In a Growing Economy, Why Are Workers Falling Further Behind?
Jobs, jobs, jobs! Growth, growth, growth! Winning, winning, winning!
That’s the story we get from our beloved president, Donald J. Trump, at least. As many of us can attest to, though, what he says may not be (or is rarely) the gospel truth.
In an August 13 post in his nascent online newsletter, Popular Information, journalist Jedd Legum discusses how, indeed, GDP growth is strong and unemployment is low. Sounds great, right? While not to discount these trends, the issue is that wages aren’t rising to accompany them. Legum writes:
There is something fundamentally broken about the United States economy and no one is doing anything about it.
Unemployment is low. GDP growth is strong. But official government data released on Friday show that real wages for American workers have gone down over the last year.
Nominal wages, the dollar amount workers see in their paychecks, have slowly crept up, increasing 2.7% between July 2017 and July 2018. But that has not kept up with inflation, which rose 2.9% over the same period.
The economy is growing. Workers, however, are falling further behind.
This sounds awfully doom-and-gloom coming from Legum, but as he indicates, he has the data provided by the Bureau of Labor Statistics to back him up. What’s more, he identifies key reasons why workers aren’t reaping the benefits of a robust economy through their take-home pay.
First of all, before we get to why wages are stagnant or declining, there’s the matter of the Trump tax cuts. After the Tax Cuts and Jobs Act was signed into law, the White House promised that “the median U.S. household would get a $4,000 real income raise.” That hasn’t happened, though.
To make matters worse, Trump and his advisers are apparently not interested in revisiting their policies to assess their potential flaws. Instead, Trump has—in characteristic fashion—doubled down on his assertions. He has ignored any evidence to the contrary, boasting that our paychecks are bigger and America is booming like never before. That’s especially not true in the case of our “booming” nation, but why let facts get in the way of a good story?
As Legum is keen to point out, however, trends in wage stagnation relative to inflation are bigger than Donald Trump. (But shh—don’t tell Trump that. In his mind, he is the sun around which we revolve.) Regardless of who is president or which party is in power, wages have been effectively stagnant for decades.
Based on this phenomenon, Legum insists that if people are complaining of an economy “rigged” against them, they are, well, right. Despite America’s status as one of the richest countries in the world and in an era of increasing profits, fewer people are enjoying those additional rewards. Cue the conversation about the 99% versus the 1%.
Accordingly, as Legum asks in his introduction, what gives? The answer is a complicated one, though there are some major culprits in the eyes of economic analysts. The first is employer-based health insurance, of which costs are on the rise. Because of escalating health care expenses, employers are less likely to raise wages. Because they are concerned about coverage and costs, employees are less likely to seek employment elsewhere. Consequently, employers are less inclined to negotiate on wages for fear of a departure. It shouldn’t surprise you to know that lower-wage workers also are disproportionately affected by these rising health care costs.
Speaking of negotiating for higher wages, a decline in union membership mediated by deliberate attempts to undermine organized labor has weakened the bargaining power and wages of union and non-union workers alike. Without significant union membership, there is insufficient reason for non-union employers to raise wages to compete with those of union firms. This is to say that it is not a zero-sum game involving the wages of union and non-union workers.
Compounding the problem of wages in America is that productivity is lagging despite advancements in technology. Legum speaks to the theory that American companies are simply not investing enough for the long term, instead opting to turn revenues into dividends or stock buybacks that inflate stock prices. Meanwhile, as he also indicates, wages have increased more slowly than productivity, so this is “only a piece of the puzzle.”
All of these factors lead up to Legum’s central point. While wage stagnation is obviously complex, there are yet remedies which can be effected. On the health care front, Medicare-for-all and other single-payer models at the state level have been suggested as ways to make employer costs more manageable. For unions, there are possible interventions like majority sign-up or multi-employer bargaining. For productivity’s sake, where private organizations fail, public investments in infrastructure can help pick up the slack.
The problem with these remedies is that they aren’t being implemented, or as Legum puts it, “no one is working to fix the problem.” Re the Trump administration, in many cases, these solutions aren’t just being ignored—they are forsaken for policies that deliberately move us backward.
We all remember the attempts by the president and a Republican-led Congress to kill the Affordable Care Act. They haven’t yet proven wholly successful, though this doesn’t mean the GOP will stop trying. Trump also celebrated the ruling in Janus v. AFSCME, characterized by many as a major blow to public-sector unions. As for infrastructure, Trump promised it would be a priority of his tenure in office. Heretofore, like most of Trump’s promises, it has yet to come to fruition.
In closing, Legum writes, “Politicians of all stripes speak incessantly about the American worker. But until they tackle the wage crisis head-on, it’s hard to take them seriously.” The absence of references to a specific political party here implies that both Republicans and Democrats should be taken to task for their role in subverting the wage growth of the labor force in the United States.
For the GOP, which has long kept the interests of big business close to heart, this is no big surprise. On the other hand, for the Democrats, the putative party of the people, the charge is that they have failed workers by not more vigorously defending organized labor, not to mention too eagerly embracing corporate lobbies/wealthy donors and their influence. This is the sort of inaction from lawmakers that the average voter is arguably justified in raging against. With the criticism from the left, there is an added sense of disappointment that a party which traditionally has embraced working-class Americans appears to have so readily abandoned them.
As Judd Legum underscores, these trends which have contributed to wage stagnation amid a growing economy were in motion before the rise of Donald Trump. His ascendancy is perhaps an all-too-logical consequence of their elaboration. As numerous publications and pundits observed, working-class whites, who came out in force for the business tycoon in 2016, were a key source of his support.
Before the election, the voting bloc of whites without a college degree was reportedly shrinking, and polling data had Hillary Clinton with one foot in the White House. Meanwhile, a group of individuals who disdain professionals because they perceive themselves to be disdained, while holding fast to the aspirational model embodied by Trump, was instrumental in swinging the election to the Republican presidential nominee. If Democratic strategists were convinced they could all but ignore this subset of the electorate (and key segments of the Rust Belt), it turned out they were wrong.
It’s political realities like this which make the recent decision by Tom Perez and the Democratic National Committee to reverse a ban on donations from fossil fuel companies rather alarming. Ostensibly, this was a move made because input from labor suggested a ban on fossil fuel money was an “attack” on workers. In reality, and as the activist community has observed, this 180 is designed to allow fossil fuel executives to keep donating to (and buying influence within) the Democratic Party.
The DNC’s about-face is particularly galling given that the prohibition on fossil fuel contributions—which specifically targeted corporate PAC donations—only came about this past June. Defenders of Perez’s proposal might be wont to point out that the Republican Party accepts substantially higher amounts of cash from the fossil fuel industry than the Dems do. There’s also the aspect that Democrats in contested districts/states feel they need to take a more moderate stance when it comes to energy production.
Still, as Kate Aronoff, contributor to The Intercept, quipped, “There are no jobs on a dead planet.” The DNC’s recommitment to an “all-of-the-above” energy strategy is a regressive turn of events at a time when more urgent action on climate change is needed, and when the Trump administration is doing its part to reverse as many regulations designed to safeguard the environment as possible (see also Scott Pruitt as the original pick for the EP-freaking-A).
Moreover, the rationalization of taking fossil fuel PAC money as a defense of organized labor is an altogether cynical one. Apparently, being a rank-and-file worker/Democratic Party supporter and having enthusiasm for an energy plan based on renewable sources are mutually exclusive. If you care about your job, evidently you give f**k-all about the planet.
To reiterate, the problem of stagnant and declining wages in America is a complex one mediated by a number of factors. At the same time, a little leadership from our elected representatives could go a long way in convincing us we are on the right track in trying to ameliorate the situation. Unfortunately, legislative gridlock and intentional concessions to corporate interests inspire little confidence we’re moving in the right direction on this issue.