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Sherrod Brown

By Sherrod Brown
U.S. Senator, D-Ohio

Progressives are an impatient bunch. We fight for people who have waited too long already — for health care, for educational opportunity, for jobs to keep them in the middle class.

But for generations, conservatives have appealed to fear to protect the privileged and preserve the status quo — fear of immigrants, fear of diversity, fear of big government. For conservatives in 2010, it’s easy:

“Stop.”

“No.”

“Repeal.”

Meanwhile, for more than a century — in churches and temples, in union halls and neighborhood centers, in the streets and at the ballot box — progressives have moved the country forward. Progressives brought us minimum wage and Social Security in the 1930s, civil rights and Medicare in the 1960s, and health care and Wall Street reform in 2010.

Opponents of these accomplishments — some of society’s most privileged and well-entrenched interest groups — have not changed much. The John Birch Society of 1965 has bequeathed its fervor and extremism to the Tea Party of 2010.

History tells us that rage on the right should not be confused with populism. The far right attacks government regulation as it feeds Wall Street and the insurance companies. It rails against government spending for the least privileged as it lavishes tax cuts favoring the most privileged.

No one should be surprised over what has happened in the last 18 months:

•We passed health care reform, so the insurance companies are coming after us at election time. (more…)

Jack Metzgar

By Jack Metzgar
Emeritus Professor of Humanities at Roosevelt University in Chicago

British historian E.H. Carr once said something to the effect that while no serious scholar makes up the facts, they all choose which facts “to put on stage.”  The problem of cultural bias is that there are way too many facts to give them all their proper due, and in choosing what we think is most significant among them, we are guided by our own focus and general sense of significance – that is, by our values, our hopes and fears, and our everyday sense of how the world works.

Every two years the Bureau of Labor Statistics (BLS) makes detailed projections of how many jobs there will be in which occupations ten years from now.  The latest one came out late last year, and among a dizzying array of facts and figures, here’s what they headlined in italics at the top of their report:

Professional and related occupations and service occupations are expected to create more new jobs than all other occupational groups from 2008 to 2018; in addition, growth will be faster among occupations for which postsecondary education is the most significant form of education or training. . . . .

This was duly reported by The New York Times under the headline “Where the Jobs Will Be,” with the same emphasis on “professional and related occupations” and “postsecondary education.”   The message is that our society is going to need many more college graduates than it has now, which is true.  The impression most often left, however, is that we are rapidly becoming a society of “professionals” and “knowledge workers,” and that the key to our future is making sure that almost everybody gets a college education.  This impression is not only false, but spectacularly so.

Disguised in the text, but present in the BLS tables is another set of facts: Only 21% of jobs now require a bachelor’s degree, and despite faster growth among these credentialed occupations, that isn’t going to change much.  By 2018, according to the BLS, only 22% of jobs will require a bachelor’s degree or more.  Of the 51 million “job openings due to [both] growth and replacement needs” in the next ten years, fewer than 12 million will require a bachelor’s degree.

At the heart of what the BLS and The New York Times choose to put on stage is confusion between the fastest growing jobs and the jobs with the largest job growth.  Though the BLS tables report both the fast and the large in detail, the headline and the text emphasizes speed over size.  For example, the fastest growing occupation in the next ten years will be biomedical engineers; these jobs will increase by a whopping 72% from 16,000 to nearly 28,000, a net increase of 12,000 jobs.  Meanwhile, retail salespersons will see job growth of a meager 8.4%, but since there are now more than 4 million of them, that’s an increase of 375,000 jobs.

A second confusion involves the word “service,” which in other contexts is used to indicate all work that does not involve making or building things, as in “service economy.”  This usage conjures images of doctors, lawyers, teachers, and management consultants – all of them growing occupations and highly paid.  But that’s not what the BLS means by “service occupations.”  The BLS service jobs with the largest projected growth are home health and personal aides; food service workers (including fast food); nursing aides; landscaping and groundskeeping workers; medical assistants; security guards, and child care workers – all of them already very large and all of them paying “low” or “very low” wages.

Of the 30 fastest growing occupations, 14 require at least a bachelor’s degree and another five will require an associate’s degree; all 19 of these fast-growing jobs pay “very high” or “high” wages by BLS standards.  That is good news.  But among the 30 with the largest growth, only seven require a bachelor’s and one more requires an associate’s.  And, unlike the fast, of the top 30 for size, the majority of new jobs are either “low wage” or “very low wage.”   Here’s my tabulation of the largest 30 by how well they pay:

Top 30 occupations with largest projected job growth, 2008-2018

These top 30 occupations account for about one half of the net new jobs the BLS projects, and other data show that the wage composition of these 30 is not unrepresentative of the job structure as a whole, now and in 2018.  If these were the facts the BLS chose to put on stage, the headline might be: Majority of American workers projected to remain poorly paid and in need of a living wage.

We might then realize that we cannot close the widening gap between the earnings of high school graduates and college graduates simply by producing more college graduates.  There simply are not and will not be enough jobs requiring a college education. With a different set of facts on stage, we would understand that we need to do something to increase the majority’s wages and incomes directly.

What’s more, as a nation we know how to do this because we’ve done it before, in the three decades after World War II.  Though each has its limits, we need some combination of greater unionization, steadily improving minimum wage laws, and enhancements in the social wage, now called “work supports.”  Democrats, for all their other faults, have committed to advancing on all three of these fronts, and in the last three years have advanced a little on each of them.  College professors (called “post secondary teachers” and #10 on the BLS largest list) could lend a hand simply by putting some of these “other” facts on our stages.  The BLS largest list is a richly complex document that reveals contradictory tendencies in what some 150 million of us do and will do to earn a living.   My arrangement of that list by educational requirements and pay simplifies it some by separating out those countertendencies.  No facts are made up, but by reorganizing the stage, the same facts make a decidedly different impression.

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Jack Metzgar is the author of a book about the 1959 steel strike called Striking Steel: Solidarity Remembered

Lawrence Mishel

 By Lawrence Mishel
President, Economic Policy Institute

Financing health care reform will be a prime subject of discussion among the Senate and House conferees, specifically how much the financing relies on a tax on high-cost health plans. Supporters of this tax label these “Cadillac” health plans and make the assumption that they provide comprehensive (even lavish) coverage that requires very low out-of-pocket costs from beneficiaries. However, in the dysfunctional health insurance market, high-cost does not equal high-value; and it is not comprehensiveness of coverage that is the primary predictor of who will be affected by this tax, rather it is the size of the firm they work for or the age of their co-workers. The fact that Chevy plans are about as likely to be taxed as Cadillac plans is one reason to be cautious about relying on such a tax. Bivens and Gould (2009) document this as well as other reasons to prefer the more straightforward, progressive financing in the House bill.

One claim for the Senate excise tax has recently surfaced: that health care cost increases have been a major driving force in constraining wage growth and that wages will grow more strongly by curtailing employer health costs via the excise tax. This claim boldly asserts that health care costs are large enough (and the tradeoff with wages is large enough) to drive major changes in overall wages. This is a much stronger claim than saying that there is some tradeoff between higher health costs and wages in the total compensation package.(1)

Jonathan Gruber, an economics professor at M.I.T., argued in an op-ed in the Washington Post on December 28, 2009:

And when firms reduce their insurance generosity, they make it up in higher pay for their workers. We saw this in the late 1990s, when the rise of managed care temporarily lowered insurance costs, and wages rose in real terms for the first time in many years. But as soon as managed care was weakened and health costs rose again, we once again saw flat or declining real wages in the United States. (Gruber 2009)

Others, including prominent and well-respected journalists, have also made the argument recently for a “health care theory of wage determination.”(2) Proponents of this theory point for evidence to the latter half of the 1990s, a five-year period when wages were growing rapidly while growth in employer health care spending was relatively constrained. They contrast the period from 1995 to 2000 with the periods from 1989 to 1995 and 2000 to 2006, when wages stagnated while health care costs grew much more rapidly.

There is logic to their argument, but it is only skin-deep and deeper examination will show it to be simply not true. The logic can be seen looking at trends in health care premiums and wages—wage growth fared better in the late 1990s when health care premiums grew more slowly than in the early 1990s and wages performed poorly in the 2000s, a period when health premiums grew strongly again.(3)

However, digging just a bit beneath the surface reveals the following:

1. Health care costs are not large enough to substantially move wages as these proponents claim;

2. Examination of actual wage and benefit trends confirms that changes in the trajectory of health care costs did not materially affect wage trends over the last 20 years; and

3. The wage behavior described—accelerating in the late 1990s and more slowly thereafter—actually best characterizes wage growth for low-wage workers who have minimal access to employer-based health care. Conversely, this pattern of wage-growth over time is least pronounced for higher paid workers with the most health coverage.

Clearly, this “health care theory of wage determination” is wrong, and other factors explain these overall wage trends. The simple explanation is that productivity accelerated in the mid-1990s, and the low unemployment (and hikes in the minimum wage) facilitated faster wage growth. That this wage growth disappeared entirely in the 2002-07 recovery is not due to faster health care cost increases but to weak employment growth and employers’ ability to achieve increased profitability rather than pass on productivity gains to workers. This reveals a fundamental flaw in our economy: productivity gains are not passed on to higher living standards for workers.

SCALE

It is easy to understand that health care cost trends have not been a significant driver of wage trends when one examines the scale of employer expenditures on health care. Health care costs were just 7.6% of total compensation and 9.4% of total wages (all wages paid, including premium pay, paid leave, and so on) in 2007.(4) The share of health care in total wages (in nominal, non-inflation adjusted terms) grew from 7.2% in 1989 to the 9.4% in 2007, suggesting that the expanded role of health costs could have reduced wage growth by 2.2% over this entire 18-year period, or 0.12% each year. This assumes a complete tradeoff between health costs and wages (if every dollar of higher health costs reduced wages correspondingly). Consequently, employer health costs can hardly be considered a major determinant of wage growth.

Further, overall benefits’ (health care plus all other fringe benefits) share of total compensation has actually been stable for the last 20 years or so—as health costs expanded, pension and payroll tax shares diminished. Hence, the story of stagnant wages in the U.S. economy is not one of growing non-wage compensation.(5)

ACTUAL WAGE AND BENEFIT TRENDS

Digging deeper, consider the changes in health care costs and wages per hour worked in the early 1990s, the late 1990s, and 2000 to 2006, the periods cited by proponents of the health care theory of wage determination.

The data in Table 1 show that wages and total compensation definitely accelerated in the late 1990s, with hourly compensation growth tripling from a $0.22 to a $0.68 annual growth. This alone disproves the theory that moderated health care costs were the primary driver of wages: it was not a change in the mix of compensation between wages and benefits that drove growth, rather it was the simple fact that total compensation accelerated rapidly. After 2000 compensation growth subsided to $0.41 per hour but still remained faster than that of the 1989-95 period.

Do trends in health care costs explain this behavior in compensation or wages? Employer health care expenditures grew $0.03 in the late 1990s, pretty much the same as in the early 1990s, so that hardly seems an explanation. Health care expenditures did grow more quickly in the 2000-06 period (up $0.09 each year).

This greater growth could at most explain $0.06 of the $0.45 deceleration of wage growth from 2000 to 2006 versus the late 1990s. Interestingly, the growth of pension costs is more important than that of health costs. More important, the health care story misses and cannot explain the substantial deceleration (one-third slower) of overall compensation growth in the 2000s.

Most economists would point to the faster productivity growth of the late 1990s to explain the faster wage and

compensation growth. In the early 1990s, as in the 1980s, productivity growth was about 1.3% each year. Productivity growth doubled in the late 1990s to 2.5% annually and maintained that pace in the 2000s. It is the combination of this trend—a faster growing pie—and the lower unemployment and higher minimum wages that allowed workers the leverage to make sure their wage growth kept pace with overall productivity.

But the lessons of the 2000s are also instructive: despite the faster productivity growth there has been no real wage growth recently, either for those with a high school or a college degree (See Mishel et al. (2009), Figure 3A).

There is something fundamentally broken about our economy when workers gain nothing from productivity

growth, and this should give pause to those who assume that when employers lower their health care expenses they will automatically pass these savings onto workers in the form of higher wages. This is an especially problematic assumption given the very high unemployment expected to prevail over the next five years, an environment where workers will have little leverage.

WAGE TRENDS FOR LOW-, MIDDLE-, AND HIGH-WAGE WORKERS

The last piece of evidence on this issue is data on the wage trends for workers at differing wage levels. The same trends discussed above—accelerated wage growth in the late 1990s and the subsiding of this growth in the 2000s—are evident across the board for segments of the workforce that have extensive health care coverage and those for whom coverage is sparse.

This is a point made by Jared Bernstein and Sylvia Allegretto in an analysis in 2006:

About half of all workers don’t even receive employer-provided coverage. According to the U.S. Bureau of Labor Statistics (BLS), 47% of workers did not participate in employer-provided health care benefit plans in 2005. Thus, there is no health care squeeze that would explain the wage losses of nearly half the workforce. In addition, the BLS data show that among workers whose average wage was less than $15 per hour last year, only 39% participated in employer-provided health plans….. low-wage workers also lost the most ground in terms of real wages. Thus, those least likely to get health care experienced the greatest loss in real wages, the opposite of what the trade-off explanation would predict. (Bernstein and Allegretto 2006)

Table 2 shows the wage growth for workers at every decile over the 1989 to 2007 period, including the relevant sub-periods. Wage growth was far faster from 1995 to 2000 than in the 1989-95 period at every wage level. However, the acceleration of wage growth was far greater for low- and middle-wage workers, the groups with the least coverage by employer-provided health care plans: only 27% and 64%, respectively, of workers in the bottom and middle fifths of the wage distribution received employer-sponsored health insurance in 2000 (see coverage by wage fifth in Mishel et al. (2009), Table 3.12). This further reinforces how health care cost containment of the late 1990s was not the major, or even an important, determinant of wage trends. Note that the acceleration of wages for the two highest-paid groups—at the 90th and 95th percentiles—was half that of what the lowest-paid workers enjoyed even though 80% of the highest fifth of earners received employer-sponsored health coverage. This runs directly counter to the notion that health care costs are driving wage trends. Note also that wage growth was substantially diminished in the 2000s, even though productivity growth continued at the same fast pace. In the recovery period from 2002 to 2007 there was hardly any wage growth at all (see Mishel et al. (2009), Table 3.1). The worst wage growth in the 2000s was for low- and middle-wage workers, the groups with the least health care coverage. So, it does not seem likely that faster health care premium growth in the 2000s can explain the disappointing wage growth.

CONCLUSION
The recent claims that trends in employer health care expenditures explain the beneficial wage growth of the late 1990s and the disappointing wage growth since 2000 does not hold up to any careful scrutiny. Health care expenditures are relatively small compared to overall wages, and an examination of the actual trends shows that health care cost increases do not correspond to the major movements in wages or compensation. This is especially the case for the wage trends of low- and middle-wage workers: their wages accelerated the most in the late 1990s and grew the least in the 2000s. The fact that these groups have the least participation in employer-provided health plans confirms that health care is not the major factor that the advocates of this new health care theory of wage determination would have us believe. There undoubtedly is a tradeoff between health care costs and wage growth, but this dynamic does not play a leading role in the drama of the stagnant wages facing workers for several decades and the inability of working families to benefit from rising productivity growth.

REFERENCES
Bernstein, Jared, and Sylvia Allegretto. 2006. The Wage Squeeze and Higher Health Costs. EPI Issue Brief #218. Washington D.C.: Economic Policy Institute. http://www.epi.org/publications/entry/ib218/
Bivens, Josh, and Elise Gould. 2009. The House Health Care Bill is Right on the Money: Taxing High Incomes is Better Than Taxing High Premiums. EPI Issue Brief #267. Washington D.C.: Economic Policy Institute. http://epi.3cdn.net/d4461bae3920d3a28a_7jm6b9314.pdf
Gruber, Jonathan. 2009. ‘Cadillac’ tax isn’t a tax—it’s a plan to finance real health reform. Op-ed. Washington Post. December 28.

http://www.washingtonpost.com/wp-dyn/content/article/2009/12/27/AR2009122701714.html

Mishel, Lawerence, Jared Bernstein, and Heidi Shierholtz. 2009. The State of Working America 2008/2009. Washington, D.C: Economic Policy Institute.

ENDNOTES
1 I remain a skeptic that the tradeoff is 100% over any short-run period, especially the high unemployment period ahead. That is a different topic for another time.

2 Ezra Klein, in his (appropriately) highly regarded blog for the Washington Post and in an op-ed, was the first to enunciate this “health care theory of wage determination”:

From 1989 to 1995, median wages actually fell a bit. Then, managed care kicked in. Annual growth in health-care costs fell from more than 10 percent in the early 1990s to less than 5 percent in the late ‘90s. Meanwhile, wages shot through the roof, rising more than 11 percent from 1995 to 2000. Then we ended the managed-care experiment, and health-care costs resumed their normal speed of growth. Predictably, wages slumped back down from 2000 to 2006. (http://voices.washingtonpost.com/ezraklein/2009/12/lower_health_costs_higher_payc.html)
David Leonhardt, an influential economics reporter for the New York Times, weighed on this as well:
A dollar that an employer spends on insurance is a dollar that’s unavailable for income. This helps explain why the one period of slow growth in medical costs over the last two decades — the late 1990s — was also the one period of rapid income growth. (http://www.nytimes.com/2009/12/23/business/economy/23leonhardt.html?_r=1)

3 See Exhibit One in this compilation from the Kaiser Foundation: http://www.kff.org/insurance/7672/upload/7693.pdf.

4 See the Bureau of Labor Statistics’ survey of Employer Costs for Employee Compensation, Table 9, ftp://ftp.bls.gov/pub/special.requests/ocwc/ect/ececqrtn.pdf.

5 See the Bureau of Labor Statistics’ survey of Employer Costs for Employee Compensation, Table 9, ftp://ftp.bls.gov/pub/special.requests/ocwc/ect/ececqrtn.pdf.

***

Lawrence Mishel has co-authored numerous books, including The State of Working America, Emerging Labor Market Institutions for the Twenty-First Century, The Charter School Dust-up: Examining the Evidence On Enrollment And Achievement, and The Teaching Penalty: Teacher Pay Losing Ground 

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This piece was crossposted from the Economic Policy Institute, originally published on January 6, 2010.

Leo W. Gerard

By Leo W. Gerard
International President

This week the minimum wage rose by 70 cents to $7.25 an hour, a beggar’s lot really, but still corporations across America decried it. Good times or bad, somehow Wall Streeters walk away with $700,000 bonuses, you know, on top of their salaries, but a 70-cent minimum wage hike is never affordable.

That’s why America’s workers must seize control of their own fates. President Obama said: “Our destiny is not written for us. It is written by us.” Well, on a sweltering July 11, 1,500 civil rights, human rights and workers rights activists in Little Rock began writing a new destiny for American workers.

That destiny includes the freedom to form and join a union and to collectively bargain for a piece of the wealth they helped create. That destiny includes passage of the Employee Free Choice Act.

The 1,500 met in Little Rock because Arkansas is the home state of Sen. Blanche Lincoln, a Democrat who turned her back on the Employee Free Choice Act this year, succumbing to pressure from the likes of Wal-Mart, a notoriously anti-union corporation headquartered in the Razorback State. Many Wal-Mart workers will be getting a 70 cent raise this week – thanks to that minimum wage hike.

Rich Trumka, secretary-treasurer of the AFL-CIO, and I met with Sen. Lincoln a couple of weeks before the rally, and she kept telling us how she had passed legislation to help children and how she really wanted to help families. The best way to help families is to let them help themselves through collective bargaining.

I’ll tell you what I told the 1,500 in Little Rock that day. Write her. Call her. E-mail her. “Tell her the best way to help the children, the best way to help families, the best way to help the seniors, the best way to get to the middle class is for workers to have the right to join a union and bargain collectively for a piece of the pie that they helped to make and for a piece of the wealth they helped to create.”

That is what the Employee Free Choice Act does.

The rally in Little Rock started at Central High School where nine Black youngsters braved violence to desegregate in 1958. Fifty-one years later, we are engaged in another civil rights struggle. And Rev. Wendell Griffin, a Baptist pastor and judge on the Arkansas Court of Appeals, expressed that best.

Rev. Griffin asked the 1,500, “Are we free?”

No one yelled yes.

He repeated, “Are we free?”

Again, no affirmative response.

He explained, when one person is not free, all people are not free. “We are brothers and sisters, and when one worker is not paid fairly, all workers are not paid fairly.”  And, he said, the way for all workers to be paid fairly, is for workers to have the right to organize.

He told the story of his father working, without a union, in a saw mill; how he later got  union representation, a raise, a pension and better working conditions. And, importantly, how that changed his family’s life.

Finally, he told the crowd:  “What my father had is what every worker ought to have in Arkansas.”

Every worker should have the right to join a union, receive a pension and labor in safety.

He noted that the people of Arkansas have given that to Blanche Lincoln – voted to provide her with a government job, good benefits and a pension.

“Now is our time,” he said.

“Employee Free Choice Act Now.”

Watch the Video.

Seth Freed Wessler

By Seth Freed Wessler
Researcher at the Applied Research Center

When General Motors filed for bankruptcy on Monday, it left behind a long trail of grievers– twenty-one thousand of them. The loss of these good, union jobs and the many more that will be shed when related businesses close are devastating families and communities. For Black workers, who are highly concentrated in the auto industry, these have long been some of the few reliable jobs that pay living wages, supplying families of color the with the possibility of entering the middle class.

As we now know, high levels of unionization equate with smaller income gaps between people of color and whites. But in the economy we’ve inherited from the last three decades of deregulation and declining union density, people of color are increasingly relegated to low-wage, precarious work that pays too little to support a family. Unless Congress acts now to ensure that work actually pays, these workers will have few options and we’ll only deepen the racial income and wealth divides.

A few months ago, I traveled to Michigan to interview dozens of people for “Race and Recession,” a new report released by the Applied Research Center. I met Leo Shipman, a 24-year-old Black man, who had recently lost his job in an auto parts factory in Detroit. “My biggest worry is my son,” he said about his 3-year-old. “You don’t know how you’re going to feed them. He doesn’t know the bills are running up, but I do.” When I met Shipman, he was on the edge of being evicted from his apartment.

With only a high school education–Shipman’s been trying to enroll in a technical college–securing a living-wage job proves elusive if not impossible. Because he had been underemployed, Shipman had no unemployment check coming in. It’s growing more likely that his only option will be to work a job that makes feeding his son a daily struggle.

As one of the last strongholds of union jobs shrinks, and people like Shipman are cast out, it’s time to confront some tough truths about work in our country. Black workers like Shipman have been hit especially hard by layoffs and closures because their concentration in the auto industry is higher than their overall share of the state’s labor market. In fact, across the labor market, workers of color are overrepresented in occupations with high unemployment rates. These include jobs in the service sector, as well as construction and transportation occupations. The loss of these auto industry jobs strikes a massive blow to the ability of workers, especially Black workers, to earn middle-class incomes, to save enough to pass on to their children and to achieve some financial stability. Indeed, the UAW was one of the first unions to organize Black workers and the implosion of GM further dismantles one of the mainstays of the Black middle class.

The collateral damage of job loss are taking their toll. Sandra Hines, a 55 year old Detroit native who I wrote about last week, lost the home her family owned for 40 years after her sister was laid off from GM and was forced refinance. The family was sold a predatory loan with an adjustable rate and was evicted after payments skyrocketed. As more people lose their jobs, more families will find themselves unable to pay their mortgages and more wealth will be drained. It is now clear that the perils of this situation go beyond these communities. Indeed, as we find in “Race and Recession,” the racially discriminatory predatory lending and foreclosure crisis was a central factor in pushing the economy into this recession.

As a country, we’re reckoning with the fall-out from decades of putting profit above people. As precious union jobs disappear, the time has come to ensure that those who are unemployed–disproportionately people of color–are able to enter employment that actually pays. Congress should immediately pass the Employee Free Choice Act (EFCA) so that workers can demand fair pay without intimidation. Since UAW now has a major ownership stake in the company, the workers who remain there will be taken care of, but the 21,000 workers who are getting pushed out will be less likely to find jobs with sufficient salaries and benefits, especially as the federal minimum wage increase to $7.25 next month still does not approximate a living wage.

Ultimately, as we recover from this recession, we need to make sure that the jobs we create and the economy we build help those who have been most hurt by the recession, which have disproportionately been families of color. Ensuring that good, sustainable jobs go to communities of color across the country is an essential part of building an inclusive and working economy.

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Check out arc.org/recession to learn about how racial inequity rigged the economy and how to change the rules.

By Robert L. Borosage
Co-Director Campaign for America’s Future

So much for the $700 billion bailout of Wall Street. Clearly, once the bailout passed, investors took a good look at the real economy and went to the mattresses. We’re headed into a great reckoning. And at the heart of that, as illustrated in the new Institute for America’s Future op ad in the New York Times – “Even the Rope we’re Hanging Ourselves with is made in China”: — is this country’s unsustainable global strategy. To see the ad and supporting charts go here.
This is a result, as Barack Obama has stated, of a failed economic philosophy – the “market fundamentalism” that dominated Washington over the last thirty years, the notion that markets are efficient and self-correcting and, as Sarah Palin repeated in the last debate, governments should just get out of the way.
What that meant in practice was the worst forms of crony capitalism. Abroad, global corporations and banks essentially wrote the constitution of the new global economy, protecting property rights but not workers, consumers or the environment. Financial flows were deregulated opening the casino up for business. Banks were favored; the military industries protected; agribusiness subsidized.
At home, Reagan launched the war on unions, and rolled back government and regulation. The minimum wage was frozen for a decade. Undocumented workers exploited to undermine wages and standards. Banks got rid of the protections built during the Great Depression. Companies used globalization as a club against workers. Pensions and health care benefits were rolled back… Over the last eight years, productivity and profits rose, but wages lost ground. We lost one in five manufacturing jobs. Now some 15 million service jobs are at risk of off-shoring.

Global economy

Yet this global economy depends on American consumers as the buyers of last resort. Sustaining a low wage, high consumption economy is no mean trick. The gulf was bridged by mountains of debt and successive asset bubbles. Household debt soared to unprecedented levels, as Americans loaded up on credit cards and cashed out their homes. And the US is now the world’s largest debtor, having added over $4.4 trillion in foreign debt since 2001. We must borrow or sell off assets with $2 billion a day simply to cover our trade deficits. We now run a high tech trade deficit with China. Mexico exports 50% more cars to the US than the US exports to the rest of the world.
What can’t go on indefinitely, won’t. And with the bursting of the housing bubble, the reckoning is here.
Clearly we need to change course. We need a national economic strategy for a global economy, a strategy for the nation, not for the multinationals that have very different interests.
Yet our political debate is still frozen into a silly spit ball fight about “free trade” and “protectionism.” Barack Obama questions NAFTA-type accords and is charged with “protectionism” in editorials across the country. John McCain, a stalwart of the failed policies of the last two decades, still intones the old “free trade” mantras, denouncing critics as lacking “faith in the American worker.”
This mindless debate has been going on for three decades, as the country has sunk deeper and deeper in debt. Surely in the wake of the current crisis, it is time for an adult conversation about a strategy that would sustain a prosperous middle class in a global economy.
That means deciding if America will remain a center of innovative manufacture. A concerted drive for energy independence will not only reduce the half of our trade deficits that go to oil, but could capture the green technologies that will drive the markets of the future.

Broad middle class

It means deciding if we are going to sustain a broad middle class. That would require forcing business to compete within the framework of a high wage economy – not by tearing that framework down. Empower workers to organize, raise the minimum wage, and build a public social contract starting with health care and pensions to replace the promises the corporations are shredding.
Then we’ve got to change our federal priorities from policing the globe and top end tax cuts to making the vital investments here at home — in education and life long learning, in R and D, in the most efficient infrastructure.
Finally we’ll need to dispel the myth that the mercantilist nations like China are playing by the same set of rules. With China now our leading creditor, this won’t be easy. But we must find ways to bring our trade with that country into balance – either by currency adjustment, by managing our trade, or by a surcharge on imports that will force the change.
These aren’t the only answers; they may not be the best ones. But surely the question of our national strategy in the global economy can’t be put off. That’s why McCain’s decision to turn his campaign over to the Karl Rove’s protégés in character assassination is so dishonorable. We deserve a debate worthy of a great nation in trouble. Brickbats about Bill Ayers or Palin’s Alaskan separatist husband are simply insults. Americans deserve better. And McCain and Palin may find out that they just may demand it.

By Leo W. Gerard
International President

Kosher abuse
In May, when immigration officials raided the kosher meatpacking plant in Postville, Iowa and hauled out 389 undocumented workers, the news was all about immigration violations, but now the focus is on the employer, Agriprocessors Inc.
That’s because it turns out that while purportedly giving ritual consideration to the animals to be slaughtered, Agriprocessors failed to treat with dignity, or legality, the teenagers, and children, some as young as 13, in its employ. The 57 adolescents, some working 17-hour shifts, six days a week, testified to wielding knives and other dangerous tools prohibited for young workers.
The Agriprocessors incident raises difficult questions in the Jewish community. If meat is denied the kosher label because the animal does not die within seconds of precise slitting, is it kosher when the 13-year-old child who processed it was illegally hired, worked a 17 hour day and was refused overtime pay? What if a 16-year-old undocumented youth, who put in 17-hour shifts, six days a week, leaving no time for anything but work and sleep, said in an affidavit, “I felt like I was a slave?”
These violations happened in Iowa, but they occur elsewhere as well, for a simple reason: the Wal-Mart mentality.

Soulless corporate mindset

We have allowed that soulless, unpatriotic global-corporate mindset to control government policy. As a result, the rich have gotten richer while the middle class has paid the bill and gone bankrupt. The great builder and protector of the middle class, collective bargaining, has been eroded by deliberate corporate actions over the past quarter century. Meanwhile, the national debt has increased; inflation and unemployment are up, and foreclosure signs mar every neighborhood.
Corporate lobbyists secured from compliant politicians so-called free trade agreements that have resulted in the loss of millions of good paying, often unionized manufacturing jobs. Those jobs have gone to third-world countries where investigations have shown workers often labor long, grueling hours and are not even paid their own countries’ minimum wage. Then their products are shipped back to the U.S. to be sold at cheap prices at Wal-Mart by workers who are paid less than a living wage and are denied full-time status and health insurance.
What comes around, goes around in the Wal-Mart world. When uninsured Wal-Mart workers get sick, American taxpayers foot the bill. They pay for coverage through Medicaid, the health insurance plan for the poor. That’s what the Walton family, which owns Wal-Mart, banks on. Literally banks on. When American taxpayers step up and pay for half of all Wal-Mart employees’ health care, that certainly helps the Waltons stay among the 25 wealthiest families in the world.
Wal-Mart workers would benefit tremendously from forming a union. Workers who belong to unions earn 30 percent more than nonunion workers, and they are 59 percent more likely to have employer-provided health insurance. The same goes for those workers at Agriprocessors. If they had a union, it could file grievances over the hiring of children, against unpaid overtime and about unsafe working conditions.
In surveys, more than half of U.S. workers, nearly 60 million, say they would join a union immediately if they could. But they don’t get that opportunity under the current Wal-Mart mentality global-corporate system. The political system has been stacked against collective bargaining. Global corporations hire “union busters” to intimidate, harass and fire workers who try to organize unions. Workers are fired in a quarter of the campaigns where workers try to organize unions at private companies. Even when workers successfully form unions, they can’t get a first contract 44 percent of the time because companies refuse to bargain meaningfully.

Employee Free Choice

There is a solution for this problem. It’s called the Employee Free Choice Act. It would restore workers’ freedom to form unions and bargain. It would allow workers to create unions by collecting signatures from a majority of workers. As it is now, a company can demand an election for a union. Under the Employee Free Choice Act, workers may have an election if they want one, but the signatures are sufficient in most cases. This puts the workers in control of their union instead of the company.
The Employee Free Choice Act also would increase penalties for companies that intimidate and fire employees trying to form unions. And it would establish mediation and binding arbitration when the employer and the workers cannot agree on a first contract.
The Employee Free Choice Act has bipartisan support in Congress and polls show it is backed by two-thirds of the American public, including Republicans. It passed easily in the House last year, but in the Senate got only 51 votes, not the 60 needed to stop a Republican filibuster.
Fearing the Employee Free Choice Act could win in the Senate if a few more Democrats secure seats there in the fall elections, Wal-Mart took action in recent weeks. Obviously, Wal-Mart fears that Employee Free Choice means less money for the Waltons, and more free choice for its employees.
The Wall Street Journal reported last week that Wal-Mart executives began indoctrinating thousands of store managers and department heads about what the company claims are the evils of unionization in an attempt to get them to vote Republican. These managers told reporters that the executives informed them that workers would be forced to pay large amounts of union dues and get nothing in return and be obliged to go on strike and get no compensation.

Contracts like CEOs

Apparently the nation’s largest private employer failed to mention that a portion of union dues goes into a strike fund to provide money for workers who vote to strike. In addition, what workers get for union dues is a contract, guaranteeing them certain salaries and benefits – like the contracts CEOs demand when they are hired by boards of directors.
All of this from a company that flies rapid response teams out to any of its more than 5,000 Wal-Mart stores worldwide to quash brewing union activity.
Global corporations like Wal-Mart have hired the likes of Coalition for a Democratic Workplace and Employee Freedom Action Committee, run by former tobacco lobbyist Rick Berman, to blockade the Employee Free Choice Act. They are trying to make big business out to be David in this David and Goliath struggle, although it is union membership that has shrunk to David size over the past half century. Since its height in 1953, when 35 percent of workers belonged to unions, membership has now fallen to 12.1 percent.
A big part of the reason for that is constant harassment by big business. Let’s go back to Agriprocessors. Three years ago, Human Rights Watch investigated working conditions in the meatpacking business and found, among other things, that companies often use illegal tactics to crush union organizing efforts. The report, “Blood, Sweat, and Fear: Workers’ Rights in U.S. Meat and Poultry Plants,” says that when workers tried to defend themselves against harsh working conditions by forming unions, employers used fear and intimidation to stop them. “U.S. law does little to protect workers who try to organize. Enforcement efforts drag on for years, and even decisions that favor workers are usually too little, too late,” report author Lance Compa wrote.
He offered this example: At the Smithfield Foods pork processing plant in Tar Heel, N.C., management fired union supporters, threatened plant closure, stationed police at plant gates to intimidate workers and orchestrated an assault on union activists. When the National Labor Relations Board ordered a new election, Smithfield immediately appealed. In 2000, Smithfield created a company security force that under North Carolina law had public police powers. In 2003, it used trumped-up charges, Compa said, to arrest workers who were active union supporters.

Human rights

The meatpacking industry chooses to use undocumented workers, Human Watch found, because they are easily intimidated. As in Agriprocessor, immigration officials will swoop in and take away a large chunk of a meat packing work force at the drop of a quarter in a pay phone. Human Rights Watch found that some employers use this ability as a threat against undocumented workers who are trying to organize unions.
In addition, what employers like Smithfield and Agriprocessor have up their sleeve is a 2002 U.S. Supreme Court ruling saying that undocumented workers who are illegally fired for union organizing are not entitled to back pay for lost wages.
Despite all of Wal-Mart’s money and conniving, on rare occasions, a union organizing effort wins. And then, the global giant responds by shutting them down.
In 2000, when the United Food and Commercial Workers finally organized a small number of butchers in East Texas, Wal-Mart immediately phased out butchers at all of its stores and stocked prepackaged meat. Similarly, when a store in Canada voted to unionize, Wal-Mart closed the whole store, contending it had been unprofitable.
This really comes down to a moral issue, just like it does for Jews who question whether meat processed by child laborers in abusive, illegal conditions is really kosher. The question for this country is whether it is moral to allow continued rule by Wal-Mart mentality, with its cheap imported wares of dubious safety manufactured under questionable conditions in foreign countries, then imported and sold in stores by American workers paid less than a living wage and denied health care and the right to organize a union.
Restoring workers’ freedom to organize and bargain collectively would protect them against the kinds of abuses alleged Agriprocessors. And it would begin to rebuild America’s great middle class as well as re-establish one of our country’s fundamental liberties: the right of free association.

By Leo W. Gerard

International President

Lies, traderous lies and statistics

In the free for all Twenty-First Century, it all sounds terrific – free markets, free trade and free commerce. But really, it’s lies, traderous lies and statistics.

The d in trader is deliberate. This is about the sleight of hand billed as free trade.

We’re constantly told it’s a win-win. In 2000, when China was admitted to the World Trade Organization, for example, a former president said that exports to China already supported hundreds of thousands of American jobs, and this figure would grow substantially with the new access to Chinese markets that the WTO agreement would create. Politicians also promised the U.S. would benefit from exports to the rapidly growing consumer market in China.

The opposite, however, has occurred: China has exploited the U.S. consumer market while U.S. companies have been restricted to selling to China bulk goods such as grains, scrap, and chemicals, some intermediate products such as semiconductors and some durable products such as aircraft.

The China trade promises were snake oil.

The Economic Policy Institute released a study Wednesday revealing what happened to American jobs since China was admitted to the WTO. Between 2001 and 2007, 2.3 million workers lost their jobs or were displaced because of trade deficits with China.

Annual earnings lower

Annual earnings for all U.S. workers without a college degree are $1,400 lower because of competition with China’s low-wage workers and because China now accounts for such a huge percent of all of our imports. Displaced American workers, who did find new jobs, lost an average of $8,146 a year in earnings each. That is $156 less each week to use to feed the kids, to pay the mortgage, to meet the car payments.

Coincidentally, on the very same day EPI released its report, talks in Geneva, Switzerland to open global markets even further collapsed as China and India refused to allow free trade when it came to their own agricultural products. Both countries wanted to impose or raise tariffs on imported agricultural goods to protect their indigenous farmers.

Remember, it is for the most part, bulk goods, such as agricultural products, that the U.S. is exporting to China. A sticking point in the negotiations, for example, was soybeans. U.S. trade representative Susan C. Schwab had agreed that China could increase tariffs on soybeans in 8 of every 10 years, and still China walked away from the Geneva talks.

So here is the question: how can this relationship possibly be called free trade when China wanted to impose tariffs on our soybeans in 8 of 10 years, when it is manipulating its currency, when it is subsidizing its manufacturing, when it is failing to enforce even the most basic environmental and labor regulations?

That is snake oil.

We need fair trade. And so do Chinese workers and families, who are being abused by this so-called free trade system that benefits only CEOs and major shareholders of global corporations.

Unfair trade kills

What do Americans workers and families get out of so called free trade? A report, “The Toxic Truth: Unfair Trade Kills” issued recently by the United Steelworkers details the gross destruction, including a four-year-old who died after swallowing a lead pendant that was attached to his shoe imported from China; two Philadelphia carpenters killed when their van crashed while they were traveling home from work on defective tires manufactured in China, and 81 patients from across the country poisoned by contaminated heparin, a blood thinner imported from China.

In addition, the U.S. Consumer Products Safety Commission recalled 30 million toys made in China last year because they were doused with dangerous leaded paint; Chinese-made pet food sickened and killed untold numbers of American cats and dogs because it contained tainted wheat protein; officials pulled off the market poisonous Chinese toothpaste; children were sickened by Aqua Dots toy kits made in China with a substitute chemical that turned into the “date rape” drug when swallowed, and the U.S. blocked import of Chinese fish containing banned antibiotics.

That’s just the consumer viewpoint. The EPI study dispelled the myth that a good education is insurance against job displacement. EPI found that 31 percent of the jobs lost since China entered the WTO were among workers with college degrees and more than half – 55.6 percent — of the displaced were in the top half of American wage earners. The China trade deficits have contributed to the loss of 200,000 scientist and engineer jobs within this nation’s manufacturing base, a 10.7 percent drop.

This is what free trade has given the U.S. Poisonous products. Lost jobs. Lower earning power.

It’s not just us though. Think about this: One effect of free trade is polluted air wafting all the way across the Pacific Ocean to the shores of California, a state that enforces environmental standards higher than the national ones. Twenty-five percent of the pollutants in the Los Angeles basin come from China. That’s tragic for Californians who try so hard.

Tragic for China too

That’s also tragic for the Chinese people who live with befouled air every day. (Well, except during the brief period of the Olympic Games when the country is attempting to impress the world. After that, the cars, trucks and industrial pollution will return full force.) More than half of the rivers in China are too polluted to serve as a source of drinking water – often because of untreated pollution pouring into them from factories.

An investigative report issued earlier this month by the National Labor Committee describes conditions in the Kai Da Toy factory in Shenzhen, China where the Sesame Street’s Kid K’Nex Ernie construction toys are made. In violation of local and national laws, the factory’s employees are forced to work 13 to 15 hours a day, 7 days a week without health care. After deductions for room and board, they are paid 28 cents an hour, far below the requisite minimum wage. The 600 workers include 100 16-year-olds, and earlier this year, included numerous children who “disappeared” after an investigation by a Chinese newspaper.

NLC inquiries have repeatedly uncovered violations of Chinese labor law. Chinese firms don’t have to pay U.S. minimum wage. But they need to follow their own rules and not make virtual slaves of their country’s own adolescents.

Adult American factory workers trying to support families cannot compete with Chinese teenagers living four to a dormitory room on the factory site without any health or other benefits, working sweatshop hours, seven days a week.

What kind of “free trade” system is this? Those Chinese adolescents aren’t free. The American factory workers who have lost their jobs have forfeited financial freedom.

Still, the Kai Da factory will make big money. And the American corporations selling the Ernie construction toys will make big profits. Free trade works just fine for them.

If so-called free trade is ever to be replaced with fair trade, workers and families in China and America and every other trading country must demand it. Fair trade means that at the very least, labor and environmental regulations must be respected and enforced, so that people are not enslaved and the environment destroyed in the name of global corporate profit.

Really, at some point, when politicians claim these free trade deals are a win-win, and the actual result is 16-year-old Chinese youngsters working 16 hour days and American workers idled while their youngsters play with toxic imported toys, aren’t the lies traitorous?