On Labor Day, Little Reason For Workers To Celebrate

There appears to be some confusion about Labor Day. It was a PR move by 19th century labor unions to underscore the contribution regular workers, and not just business owners, make to the economy. Though there are those who want to redirect attention back to the owners again. Take this tweet that captured a post by former representative Eric Cantor while it still existed on his Twitter feed. (As far as I can tell, he must have taken it down, as it no longer appears).

Sure, let’s redefine Labor Day by celebrating the historical enemy of organized labor, the Noble Small Businessman. pic.twitter.com/UCK8cc6uwE

The Cantor tweet read, “Today we celebrate those who have taken a risk, worked hard, built a business and earned their own success.”

Jeb Bush, just before Labor Day, cheered on Charlie Baker, who’s been pushing for charter schools in Massachusetts, which could become a backdoor to weakening teachers’ unions. (And for those who haven’t had kids in charter schools, I can say from experience that there can be plenty of problems with them.)

How one frames the “heroes” of the economy helps determine who should be given credit for economic success and, tacitly, who should share in the riches.

In a country that has high economic inequality, there are those who can afford $4,000 baby strollers and $20,000 crocodile-skin bags. More might be able to drop hundreds of dollars for pre-distressed sneakers at Barneys New York, even if just as a treat requiring savings. (A hint: Buying sneakers and wearing them out is more cost-effective.)

And then there is the vast majority of people who are struggling, even as middle income slowly disappears and the country’s socioeconomics becomes more polarized.

A new report from the left-leaning Economic Policy Institute includes an analysis that says a decline in union wages has depressed the wages of non-union workers and helped grow inequality.

Private-sector union decline since the late 1970s has contributed to wage losses among workers who do not belong to a union. This is especially true for men, particularly non–college graduates. For nonunion private-sector men without a bachelor’s degree or more education, weekly wages would be an estimated 8 percent ($58) higher in 2013 if union density remained at its 1979 levels. These lost wages due to declining union power eclipse non–college graduates’ estimated 5 percent wage loss from increased trade with low-wage nations, signaling that decline in union power must receive more attention in the debate over wage stagnation and growing inequality.

Some will undoubtedly find fault with the conclusions, but there is a good degree of common sense support to the idea. If a significant group of workers makes a better living because of collective bargaining, there will be greater interest on the part of non-unionized workers in those jobs, which creates more competition for help. Assuming there isn’t overly high unemployment, companies that don’t have unions will feel competitive pressure to pay more for help.

The association — fewer unions leading to lower wages and increased inequality — might encourage the easy association that reversing the course, increasing the presence of private sector unions, would improve the lot of workers. It could help, as the movement of some larger employers to increase entry-level wages suggests.

But it isn’t enough because the nature of the work and the margins of the employers has changed. Getting $15 an hour in fast food may be a rallying cry, but many employers won’t have the money. Between the amounts they have to kick back to franchisors and rents that evoke a “‘You must pay the rent!’ ‘But I can’t pay the rent!’” image, the money may not be there, even if here were twirling moustaches. Low margins of the industry ultimately cap what is possible.

In the salad days of unions, it was work like factory jobs that enabled the salaries and the resulting better median wages. Global labor arbitrage eliminated many of those jobs and they’re not coming back. Even some return of manufacturing to the US relies on far more automation and far fewer workers. Fewer positions mean less demand for workers. Less demand results in a greater supply. Ultimately, it mess less money available for salaries and benefits — well, at least to the bulk of workers. Those at the top seem to continue to do well.

More education isn’t the answer as most jobs don’t inherently require college degrees. Growth can’t fix the problem as climate change and hard limits on energy, water, and other resources can’t be wished away. A solution to income inequality, whether in the US or globally, will require truly different principles than what we seem inclined to hold.

The association — fewer unions leading to lower wages and increased inequality — might encourage the easy association that reversing the course, increasing the presence of private sector unions, would improve the lot of workers. It could help, as the movement of some larger employers to increase entry-level wages suggests.

But it isn’t enough because the nature of the work and the margins of the employers has changed. Getting $15 an hour in fast food may be a rallying cry, but many employers won’t have the money. Between the amounts they have to kick back to franchisors and rents that evoke a “‘You must pay the rent!’ ‘But I can’t pay the rent!’” image, the money may not be there, even if here were twirling moustaches. Low margins of the industry ultimately cap what is possible.

In the salad days of unions, it was work like factory jobs that enabled the salaries and the resulting better median wages. Global labor arbitrage eliminated many of those jobs and they’re not coming back. Even some return of manufacturing to the US relies on far more automation and far fewer workers. Fewer positions mean less demand for workers. Less demand results in a greater supply. Ultimately, it mess less money available for salaries and benefits — well, at least to the bulk of workers. Those at the top seem to continue to do well.

More education isn’t the answer as most jobs don’t inherently require college degrees. Growth can’t fix the problem as climate change and hard limits on energy, water, and other resources can’t be wished away. A solution to income inequality, whether in the US or globally, will require truly different principles than what we seem inclined to hold.

Photo

This July 21, 2016 photo shows union members picketing outside the Trump Taj Mahal caino in Atlantic City, N.J. The announcement on Aug. 3, 2016 that the Taj Mahal will close after Labor Day could bolster the arguments of both sides in a November referendum in which New Jersey voters will decide whether to authorize two new casinos in the northern part of the state near New York City. (AP Photo/Wayne Parry)

Erik Sherman ,   CONTRIBUTOR to Forbes