Disparity Between Productivity and Pay: $3 Trillion a Year

By Roger Bybee

The growing economic polarization of America is increasingly obvious, if not a major topic of discourse in mainstream corporate media.

As Les Leopold notes in The Looting of America, the richest 1% of earners collected 8% of national income in 1973. "By 2006, the top 1% got nearly 23% of the pie, the highest proportion since 1929, " he writes. Moreover, the richest 1% now earns more than the bottom 50% of Americans. During almost exactly the same period, the pay gap between the top 100 CEOs and workers rose from 45 to 1 in 1970 to Himalayan proportions in 2006, reaching 1,723 to 1, Leopold says, citing data from Forbes.

But one of the most significant and least-discussed elements in the stunning polarization of America is the extent to which rising productivity has become unhitched from the way that its rewards are distributed.

PRODUCTIVITY UNHITCHED FROM WORKER PAY

Leopold lays out the astonishing data on this disparity:

By 2007, real wages in today's dollars had slid from their peak of $746 per week in 1973 to $612 per week--an 18% drop. Had wages increased along with productivity, the current average wage for nonsupervisory workers would be $1,171 per week--$60,892 instead of today's average of $31,824.

Our real average compensation is now about $25 per hour, including all benefits, representing a small increase from the early 1970s [in part created simply because of the sharp rise in health costs.] If it had risen along with productivity, it would be more like $41 an hour. The productivity bonus--about $16 an hour--is still AWOL.

Over roughly the same period, the ratio of household debt to income went from 55% to 127%, as Americans tried to make up for the loss of real wages with increased use of their credit cards.

American families have found themselves with vastly reduced time off the job, losing vacation days, sick time, and other leave. Until the recession hit, we were working the longest hours in the world.

So although we are producing more, working longer hours (if we are working), and have taken on unsustainable levels of debt, working people are falling further and further behind. The number of home foreclosures, for example, is expected to go from 2.8 million in 2009 to 4.5 million families losing their home in 2010.

$3 TRILLION SUCKED UPWARD TO INVESTOR CLASS

Instead, the additional income generated by US workers has been redistributed upward. That means about $3 trillion more flowing each year mostly "to the investor class all over the world, " as Leopold puts it.

There are three chief reasons why the $3 trillion has been sucked upward. First: U.S. corporations have used the threat of relocation to Mexico or China to ratchet down US wages.

Second, millions of Americans have lost the right to bargain over their wages as heavily-unionized  manufacturing plants have been shut down and often relocated in low-wage nations. We have lost 5.6 million industrial jobs--about 32% of the total--since 2000 alone.

Third, the right to form unions has suffered a de facto repeal.  Employers realize that they can intimidate and fire pro-union workers (over 31,000 in 2005 alone, according to State of the Unions author Philip Dine) without repercussions, so an atmosphere of fear and anxiety haunts American workplaces.

Thus, American workers will not even begin to be able to  claim what is rightfully theirs--some $3 trillion in annual income--until the labor movement can crack that sense of intimidation and powerlessness.

PAYOFF FROM POLITE LOBBYING?

With President Obama surrounded by Wall Street believers in trickle-down economics like Lawrence Summers and Timothy Geithner, we should have no rational expectation that more polite lobbying in Washington D.C. will make any difference.

We will neither produce meaningful legislative changes nor break through the fatalism that working people seem to feel so deeply these days.

US labor needs desperately to inspire and support workers at the grassroots level finding leverage over corporate power, whether it be fighting plant closings or resisting foreclosures.

Only when we have successfully exerted some power at the local level, can we hope to command respect (as in, instill fear) and wrench real concessions from the Obama administration and the Democrats in Congress on real job-creation programs, curbing the relocation of U.S. jobs, and restoring union rights.