Posts Tagged ‘labor’

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Recent legal decisions—such as the NLRB’s ruling that Northwestern University’s football players are employees of the school and are therefore entitled to a union election, and U.S. District Judge Claudia Wilken’s ruling on the so-called O’Bannon case, which will enable football and men’s basketball players to receive more from schools than they are receiving now—have raised lots of important questions about how we look at and compensate the work performed by student-athletes in American colleges and universities.

One of the most interesting issues has to do with unpaid labor. Here’s the New York Times editorial board on the O’Bannon ruling:

The N.C.A.A. and its member institutions have no one to blame but themselves for any unintended negative consequences. They built a lucrative commercial enterprise that depended in large part on unpaid labor. Now they have to move forward without exploiting the very students they have always purported to protect.

That’s right: U.S. colleges and universities have been producing and selling athletic performances—especially, but not only, football and basketball games—that are produced by student-athletes who are not paid for their labor. The players do receive some compensation, such as tuition and room and board (and, on the O’Bannon ruling, will be permitted to receive money to defray some additional costs of attending school) but they are not being paid for the total value they produce for the schools they attend. Therefore, the players are performing unpaid labor.*

But why stop there? It may be easier to see unpaid labor when workers, such as student-athletes, receive absolutely no pay—and their employers are raking in huge sums of money from the work they perform. But why not then identify and do something about all the other forms of unpaid labor being performed in our economy? I’m thinking, for example, of autoworkers, restaurant employees, nurses, daycare workers, and so on, all of whom receive wages but wages that are much less than the total value they produce. They, too, are performing unpaid labor, which is then appropriated by their employers and serves as the source of the enterprises’ profits. 

No amount of tinkering with workers’ compensation—whether in the form of establishing a trust fund for student-athletes or raising minimum wages or increasing wages through market pressure or collective bargaining—will ultimately eliminate that unpaid labor. It may diminish it, by changing the ratio of unpaid to paid labor, but vast amounts of unpaid labor will continue to exist.

And that’s the problem that needs to be solved, both on American campuses and in the wider economy.

*In Marxian terms, the players are productive laborers and, by virtue of creating surplus-value, are being exploited by their capitalist employers, the boards of trustees of the colleges and universities where they work. Much of that extra value is retained by the athletic departments (which is then used to pay head coaches, their coaching staffs, and to build new, start-of-the-art athletic facilities), and another large portion is distributed to the NCAA. Hence, the opposition of the schools, coaches, and the NCAA to any measure that increases the bargaining power of the student-athlete-workers.

Chart of the day

Posted: 29 July 2014 in Uncategorized
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This is how labor is being organized in building projects for the 2022 World Cup Finals scheduled for Qatar.

Migrant workers who built luxury offices used by Qatar’s 2022 football World Cup organisers have told the Guardian they have not been paid for more than a year and are now working illegally from cockroach-infested lodgings. . .

By the end of this year, several hundred thousand extra migrant workers from some of the world’s poorest countries are scheduled to have travelled to Qatar to build World Cup facilities and infrastructure. The acceleration in the building programme comes amid international concern over a rising death toll among migrant workers and the use of forced labour.

“We don’t know how much they are spending on the World Cup, but we just need our salary,” said one worker who had lost a year’s pay on the project. “We were working, but not getting the salary. The government, the company: just provide the money.”

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Capitalism, to be sure, comes in different—more or less unequal—forms.

For example, the less unequal form of U.S. capitalism in the three decades following World War II was different from the periods before the first and second Great Depressions, when capitalism in the United States became increasingly unequal. The same is true across countries—in the sense that the forms of capitalism in Scandinavia are less unequal that what we are living through in the United States.

But at the heart of all forms of capitalism is a fundamental inequality: between workers and owners, between those who produce the surplus and those who appropriate and receive distributed cuts of it. Those groups play different roles and engage in different kinds of economic behaviors. For example, workers sell their ability to work, most of their income takes the form of wages, and they’re able to save relatively little; owners and high-level corporate executives are able to capture what others produce, their incomes consist of both salaries and other returns on capital, and they can save and invest a large percentage of their incomes.

That basic inequality is mostly hidden or overlooked within mainstream economic theory. But, it seems, in the debate surrounding Thomas Piketty’s new book, at least some people are discovering or finding ways of articulating the fundamental links between capitalism and inequality.

As we saw yesterday, Seth Akerman gets it:

The statistical image that emerges from these numbers is neither Piketty’s vision of rising returns to “capital” as such, nor Krugman’s picture of an increase in returns to managerial “labor.” Rather, we see the burgeoning of a general surplus: an excess of national income over and above what’s needed to pay the nation’s non-managerial workers, appropriated broadly by all those who control capital — whether as shareholders, managers, or financiers.

So does Branko Milanovic, who, in challenging the latest attempt to undermine Piketty’s argument (by Debraj Ray), makes some rudimentary observations that most mainstream economists choose to ignore:

Let me now explain why I disagree with Debraj. While r>g (or r>=g) may be a feature of all growth models it is still a contradiction of capitalism for three reasons: because returns from capital are privately owned (appropriated), because they are more unequally distributed (meaning that the Gini coefficient of income from capital is greater than the Gini coefficient of income from labor), and finally and most importantly because recipients of capital incomes are generally higher up in the income pyramid that recipients of labor income. The last two conditions, translated in the language of inequality mean that the concentration curve of income from capital lies below (further from the 45 degree line) the concentration curve of income from labor, and also below the Lorenz curve. Less technically, it means that capital incomes are more unequally distributed and are positively correlated with overall income. Even less technically, it means that if share of capital incomes in total increases, inequality will go up. And this happens precisely when r exceeds g.

It is indeed a contradiction of capitalism because capitalism is not a system where both the poor and the rich have the same shares of capital and labor income. Indeed if that were the case, inequality would still exist, but r>g would not imply its increase. A poor guy with original capital income of $100 and labor income of $100 would gain next year $5 additional dollars from capital and $3 from labor; the rich guy with $1000 in capital and $1000 in labor with gain additional $50 from capital and $30 from labor. Their overall income ratios will remain unchanged. But the real world is such that the poor guy in our case is faced by a capitalist who has $2000 of capital income and  nothing in labor and his income accordingly will grow by $100, thus widening the income gap between the two individuals.

In their different ways, what Ackerman and Milanovic are arguing is that there is a fundamental class inequality at the heart of all forms of capitalism.

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As if to illustrate the point I made the other day (about earnings at the top being themselves distributions of the income captured by capital), Seth Ackerman put together the chart above (from data in Simon Mohun’s recently published article on unproductive labor) comparing the sum of profits and managerial compensation to non-managerial compensation, both as shares of total net income.

Indeed, in a direct rebuttal of the neoclassical marginal-productivity theory of distribution, capital’s share of income has been growing at the expense of labor’s share since the late-1970s.

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I find it interesting that Thomas Piketty’s classical treatment of inequality is being interpreted—and criticized—as a battle of capital versus labor. (Is that just because Piketty begins chapter 1 with the story of the August 2012 strike at Lonmin’s Marikana platinum mine? It must be, because the book (as far as I’ve read) focuses much more on rates of demographic growth than it does on class conflict.)

In any case, as I suspected, the main line of attack (at least within mainstream economic thinking) against Piketty’s treatment is to undermine the idea of capital versus labor and to focus instead on growing inequality among workers. We saw this with David Autor’s article. Now, it’s Laurence Kotlikoff:

The deep flaws in parts of Piketty’s book don’t mean that inequality is either small or benign. But the real source of inequality these days is not due to capitalists saving every penny and workers spending every cent or to r always exceeding g. It’s due to labor earnings becoming ever more skewed. This is happening for a variety of reasons, including the advent of smart machines. This rising wage inequality, which Berkeley’s Emmanual Saez and co-author Piketty have spent years carefully documenting, doesn’t pit capitalists against workers. It pits workers against workers.

In my view, the problem with juxtaposing ownership-of-capital inequality and labor-earnings inequality is that it ignores the extent to which earnings at the top are themselves distributions of the income captured by capital. That’s a point that seems to have been missed by both Piketty and his mainstream critics.

Map of the day

Posted: 21 May 2014 in Uncategorized
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The International Trade Union Confederation (ITUC) [ht: hk], an alliance of regional trade confederations that advocates for labor rights around the world, debuted its Global Rights Index this week, ranking countries on a 1 (best) through 5 (worst, in darker shades of red on the map) scale on the basis of how well workers’ rights are protected.

According to the report [pdf],

In the past 12 months alone, governments of at least 35 countries have arrested or imprisoned workers as a tactic to resist demands for democratic rights, decent wages, safer working conditions and secure jobs. In at least 9 countries murder and disappearance of workers were used as a common practice in order to intimidate workers.

The United States received a 4 (the same as such countries as Bahrain, Haiti, and Pakistan), indicating a “systematic violation of rights”:

Workers in countries with the rating of 4 have reported systematic violations. The government and/or companies are engaged in serious efforts to crush the collective voice of workers putting fundamental rights under continuous threat.

Robert Jacob Hamerton, illustration from Punch, 29 July 1843

No, I haven’t had a chance to read Thomas Piketty’s book yet. But I’ve just finished my end-of-semester grading. So, soon…

In the meantime, Thomas Frank [ht: ra] offers a few things to look out for, such as:

1. Piketty’s critique of the discipline of economics.

One of the best things about Piketty’s masterwork is his systematic demolition of his own discipline. Academic economics, especially in the United States, has for decades been gripped by a kind of professional pretentiousness that is close to pathological. From time to time its great minds have grown so impressed by their own didactic awesomeness that they celebrate economics as “the imperial science”— “imperial” not merely because economics is the logic of globalization but because its math-driven might is supposedly capable of defeating and colonizing every other branch of the social sciences. Economists, the myth goes, make better historians, better sociologists, better anthropologists than people who are actually trained in those disciplines. One believable but possibly apocryphal tale I heard as a graduate student in the ’90s was that economists at a prestigious Midwestern university had actually taken to wearing white lab coats—because they supposedly were the real scientific deal, unlike their colleagues in all those soft disciplines.

Piketty blasts it all to hell. His fellow economists may have mastered the art of spinning abstract mathematical fantasies, he acknowledges, but they have forgotten that measuring the real world comes first. In the book’s Introduction this man who is now the most famous economist in the world accuses his professional colleagues of a “childish passion for mathematics and for purely theoretical and often highly ideological speculation”; he laughs at “their absurd claim to greater scientific legitimacy, despite the fact that they know almost nothing about anything.” In a shocking reversal, he calls on the imperial legions of economic pseudo-science to lay down their arms, to “avail ourselves of the methods of historians, sociologists, and political scientists”; the six-hundred-page book that follows, Piketty declares, is to be “as much a work of history as of economics.”

2. His lack of knowledge of U.S. history.

Whenever Piketty moves away from numbers and tries to describe life in the United States, things go wrong in a hurry. The worst example first: Piketty tells us that, unlike the French, Americans feel “no nostalgia for the postwar period” because our economy didn’t grow rapidly in those years. In fact, American GDP often grew by 5 and 6 percent in the ’50s and ’60s and Americans have felt intense sweet wistfulness for those days ever since “American Graffiti” came out in 1973. To be fair, Piketty corrects himself several hundred pages on, but then not because he’s looked around and noticed the four decades of ’50s-revival crap Americans have so eagerly consumed, but because of a stray nostalgic remark by his fellow economist Paul Krugman. It’s all moot, I guess, because before long and without any explanation he reverts to his original position of nostalgia denialism.

Piketty’s command of American political history is, quite simply, abysmal. He announces that the U.S. “never became a colonial power,” which would be news to the people of the Philippines, not to mention the Sioux. He describes Herbert Hoover as a “liquidationist” though that was Hoover’s own term for the policies that Hoover rejected. About the presidency of Franklin Roosevelt—ordinarily an important period for students of inequality—Piketty seems to know almost nothing, except that FDR used wage and price controls during World War II. At one point, he comes close to denying the existence of Rooseveltian liberalism altogether, writing that for we benighted Americans “the twentieth century is not synonymous with a great leap forward in social justice.” As for the great right turn of the Eighties, he asserts repeatedly and with virtually no documentary evidence that it happened because America was falling behind Germany and Japan in economic growth—in other words, that the galaxy of nutty anxieties that fuel modern right-wing politics can be easily deduced from a few lines on a graph.

3. And Piketty’s blind spot when it comes to unions.

Turning to the problem of income inequality here in the United States, there is an even simpler solution, by which I mean a more realistic solution, a solution that builds on familiar American traditions,that works by empowering average people, that requires few economists or experts, that would involve a minimum of government interference, and that proceeds by expanding democracy and participation rather than by building some kind of distant and unapproachable global tax authority: Allow workers to organize. Let people have a say on the basic issues affecting their lives.

Piketty’s biggest blind spot is that he has virtually nothing to say about labor unions. He starts Chapter 1 of “Capital” with an anecdote about a bloody strike in South Africa and he returns to that same tragic episode at the very end of the book, but in between he addresses the matter almost not at all. Piketty talks a good game about democracy, but like other economists who have made inequality their subject, he prefers solutions that are handed down from the lofty heights of expertise.

The best remedy for inequality, however, is the one that comes up from below. Economists may not think very highly of those hardened people in SEIU t-shirts—some of them smoke too much, some are suspicious of “free trade,” some of them (gasp!) didn’t go to college—but the fact remains that in nearly every particular they represent the obvious and just about the only social force on the ground in America that might bend the inequality curve the other way.

In all honesty, one can go even further than Frank. Letting people have a say on the basic issues affecting their lives means more than forming unions. It means letting them having a say in the way the surplus is appropriated and distributed in their workplaces. Now, that’s a solution to the battle between capital and labor that has been going on since the mid-nineteenth century.