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Need for Labor Movement Greater Than Ever

By Kevin Osborne · September 7th, 2011 · Porkopolis
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If you listen to today’s Republican leaders, they will tell you that it’s because of high taxes and overzealous regulations that the economy is sluggish and the unemployment rate remains high.

“Right now, America’s employers are afraid to invest in an economy ... hamstrung by uncertainty,” said House Speaker John Boehner (R-West Chester) during a speech in August 2010. “The prospect of higher taxes, stricter rules and more regulations has employers sitting on their hands.”

Since then, the GOP has repeated some variation of that theory ad nauseum.

Anyone who analyzes both short- and long-term trends, however, can readily peg this as a bullshit rationalization for policies that harm the public interest and the common good, and has little or nothing to do with our current predicament.

Corporate profits are at an all-time high. Profits at the 500 largest U.S. corporations grew by a record 81 percent last year.

They’re so high, in fact, that the U.S. Commerce Department recently had to revise its figures upward for the years 2009 and 2010, based on newly available data from corporate tax returns.

I’m sure most of my readers will remember that those two years were abysmal for the average person’s finances, with many people either losing their jobs or homes and seeing their investment portfolios or retirement plans shrink in value.

Nevertheless, The New York Times reported last month that corporate profits accounted for 14 percent of the total national income in 2010, the highest proportion ever recorded.

Meanwhile, the amount spent on wages, salaries and benefits for employees fell to 62.1 percent of the national economy in 2010, which is its lowest level since 1965. For the first quarter of this year, it fell even more, to 61.7 percent.

As The Times noted, “Corporate profits more than kept up with inflation. Other categories of income did not.”

I’ve written before about how data from the latest U.S. Census shows the gap between the richest and poorest Americans is at its widest since records tracking household income have been kept, and is the highest among all industrialized Western nations.

Between 1993 and 2008, the top 1 percent of Americans captured 52 percent of all income growth in the nation. To put this in perspective, the average CEO makes more than 300 times the salary paid to the average worker.

That ratio was 42-to-1 in 1960, and it still is 25-to-1 in Europe. But unfettered greed, alas, has become the new American virtue.

The real explanation for this gap mostly can be found in two major trends: Changes in tax policy and the decline in labor unions.

A study published last month in American Sociological Review found that the dramatic decline in union membership between 1973-2007 was responsible for one-third of the wage inequality among male workers in the United States that occurred during that period, and also for one-fifth of the wage inequality among female workers.

The study was conducted by Jake Rosenfeld, a sociology professor at the University of Washington, and Bruce Western, a sociology professor at Harvard University.

“The decline of organized labor in the United States coincided with a large increase in wage inequality,” the pair wrote.

“From 1973 to 2007, union membership in the private sector declined from 34 to 8 percent for men and from 16 to 6 percent for women. During this time, wage inequality in the private sector increased by over 40 percent.”

Even when accounting for factors like educational differences and technological innovation, the study concluded that unions play an important role in fostering wage equality for all.

“We argue that unions also contribute to a moral economy that institutionalizes norms for fair pay, even for nonunion workers,” the pair wrote. “In the early 1970s, when 1 in 3 male workers were organized, unions were often prominent voices for equity, not just for their members, but for all workers. Union decline marks an erosion of the moral economy and its underlying distributional norms. Wage inequality in the nonunion sector increased as a result.”

It should come as no surprise, then, as union membership has declined, income inequality and the average pay for CEOs have skyrocketed. Put simply, there is no mediating force to counter the avarice rampant in corporate boardrooms.

If you don’t believe the professors, check out this nugget from an article earlier this year on the CNN Money website, which is produced by CNN and Fortune magazine.

“Incomes for 90 percent of Americans have been stuck in neutral, and it’s not just because of the Great Recession,” wrote Annalyn Censky. “Middle-class incomes have been stagnant for at least a generation, while the wealthiest tier has surged ahead at lighting speed.”

When analyzing economic data going back decades, CNN Money found the average American’s income hadn’t budged much, although the richest 1 percent of Americans have seen their earnings surge. The average U.S. worker earned about $33,400 in 1988, when adjusted for inflation. In 2008, that amount was $33,000 — basically unchanged. By comparison, the richest 1 percent have seen their incomes grow by 20 percent in the same period.

Interestingly, some economists have concluded that income inequality has grown more rapidly under Republican presidential administrations than under Democratic administrations, largely due to income-tax policy.

Overall, the top income-tax rate for married couples making more than $250,000 annually has decreased from 92 percent in 1952 to 70 percent in 1966 to 50 percent in 1982 and to 28 percent in 1988.

After increasing slightly to 31 percent in 1992, and again to 39.6 percent in 1994, it remained at 36 percent during much of Bill Clinton’s term before dropping to 33 percent under George W. Bush and Barack Obama.

And thanks to various loopholes and tax breaks, many wealthy people pay far less, with some paying nothing at all.

So, the rich generally have more money and are paying less taxes than almost ever before.

Similarly, the “fear of more regulations” argument offered by the GOP rings hollow.

It was the nonenforcement of many financial regulations under Bush II that led to the Great Recession which, in turn, prompted Wall Street to ask for a taxpayer bailout to save it from its own recklessness. (So much for the “invisible hand of the free market” providing checks and balances.) And it was the lack of proper enforcement of regulations that also led to the Deepwater Horizon oil spill in the Gulf of Mexico for three months, beginning in April 2010.

If it was left up to Wall Street, the Republican Party and, yes, some Democrats, we wouldn’t have any effective regulations. Witness the GOP-led effort to kill the Environmental Protection Agency as proof. But we need regulations to protect society from excess and abuse; taxpayers end up paying more in the long run when they’re not enforced.

So, don’t believe the hype being pushed by Boehner, Rick Perry, Michele Bachmann and the Koch brothers. It’s malarkey.

A message that went viral on the Internet this past Labor Day noted that unions fought to bring us the eight-hour work day, end child labor and wage discrimination, gave us vacations, paid holidays and the minimum wage, along with many other progressive reforms that make our working life easier.

As my friend, Paul, noted, how many of these reforms would be opposed by Boehner and crew as “job-killers” if they were proposed today? I’m betting most, if not all, would be.

Keep that in mind the next time politicians try to fool you into voting against your own economic self-interest.


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