Devaluing Labor

By Harold Meyerson
Wednesday, August 30, 2006; Page A19

Labor Day is almost upon us, and like some of my fellow graybeards, I can, if I concentrate, actually remember what it was that this holiday once celebrated. Something about America being the land of broadly shared prosperity. Something about America being the first nation in human history that had a middle-class majority, where parents had every reason to think their children would fare even better than they had.

The young may be understandably incredulous, but the Great Compression, as economists call it, was the single most important social fact in our country in the decades after World War II. From 1947 through 1973, American productivity rose by a whopping 104 percent, and median family income rose by the very same 104 percent. More Americans bought homes and new cars and sent their kids to college than ever before. In ways more difficult to quantify, the mass prosperity fostered a generosity of spirit: The civil rights revolution and the Marshall Plan both emanated from an America in which most people were imbued with a sense of economic security.

That America is as dead as the dodo. Ours is the age of the Great Upward Redistribution. The median hourly wage for Americans has declined by 2 percent since 2003, though productivity has been rising handsomely. Last year, according to figures released just yesterday by the Census Bureau, wages for men declined by 1.8 percent and for women by 1.3 percent.

As a remarkable story by Steven Greenhouse and David Leonhardt in Monday's New York Times makes abundantly clear, wages and salaries now make up the lowest share of gross domestic product since 1947, when the government began measuring such things. Corporate profits, by contrast, have risen to their highest share of the GDP since the mid-'60s -- a gain that has come chiefly at the expense of American workers.

Don't take my word for it. According to a report by Goldman Sachs economists, "the most important contributor to higher profit margins over the past five years has been a decline in labor's share of national income."

As the Times story notes, the share of GDP going to profits is also at near-record highs in Western Europe and Japan.

Clearly, globalization has weakened the power of workers and begun to erode the egalitarian policies of the New Deal and social democracy that characterized the advanced industrial world in the second half of the 20th century.

For those who profit from this redistribution, there's something comforting in being able to attribute this shift to the vast, impersonal forces of globalization. The stagnant incomes of most Americans can be depicted as the inevitable outcome of events over which we have no control, like the shifting of tectonic plates.

Problem is, the declining power of the American workforce antedates the integration of China and India into the global labor pool by several decades. Since 1973 productivity gains have outpaced median family income by 3 to 1. Clearly, the war of American employers on unions, which began around that time, is also substantially responsible for the decoupling of increased corporate revenue from employees' paychecks.

But finger a corporation for exploiting its workers and you're trafficking in class warfare. Of late a number of my fellow pundits have charged that Democratic politicians concerned about the further expansion of Wal-Mart are simply pandering to unions. Wal-Mart offers low prices and jobs to economically depressed communities, they argue. What's wrong with that?

Were that all that Wal-Mart did, of course, the answer would be "nothing." But as business writer Barry Lynn demonstrated in a brilliant essay in the July issue of Harper's, Wal-Mart also exploits its position as the biggest retailer in human history -- 20 percent of all retail transactions in the United States take place at Wal-Marts, Lynn wrote -- to drive down wages and benefits all across the economy. The living standards of supermarket workers have been diminished in the process, but Wal-Mart's reach extends into manufacturing and shipping as well. Thousands of workers have been let go at Kraft, Lynn shows, due to the economies that Wal-Mart forced on the company. Of Wal-Mart's 10 top suppliers in 1994, four have filed bankruptcies.

For the bottom 90 percent of the American workforce, work just doesn't pay, or provide security, as it used to.

Devaluing labor is the very essence of our economy. I know that airlines are a particularly embattled industry, but my eye was recently caught by a story on Mesaba Airlines, an affiliate of Northwest, where the starting annual salary for pilots is $21,000 a year, and where the company is seeking a pay cut of 19 percent. Maybe Mesaba's plan is to have its pilots hit up passengers for tips.

Labor Day is almost upon us. What a joke.

meyersonh@washpost.com