Three years into an economic recovery, workers are losing ground–so much so that the mainstream media are finally having to take notice.
Once inflation is taken into account, compensation for nonsupervisory workers in the private sector–about 80 percent of the workforce–dropped 0.4 percent in 2004. Analyses in the New York Times and Los Angeles Times blamed the usual suspects: globalization and the outsourcing of jobs overseas, a slack labor market and weak unionization rates. (Source: State of Working America, 2004-05) These developments are, in fact, symptoms of the underlying cause: a systematic shift of wealth from labor to capital through free-market policies — known internationally as "neoliberalism" — that began more than three decades ago. Today’s economic picture — in which profits are taking a greater share of the national income in an economic recovery than at any time since the Second World War — reflects the consolidation of the neoliberal economic order internationally.
The economic reality for U.S. workers today bears increasing similarities to their counterparts in less developed countries: a small and shrinking sector of better-paid workers amid a sea of low-paid and often temporary labor, a country where unions are weak and any economic gains for workers are under constant threat, and where the state has abandoned aljost all pretence of a social safety net.
That, said Sylvia Allegretto of the liberal Economic Policy Institute (EPI), is the real character of what George W. Bush calls "the ownership society."
Until the 1970s, "corporations provided health care and pensions, and the government was there when they failed," she told me. "Today, fewer employers provide health care, and there is less of a government safety net. It is a huge shifting of risks from big business and the government onto workers’ backs. An ownership society? To own something, you have to be able to afford it."
Allegretto, a co-author of the EPI’s comprehensive book The State of Working America 2004/2005, pointed out that with workers’ wages stagnant, the three-year-old economic recovery from the 2001 recession has leaned heavily on mortgage refinancing and middle-class consumption. "One writer called it the Nieman Marcus recovery," she said. "With interest rates rising, you will see the refinance boom continue to fall off, and you can’t get around the high cost of health care costs and the high oil and gas prices. If this continues, it will put a damper on the economy."
The pattern of wage stagnation and decline has worsened the precarious situation of U.S. workers. While overall real pay last declined in the early 1990s, hourly wages either declined or stagnated throughout the period between 1973 and 1995. Beginning in the mid-1990s, tight labor markets finally pushed up pay, particularly among low-wage workers. Unions were able to reverse some of the downward trends — workers went on strike at UPS in 1997 and General Motors to win more full-time jobs; at Bell Atlantic/Verizon, workers struck twice to win better pay and benefits.
But the recession of 2001 and the weak recovery since unraveled many of these gains. Although real wages continued to grow slowly during the recession, the economy shed large numbers of jobs, particularly in manufacturing, which saw 41 straight months of employment decline.
At the same time, productivity gains that emerged in the late 1990s continued to accelerate, which meant that fewer workers could produce more. According to the Bureau of Labor Statistics, the 4.3 percent average annual increase in productivity for 2001 to 2004 was last matched in 1948 to 1951.
This big spike in output per hour occurred despite the sharp drop in capital investment during the recession. Technology from Corporate America’s late 1990s spending spree undoubtedly played some role in the productivity increase, but old-fashioned speedup is also indisputably responsible. In other words, Corporate America has intensified its one-sided class war–and made major gains.
The result is that while the U.S. economy in 2004 generated 2.2 million jobs, that total is 1.4 million less than expected, based on averages from previous economic recoveries. About 20 percent of the jobless today are among the long-term unemployed — people who have been 27 weeks without a job — "an unprecedented development in the post-[Second World War] period," according to the EPI.
This poor jobs picture persisted even as U.S. Gross Domestic Product (GDP) grew at a brisk 4.3 percent. While this is less than half of China’s booming growth, it far outpaced Germany’s GDP increase of 1.6 percent and is ahead of Japan’s 4 percent gain. The numbers add up to this conclusion: The success of the U.S. economy has been decoupled from improvements in the lives of U.S. workers. The idea that increases in productivity will automatically lead to wage increases and improvements in living standards — the assumption of liberal Keynesian economists and union leaders alike — has been shattered.
What matters is class struggle. As the socialist economist Michael Yates put it in a recent article on the U.S. working class in Monthly Review, "rebuilding the power of the U.S. working class is the only thing which can give workers any sense of hope that the future will be in any way better than the past 30 years."
The challenges in doing this are profound. The lingering labor surplus, along with the productivity boom, gave employers a powerful weapon, even as the economy picked up steam. Unions at major corporate employers in the airline, steel and auto industries made big concessions on wages and benefits, adding to the economic downdraft. Capital’s dominant position in the balance of class forces, which provoked some resistance in the late 1990s, has been restored–and then some.
The latest wage statistics underline the point: It’s no longer true — if it ever was — that a rising economic tide will lift all boats. It’s class war from above that’s allowed America’s rulers to accumulate their vast power — and it will require class war from below for workers to make any significant gains.