Wage-labor and capital—pandemic edition

It’s clear, at least to many of us, that if the United States had a larger, stronger union movement things would be much better right now. There would be fewer cases and deaths from the novel coronavirus pandemic, since workers would be better paid and have more workplace protections. There would be fewer layoffs, since workers would have been able to bargain for a different way of handling the commercial shutdown. And there would be more equality between black and white workers, especially at the lower end of the wage scale.

But, in fact, the American union movement has been declining for decades now, especially in the private sector. Just since 1983, the overall unionization rate has fallen by almost half, from 20.1 percent to 10.3 percent. That’s mostly because the percentage of private-sector workers in unions has decreased dramatically, from 16.8 percent to 6.2 percent. And even public-sector unions have been weakened, declining from a high of 38.7 percent in 1994 to 33.6 percent last year.

The situation is so dire that even Harvard economist Larry Summers (along with his coauthor Anna Stansbury) has had to recognize that the “broad-based decline in worker power” is primarily responsible for “inequality, low pay and poor work conditions” in the United States.*

Summers is, of course, the extreme mainstream economist who has ignited controversy on many occasions over the years. The latest is when he was identified as one as one of Joe Biden’s economic advisers back in April. Is this an example, then, of a shift in the economic common sense I suggested might be occurring in the midst of the pandemic? Or is it just a case of belatedly identifying the positive role played by labor unions now that they’re weak and ineffective and it’s safe for to do so?

I’m not in a position to answer those questions. What I do know is that the theoretical framework that informs Summers’s work has mostly prevented him and the vast majority of other mainstream economists from seeing and analyzing issues of power, struggle, and class exploitation that haunt like dangerous specters this particular piece of research.

Let’s start with the story told by Summers and Stansbury. Their basic argument is that a “broad-based decline in worker power”—and not globalization, technological change, or rising monopoly power—is the best explanation for the increase in corporate profitability and the decline in the labor share of national income over the past forty years.

Worker power—arising from unionization or the threat of union organizing, firms being run partly in the interests of workers as stakeholders, and/or from efficiency wage effects—enables workers to increase their pay above the level that would prevail in the absence of such bargaining power.

So far, so good. American workers and labor unions have been under assault for decades now, and their ability to bargain over wages and working conditions has in fact been eroded. The result has been a dramatic redistribution of income from labor to capital.

Clearly, as readers can see in the chart above, using official statistics, the labor share of national income fell precipitously, by almost 10 percent, from 1983 to 2020.**

Not surprisingly, again using official statistics, the profit rate has risen over time. The trendline (the black line in the chart above), across the ups and downs of business cycles, has a clear upward trajectory.***

Over the course of the last four decades is that, as workers and labor unions have been decimated, corporations have been able to pump out more surplus from their workers, thereby lowering the wage share and increasing the profit rate.

But that’s not how things look in the Summers-Stansbury world. In their view, worker power only gives workers an ability to receive a share of the rents generated by companies operating in imperfectly competitive product markets. So, theirs is still a story that relies on exceptions to perfect competition, the baseline model in the world of mainstream economic theory.

And that’s why, while their analysis seems at first glance to be pro-worker and pro-union, and therefore amenable to the concerns of dogmatic centrists, Summers and Stansbury hedge their bets by references to “countervailing power,” the risk of increasing unemployment, and “interferences with pure markets” that “may not enhance efficiency” if measures are taken to enhance worker power.

Still, within the severe constraints imposed by mainstream economic theory, moments of insight do in fact emerge. Summers and Stansbury do admit that the wage-profit conflict that is at the center of their story does explain the grotesque levels of inequality that have come to characterize U.S. capitalism in recent decades—since “some of the lost labor rents for the majority of workers may have been redistributed to high-earning executives (as well as capital owners).” Therefore, in their view, “the decline in labor rents could account for a large fraction of the increase in the income share of the top 1% over recent decades.”

The real test of their approach would be what happens to workers’ wages and capitalists’ profits in the absence of imperfect competition. According to Summers and Stansbury, workers would receive the full value of their marginal productivity, and there would be no need for labor unions. In other words, no power, no struggle, and no class exploitation.

That’s certainly not what the world of capitalism looks like outside the confines of mainstream economic extremism. It’s always been an economic and social landscape of unequal power, intense struggle, and ongoing class exploitation.

The only difference in recent decades is that capital has become much stronger and labor weaker, at least in part because of the theories and policies produced and disseminated by mainstream economists like Summers and Stansbury. Now, as they stand at the gates of hell, it may just be too late for their extreme views and the economic and social system they have so long celebrated.

*The link in the text is to the column by Summers and Stansbury published in the Washington Post. That essay is based on their research paper, published in May by the National Bureau of Economic Research.

**We need to remember that the labor share as calculated by the Bureau of Labor Statistics includes incomes (such as the salaries of corporate executives) that should be excluded, since they represent distributions of corporate profits.

***I’ve calculated the profit as the sum of the net operating surpluses of the nonfinancial and domestic financial sectors divided by the net value added of the nonfinancial sector. The idea is that the profits of both sectors originate in the nonfinancial sector, a portion of which is distributed to and realized by financial enterprises. The trendline is a second-degree polynomial.

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The condition of the black working-class in the United States

Before he was killed, George Floyd worked as a truck, a bouncer, and a security guard. Ahmaud Arbery worked at his father’s car wash and landscaping business, and previously held a job at McDonald’s. Breonna Taylor was a certified Emergency Medical Technician who had two jobs at hospitals in Louisville, Kentucky. Eric Garner worked as a mechanic and then in New York City’s horticulture department for several years before health problems, including asthma, sleep apnea, and complications from diabetes, forced him to quit. Trayvon Martin was the son of a program coordinator for the Miami Dade Housing Authority and a truck driver; he washed cars, babysat, and cut grass to earn his own money.

All of them, and most of the other African Americans who have been killed in recent years (by the police or other Americans), were members of the black working-class in the United States.

The history of the black working-class begins, of course, with slavery and then continues—with almost-incessant violence, from slave patrols through lynchings to beatings and deaths at the hands of law enforcement and incarceration by the criminal justice system— through southern sharecropping, the Great Migration out of the rural South to the urban factories of the Northeast, Midwest, and West, and the panoply of jobs that currently exist in the public and private sectors of the United States.

For the purposes of this post, I want to focus on the most recent period—thus, from the end of the Great Migration, which roughly coincided with the assassinations of the two great Civil Rights leaders of the period, Malcolm X and Martin Luther King, Jr.

Even at the end of the Great Migration, more than half of the black working-class population remained in the South. But the region itself was changing, in large part because of the infrastructure associated with the spread of military bases and the subsequent industrialization of cities and towns in the non-cotton south—without however eliminating the anti-union, low-wage legacy of southern economies.

Meanwhile, in the North (both the Northeast and the Midwest), a large portion of black migrants managed to secure factory jobs. But the same migration channeled other black workers into the high-unemployment ghettos of northern cities, which if anything were worsening with the passage of time.

While in the first half of the twentieth century, labor unions had been anything but a positive force for black workers, by 1973 unionization rates among black men were over 40 percent, while rates among white men were between 30 and 40 percent.* And by the late 1970s, almost one quarter of black women—nearly double the share of white women—belonged to a union.

But, in 1972 (the first year for which data are available), the black unemployment rate was more than twice (2.15 times) that of white workers—which has persisted as an average, through the ups and downs of both unemployment rates, for the entire period down to the present.

What about workers’ wages? In 1973, average (median) real wages of black workers were only 78 percent of white wages—and, while the percentage has varied over the decades (reaching a high of 84 percent in 1979, no doubt due to the influence of labor unions), by 2019 the percentage had fallen even lower, to 76 percent.

The wages of the black working-class (just like those of the white working-class) exhibited a clear hierarchy based on gender in the early 1970s. Black women earned on average 69 percent of what black men did (while white women’s wages were even less, about 62 percent of their male counterparts). But then some of the gaps began to decrease: between black women and men (as well as between white women and men). In fact, by 2019, black working-class women’s wages were 94 percent of those of black men (although, by then, white women’s wages were higher than both black men and women). But the wage gap between black and white men had actually grown—from 24.5 percent (in 1973) to 31.7 percent (in 2019).

The gender composition of the black working-class both reflected and contributed to the changes in wage gaps over the past five decades. In 1972, the labor force participation rate of black men was much higher than that of black women: 78.5 percent compared to 51.1 percent. But the gap between the two rates has declined dramatically over time, both because the rate for men has fallen (largely due to the increased incarceration rate of black men) and the increase in the rate for women (as they became increasingly engaged in employment outside the household). So, even though both rates have fallen in recent decades (mirroring the nationwide decline in the labor force participation rate, the gray line in the chart), the changes between 1972 and 2019 for both groups are striking: the rate for black men had declined to 68.1 percent while that of black women had increased to 62.5 percent.

The result is that black women, who in 1972 made up 44.9 percent of the black civilian labor force, now comprise 52.5 percent. The share of black men has thus declined—from 55.12 percent to 47.5 percent.

While the victories of the Civil Rights Movement in dismantling Jim (and Jane) Crow laws were appropriately celebrated, the movement never succeeded in eliminating systemic or structural racism—from employment and housing discrimination through health disparities to the racial biases of the prison-industrial complex. Moreover, the initial progress in narrowing the wage gaps within the working-class coincided with a new assault on American workers and the dramatic growth in inequality in the U.S. economy as a whole. Racial capitalism in the United States therefore changed beginning in the late-1970s, leaving the American working-class—and, even more so, black (and Hispanic) workers—further and further behind the tiny group at the top.

By 2020, the increasing precarity of the black working-class made its members more exposed to physical attacks and police murders, the ravages of the novel coronavirus pandemic, and the negative effects of the economic crisis.

source

Last year, 24 percent of all police killings were of black Americans when just 13 percent of the U.S. population is black—an 11-point discrepancy. Mapping Police Violence also showed that 99 percent of all officers involved in all police killings were never charged.

The latest overall COVID-19 mortality rate for black Americans (compiled by the the APM Research Lab) is 2.3 times as high as the rate for whites, and they’re dying above their population share in 30 states and, most dramatically, in Washington, D.C.

Even as the rate of layoffs has largely slowed over the past two months, black job losses rose in May and June relative to those of white workers. In fact, according to the New York Times,

For long stretches of the pandemic, black and white employment losses largely mirrored each other. But in the last month, layoffs among African-Americans have grown while white employment has risen slightly. Now, among all the black workers who were employed before the pandemic, one in six are no longer working.

And all indications are that the economic recovery, if and when there is one, will be both long and painful, especially for the African American working-class.

It has become increasingly clear, especially in recent weeks as a national uprising has responded to the deaths of Floyd and many other members of the black working-class at the hands of the police, that these incidents did not happen in isolation. It is therefore time for the American working-class—black, brown, and white—to overcome its divisions and confront the problem of racism head-on. That’s certainly how the Executive Board of the Communication Workers of America sees things:

The only pathway to a just society for all is deep, structural change. Justice for Black people is inextricably linked to justice for all working people – including White people. The bosses, the rich, and the corporate executives have known this fact and have used race as one of the most effective and destructive ways to divide workers. Unions have a duty to fight for power, dignity and the right to live for every working-class person in every place. Our fight and the issues we care about do not stop when workers punch out for the day and leave the garage, call center, office, or plant. . .

Thoughts and prayers aren’t enough. No amount of statements and press releases will bring back the lives lost and remedy the suffering our communities have to bear. We must move to action.

 

*According to Natalie Spievack,

In 1935, when the National Labor Relations Act gave workers the legal right to engage in collective bargaining, less than 1 percent of all union workers were black. Union formation excluded agricultural and domestic workers, occupations predominantly held by black workers, and largely left black workers unable to organize.

By the late 1960s and early 1970s, unions began to integrate. The manufacturing boom brought large numbers of black workers north to factories, the civil rights movement focused increasingly on economic issues, and the more liberal Congress of Industrial Organizations organized black workers.

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Freedom—pandemic edition

“Formal” freedom is the freedom of choice WITHIN the coordinates of the existing power relations, while “actual” freedom designates the site of an intervention which undermines these very coordinates.

— Slavoj Žižek, On Belief

The novel coronavirus pandemic has demonstrated how shallow and restricted the notion of formal freedom is in the United States.

After years of pretending that private healthcare and health insurance expanded the freedom of individual choice, even with the changes introduced by Obamacare, the existing health system has failed to protect most Americans from the ravages of the disease. Right now, with over 2 million confirmed cases and over 100 thousand deaths, the United States has over one quarter of the world’s cases and fatalities. And the numbers continue to rise in many states, with the forced reopening of businesses.

Yes, in recent years, Americans have been able to choose to work at a job and use their employer-provided health benefits or to purchase health insurance on state exchanges, thereby dramatically lowering the number of uninsured people. But they haven’t been able to choose what kind of health system they want, how they want their healthcare to be provided. As a result, the existing—understaffed and underfunded—public health system, in the midst of an obscenely unequal economy and society, has been unable to effectively confront the spread of COVID-19.

It’s that same formal freedom that allows investors to purchase stocks, including equity shares in Hertz, which just happens to have entered bankruptcy protection in late May. Between the 3 and 8 June, Hertz’s stock exploded in price. During that week, it increased to $5.53 per share, from 82 cents, a preposterous rise of nearly seven times—apparently just one example of a more general “flight to crap” in U.S. stock markets. And just to highlight the absurdity of what freedom means in the United States, the nation’s second-largest car-rental agency filed with the Securities and Exchange commission to sell up to $500 million worth of new shares—shares that would likely be rendered worthless after creditors are paid off—in a move that was approved by the federal judge in Delaware overseeing the Hertz bankruptcy case. (And then, just yesterday, Hertz reversed course and decided to pull the plug on the deal.)

And it’s the freedom aircraft manufacturer Boeing relied on in late April to raise $25 billion by selling bonds to investors, to avoid taking aid from the federal government, and then a month later to fire 6,770 workers (part of its plan to reduce a total of 16 thousand jobs).

Meanwhile, employers and the White House (including Labor Secretary Eugene Scalia) are clamoring for businesses to be allowed the freedom to reopen. But they’re worried unemployed workers, who have received supplemental benefits as a result of the CARES act, will not want to return to work under with the risk of becoming infected with the virus. So, they’ve announced both that the extra $600 “disincentive” for people to return to work will be allowed to expire at the end of July and that any workers who refuse to be called back to work will lose their unemployment payments.

Clearly, employers’ freedom to reopen their businesses is coming at the expense of workers’ freedom to stay home during the pandemic. And that’s the limit of formal freedom under capitalism—the kind of fundamental clash during which it is possible to begin to exercise an actual freedom of reimagining and reinventing the rules of economic and social organization.

Thus far, however, we haven’t seen much in the way of actual freedom in the economic sphere. Massive unemployment, and therefore the unremitting pressure on all workers, both those with jobs and those without, will do that. But we might just be witnessing such a site in the other fundamental clash currently taking place, the one that arose in response to the recent murders of George Floyd, Ahmaud Arbery, and Breonna Taylor.

The first demand of the Black Lives Matter movement is, of course, freedom from police violence. It’s a freedom enumerated in the Constitution (in the Fourteenth Amendment) but undermined and subverted by the systemic racism that historically and still today has haunted the administration of justice in the United States—by both the police and the courts.

The pandemic has also highlighted—and further exacerbated—the obscene racial inequalities that characterize the American economy and society. For example, black Americans are dying from Covid-19 at three times the rate of white people. And while unemployment has skyrocketed for black and white workers in the COVID-19 labor market, the unemployment rate is much higher for black workers, which has in turn worsened the already-high income and benefits gaps between white and black workers.

As it turns out, the Black Lives Matter movement was already, back in 2016, thinking beyond police violence. As Robin G. D. Kelley explained, the organization is invested in a structural overhaul of the American system that oppresses most people. Its demands therefore include

ending all forms of violence and injustice endured by black people; redirecting resources from prisons and the military to education, health, and safety; creating a just, democratically controlled economy; and securing black political power within a genuinely inclusive democracy.

That’s more than a laundry list of demands or a simple political platform (like those of the Democratic and Republican parties). It’s a vision of economic and social transformation that will produce deep structural changes—for black communities and for all Americans. In other words, it aspires to an enactment of actual freedom that questions the existing coordinates of power relations in the United States (and around the world).

The Black Lives Matter movement infuses the current protests—indeed, the multiracial national uprising we’re witnessing across the country—with the potential of becoming the most recent in the tradition of real progressive social movements which, as Kelley explained in his 2002 book Freedom Dreams: The Black Radical Imagination,

do not simply produce statistics and narratives of oppression; rather, the best ones do what great poetry always does: transport us to another place, compel us to imagine a new society.

It’s only a possibility, at this stage—the potential of moving beyond a formal freedom from fear to an actual freedom of redrawing the existing boundaries of the economy and society, by generating radically new questions, theories, and knowledges. It’s a freedom that can only be produced by a combination of ruthless critical thinking and collective political activity.

It’s a freedom that allows us—indeed, compels us—to imagine a new society.

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Cars and drivers—in the age of inequality

How many of you read Car and Driver magazine?

Not many of you, I presume. But maybe you should. At least the June 2020 issue.

It’s certainly a sign of our obscenely unequal times that a magazine better known for its reviews of foreign supercars and domestic muscle cars and for an editorial policy that courts controversy only when it attacks SUVs (in favor of minivans and cars) highlights the story of Oliver, Jason M. Vaughn’s family’s 260,000-mile Subaru in a piece subtitled “The Fear of Failure.”

Turning the key has become an act of faith. As the engine grumbles to life on this fine southwest Colorado morning, the yellow check-engine light comes on, as it has every day for the past four years, and the same questions swirl in my mind. Is this the day that tiny head-gasket leak turns into a gusher? Is this the day the catalytic converter chokes closed for good? Is this the day that one speck of sand too many works its way into that cracked CV-joint boot, causing it to seize up at some bend in the road and send me spinning into a ravine, not to be discovered until spring?. . .

I intimately know everything wrong with this car. I feel the squishy brakes and the engine straining to get up a hill, and I hear the ominous grinding sounds coming from under the right-front wheel well. But I can’t afford to do anything to ward off those looming disasters.

That’s because Vaughn’s family is like many American households, who don’t have any emergency savings and therefore can’t cover a surprise $400 expense without borrowing money or selling something. Or they can’t come up with the money at all.

Oliver, purchased new in 2004, is also like many other cars on U.S. roads, in being old (at 11.8 years old, the average age of the 278 million vehicles on American highways has never been higher). One reason is because

many Americans—in a time of stagnant wages combined with soaring consumer debt and a high cost of living—can’t afford to replace their old beaters. Or if they can get another vehicle, they’re only able to replace it with another beater.

As for Vaughn, he and his wife were both laid off from their respective, “and not very lucrative jobs,” last year and they can’t afford to keep up on the current maintenance, much less fix all the stuff on the car they’ve been putting off.

That’s why Vaughn identifies so much with Linda Tirado, the author of the 2014 book, Hand to Mouth: Living in Bootstrap America, an account of what it’s like, day after day, to work, eat, shop, raise kids, and keep a roof over your head without enough money. One of the lessons Vaughn highlights is the predicament of the poor working-class:

One of the hardest ironies of all for the working poor is the often unspoken truth that in America, you usually have to already have money to even get an opportunity to make money. And simply moving someplace with better jobs and higher pay isn’t really an option when you’re broke.

To keep Oliver running, Vaughn has taught himself some basic maintenance and repairs (via YouTube videos, of course) and resorted to cheap fixes that betray “more than a twinge of desperation”—all in the hope that the Subaru can last another 100,000 miles. The fact is,

We’ll probably need another 100,000 miles out of Oliver whether we can properly care for him or not.

That makes a lot of sense. It’s exactly the predicament more and more working-class drivers and their cars find themselves in as economic inequality, already grotesque, continues to soar in the United States.

Clearly the problem of inequality is so serious and so widespread that it has forced its way into a Hearst-owned automotive enthusiast magazine, squeezed between articles on the new Porsche 718 Cayman GT4 (price as tested: $118,600) and a golden-wheeled, Kar Tunz-modified Lamborghini Urus (price: $277,904).

Now, tell me, is there a better illustration of what life is like in the United States in the age of inequality?

 

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