Labor Day 2003: Nothing to Celebrate

If ever there was a Labor Day for American
workers to celebrate, this sure isn't the one. It's now thirty
years since the end of the "golden era" for American
labor, which by most accounting ended in 1973. Over the
past thirty years the productivity of the people whose
brain and muscle creates the wealth of the world's richest
nation has grown by 66 percent. But the wage of the
typical employee -- the median wage -- has grown by
only 7 percent.

This one statistic says more than the volumes of
hype and tripe that will fill the papers and the air waves
on Labor Day. It encapsulates the most massive
redistribution of income in American history, from the
poor, from workers, from former middle classes -- to the
rich and the super-rich. As billionaire Warren Buffett said
to ABC's Ted Koppel last month, "If it's class warfare,
my class is winning."

What these numbers mean is that while American
labor has continued producing more goods and services,
the vast majority of employees have barely shared at all
in the fruits of their increasing productivity. Compare
these past 30 years with the first half of the post World
War II era (1946-1973), when the typical wage grew by
nearly 80 percent, or about in line with productivity
growth.

At the lower rungs of the economic ladder, the
results of this "regime change" are even more
pronounced. Ten million minimum wage workers -- 71
percent of whom are not teenagers -- now earn about 23
percent less, in terms of real purchasing power, than they
did in 1967.

In the arena of non-wage income the story has
become even more grim. Pension plans with a guaranteed
benefit are now a thing of the past, and in the last few
years millions of employees lost an enormous amount of
their retirement savings in the stock market. Rising health
care costs, along with shifting more of the cost to
employees, are taking another bite out of most workers'
living standards.

These changes are the result of deliberate policy
decisions that have reduced the bargaining power of most
workers, whether unionized or not.

One such change has occurred at the Federal
Reserve, which in normal times is able to determine the
national unemployment rate through its control over
interest rates. When unemployment gets "too low," the
Fed raises interest rates in order to slow the economy and
wage growth by throwing people out of work. For most
of the last quarter century, unemployment of less than 6
percent (and sometimes even more) was considered "too
low."

The Fed temporarily eased up on this policy in the
second half of the 1990s, and unemployment dropped
drastically to 4 percent by 2000, without any upsurge in
the much-feared inflation rate. America's workers saw
their best wage gains -- about 2 percent annually for four
years -- in decades. The gains reached down, in a break
from recent decades, to lower and middle-income
workers; and unemployment among African American
teenagers dropped from 36 to 24 percent.

But what the Fed giveth, the Fed taketh away. The
financial markets are already anticipating that the Fed
will raise interest rates early next year, even though
unemployment is projected to be at 6.2 percent. In other
words, when the economy recovers, the Fed has no
intention of allowing a repeat of that brief spate of near-
full employment.

In addition to the Fed's decisions, other intentional
policy and institutional changes have contributed to
American labor's 30-year nightmare. President Ronald
Reagan fired 12,000 striking air traffic controllers soon
after taking office in 1981, beginning an assault on
organized labor that has built a bridge to the 19th century.
And what is commonly called "globalization" has been a
deliberate process of crafting trade and commercial
agreements like NAFTA and the World Trade Organization that increasingly throw American labor into
competition with workers making as little as 25 cents an
hour in places like China.

Contrary to the views of most journalists and
economists, these changes are not inevitable or
irreversible, nor are they a result of advances in
technology or communications. This is about economic
and political power, and the vast majority of American
labor has little of either. Until that changes, this country
will continue its slide towards the economic inequality
and insecurity of our much poorer neighbors, and there
will be little to celebrate on Labor Day.

Mark Weisbrot is co-Director of the Center for
Economic and Policy Research, in Washington, DC.