I’m a little miffed Tali Kristal stole the title of an article I’ve been working on.*
But no matter: the issue Kristal investigates—the causes of the decline in labor’s wage share of national income and the rise in capitalists’ profit share—is an important one. And she moves the argument ahead in important ways.
The fact is, the issue has mostly been ignored or shunted aside by mainstream economists, who have focused their attention instead on skill-biased technological change and inequality between the remuneration to what they consider to be high-skilled and low-skilled workers. They have proceeded in that manner partly because, using the neoclassical theory of value, they presume factors of production receive incomes equal to their marginal contributions to production, and partly because they have made an ethical and political choice to do so.
So, it falls to others—academic economists outside the mainstream and noneconomist academics like Kristal—to move outside the confines of neoclassical economics and tell a different story about inequality, especially the growing divide between workers and capitalists.
Kristal’s story focuses on the role of trade unions in different industries (e.g., construction, manufacturing, and transportation as against finance and services industries). Her conclusion is that the main factor leading to the decline in labor’s share was the erosion in workers’ positional power, and this erosion was partly an outcome of class-biased technological change, namely, computerization that favored employers over most employees.
Why might computer technologies have led to a decline in labor unions? The first plausible mechanism is that automation of the production process prompted firms to utilize computer equipment in tasks previously performed manually by blue-collar, mostly unionized workers, thus downsizing many unionized manufacturing jobs. . .
The second plausible mechanism is that management’s greater control due to the computer revolution empowered employers and management, allowing them to use more legal and illegal anti-union tactics, such as illegal discharge of union activists, surveillance of union leaders, mandatory captive-audience meetings with top management, and refusal to negotiate a collective agreement. . .
An additional mechanism links computer technology to skill polarization of the work-force, which undermines established workers’ solidarity, thereby reducing the likelihood of working-class cohesion and collective action.
Thus, in Kristal’s view, the decline in unionization, coupled with a rise in unemployment and the import of goods from less-developed countries, curbed workers’ bargaining power over the past decades and led to a significant decline in labor’s share. And the decline in unionization was, at least in part, the result of computerization.
Now, my own approach to class-biased technological change proceeds a bit differently, focusing on the way technological change in consumer goods industries raises productivity and drives down the value of wage goods (as does the offshoring of consumer goods production, which itself has been assisted by computerization). The result is a decline in the amount of value capitalists need to advance in order to purchase workers’ ability to work, and thus an increase in the share of new value created that is appropriated by capitalists.
Assuming, of course, that workers are not able to bargain for a substantial increase in the amount of stuff in their wage bundle. And this is where Kristal’s analysis may dovetail with mine: the decline in unionization (which itself is partly the result of computerization) may have had the effect of undermining both workers’ resistance to technological change and their ability to bargain for an increase in the wage bundle.
The consequence (especially when we consider that the wage component of national income accounts includes distributions of profits to executives and other “workers” at the top) is exactly what the capitalist machine has produced over the course of the past three decades: a decline in labor’s share of national income and the rise in capitalists’ share.
*No, not the title Kristal actually uses: “The Capitalist Machine: Computerization, Workers’ Power, and the Decline in Labor’s Share within U.S. Industries.” But she does refer to “capital-biased technological change” during the course of her article, which is similar to the title I am planning to use when the article is finally finished: class-biased technological change.