Labor Day?

Labor hasn’t had its day in half a century.

When I was in school, the Democratic Party’s base of support was organized labor, and the Republican Party’s base of support was management, including small business owners.

The Democratic Party no longer represents workers. The Republican Party never did, although DT has harnessed workers’ anger to his advantage. Union membership, as percentage of the work force, is less than half what it was in the 1970s.

Anyone who has been in the housing market or shopped for groceries knows that it is harder to make ends meet than it used to be. Some, but not all of the problem is reflected in government statistics. Our GDP is supposed to be a measure of how much wealth we are producing, but as more and more of the GDP goes to a smaller and smaller percentage of people at the top of the food chain, the number becomes less and less meaningful. 

Wealth inequality in the US has been growing for 50 years
Gini coefficient measures inequality. Gini=0 means everyone has the same income. Gini=1 means one person has all the income, everyone else is penniless.

Official numbers say that per capita GDP has increased dramatically, even when adjusted for inflation, but we know it doesn’t feel that way.

My father graduated from college in 1943, and ten years later he was married with two young children. He worked hard as a traveling salesman for a chemical company, and he was away from home too much of the time. He was able to buy a modest, single-family home in a safe neighborhood of Queens with good schools, for $12,000, which was less than 2 years’ salary. He got a 4% mortgage. According to Zillow, that house would sell for $800,000 today, and the mortgage rate would be 7%. The buyer would probably pay for private schools, because New York City schools have declined. 

Instead of GDP, look at median worker’s salary. The average salary can be pulled up by a few people at the top end. The median better represents what a typical worker experiences. This is a graph of median income from Bureau of Labor Statistics.

The dashed lines at the bottom are adjusted for inflation. Median weekly earnings have barely increased at all.

But the reality is much worse. BLS adjustment for inflation is grossly understated, according to John Williams of ShadowStats.com. Williams notes that, beginning with Reagan in the 1980s, the way that government economic statistics are calculated has changed, each time to flatter the regime in charge. His website features re-computation of the cost of living index using the original, pre-1980 methodology. Since 2000, his inflation numbers have been 7-10% higher than the government numbers.

This compounded difference means that buying power is far lower than advertised. I have re-calculated the BLS chart of median wages, using a conservative 7% difference.

The average worker today gets a salary that is nominally much larger than his counterpart in 2000, but he can buy about ¼ as much with his week’s pay. I claim that this graph much better represents what it feels like to have a job and a family in America. 

The Democratic Party has completely failed the American worker. During the Biden years, median real wages declined by -24%. During Trump’s four years, median real wages declined by “only” -17%. This is hardly a reason to support Trump, but it explains why the Democrats have lost the loyalty of the working class. For the record, the decline in earning power during GW Bush’s two terms was -22% and -24%, respectively. During Obama’s two terms, the decline was -24% and -20%. Before them, Reagan destroyed organized labor, and Clinton shipped millions of manufacturing jobs to Mexico. 

ShadowStats also computes unemployment as it would have been measured before the metric was re-defined. According to BLS, our unemployment rate is 3%, but If we computed unemployment with the same formula we used in the 1970s, the number would be 25%.

Executive summary: Expansion of the economy is a mirage. The reality for the
average worker is that it gets harder and harder to make ends meet. This is true
in Republican and Democratic administrations alike. This is not a theorem you
can prove with the Dismal Science. It’s not inevitable. From 1950 right through
the mid 1970s, inflation-adjusted median salaries were increasing.

It doesn’t have to be this way. Tax policies are much lower on unearned income than on wages. Because of the way the Payroll Tax is structured, the first $168,000 of family income ends up being taxed at a much higher rate than income beyond that level. Secure, unionized government jobs are disappearing as more and more of the government’s work goes to contractors. The contractors pay lower wages to their employees, and don’t even pass on the savings to the government, which ends up paying much more for contract work than if they hired workers directly. Corporate welfare is expanding, even as the social safety net is shredding. I claim that the desperate plight of American workers is the direct result of evolving government policies since Reagan.

A view from the last century

Bertrand Russell came from the British aristocracy, but he had no illusion that aristocrats were smarter or more virtuous than working stiffs. In 1932, Russell wrote a wise and delightful essay for Harpers, titled In Praise of Idleness. 

“A great deal of harm is being done in the modern world by the belief in the virtuousness of work, and that the road to happiness and prosperity lies in an organized diminution of work.”

Russell chides the managerial class for their fatuous bureaucracies. He argues that, with 1930s technology and a rational use of labor, everyone in England (and, presumably America) could live comfortably with one worker per household working 20 hours per week. According to BLS, worker productivity is more than 7 times higher than it was when Russell published his essay, and now, the typical household has two wage-earners, not one. Yet, families today have a much harder time making ends meet than in the 1920s. 

“In a world where no one is compelled to work more than four hours a day every person possessed of scientific curiosity will be able to indulge it, and every painter will be able to paint without starving, however excellent his pictures may be…Above all, there will be happiness and joy of life, instead of frayed nerves, weariness, and dyspepsia.” 

“We produce hosts of things that are not wanted. We keep a large percentage of
the working population idle because we can dispense with their labor by
making others overwork. When all these methods prove inadequate we have a war.”

“Leisure is essential to civilization, and in former times leisure for the few was rendered possible only by the labors of the many. But their labors were valuable, not because work is good, but because leisure is good. And with modern technic it would be possible to distribute leisure justly without injury to civilization. [But] the idea that the poor should have leisure has always been shocking to the rich.”

“The morality of work is the morality of slaves, and the modern world has no need of slavery.”

If I were a conspiracy theorist, I would say that the owning class wants money, yes, but money for the sake of power. They came to realize that accumulating more wealth was of no use if the working class was comfortable, so that people had a choice about whether to do the rich man’s bidding. So their goal morphed from making themselves rich to making the rest of us poor. If I were a conspiracy theorist. 

We are numbed

Our buying power is corroded bit by bit, year by year. Furthermore, our “liberal” press is not telling this story to America. So we don’t notice it, or we notice it in our personal lives but think that it must be our own fault, or we know that something is amiss with the economy but think that the Democrats will fix it. Or that the Republicans will fix it.  

There is plenty of anger in this country, but we’re directing it at one another, instead of where it belongs: the owning class and the two-party duopoly that is in their service. They have waged asymmetric class warfare from the top down for the last half century.

If the US were a democracy, this would be a big opportunity for a third party that truly represented the interests of labor. But independent candidates and third parties are thoroughly suppressed by the duopoly, and by our media that don’t take independent candidates seriously.

All these forces are keeping a tight lid on the pressure cooker, as temperature within rises steadily. How long will the lid hold?