Strong Unions - The Worst Nightmare for the Financial Elite

Michael Collins

Man wouldn't pay you unless he had to. Chris Rock


The antiunion movement in the United States keeps us underpaid and represents a serious impediment to economic growth. Yet antiunion sentiment remains strong among the political establishment and their patrons. Why?

Worker rights and a decent wage represent a toxic brew to the ruling elite. In the past, they expressed their antiunion position in a crude fashion. From the 1870s through the 1920s, industrialists fought union growth with hired thugs and complicit law enforcement officials. Organizers and union members were harassed, maimed, and killed throughout the country for simply acting on the right to organize and participate in a union.

Time for a Bailout for the American Workforce


Note: this is a cross-post from The Realignment Project. Follow us on Facebook!


As the third year of recession ends, the scale of the task of undoing the social and economic damage of the recession is now made plain. It is already well-known that 15 million Americans are officially unemployed, with another 15 million unofficially unemployed. But the scope of the recession goes far beyond their ranks  - more than half of the U.S. labor force (55 percent) has “suffered a spell of unemployment, a cut in pay, a reduction in hours or have become involuntary part-time workers” since the recession began in December 2007.

The widespread nature of workers' declining fortunes, even if they have not suffered unemployment, explains why it is that one-third of U.S working families are now low-income (i.e, under 200% of poverty), one lost paycheck, one illness, or one accident away from disaster. But as I have noted before, the underlying illness of stagnant wages and a weak labor market have existed before - the one-third figure discussed above is only 7% higher than before the recession, and during the previous recovery in '02-05 we saw that figure increase, never falling below its 2007 level.

A rescue is deeply needed.

Wages versus gold: A look at historical data

One of the most visible measures of the condition of working families is the price level of a day’s wages. So, we figured it might make sense to subject those wages to the same sort of analysis we used in the last post: the withering criticism of an ounce of gold.

Here is a chart of an average day’s wage since 1964, as presented by the Bureau of Labor Statistics:

 Average wages in dollars

Chart 1: Average day's wage in dollars (1964-2010) (Source: bls.gov)

As is befitting a labor force enjoying the prosperity of the freest, most productive, nation on the planet, we have seen our wages rising for the entire period from 1964 to 2010. Even through depressions as intense as that of the Great Stagflation (the first set of green and red bars) and the current Great Recession (the second set of green and red bars) the average day’s wage of American workers has never fallen year over year.

Unfortunately, things are not so rosy when the value of a day’s wage is measured by an ounce of gold:

Chart 2: Average day's wage in gold (1964-2010) (Source: bls.gov)

The Race Continues

The race to the bottom. But this time the supporters of the ideology that is leading the race to the bottom are not hiding behind slogans such as "small government", "government is the problem" or "trickle down economics". No, no, they are coming right out in the open. For example this New York Times article: here.

The authors of this article don't waste any time. Check out the first paragraph:

American workers are overpaid, relative to equally productive employees elsewhere doing the same work. If the global economy is to get into balance, that gap must close.

But it gets better:

The big trade deficit is another sign of excessive pay for Americans. One explanation for the attractive prices of imported goods is that American workers are paid too much relative to their foreign peers.

Time to "Put some Jam on the Bottom Shelf where the Little Man can Reach it!"

"Put the jam on the bottom shelf so the little man can reach it," Sen. Ralph Yarborough used to say in the 1950s and 60s, when Texas still elected populist democrats to the Senate.

Well, it's time for Obama and the Congress to put some jam, in the form of stimulus and jobs (like a new WPA) in the reach of the little people, because if they aren't careful, the little people are about to get dragged back over the precipice into a chasm of wage deflation.

Henry C. K. Liu of the Asia Times: It's a Global Wage Crisis

H/t to Bigchin who sent me a link to an Asia Times column by Henry C. K. Liu:

"the Fed's new money has not been going to consumers in the form of full employment with rising wages to restore fallen demand, but instead is going only to debt-infested distressed institutions to allow them to deleverage from toxic debt. Thus deflation in the equity market (falling share prices) has been cushioned by newly issued money, while aggregate wage income continues to fall to further reduce aggregate demand.

No Long-term Recovery without real Wage Growth

In my recent series, Economic Indicators during the Roaring Twenties and Great Depression, I concluded that the indicators that were studied from the Deflationary period of 1920-1950 suggested that this recession might bottom out in about Q3 2009. But with anemic wage growth to say the least, such a weakly based recovery might be doomed at birth to be short-lived.

All the deflationary recessions from 1920 - 1950 followed a pattern. The CPI declined from the beginning of the recession and its YoY rate of decline bottomed immediately before the recession's end. M1 money supply followed a similar pattern, sometimes coincidentally, sometimes leading slightly. In all 6 of the deflationary recessions during the period of 1920-50, once M1 and CPI both declined at a decreasing rate, the recession was about to end.

The American consumer capitulates

Back in August 2007 I wrote a diary entitled, Are Hard Times near? The Great Decline in interest rates is ending, that began:

The American consumer has had largely stagnant wages since 1974. While from 1980 through 2006, the median income of an American household has risen only from $39,700 to $48,200 in real terms, house prices for example have shot up form nearly $125,000 to $246,500. Consumers have responded generally by taking on more and more debt. Total household debt service has risen from 16% in 1980 to 19.4% in 2006.