This Labor Day, Americans realize that their economic well-being and their prospects for upward mobility are at risk.
According to a recent poll by Time magazine and the Rockefeller Foundation 72 percent of Americans believe they are less economically secure than a decade ago.
This widespread economic insecurity is a consequence of the economic restructuring that began in the 1970s, particularly the dramatic polarization of incomes and wealth, the decline of unions and the breakdown of the social contract between corporations and their employees.
Unions are the foundation of the American middle class, and the revival of labor is essential for building a new post-industrial economy based upon shared prosperity, rising productivity and labor-management co-operation.
New York Times reporter Steven Greenhouse, in his new book “The Big Squeeze: Tough Times for the American Worker,” states that 37 percent of private-sector workers were union members in 1955, but by 2007 only 12 percent of all workers, and 7 percent of private sector workers, were unionized, the lowest number since 1901.
Until the mid-1970s, productivity gains and worker pay increased together, particularly in the highly unionized manufacturing sectors such as auto, steel and consumer durables.
Between 1947 and 1973 median family income and productivity roughly doubled. All quintiles of the income distribution grew together: the inflation-adjusted family income of the bottom 20 percent increased by 116 percent, the middle fifth by 111 percent and the top fifth by 99 percent.
Union contracts included cost-of-living adjustments and comprehensive health, retirement and vacation benefits.
Over time, nonunion firms matched the wages and benefits paid to union employees to retain their skilled workers and to avoid unionization. When President John F. Kennedy noted in 1960 that a “rising tide lifts all boats,” he described the experience of an entire generation.
However, this golden era of American capitalism ended when President Ronald Reagan fired 11,500 striking air traffic controllers in 1981. Legal protections for workers’ rights soon eroded, good jobs in the unionized manufacturing sector moved abroad, and American business instigated a prolonged attack on the standard of living of American workers.
The Reagan era initiated the “great disconnect” between wages and productivity. Between 1979 and 2005, the inflation-adjusted average hourly wage for production and nonsupervisory workers increased by less than 1 percent, while productivity grew by 60 percent. As a result, the incomes of American families grew apart during this period: The after-tax incomes of the bottom fifth were virtually stagnant, increasing only 6 percent; the middle fifth rose a modest 21 percent; the top fifth jumped 80 percent, and the top 1 percent left all behind as their incomes increased by 228 percent.
According to Greenhouse, if wages had increased as fast as productivity since 1979, a full-time worker would earn $58,000 a year and not the $36,000 that was the average in 2007.
To cope with declining incomes and rising costs, particularly for housing, health care and higher education, middle-class families must have two income earners. So, 70 percent of married women with children are now part of the paid labor force. Moreover, the typical middle class couple works 540 more hours a year than a generation ago, while families are borrowing more than ever before. In 2005, the personal savings rate tanked to zero. Housing foreclosures and personal bankruptcies have tripled since 1979 as a result of this big squeeze on American workers.
Billionaire investor Warren Buffet has stated, “There’s class warfare all right, but it is my class, the rich class, that’s making war, and we’re winning.”
UC Berkeley economist Emmanuel Saez calculates that the wealthiest 1 percent of Americans, averaging $1.1 million annual incomes, received 22 percent of all pre-tax income in 2005, up from 9 percent in 1980. The top 1 percent earned more than the bottom 40 percent.
The decline in the standard of living for the majority of American workers means that unions matter more than ever. According to the Economic Policy Institute, unions raise wages by 28 percent on average.
Union workers are much more likely to receive comprehensive and high quality health and pension benefits. The total union premium for wages and benefits is 44 percent more than nonunion. A 2006 Peter Hart poll indicated that 58 percent of nonunion workers would join a union if given the opportunity.
Unionization and high productivity go hand in hand. Union workers are more productive than nonunion, because they have better training, lower turnover and they are more highly motivated, given fair compensation and a stronger voice regarding innovation, promotions and production standards.
Kaiser Permanente provides an excellent example. In 1997, Kaiser made a commitment to a partnership with 26 unions representing 86,000 Kaiser employees. The partnership involves workers in a structured and collaborative decision-making process regarding compensation, working conditions, staffing ratios, workforce training and patient care. The result? Kaiser workers receive the highest wages and best benefits in the industry while costs are down, on-the-job injuries are reduced, staff turnover has dropped, worker job satisfaction is up and the quality of patient care continuously improves.
Unions brought you the weekend, but even more importantly, unions brought shared prosperity and a broad middle class. It can happen again.
Martin J. Bennett teaches American history at Santa Rosa Junior College, serves as Co-Chair of the Living Wage Coalition of Sonoma County, and is a Research and Policy Analyst for UNITE HERE Local 2850.