When General Motors
President Charles Wilson told a U.S. Senate Committee in 1953 that what
was good for General Motors was good for the country, he captured an era
in which the good wages and benefits earned by the workers at U.S.
manufacturing companies powered the nation’s economy and built the
middle class.
But sixty years later, what is good for the GM of
our day – Walmart – is clearly not good for America, as a comparison
between the biggest private employers of both eras underscores. While
the American auto industry operated on the premise of one of its
founders, Henry Ford, that workers should get paid enough to buy its
costly products, Walmart operates on the premise that its workers should
get paid so little that the only place they can afford to shop is at
their low-priced employer.
A General Motors plant was the anchor
of a community. It became the hub of a supply line for auto parts
manufactured by other unionized companies. Its managers and factory
workers earned enough to shop at local businesses and pay taxes to
support public services. They had the resources and time to participate
in the life of the community. They expected to stay with GM for their
entire careers and to retire on a pension earned while working at the
firm.
How very different from Walmart. When a Walmart opens up,
local businesses close. Wages decline throughout the community. Many of
the items in a Walmart store are made outside of the country, part of a
global supply chain built in search of lower wages in order to meet
Walmart’s low pricing demands. Workers often earn so little that they
qualify for government benefits. Many Walmart employees are hired
part-time or as temps. They lack job security and retirement security,
other than the small Social Security checks their wages will accrue.
There
are stark differences between prospects for organizing workers into a
union between the auto factories of the 20th century and the Walmarts of
today. The GM plant in which workers staged the famous sit-down strike
in Flint, Michigan in 1937 employed 47,000 workers. The average
Walmart store employs 300 workers.
It would be too expensive for an auto manufacturer to shutter a factory
threatened by a strike. But when workers voted to unionize a store in
Canada,
Walmart closed down that location, a small loss for a company with 4,200 stores.
How
did the transition from the manufacturing economy to the Walmart
economy occur? The breakdown of the union and government enforced New
Deal social compact, in which major corporations shared their profits
with their workers, began in the mid-1970s. The resurgence of economies
around the globe and the shocks of oil price increases threatened the
dominance and profitability of American business. The U.S. began
bleeding manufacturing jobs, a loss of 2.4 million jobs between 1979 and
1983.
U.S. corporations responded in a number of ways. One was to insist that, in the words of a 1974
Business Week editorial, “Some people will have to do with less…so that big business can have more.”
Corporations
increased their focus on rewarding shareholders with short-term
profits, rather than investing in their workers or in long-run growth.
General Electric, for example, slashed its workforce and cut investment
in research, and its stock price soared.
When Chrysler faced
bankruptcy in 1979, the United Auto Workers agreed to an end to annual
wage increases tied to productivity. These concessions were then
extended to unionized workers at Ford and General Motors. As
Harold Meyerson writes,
“Henceforth, as the productivity of the American economy increased, the
wages of the American economy would not increase with it.”
Corporations
also began exploiting weaknesses in U.S. labor law, which allowed
corporations to hire replacements for striking workers. In 1981, a
period of high unemployment, President Ronald Reagan fired the nation’s
air-traffic controllers for going out on strike. Major firms in a host
of industries followed Reagan’s precedent: they demanded that their
workers accept lower wages, which precipitated strikes, and then hired
replacement workers at lower wages. The strike – the central tool that
workers had used to win their fair share of economic growth -
virtually evaporated over the next few decades. In the 1960s and 1970s, workers staged an average of 286 strikes a year.
That declined to 83 strikes a year in the 1980s and finally to 20 a year since 2000.
In
the early 1970s, after major consumer and environmental legislation was
enacted by Congress over the objections of big business, Corporate
trade associations moved their offices to the nation’s capital and made
big investments in lobbying and campaign contributions. The policies
they pushed included gutting trade protections for American manufactured
goods. This eased the way for the
loss of 900,000 textile and apparel jobs in the 1990s and 760,000 electronics manufacturing jobs in the past two decades.
Corporations
pressed for the appointment of national labor law regulators who were
antagonistic to unions. The combination of weak labor laws and hostile
regulators enabled businesses to resist union organizing more
aggressively. Unions lost members, and their political clout declined
relative to surging corporate political power. Their efforts to win
labor law reform fizzled, even in Democratic administrations from Carter
to Clinton to Obama.
As major banks and Wall Street firms went
public, they too became focused on short-term profits. They drove the
businesses to which they loaned money or invested in to maximize their
short-term profits by cutting pay and benefits and by firing workers. A
hot private equity industry saddled businesses with huge debts and drove
firms to slash labor costs.
While the labor movement as a whole
was slow to respond, there were some major unions that refocused
resources on organizing new members. These unions won some victories in a
few sectors, notably health care and in the public sector. But the
gains were not enough to reverse the decline of union membership in
traditional strongholds like manufacturing and construction. Today,
unionized workers
make up 11% of the workforce,
the lowest level in 97 years. With only 7% of private sector workers in
unions, the labor movement can no longer play an effective role in
raising workers’ wages throughout the economy.
American workers remain
among the most productive in the world; productivity in major sectors like
manufacturing continues to rise. But in industry after industry, the
share of revenues going to wages has dropped, while the
share going to profits has soared. Labor’s share of national income has plummeted, while the
share taken by capital is at a record high. If median annual income had kept up with productivity, it
would now be $86,426. But the
current median income is actually $50,054, the lowest it has been since 1996 when adjusted for inflation.
Today,
unemployment is stuck at high levels. Millions of workers are trapped
in part-time jobs or jobs for which they are over-qualified.
Most of the new jobs that have slowly emerged after the recession are low-wage jobs, but the proportion of high-wage jobs is also on the rise. It is the share of middle-wage jobs that is shrinking.
Economies
will always face challenges. But the crushing of America’s middle-class
over the past forty years was not inevitable. It was the result of
decisions made directly by corporate America to advance public policies
that enabled them to take more of America’s wealth and to share less
with American workers. One of the most significant of these corporate
strategies was to weaken the ability of unionized workers to demand a
fair share of the nation’s growing wealth, whether they demanded their
fair share at the bargaining table or in the halls of Congress.
Rebuilding
the engine of our economy – the middle class – requires us to
re-imagine how organized workers can once again exercise power to
recreate an America in which prosperity is broadly shared.
(Credit: Reuters/Kevork Djansezian)
This is the second in a series of posts summarizing a new Roosevelt Institute report by
Senior Fellow Richard Kirsch, entitled “The Future of Work in America:
Policies to Empower American Workers and Ensure Prosperity for All”. The
report provides a short history of how the rise and decline of unions
and then explores reforms in labor policy to empower American workers to
organize unions and rebuild the middle class. Today’s post describes
the corporate effort beginning in the 1970s to grab more of the nation’s
wealth, at the expense of workers.
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