Dave Johnson
Fellow, Campaign for America's Future
At the Take Back The American Dream conference session titled “Make Work Pay: Why Empowering Workers & Holding CEO’s Accountable is Vital to Economic Growth” Christine Owens of the Nationsal Employers Law Project described to the audience how wages are declining. “Job growth is extremely slow. We have a net deficit over 11 million jobs, and 75% of the jobs that are returning pay between $7.50 and $13.50 an hour.”
We are in a very deep hole, and this explains why personal income is falling as well, in the wage and poverty data. Meanwhile corporate CEO pay has exploded.
What we can do is raise the minimum wage, and make employers pay workers what they have promised to pay. The minimum wage is $7.25. It would be close to $10.50 if it kept up with inflation, and 26% of the workforce makes less than %10.50. But all wages are anchored by this minimum – called a “spill up effect.” So move it up, and index it to inflation. Even Tea Party members support raising the minimum wage.
Wage theft is when employers impoverish workers by not paying what they had promised to pay. A 2008 survey showed that of low-wage workers a quarter had not been paid the minimum wage and three-quarters had not received overtime pay. For low-wage workers this is a big chunk of what they make.
Robert Weissman of Public Citizen explained that the ratio of top CEO’s pay to regular workers was 43 times in 1980 and 340 times in 2010. In many cases these CEOs were paid more than the company paid in federal taxes. In 2009 the top 12% collectively take just short of all national income. The top .4% get 14%. The top .2% are taking 10%. In 2011 departing CEOs are getting on average 724 weeks of severance pay fo reach year of service. Regular workers are lucky if they get a week or two.
A Culture Of High CEO Pay
Weissman explained that the “Lake Woebegon Effect” of setting CEO pay occurs when every CEO thinks they are better than average and should be paid better than average. But it is not related to performance – in many cases as share prices drop, pay goes up. Weissman says CEO pay matters because the CEO pay story is a big part of the cultural shift that has led to the massive increase in inequality. Other CEOs look at the highest-paid CEOs, and feel they should be paid even more. This drives a culture making it permissible for such outrageous inequality to go on.
Weissman said this CEO pay is an incentive to do really bad things, like playing around with stock prices even if it undermines the core health of the company. This helps explain the hollowing out of manufacturing and the real economy. It is a central part of the story of the Wall Street crash. CEOs getting huge returns while the bubble inflated without worrying what happens later on, because they were pocketing the money and someone else will pay for it later. People got away with taking money out of the system and the system crashed.
Damon Silver of the AFL-CIO said CEO pay is supposed to reflect performance, which is supposed to reflect wealth-generation making us all better off. But if you look back to 1964, the apex of performance of the economy, CEO pay relative to regular workers was 24 to 1. Now it is 340 to 1.
Damon said that people used to have a pension, health care, a family wage covered by a single worker. What’s different between 1964 and today is private-sector union density — the proportion of the private workforce that has the right to bargain collectively with its employer. In 1964 it was about 35% of American workers now it is about 7%.
Silver: “If we are going to rebuild the dream that conversation has to run differently. Where workers have a real voice at work and in their communities and in the politics of society. When societies have that wages and productivity move together.”
The Big Breakdown
Silver said that after WWII wages and productivity moved together, and then they diverged. More or less on the day that Ronald Reagan fired the PATCO strikers. Productivity kept going up, wages went flat, and then they went down, for more than a generation. The effect of this was covered up for more than a generation by spouses going to work, then tax cuts, then borrowing. We have an interstate highway system with no tolls because of aggressive taxation. Now we have no infrastructure investment because there are no public funds available to pay for public goods.
Countries that have high industrial union densities are more competitive. China’s government can’t figure out what to do: if they don’t give good income to workers their economy can’t grow but if they give workers a voice their government can’t survive politically.
Changing The Conversation
“How do we change the conversation? You have to convince workers their future lies in their own hands. Here is how this is done and what it means.” Silver told ta story about Detroit. In the 1920s Detroit was very anti-union, by 1940 was the world capital of organized labor. It started in a machine shop. It was a sweatshop, people would pass out and they wouldn’t stop the machines. One day a pregnant woman passed out and one of the Ruether brothers said, would you do that again, and the next day she passed out and the workers stood on tables and said, “Turn all the machines off.” They all sat down. They said they want a break schedule and they got it. Not long after that same approach was used to organize GM. A worker was asked what that was like, he said “I always thought the machines were in charge of me, when I turned that machine off I realized that was a machine and I was a man.”
Escaping The Machine
In the movie Modern Ties, a man can be swallowed by a machine. Working people in the United States have been swallowed by the machine. The key to empowerment is making people realize they can get out. Everything a boss does to stop union organizing is to convince people they are powerless. That change has to happen on a national scale. That is what we need to do.
Silver concluded, saying that it is happening in front of us on Wall Street. Citizens are beginning to get the feeling that in fact we can be the accountability. Every day a few more people figure this out.
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This entry originally appeared at The Campaign for America’s Future Blog at OurFuture.org.
Posted October 5, 2011 at 12:00 pm, in Allied Approaches, From Campaign for America's Future
