Thinking About Labor Day 2010

On Labor Day 2010, the State of America’s Workers Is Appalling.

Millions have lost their jobs. Millions have had their lives put on hold or thrown into reverse.

We’re in the midst of a “Great Global Recession.” The state of the world’s workers — at least in the advanced democracies — should be similarly appalling. But… it is not.

The Great Recession has taken an extraordinarily greater toll on U.S. workers than workers in most other advanced countries, even those whose economies have dipped more steeply than ours.

Compare GDP Declines:

  • U.S. gross domestic product is currently about 1 percent beneath its 2008 peak…
  • French and German GDP’s have each fallen by 2 percentage points from peak, while…
  • Britain and Japan have seen declines of 5 points, but…

Compare Unemployment Increases:

  • U.S. unemployment has increased about 5 percentage points since 2007, compared to…
  • Only 1 point unemployment increases in France and Japan, and…
  • A two point increase in Britain’s unemployment.
  • In Germany, unemployment has actually dropped a point since the recession began, and…
  • Miraculously, Germany is expected to end 2010 at full employment.

No wonder Obama’s head of the Council of Economic Advisers, Christina Romer, confessed bewilderment at the scope of American job losses during her farewell address a week ago.

American employers have responded to recession with far more layoffs than their counterparts in comparable or even worse situated nations.

One reason for this anomaly is that productivity has surged in the United States, enabling employers to maintain output with far fewer workers. According to traditional economic thought, this situation should prove beneficial for those workers still on the job: Sustained production with fewer workers should equal higher wages, should it not? Yes, it should, but… it hasn’t.

Northeastern University’s Center for Labor Market Studies documented that pretax corporate profits increased $388 billion from the low point of the current recession, the second quarter of 2009, to the third quarter thereafter, while wages increased merely $68 billion.

At a comparable point in the 1981-82 recession, corporate profits were 10 percent of the combined increase in profits and wages. Now, in 2010, corporate profits account for 85 percent of the combined increase in profits and wages.

Astoundingly, big banks’ profits have rebounded to pre-crisis levels, and American corporations have amassed $1.8 trillion in cash — even as unemployment remains between 9 and 10 percent.

Now we know how this anomaly has occurred:

  1. America’s large financial institutions and corporations have pocketed their firms’ revenue,
  2. even as they have neither resumed lending (if banks),
  3. nor rehired laid-off workers…
  4. nor given raises to those who continue working for them.

The same slight-of-hand has worked well for employers with health insurance provision, the costs of which have continued to rise. The employers, however, have not borne those rate increases. A survey, released last week by the Kaiser Family Foundation and the Health Research & Educational Trust, shows that employee premiums rose 13.7 percent over last year, while the amount employers contributed dropped — dropped! — 0.9 percent.

Dr Pepper Snapple Group CEO, Larry Young, took home $6.5 million last year.

But he thinks his employees at Mott’s applesauce plant in Williamson, N.Y., should make $20,000 a year.

So, the corporate conglomerate has been trying to cut $1.50 an hour—$3,000 a year—from the salaries of 350 workers, while freezing pensions and health care.

There’s no need to bring up CEO pay. Really.

According to Dr Pepper Snapple Senior Vice President Robert Callan: Executive pay is completely irrelevant to the discussion.

Only an myopic ideologue could ignore or deny the reality: American employers — more than employers in other nations and more than American employers in previous downturns — have imposed the costs of the recession and the costs of doing business on their workers, while hoarding for themselves nearly all the earnings from doing business.

What’s up with that? Are American employers more callous than their European counterparts and American forebears? Some would doubt it, while I might cynically agree. The difference — it seems on Labor Day 2010 — is that American workers have markedly less power than their European counterparts and their American forebears. Certainly, this situation is partly because unemployment remains so high here, leading to workers basically down-bidding wages against each other.

More fundamentally, though, the U.S. private sector is almost entirely — 93 percent — nonunion.

Unlike European workers, unlike their own parents and grandparents who lived in a much more heavily unionized America, U.S. workers now seem powerless to stop their employers from pocketing all the additional profit from reduced wages, off-loaded health care costs, and increased productivity.

Human Rights Watch recently documented how corporations that are model (and highly profitable) employers in Europe, and collaborate with european unions as “stakeholders,” descend to American employer norms — denying workers the right to join unions — for their U.S. operations.

The source of this situation is outlined in a report released on Labor Day from Freedom House*, an organization with a staunch  aversion toward authoritarian regimes both left and right: through the weakness of our labor laws, private-sector American workers can no longer effectively form unions. Citing the near-impossibility of forming unions in America, the report bemoans that the United States can no longer be classified among the 41 nations that afford their workers full freedoms.

  • A union-free America…
  • Growth down a little…
  • Employment down a lot…
  • Profits and productivity up…
  • Wages flat…
  • Health-care costs up for workers, down for employers…

Wondering about the return of a thriving middle class? Not gonna happen — not in the United States of America.

Happy Labor Day, America!

*The 2010 Freedom House report, The Global State of Workers’ Rights: Free Labor in a Hostile World, found that one-third of the global population lives in societies in which workers’ rights suffered a significant degree of repression.

Notably, the report found substantial and systematic violations of internationally recognized labor norms in every region of the world except Western Europe.

Among the findings is that 41 countries, or almost one quarter, were found to have “Free” labor rights environments — of these, 26 were European Union member states. At the other end of the spectrum, 40 countries, or nearly one-quarter of those assessed, were judged to have either Repressive or Very Repressive labor rights environments.

The United States ranked as Mostly Free — trailing behind Western Europe, Canada, Australia and a number of developing countries.

The United States today has one of the weakest labor movements among advanced economies, has suffered a precipitous decline in private-sector union membership, and—unlike most European countries—features an overall political environment that is distinctly hostile to unions, collective bargaining, and labor protest.

The report noted that while American law guarantees workers core labor rights, the overall American sentiment has encouraged growing resistance to unions by employers. Management has used a variety of tactics to forestall unionization and has shown a willingness to violate labor law if it would result in the defeat of a campaign to gain bargaining recognition for a union.


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