union now as they were in the mid-195Os.
The minimum wage is only worth about two-thirds as much as it
was at its high point in the late 1960s (after taking inflation
into account). Because the low-wage workforce includes disproportionate
numbers of women and people of color, the minimum wage and unions
particularly benefit these groups.
Republican presidents have joined in the
attacks on these protections. Every Republican administration
since Ronald Reagan has doggedly opposed minimum wage increases.
When Reagan fired striking air traffic
controllers in 1981, he set a precedent for the permanent replacement
of strikers. George W. Bush out-did Reagan in 2002 when he demanded
that the Department of Homeland Security not have civil service
protections and announced plans to privatize half of the federal
workforce. Republicans in the White House have also stacked the
National Labor Relations Board (NLRB), other federal agencies,
and the courts with anti-labor appointees. As a result, these
agencies offer at best weak enforcement of labor protections.
To provide two recent examples: the NLRB recently ruled that unions
have no right to hand out leaflets in company parking lots, and
the Supreme Court ruled in 2002 that if a company terminates an
undocumented worker, it need not pay the worker his or her back
pay. Further, under-funding of the Occupational Safety and Health
Administration (OSHA) has reduced inspections in hazardous workplaces-like
meat processors. Self-styled New Democrats have backed many of
these changes in the name of aiding business.
Of course, at the same time as corporations
have attacked rank-and-file workers' protections, they have increased
the rewards to top executives and stockholders. CEO pay kept growing
through 2001, even while profits and stock values declined.
The third reason for the raw deal is that
businesses have pushed more and more risk onto workers. The most
extreme example of this is the growth of temporary work, which
has expanded more than twenty-fold since the late 1960s. (Temporary
work has been shrinking for the last two years-which of course
is exactly the point: you hire temporary workers so you can dump
them when the economy goes south.) But beyond the temps themselves,
the frequency of mass layoffs (see boxes) highlights the fact
that really, almost all jobs are temporary today.
Benefits are another area where workers
bear more and more risk. Twenty-five years ago, most workers with
pensions had "defined benefit" plans which specified
the amount they would be paid upon retirement. Today, fewer than
half of all workers are covered by any retirement plan, and fewer
than one in five has a defined-benefit pension plan. Businesses
prefer to offer defined-contribution plans like 401(k)s which
require employee contributions and tie retirement income to market
returns. In the last two years, we saw the results for those who
had invested their 401(k) savings in Wall Street. Similarly, employers
who offer health insurance have made workers take on more and
more of the cost of health benefits-with the result that a growing
number of workers decide they can't afford their health plan and
go without coverage.
BECAUSE THEY CAN
Why are businesses attacking worker protections
and demanding that workers bear more risk? The first answer that
many people give is "globalization"-and the increased
competition that comes with it. Globalization has certainly had
an important impact, but it does not offer an adequate explanation
for business's newly combative stance. After all, it is the National
Restaurant Association-representing an industry that experiences
absolutely no global competition-that has fought hardest to keep
the minimum wage low. To a large extent, businesses have gone
on the offensive not because they must, but because they can.
Of course, businesses have always had
the ability to lobby against the minimum wage, to cut health benefits,
and to run anti-union campaigns. What has changed is the social
acceptability of such actions. Princeton economist Paul Krugman
recently argued that this is what accounts for the stratospheric
rise of CEO pay: businesses have torn up the old social contract
that placed important restraints on corporate self-seeking. Once
a few large companies did this, the pressure mounted for other
companies to go along or else face a competitive disadvantage,
both in the stock market and in the market for goods and services.
And as the social contract got rewritten, the government stopped
enforcing the old rules. Cases in point are recent changes by
the Supreme Court, the NLRB, and OSHA, mentioned earlier.
What can be done about this raw deal?
It's tempting to think about the Arnold Schwarzenegger solution.
In the 1986 movie Raw Deal ( "They gave him a raw deal. Nobody
gives him a raw deal."), Schwarzenegger used fists, guns,
and explosives to wipe out the Chicago mob. But leveling the playing
field for workers is no Hollywood action film. Complicating the
task of winning a fairer share are three paradoxes.
The first is the paradox of corporate
thrift. Again, businesses are spending less on investments in
equipment and training, and are also doing their best to keep
wages and benefits low, all because the demand for the goods and
services they sell is not growing very fast. For any business
individually, this kind of thrift makes sense. But the paradox
is that for businesses taken as a whole, it's counterproductive.
Because if businesses are keeping down their own spending, and
giving workers as little as possible, the overall result is to
keep down the demand for goods and services. It's a vicious circle.
Handing another million dollars to a CEO
is not a good way to stimulate the economy. True, some CEOs, like
Tyco's Dennis Kozlowski, found creative ways to spend the money-on
art, furniture, boats, and travel. But in general, rich people
save most of their income. If you took a million dollars of executive
pay and divided it among 1,000 poor families, you would get a
lot more economic impact.
The second paradox is what University
of Massachusetts economist James Crotty calls the neoliberal paradox.
With slow global growth and increased global competition, it's
become harder for most businesses to keep profits up. But at the
same time, changes in the stock market mean that investors now
demand consistently high profits. The growth of large institutional
investors and the invention of the hostile takeover have made
it possible for investors to threaten companies with takeover
or destruction unless they generate high returns. Crotty points
out that profit for non-financial corporations actually peaked
in 1997. But corporations knew what would happen if they told
their shareholders this bad news. In this context, the pressures
for accounting games and even fraud became irresistible.
These first two paradoxes point out that
the economy is far too important to let businesses run it. But
when we think about how to take more control away from businesses,
we run into the third paradox, the Arkansas Traveler paradox,
named for an old song in which a traveler comes upon a man whose
roof is leaking in a rainstorm. When the traveler asks him why
he doesn't fix the roof, he says, "I can't fix it when it's
raining." Asked why he doesn't then repair the roof when
it's sunny, he replies, "When it's sunny, there's no need
to fix it."
Similarly, when the economy is booming,
workers have more economic leverage. Businesses run up against
labor shortages, so they're more willing to make concessions to
in order to ensure they can get the workers they need. It's a
good time to organize a union, push for a higher minimum wage,
or demand that employers provide a training program. Governments
have the money to enforce regulations or to help pay for training.
But when the economy is booming, many
workers don't see as much need to band together to defend their
interests. Why form a union or lobby for a higher minimum wage
when you can hop to a better paying job? Why push for a training
program when even unskilled workers are getting jobs? The 1990s
may not have amounted to a workers' paradise, but employment rates
and wages were relatively anemic compared to the two decades that
On the other hand, when the economy crashes,
all of a sudden even the corporate media and mainstream politicians
begin to focus on all the ways that business falls short. But
when businesses are struggling for survival, they will fight desperately
against any attempt to give workers a bigger share. The large
numbers of unemployed job seekers put a damper on any attempts
to organize unions or boost minimum wages. Governments face budget
shortfalls, so they are not inclined to take on new activities.
The only way out of this box is not economic,
but political. We have to build a movement that sees beyond the
current situation in any given year. In the boom years, we have
to remember all the problems of a business-dominated economy and
use our economic leverage to strengthen institutions and business
practices that help workers. In the bust years, like now, we have
to keep in mind that economic resources will soon enough be growing
again, and put in place rules that will more equitably distribute
and effectively use them. We know what rules make a difference:
the most important are strong wage floors and collective bargaining
protections. By making businesses work under a better set of rules,
we can actually help grow those resources by steering the economy
out of the paradox of thrift and the neoliberal paradox.
If the problem is a raw deal, the solution
is a new New Deal. The New Deal of the 1930s and 1940s saved U.S.
capitalism from itself. It looks like we're going to have to do
it again. n
Chris Tilly, an economist teaching at
the University of Massachusetts-Lowell, is a member of the Dollars
& Sense editorial collective. This article is based on a talk
he gave at the Ethical Society of Boston in November 2002.