The War On Wages

Mitt Romney, who helped build his massive fortune by serving as a “pioneer” in offshoring family-sustaining jobs to low-wage sweatshops in China, proclaimed that his campaign was actually dedicated “to the man from Waukesha, Wisconsin [who] used to have a job at $25 an hour with benefits and now has one at $8 an hour, without benefits.” Romney went on to declare his firm commitment to oversee “rising take-home pay” for American workers.

Of course, the key tenets of the Romney-Ryan campaign were aimed precisely at destroying any support for wages in the $25 range. Romney’s pledge of higher pay for U.S. workers collided directly with his support for a national “right-to-work” law designed to virtually eradicate unionism, his support for running-mate Paul Ryan’s proposal for eliminating taxes on the profits from overseas plants operated by major U.S. firms would heighten the incentives for moving highly-paid jobs outside the U.S., and his call for “making America the most favorable and competitive.”

This push for “improving” competitiveness in the global economy translates into deteriorating conditions in the lives of working families. While unions and their members have been a primary target, the result has been a flattening of earnings across the middle class.

Amid a general push to drive down pay for American workers, there are mounting signs that major U.S. corporations are stepping up efforts to force workers to accept their definition of $13 an a hour as a “competitive” wage which U.S. workers should find acceptable. This amounts to slightly less than half of the pay prevailing among veteran workers in unionized industries like auto production and paper-processing. Yet, despite the immense suffering inflicted on working families by this drive by Corporate America, the basic outlines of the global competitiveness framework are accepted almost unanimously in the pro-“free trade” elite media and among the top leaders of both major parties (although there is dissent from the Democrats’ progressive wing, such as Senator Sherrod Brown and Representative Marcy Kaptur, both of Ohio). Even as Obama’s campaign ads took Romney and Bain Capital to task for the offshoring of U.S. jobs to low-wage nations, the Obama administration successfully pushed for three NAFTA-style trade agreements with Colombia, South Korea, and Panama—which foster the relocation of jobs—and is also currently negotiating a mammoth “free trade” deal called the Trans-Pacific Partnership.

Formal democracy in the U.S. and other advanced societies is now focused on “responding to the global market forces as advantageously as possible and apportioning the resulting gains and losses—while trying to manage public opinion...in accordance with the electoral cycle,” as Martin Leys described the state of governance in Market-Driven Politics. As a result, “Society is being shaped in ways that served the needs of capital accumulation rather than the other way around.”

The careful circumvention of critical issues like declining living standards by the major parties and the inability of voters to hold elected officials to fundamental commitments was sharply depicted by Kevin Baker writing in Harper’s. Baker pointed to Obama’s willingness to consider a “grand bargain” with Republicans under which Social Security and Medicare benefits would be cut, in spite of overwhelming opposition from the public, especially Democratic voters and Obama’s own pledges in the past. “Just as Western capitalism deindustrializes, offshoring industry, cutting wages and benefits, eliminating workers’ rights and protections—so Western democracy depoliticizes, its major parties expelling or silencing entire constituencies, scorning the participation of groups that once sustained them,” observed Baker.

The Obama administration’s defense of its policies as “saving Wall Street in order to rescue Main Street” was increasingly seen as a veiled form of trickle- down economics, as the Administration consistently consulted and courted Wall Street while allowing CEOs and bankers to set the terms of policy of critical issues like unemployment and home foreclosure. In contrast, the poor and working-class victims of shattering economic dislocations in their lives were effectively excluded from helping to shape programs to reconstruct their lives. No wonder, then, that Democracy Corps pollsters Michael Bocian and Andrew Baumann found in the spring of 2010 that, “Just 3 percent agreed that government’s policies helped ‘the average working person’ or ‘you and your family’” and “a 48 percent plurality of voters think Obama and Democrats put bailing out Wall Street ahead of creating jobs for ordinary Americans.”

President Obama’s campaign glided over the all-out attack on workers’ living standards—in terms of wages, healthcare benefits, pensions, job security, and public safety-net programs—being waged by corporate leaders. Obama devoted much of his campaign to touting his success in stimulating 31 straight months of “private-sector” job creation. But with this emphasis, Obama failed to address the sharp deterioration in the quality of jobs in the private sector as major corporations launched a war on decent wages and failed to defend the vital role of public-sector jobs in both providing needed services and stimulating the economy during economic slowdowns. Obama’s electoral strategy of stressing his successes in getting the U.S. out of its deepest crisis in 80 years—while giving limited recognition to the continuing suffering of the under-employed and jobless and poor—surely left millions of Americans feeling shut out from his vision of America, just as Romney derisively dismissed 47 percent of Americans as “dependent” wards of government.

Repudiation Of Social Compact

The assault on wages and middle-class living standards represents a radical u-turn from the unwritten “social compact” followed by leading corporations from roughly 1940 to the mid-1970s, during which corporate leaders reluctantly accepted the unionization of their workforces and paid out substantially higher wages in exchange for shop-floor peace and a vastly-expanded domestic consumer market. Unions in the U.S. reached a peak in the 1950s, representing about 35 percent of workers and setting a standard that many non-union firms felt compelled to match.

However, U.S. employers were determined to escape any sharing of power with unionized workers, even though U.S. labor law provides none of the relatively expansive democratic features in Western European labor law (e.g., in Germany, workers must have representation on corporate boards of directors). After a post-WWII strike wave, the spread of “right-to-work” laws that enabled bosses to shape docile non-union workforces—set up by the passage of the Taft-Hartley Act in 1947—gradually made the old Confederacy increasingly attractive to employers seeking to escape unionized workers and pro-union communities in the North. The low unionization rates once common only in the South have become the national norm: just 7.9 percent of American private-sector workers are now in unions. Ironically, non-union Southern communities are being de-industrialized by employers seeking even lower wages and moving on to Mexico, Central America, China, and elsewhere.

A trend that has been labeled “Caterpillar Capitalism” has begun to emerge. Corporations flush with record profits nonetheless exercise their leverage to extract wage concessions. The exemplar, Caterpillar, with profits of $4.8 billion in 2011 and CEO Douglas Oberhelman enjoying a 60 percent increase in his compensation to $16.9 million, chose to target machinists in Joliet, Illinois to impose massive concessions—including a 6-year wage freeze, a doubling of health care premiums and cuts to pensions. Caterpillar had previously been a leader in forcing the acceptance of 2-tier wage structures, under which new workers receive 50 to 60 percent of veteran workers, along with far more limited health and retirement benefits. The 2-tier trend has spread to GM, Chrysler, and Ford, with new hires beginning the brutally-paced work at around $14 an hour. In Wisconsin, within a span of four months, three major firms—Mercury Marine, Harley-Davidson, and Kohler—all used the threat of relocating jobs to extort the acceptance of two-tier wage structures. Starting wages in manufacturing have fallen by 50 percent over the last 6 years, reports former Labor Secretary Robert Reich. Particularly galling is that falling wages have coincided with $3 trillion in annual productivity gains by workers being appropriated almost entirely by “the investor class all over the world,” according to Les Leopold, author of The Looting of America.

Between 2004 and 2010, GE cut the number of U.S. employees from 165,000 to 133,000. Meanwhile, between 1996 to 2010, GE’s number of offshore workers rose from 84,000 to 154,000. GE has also virtually stopped paying federal income taxes that pay for public services, as have many other leading corporations. In 2010, GE piled up $14.2 billion in profits and then managed to gain an additional $3.2 billion in tax benefits from the federal government. General Electric’s present financial condition can be described as nothing less than superb, enjoying a 16 percent increase in profits in 2011 on top of $14.2 billion in 2010. But GE displayed its new mindset with wage cuts imposed at its non-union plant in Mebane, North Carolina, where veteran workers earned as much as $23.67 per hour. After being recalled from brief layoffs, long-time workers with up to 20 years of service at GE discovered that their pay had been cut by 45 percent and that they had been removed from the company’s defined-benefit pension plan.

The wage-slashing is about to become more widespread at GE’s non-union plants, based on GE memos obtained by the UE’s Townsend. In last year’s negotiations with a coalition of unions, GE repeatedly informed labor that it viewed $13 per hour a competitive wage in manufacturing, recalled Townsend. Alert to trends among U.S.-based firms, foreign-owned firms are emulating the downward spike in wages. “Toyota’s goal has become $12.64 an hour, the median wage for comparable manufacturing in Kentucky, where it has its largest plant, or $10.79 in Alabama, where it is building a new plant,” reports UC-Berkeley Professor Harley Shaiken, a long-time scholar on labor issues and the auto industry.

According to Chrystia Freeland, author of the new book Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else. The new super-rich are “less connected to the nations that granted them opportunity and the countrymen they are leaving ever further behind.” The United States has devolved into a state of such extreme inequality that in 2005 Citibank analysts described the country as a “plutonomy” where the super-rich thrive regardless of the fate of the bottom 90 percent. In this new hierarchy, “There are rich consumers, few in number, but disproportionate in the gigantic slice of income and consumption they take.” In fact, the richest 1 percent of America monopolized fully 93 percent of income gains in 2010, according to economist Emanuel Saez of UC-Berkeley. That 1 percent collects 24 percent of all annual income in the U.S. Senator Bernie Sanders (I-VT), outlined the outcomes of this unequal sharing of American prosperity: “The statistics on income distribution in the U.S. are staggering in their inequality. According to the latest analysis, in 2005 the top 1 percent earned more income than the bottom 50 percent of Americans—with the top 300,000 earners making more money than the bottom 150 million.” Cut off from the lives of the bottom 99 percent, the CEOs and the rest of the investor class have had few problems with sending family-supporting jobs overseas. Between 2000 and 2010, major U.S. firms eliminated 2.9 million jobs at home while creating 2.4 million jobs overseas, according to the Wall Street Journal (4/19/11).

Global Consumers, Impoverished Amercians

With U.S. wages plummeting, who will buy the products? In recent years, corporations counted on people to use their credit cards and housing equity to make up in borrowing for the wage increases that they were not receiving. Obviously, the big Wall Street meltdown, collapse of the housing bubble, and the tighter credit brought an end to that. No problem, as Frank Emspak—professor emeritus of the University of Wisconsin’s School for Workers—ruefully noted: “There’s six billion people in the world, and even in relatively poor nations like Brazil, China, India, and Mexico, you have 10 percent of the population—the elites—capable of buying products from the U.S. That means roughly 600 million consumers overseas. So there is much less reliance on the U.S. domestic market and maintaining high wages so people can buy what they make.”

The secession from domestic concerns extends to issues like healthcare, education, and global warming. Referring to the need for massive investments in healthcare, energy, and technology to ensure continuing U.S. competitiveness, even globalization cheerleader Thomas Friedman of the New York Times was uncharacteristically critical of the nation’s CEOs: “When I look around for the group that has both the power and interest in seeing America remain globally focused and competitive—America’s business leaders—they seem to be missing in action.”

At the same time as the bubble of “plutonomy” has emerged for the super-rich, America has witnessed the parallel growth of a “precariat,” working families whose hold on their jobs, incomes, homes, and retirement benefits became increasingly precarious with each passing day. The loss of middle-class jobs has been severe and is, of course, still growing. Former Reagan budget director David Stockman estimated the loss nationally at 12 percent of “high-value” jobs, falling to 68 million from 77 million. Middle-income Americans, especially working-class families, endured what Pew Research documented in the “Lost Decade” study released in August. The size of the middle class shrank substantially: “51 percent of all adults were middle class in 2011, compared to 61 percent in 1971.” So did their share of national income, Pew reported: “In 1971, the middle class had 62 percent of the income pie; in 2011, that figure fell to 45 percent.” For the middle-income group, the lost decade of the 2000s has been even worse for wealth loss than for income loss. The median income of the middle-income tier fell 5 percent, but median wealth (assets minus debt) declined by 28 percent—to $93,150 from $129,582.

A substantial part of the income loss can be explained by employers engaging in what the NY Times’ Louis Uchitelle called the largest wave of wage-slashing since the Great Depression. The almost non-existent level of job creation—under 1 percent from 1999 to 2009, the worst decade since World War II when job growth had ranged from 22 percent to 38 percent—strengthened the hand of employers in holding down pay and trimming benefits. The panic created by the Wall Street meltdown of 2008 and the ensuing loss of 8.5 million jobs added to management leverage, already strong because of labor unions’ weakened bargaining power, to push wages down further.

But the level of U.S. wages is still not low enough to satisfy key figures among the top 1 percent. For example, Pimco bond-fund founder Bill Gross told Fareed Zakariah, host of the GPS TV program, “Our labor force is too expensive and poorly educated for today’s market place.”

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Roger Bybee is a Milwaukee-based freelance writer and University of Illinois visiting professor. His articles have appeared in Dollars & Sense, the Progressive, and other publications.