[ Workers haven’t gained as much leverage as a superficial
examination might suggest. Advances thus far, such as they are, still
leave miles to travel before the American working class recovers all
the economic standing it has lost since the 1970s. ]
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DID THE PANDEMIC FINALLY GIVE WORKING AMERICANS POWER OVER THEIR
EMPLOYERS? NOT REALLY  
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Michael Hiltzik
September 30, 2022
Los Angeles Times
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_ Workers haven’t gained as much leverage as a superficial
examination might suggest. Advances thus far, such as they are, still
leave miles to travel before the American working class recovers all
the economic standing it has lost since the 1970s. _

Union-organizing victories at Starbucks may obscure the longer-term
decline in union membership, and consequently worker leverage., Matt
Rourke / Associated Press // Los Angeles Times

 

Labor advocates have been feeling their oats lately, what with a surge
of successful union organizing drives at Starbucks stores, the hint of
union interest at Amazon warehouses, higher minimum wage standards in
cities and states across the country, and a nudge up of average wages
across the board.

These trends have inspired some to proclaim the advent of a new era of
worker power.

“The labor market is experiencing a Great Upgrade
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the progressive Roosevelt Institute declared in February. 

Most indicators show either declining labor power or give mixed
signals.
  — Teresa Ghilarducci, New School

“We’re in a moment where, politically, workers are ascendant
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David Madland of the Center for American Progress, a liberal think
tank, told the investment publication Barron’s in May. (The
article’s headline read: “How Workers Gained an Edge — and Why
They Won’t Lose It Soon.”)

Unfortunately, this sort of confidence can be a drug that invites
dangerous overdoses. That’s the view of economist Teresa Ghilarducci
of the New School.

Ghilarducci recently compiled a roster of economic indicators
suggesting that workers haven’t gained as much leverage
[[link removed]] as
a superficial examination might suggest. Even the advances thus far,
such as they are, still leave miles to travel before the American
working class recovers all the economic standing it has lost since the
1970s.

“A lot of the talk about labor having power is based on organizing
efforts at Starbucks and Amazon,” Ghilarducci told me. Of 11
economic indicators she examined, she says, “most indicators show
either declining labor power or give mixed signals.”

Ghilarducci is not aiming to be a killjoy just for the hell of it. The
condition of the labor market is critically important because the
Federal Reserve Board is convinced that the tight labor market is an
important factor driving inflation higher. Consequently, its
inflation-fighting approach involves kneecapping worker bargaining
power.
 

Fed Chairman Jerome H. Powell has explicitly stated that unemployment
must rise for inflation to come down. “The labor market has remained
extremely tight,” Powell said at his Sept. 21 news conference after
the Fed’s monthly decision to raise interest rates by three-quarters
of a percentage point for the third time in a row.

As evidence for the tight labor market, Powell cited “the
unemployment rate near a 50-year low, job vacancies near historical
highs, and wage growth elevated ... with demand for workers
substantially exceeding the supply of available workers.” He
concluded, with evident regret, “So far, there’s only modest
evidence that the labor market is cooling off.”

Yet if the labor market hasn’t been tight enough to provide workers
with real gains in wages and living standards, the Fed’s approach
threatens to take away the lackluster gains they have achieved in the
last year.

So let’s examine what has really been happening on the labor front.

The most important indicator is wage growth. Although pay has been
rising, wages have been outstripped by price inflation. In raw terms,
average nonfarm hourly wages rose by 5.2% in the year that ended in
August, according to the Bureau of Labor Statistics
[[link removed]]. In real terms, however
— that is, accounting for inflation — they fell by 2.8% in that
period.

The Fed’s approach is based on an economic concept known as the
Phillips curve, which posits a concrete relationship between
unemployment and inflation (as unemployment rises, inflation falls and
vice versa).

As I reported previously,
[[link removed]] though,
this is a mechanistic approach that harks back to pre-Depression
policy, when working men and women were regarded as just another
economic input and downturns were valued as necessary medicine to
preserve the financial well-being of the bondholding class.

It was the era when the prescription for an economic downturn offered
by Treasury Secretary Andrew Mellon, one of the richest men in
America, was “liquidate labor, liquidate stocks, liquidate the
farmers, liquidate real estate,” as Herbert Hoover described
Mellon’s argument in his own memoirs.

There’s reason to doubt that the relationship applies to today’s
variety of inflation, which has been generated by factors such as
pandemic-related supply chain obstacles and an aggressive expansion of
corporate profits. The Phillips curve also depends on an accurate
reading of unemployment.

As Ghilarducci observes, the published unemployment rate of 3.7% may
be artificially low because it doesn’t account for workers who may
still be kept out of the workforce by long COVID. As their illness
abates, they may come flooding back into the workforce — a “large
reserve army of labor,”
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she calls it, indicating that the market isn’t nearly as tight as
the Fed believes.

In any event, the fact that wage growth has lagged behind price
inflation suggests that the first can’t be driving inflation higher
— if anything, it’s holding inflation down
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The inadequacy of wage growth is shown by two other factors. One is
the disconnect between productivity growth and wage growth. The two
factors marched along together from 1948 until 1979, as the
labor-oriented Economic Policy Institute has shown
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between them has grown: From 1979 through 2020, U.S. productivity
advanced by 61.8%, but average wages grew by only 17.5%.

The second factor is the value of the federal minimum wage, which
peaked in 1970 at an inflation-adjusted $12.04
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hour (in 2022 dollars). Today it’s mired at $7.75, where it was set
in 2009.

Another trend worth examining is labor’s share of national income
compared with corporate profits (which are upstreamed to executives
and shareholders). Since 1994, corporate profits have grown sevenfold
while the labor share has been stagnant. Since the pandemic took hold
in the first half of 2020, corporate profits have doubled while labor
has lost ground
[[link removed]].

It’s proper to note that white-collar workers gained significant
freedoms as a result of the pandemic, including the health-giving
ability to work from home, while the laboring class — those
so-called essential workers — were forced to report to work at
restaurants and retail stores, at great risk to their health. It’s
those more privileged workers, however, who are now facing more
pressure, even mandates, to work from the office and figuratively
punch the clock.

The union activism that has brought representation to workers at 234
Starbucks locations in 36 states and the District of Columbia this
year is certainly encouraging, but it’s a work in progress. The
company owns 9,000 stores nationally. Moreover, the company has
resisted cooperating on the crucial next step, which is negotiating
contracts with those organized workers.

Thus far, negotiations have been underway at only three locations,
although the company said Monday that it is willing to open
negotiations
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month at all the unionized stores.

The Starbucks victories are overshadowed by the long-term decline of
union representation in the U.S., which continued through the
pandemic. Union membership shrank in 2021 to 14 million
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from the year before, with the percentage of union-represented workers
falling to 10.3%. In 1983, when the government started compiling
statistics, the U.S. had 17.7 million unionized workers, 20.1% of the
workforce.

As unions struggle to retain their collective strength, mergers among
employers outpace them, reducing the options for workers seeking to
move to new jobs and strengthening employers’ power.

The truth is that worker power can’t grow unless it’s abetted by
government oversight. Regulation of labor and workplace safety
practices has been stifled over the years.

“In recent years,” the Treasury Department observed in a March
report
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“the probability of a firm being inspected has decreased sharply.”
The government’s Occupational Safety and Health Administration, for
example, conducted 140,000 inspections in 1984; by 2019, the number
had fallen to 81,000, and declined further during the pandemic.

Only recently, with new regulatory initiatives by the uniquely
pro-union Biden administration, has oversight of working conditions
and union organizing drives by the Department of Labor and the
National Labor Relations Board improved.

Despite the reality on the ground, the Federal Reserve, which has more
power than any other American institution to guide the course of the
U.S. economy, is still wringing its hands over signs that demand for
workers is “substantially exceeding the supply of available
workers,” as Powell put it on Sept. 21. He took that as a sign that
the labor market is so tight that wages will be forced higher.

The Fed’s medicine is aimed at reducing that imbalance by slowing
the economy, thereby reducing demand for workers and thus the
latter’s ability to recover the ground they have lost in an economy
that has been wholly favorable to employers for some 40 years.

Powell says his aim is to “set the stage for achieving maximum
employment and stable prices over the longer run.” Working people
who are still struggling to fulfill the dream of a middle-class
existence that has been the American promise since the 1940s might
well wonder whether Dr. Powell’s cure will be worse than the
disease.

_[Los Angeles Times columnist MICHAEL HILTZIK writes a daily blog
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on latimes.com. His seventh book, “Iron Empires
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Robber Barons, Railroads, and the Making of Modern America,” has
just been published by Houghton Mifflin Harcourt. Follow him on
Twitter at twitter.com/hiltzikm
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on Facebook at facebook.com/hiltzik
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* Economy
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* Economic Growth
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* inflation
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* Working Class
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* Labor Organizing
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* Trade Unions
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* recession
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* Minimum Wage
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* productivity
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* unemployment
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