Not so long ago, economic growth was shared widely among Americans thanks to a suite of policies that boosted the bargaining power of workers. In recent years, employer power has increased while worker powers have been significantly eroded—and as a result, income inequality has grown at record rates. Experts David Rolf and Larry Mishel explain how this collapse of worker power came to be, and offer solutions that will tilt the scales of power back in the right direction.
David Rolf is a labor leader, organizer, writer, and speaker working to build the next American labor movement. He is the founder and President Emeritus of SEIU 775 and a former Vice President of SEIU International. He led campaigns that helped organize hundreds of thousands of minimum-wage home care workers, and helped lead the nation’s first two successful campaigns for $15 minimum wages in SeaTac and Seattle.
Twitter: @DavidMRolf
Larry Mishel is a distinguished fellow at the Economic Policy Institute after serving as president from 2002-2017, where he has helped build it into the nation’s premier research organization focused on U.S. living standards and labor markets. Mishel has co-authored all 12 editions of ‘The State of Working America’, and has written extensively on wage and job quality trends in the United States.
Twitter: @LarryMishel
Further reading: https://tcf.org/content/report/roadmap-rebuilding-worker-power/?session=1
https://psmag.com/economics/what-caused-the-decline-of-unions-in-america
Larry Mishel: I mean, we’re bombarded with anti-union propaganda daily.
David Rolf: I like to think of this story of my maternal grandfather, who was born in poverty and who died as a member of the great American middle class.
Nick Hanauer: Everybody in the country feels like they’re working harder than ever before, but falling farther and farther behind.
Speaker 4: From the offices of Civic Ventures in downtown Seattle. This is Pitchfork Economics with Nick Hanauer, in honest conversation about how to make capitalism work for everyone.
Nick Hanauer: I’m Nick Hanauer, founder of Civic Ventures.
Jessyn Farrell: I’m Jessyn Farrell and I’m senior vice president at Civic Ventures and a former state legislator.
Nick Hanauer: Jessyn, today on Pitchfork Economics, we’re going to talk about wage suppression.
Jessyn Farrell: Wage suppression and the decline of worker power. What has happened over the last 40 years?
Nick Hanauer: Well, a lot of crazy things have happened. I mean, this story is pretty simple that for most of the middle of the last century, when productivity went up, wages for the typical family went up, wages for basically everybody went up. And then in the middle 1970s, neo-liberalism came along and all of that began to change.
And we either stopped doing the policies that kept wages tracking with productivity and economic growth or we instituted a new set of policies that decoupled wages from productivity and growth.
And as a consequence the country did not stop growing. The growth rate essentially stayed the same, but for most families, certainly for the bottom 90% of American’s wages essentially stagnated and the statistics are pretty astounding.
Jessyn Farrell: Yeah, it’s pretty astounding. Since 1979, the bottom 90% of the American workforce has seen their pay shrink as a percentage of their total income. And when I think especially telling about this is it wasn’t driven by a political market forces, right. The weather didn’t blow in. It was that there was a concerted attack on worker pay.
Nick Hanauer: Yeah. And worker power, which is where pay comes from.
Jessyn Farrell: And worker power, right.
Nick Hanauer: Definitely one of the themes of the podcast is that the neoliberal idea is that there are these immutable physics like economic forces at play and the market is always right and you are paid exactly what you’re worth. And if you only make 7.25 an hour, then that’s because you deserve 7.25 an hour. And if a particular group of people had their wages flattened out, well then that’s because that’s all they’re worth.
And if my went up 10% a year, but your wages only went up 1/10th of 1% per year, this reflects the relative difference in the amount of value we’re creating in the society and that’s just mostly complete nonsense.
Jessyn Farrell: And it’s nonsense. And we know it’s nonsense because if the policies that had been placed in 1979 had held constant, workers would have 1.35 trillion additional dollars in their pockets.
Nick Hanauer: That’s very conservatively.
Jessyn Farrell: And that’s very conservative, yeah.
Nick Hanauer: That’s just the change in their labor share, to say nothing of increases in corporate profits and shifts in wealth shares and so on and so forth.
Jessyn Farrell: Right. Not to mention changes in tax policy, et cetera, so things are probably a lot more dire than that number.
Nick Hanauer: Yeah and so, I mean, this is why everybody is so ticked off is that roughly speaking, if the typical family had fully participated in productivity growth over the last 40 years or 45 years, instead of earning $59,000 a year, they’d earn like $100,000 a year. And that gap is why everybody in the country feels like they’re working harder than ever before, but falling farther and farther behind.
Jessyn Farrell: Right. And going back to a point you made earlier that this issue around the pay gap and what’s changed is a direct consequence of the erosion of worker power. And when unions were at their strongest before the ’60s, they had a real impact on narrowing the wage gap, particularly for male workers.
But that spilled over to non-unionized work workers too. And we’ve seen a real sharp decline in worker power and union power since the 1970s and things have only gotten worse since then.
Nick Hanauer: Right. Yeah and in the old days, although everybody wasn’t in a union, only about I think one in three workers were, there was this massive spillover effect that union wages had a big impact on non-union wages and that helped support the entirety of the middle class.
Jessyn Farrell: Yeah and we see this today in a place like Washington state, which still has very strong unions. We’ve been able to put in place strong protections for workers and we of course want to see that go even stronger in certain things like the overtime threshold. But there really is a tight nexus between the strength of unions and the income of non-union workers as well.
Nick Hanauer: Right. And I mean, just not to brag or anything like that.
Jessyn Farrell: But go ahead.
Nick Hanauer: But we have been hard at work on increasing worker power in Washington state and instituting policies that increase wages for working and middle class people. We’ve done a pretty good job at it among the best in the country. And if you believe the neo-liberals Washington state would be sliding into the ocean, that all the restaurants would have closed, the companies would have moved, people would be poor, the state would be in disarray, but on the contrary, things have never really gone better.
And in fact, we were also tickled that U.S. News & World Report did this analysis that came out recently and they called Washington state. What was it? What did they say?
Jessyn Farrell: Number one, we are number one.
Nick Hanauer: They said he’s something even better than that, which was Washington state is the best state.
Jessyn Farrell: The best state. That’s right. The best state.
Nick Hanauer: Yeah.
Jessyn Farrell: And again, bringing it back to the topic today, it’s that worker power is actually better for everybody.
Nick Hanauer: It is.
Jessyn Farrell: And you see that in an economy like Washington state, which isn’t to say that everything is perfect here, which isn’t to say that there aren’t a lot of challenges, but it could be a lot worse and that’s the point.
Nick Hanauer: Yeah, we have a lot of things to fix. Yeah, it could be a lot worse. Yeah, we could be Alabama or Louisiana or variety of other places.
Jessyn Farrell: Or some place where worker power has degraded quite a bit.
Nick Hanauer: Right. And today on the podcast we are joined by a couple of extraordinary characters. The first is David Rolf, who is a dear friend and collaborator and is I think you can say just objectively is the most successful union organizer since World War II, I mean-
Jessyn Farrell: In the modern era for sure.
Nick Hanauer: Yeah, in the modern eras. He’s an extraordinarily talented guy. And we’ll also be joined by a remarkable guy named Larry Mishel who is, I think probably the country’s leading labor economist. He helped build an organization called the Economic Policy Institute and he’s been at this for 30 years or something like that.
Knows more about labor policy and wage suppression than probably anybody else in the country. He’s very interesting and fun guy.
Jessyn Farrell: Yeah and the two of them I think together are really interesting, because you have David talking about how to build organizations and the decline of organizations and of course Larry providing all of the research and policy backup to tell the story.
Nick Hanauer: Yeah, should be interesting.
Jessyn Farrell: We are excited to be here with David Rolf who is the former head of SCIU 775. And he is going to talk to us today about the history of worker power in the United States. And then to talk about what is coming next.
David Rolf: Happy to be here.
Jessyn Farrell: Thank you.
Nick Hanauer: And certainly, David as a labor leader, your life has been essentially confronting power and dealing with power dynamics and it’d just fun to hear you reflect on that.
David Rolf: I like to think of the story of my maternal grandfather, who was born in poverty and who died as a member of the great American middle class. Born in Appalachia not long after the turn of the last century. Had nine siblings, no plumbing, had a dollar in his pocket the day he was married and yet somehow he went on to own a home, send his kids to college, his widow never had to go on Medicaid for our nursing home care.
And that wasn’t because of a productivity revolution. And it wasn’t because God woke up one day and decided to create the middle class. It happened because he and his coworkers joined together in a union that had enough power to force the what was then the world’s largest company, General Motors to say yes when it wanted to say no.
And that’s how he got fair wages. That’s how he got a pension. That’s how we got a health plan. And my mother’s generation did it again as a classroom teacher. A job that used to be designed only for single women to do for a few years before they got married off and which paid wages accordingly became a profession, because workers got organized and expressed their power.
Now in the case of my grandfather’s auto workers union, it was vis-a-vis big company. In the case of the teachers who got organized largely in the ’60s and ’70s it was vis-a-vis the government. But what they had in common was the notion that through collective action, ordinary people could accomplish extraordinary things.
Jessyn Farrell: Oh and David, you’ve been one of the most successful labor organizers in the country in what I think is really interesting in an era where the labor movement has been in decline nationally. And so I’d love to hear a little bit about why things have been so different in Washington state? What your work around that has been and again in this broader context of what’s been happening to labor more nationally?
David Rolf: Sure. And I’ll apologize if this sounds a little bit depressing because in general, the fate of the labor movement in the United States is it’s not heading in a great direction. The 1950s about a third of the workforce was covered under a union contract. Today in the private sector, it’s down to 6.5%, about 10% overall including public sector workers.
Now in Washington state and an SCIU nationally, there have been some different outcomes, we’ve seen SCIU grow nationally, we’ve seen the labor movement grow here in Washington state accomplish some incredible victories. But I think it’s important to acknowledge that when the overall trend is towards zero, that no one heroic union or no smart labor leader is going to be able to resist those trends forever.
And the reality is that most workers today don’t have a path to power on their jobs or in the economy, because they don’t have an organization that’s capable of acting collectively with them and on their behalf. And that’s just a feature of the 21st century landscape, one created intentionally by people who are wielding power against workers.
Whether it was the 1947 Taft–Hartley Act that took away most of the most powerful tools unions could use or whether it was the concerted decades long assault on unions beginning in the 1970s, we’ve now seen the fruits of the right wings labor come to bear.
And that is to say, if unions had gone away, but we had a thriving robust middle class and growing incomes and growing jobs security and longer vacations and shorter workweeks and better benefits, we could all just kind of remember unions as part of the interesting old days.
But what happened is we got rid of unions and we largely got rid of the middle class and those things happen in tandem at exactly the same time because they were causal.
Nick Hanauer: Yeah.
Zach Burns: Hi, this is Zach Burns, one of the producers here at Pitchfork Economics. Just wanted to interrupt here for a second. David was speaking about his father and the opportunities that being in a union afforded him.
Unions in this country have vastly disappeared, but there still are some who are fighting for the rights as workers, including the employees at Delta, where thousands are trying to make their collective voices heard thus far unsuccessfully.
I spoke to one Delta employee named Dan McCurdy. He’s been fighting for years to try and get himself and his fellow employees to form a union. I first asked him why he felt he needed one.
Dan McCurdy: I think the reason employees at Delta want a union are to address the things that Delta doesn’t address. I mean, Delta is very good about putting out all these awards that they win and all the awards that also the employees win. But there’s issues, that without union representation we can’t address.
I think that sometimes the public and the people that rate these corporations, they hear what Delta is putting out and Delta is able to get some spokespeople from within the company to help push their message across. But as for many of us that have issues with some of the work rules with the staffing levels and just with a lot of issues out there, our voice isn’t necessarily heard without a union.
And I think that it’s a little bit unfair to the other major carriers, because they’re all represented by a union. United American, whenever they have an issue that they like to or that they need to discuss, they feel pretty confident and free to discuss those issues and it’s not necessarily so with Delta employees.
Zach Burns: What employees are actually trying to unionize Dan?
Dan McCurdy: We have two groups right now. I am a part of the billowing group and we consist of around 16,000 people. And we also have our flight attendants that are looking to organize and we’re both trying to organize with the IAM, International Association of Machinists.
Zach Burns: One thing that I saw was a flyer that was circulating, trying to convince employees to spend what would they would pay in union dues on something else, like a PlayStation or baseball tickets. And when I first saw it I thought, “This has to be fake.” But these flyers are actually real, aren’t they?
Dan McCurdy: It is real. And I mean, we’re bombarded with anti-union propaganda daily. There’s a displays in our break room that have flyers such as this one, we’ve got TVs in our break rooms that scroll anti-union messaging, also the anti-union campaign even flooded out into our hallways that are common areas for other airlines and Delta was pushing their anti-union propaganda there as well.
And for any new hire, they go into those new hire classes and they do say that it’s a voluntary meeting and if you don’t want to hear it, that you can leave. But if you’re a new employee to this company, you don’t feel real confident that is in your best interest to get up and walk out, so you listen to what they have to say. And then straight off the straight out of the gate, you understand that this was a very anti-union corporation.
Zach Burns: But what about the 16,000 employees that are trying to unionize? I mean, just guessing what percentage of them want to do it versus what percentage would rather do as Delta wants and just stay non-union?
Dan McCurdy: The Railway Labor Act governs our union elections and we have to get union authorization card signed in order to get to an election. This is information as of about a month, maybe two months ago, but we’ve had 9,122 employees sign a card, which is more than the 50% required to get to an election.
Our problem is that because these cards expire after one year, not all of them are valid. So if there’s a big game that is played in terms of trying to get them all valid at the same time and obviously Delta trying to stand in the way of us getting cards signed and having them all valid at the same time.
Zach Burns: Besides just the company kind of having propaganda and your break rooms and everything like that, what else have they done to dissuade people from unionizing? Have you seen any employees be punished for speaking out in favor of a union?
Dan McCurdy: Well, I can tell you the Kip Hedges, he was a Delta employee and he was terminated about three years ago. And I believe that it was for his union advocacy and so he was pushed off. He had a lawsuit and those terms are not publicly available, they don’t put that out. But I definitely feel like his termination was over his union advocacy.
And just on the inside, I mean, when you work for a company that’s this anti-union, I mean, people come up to me all the time. I went to a Mack Commission meeting one month ago and I spoke about Delta putting their anti-union propaganda up into unleased areas and that there are metropolitan airport commission should have it removed. And people came up to me and they said, “Man, you’re going to get fired for saying that.”
Overall, there’s definitely a fear amongst the employees that if you speak out for representation, that you’re putting your job on the line. And I don’t want to put my job on the line. I do enjoy working for Delta. However, I also understand that we definitely need a union because I too fear for my job, for simply speaking out for a federally protected rights that I have.
You think about like women’s rights to vote, they didn’t always have that and now they do. It’s not as if they go to the polls and when they vote, they’re afraid of something bad happening to them. I think that it should be the same way for us employees that want to exercise our federally protected right to unionize.
There shouldn’t be any fear within talking about it. And ultimately when we do get to an election, employees get to vote on this. If it was true that we don’t have the support to win an election, Delta has nothing to fear. It’s kind of strange that they are so bold and speak out so strongly against unionization and put that fear in there.
Let the employees speak, let’s let the outcome. If it’s true that there’s not enough support that would embarrass me, that would be great for the company. They could use that and say, “These employees didn’t have the support that they needed.” But I’m extremely confident that when we get these cards valid and get to an election, we’re going to win it.
Nick Hanauer: It’s important for folks to recognize that the factory jobs in the ’60s and ’70s that created stable, secure, robust, middle class families and lives weren’t because those workers were unusually productive or worked for firms that were unusually profitable.
Those wages provided middle class lives, because unions provided the mechanism to enable folks to negotiate a fair split of the value created by that enterprise. And that it was negotiation and power that generated that broad prosperity, not some magical elixir of productivity or technology or anything else, which isn’t say that productivity is important and that increasing amounts of technology and productivity don’t in a general way, increase human welfare.
But if all of the benefits of that increase in welfare accrue to a few people and you can easily leave most people out. And that’s the story of the last 40 years.
David Rolf: Yeah. I mean, once again, you could look at an industry that operates globally and ask the question, how do US workers fair working for the same companies using the same machines and the same technology at production facilities in Germany or in Michigan?
And the reality is that an automobile worker in America makes up not much more than half of what a German automobile worker makes in total wages and benefits. And yet there’s almost no difference in the productivity of that worker largely using the same manufacturing equipment on two different continents.
Nick Hanauer: That’s right. And as I recall, the Germans are now making almost twice as many cars as we are.
David Rolf: That’s exactly right.
Nick Hanauer: Paying twice as much, which is kind of an astonishing thing.
David Rolf: Yeah. And that right there, that is the power differential, because what’s true in Germany is that nearly the entire industry is covered by union contracts.
And what happened in the United States was that all the growth moved to the South and the West where unions were not as strong and so workers saw their bargaining power disappear in the United States context, where as in most of Europe, whatever the union membership levels are the vast majority of those economies are covered by union contracts.
When I was a little boy, America had the biggest men middle class in the world by per capita. Now, we’re number 27, Germany is number one.
Jessyn Farrell: We’ve been talking a lot about how we’ve been tearing down and narrative around trickle down economics and that the evidence is bearing that out and yet politicians are still deeply based in our cultural bath of trickle down and it’s hard to fight those next fights around things like raising the overtime threshold, which is the middle way, the minimum wage for the middle class.
How do we in a sustained sustainable way, get to a place where worker power is being manifested in the political and cultural dialogue?
David Rolf: Yeah, I think there’s, it’s a great question and there’s more than probably more than one thing we could say about this. But let’s start with what’s evident, right? That the decline of worker power expressed through unions has resulted in a 40 year wage collapse that’s be set working in middle class Americans.
In fact, unless you’re in the top 5% of income earners, you have not experienced any of the growth of our economy for the last 40, 45, 50 years. And all of the benefits of the growing economy of productivity growth of GDP growth, of growth in corporate profits have gone to the very top of the economy, because workers and everyday families don’t have power.
And not to be too complicated about it, but if the problem is an absence of power, the answer is to build power and in a democracy I mean, obviously if you’re a fantastically, you can buy power. If you control armies or police forces, you have a certain type of power.
But in a democracy, the type of power that’s accessible to everyday families and workers and citizens is the power of collective action. And if congress and the courts have largely made it impossible for workers to exercise the kind of collective action power that they exercised in the ’30s and ’40s and ’50s through unions, it’s really up to us in this moment to not sort of weep for what was lost, but to rather imagine what form of an organization that the government can’t stop us from joining.
Right. That does not rely on permission from our coworkers, our employers, or our government. Could we build that would have sufficient scale and power to really reverse the 40 year wage collapse that American families are experiencing?
Nick Hanauer: Yeah, somebody should do that, David.
Jessyn Farrell: Yeah, somebody should do that. That sounds like a good idea.
Nick Hanauer: Yeah, that sounds like a good idea.
Jessyn Farrell: It was great to hear David talk a little bit about his experience building up organizations to support and advocate for workers and to listen to both of you talk about the collaborations that you’ve done. In fact, I’ve gotten to be a part of that as well and to really hear about what we need to do to rebuild the working class and the middle class in the United States.
Nick Hanauer: Yeah and from that we’re going to transition to a conversation with the labor economist, Larry Mishel, who will give us, I think a clear and deeper perspective on precisely what went wrong with respect to policy. What were the choices we made in our economy, in our economic policy rather, that led to the decline of wages and worker power and there were a ton of them.
We did a lot of stuff that benefited the few and disadvantaged the many and nobody knows more about that than Larry Mishel. Larry can you hear me?
Larry Mishel: I can hear you Nick, nice to talk with you.
Nick Hanauer: Nice to talk to you buddy. How’s retirement?
Larry Mishel: I’m not retired. I’m worked full time. I’m earning a paycheck, although it’s less than what I used to earn, but that’s fine. It’s more fun. Lot more fun.
Nick Hanauer: Larry and I worked together for years and years.
Larry Mishel: Have we won yet?
Nick Hanauer: We are getting there. We’re winning in some ways. And then on the other hand, the national picture is quite grim. But you’ve been at this for 20 years longer than I have. You’ve been working on the challenge that we call more broadly wage suppression. Can you tell us what brought you to that work, Larry?
Larry Mishel: Right out of college I understood that there was an imbalance of power between workers and managers and the rich and that was something I wanted to do something about.
I did two things. One, I trained to become a PhD Economist with a specialty in this study of wages and unions. And I did spend around 10 years as a trade union economist doing bargaining, organizing, organizing and policy work. I wrote my first book on wage stagnation in 1986 called the Polarization of America.
And I’ve been working at EPI since 1987 and we put out the state of working America every other year since 1988 up until 2012, where we documented ad nauseum all the degradation of the job quality and inequalities and wage stagnation.
Nick Hanauer: Can you zoom out and talk about the dimensions of wage suppression over the last 40 years?
Larry Mishel: Well, people have referred to the phenomenon as wage stagnation meaning that wage has been growing very slowly or not at all, at inflation adjusted terms for many years. This started in the 1970s.
Nowadays, I think it is inappropriate to call this wage suppression. Wage stagnation sounds like it’s something that just happened. Wage suppression reflects the fact that it happened because that’s what the rich and powerful one of that happened, because it happened because of policy choices. Either things they didn’t do, like raise the minimum wage or things that they did do to undercut the ability of people to earn a decent living.
We basically had wage stagnation all throughout the ’70s and ’80s and the ’90s up until the mid ’90s where it actually did grow pretty quickly in the period of low unemployment. And then back in the 2000s where after a couple recessions and wages were stagnant again, except for the last three or four years of wages have picked up.
For most of the last 40 years, wages have not really grown so much and we know why, it’s because we kept on employment, way too high for way too long. We can labor standards like the issues that you work on, Nick, the overtime minimum wage.
We saw the attack on unions, we saw a particular form of globalization and we saw the expansion of a financial sector and the escalation of executive pay, which helped drain a lot of the money from everyone else up to the top 1%. Let me just describe this a little bit to show you how extreme it is.
Between 1979 and 2017, the top 0.1%, that’s a top 1000s, so their annual wages grow by 343%. This is inflation adjusted terms, that’s 8% a year. Pretty remarkable. At the top 1% did 157%, so that’s around 4% a year, if you’re in a top 1%.
Meanwhile, the bottom 90% had your annual rages grow by about 22%, mostly in the late 1990s, mostly in the last few years. The actual 50th percentile, the worker right in the middle had wages rise 0.3% a year, so that’s almost nothing.
Typical male worker, saw no growth in wages over this entire period. This is ongoing, it’s not an accident that the top got a lot of wage growth while everyone else got less. If there hadn’t been this massive redistribution of wages up the ladder to the top 1%, then the wage growth for the bottom 90% would have grown twice as fast, so redistribution upwards really mattered.
Jessyn Farrell: Larry, one of the things you were mentioning was this massive redistribution. And so over that same period, what was happening to worker power then? If you were talking about this not being an accident, it being suppression as opposed to being stagnation, what are some of the things that were going on that meant workers had less say at the table?
Larry Mishel: Great question. One of the biggest items was that we kept the unemployment much higher in the ’80s and early ’90s and then back in the early 2000s and much above full employment.
And when you have high unemployment, then middle wage and low wage workers are at a disadvantage, because the employers can find anyone they want, with whatever they really feel like paying. That’s a broad environmental thing, but it really is one of the most powerful ways of suppressing wages.
And it’s not an accident, because that was what the Federal Reserve Board did in terms of how it set interest rates and monetary policy. It reflected a not really pursuing full employment with government budget policies and not helpful trade policies, which zapped our incomes, so that’s one thing.
Jessyn Farrell: Larry, I just wanted to dial into that for just a second because it’s a really interesting thing to have this Federal Reserve Board in the 1980s really seeming not to be working on our behalf broadly, to have high unemployment and then having a real impact on workers. Has that significantly changed over the decades? Was that on purpose?
Larry Mishel: Well, the people who own bonds, people who own things are very antagonistic to inflation. And so they really want monetary policy to keep control of inflation even if it means higher unemployment and very little wage growth for workers. And that policy was the formal policy of the Federal Reserve Board in the 1980s and for much of the 1990s and that did help really suppress wages.
Now, fortunately that did change somewhat over the last 10 years and we had a Federal Reserve Board pretty dedicated to getting unemployment as low as it can. Sometimes, they may have wavered a little bit on that, but I think one of the reasons that we have very low unemployment today is that the Federal Reserve Board did not kill the recovery, although sometimes they took a couple shots at it.
Nick Hanauer: Yeah. But there were a lot of policy changes or emissions that contributed to wage stagnation and wage suppression among them, that the fact that we basically didn’t move the minimum wage at all in concert with increases in productivity growth.
Larry Mishel: Absolutely. And we really haven’t recovered from the 1980s where neither a Ronald Reagan or George H. W. Bush allow a minimum wage increase. And so when you have high inflation as we had back then, the value of the minimum wage fell to basically no value by the late 1980s and it really drove down wages.
And we can see who’s wages really got hurt. It was low wage women. They were the ones who were most dependent upon the minimum wage to support their wages. And so we saw an enormous growth of a wage gap between low wage women and middle wage women.
And since then, we’ve had moderate increases in the minimum wage, but as you know quite inadequate. The minimum wage in 2018, at the federal minimum wage in states where they haven’t exceeded that, but the federal minimum wage is now about 29% below its value in 1968, which is when the minimum wage was at its peak, that’s 50 years ago.
Since that time, productivity has more than doubled. Now, productivity is the output of goods and services per hour work. It’s what provides the potential for wage and income increases. The minimum wage, if it had grown with productivity, would be over $20 right now. And it’s amazing that it’s so low, because the productivity is up and the education levels of the people in the bottom are far better than they were back then.
One way of seeing how low it is, is that it will take a pretty bold policy of getting $15 minimum wage in 2024 to really start turning things around. But even doing that, that only allows the minimum wage in 2024 to be about 30% above 1968 levels, that’s like 56, 57 years and a 29% increase is not really all that great.
And doing that will directly raise the wages of 40 million workers or 27% of the workforce. That just shows you how low the wages are that a minimum wage it’s I think a very moderate value, would raise up almost 30% of the workforce.
It would have an even bigger effect if we didn’t have around eight States that already have set laws to get people to $15. The biggest ones being, your state in Washington, California, New York, et cetera.
It’s a huge thing, there’s billions of dollars that have been drained from low wage workers, because of the failure to raise the minimum wage. It’s the single easiest thing to do to try to spark some wage growth.
Jessyn Farrell: And this didn’t just happen to low wage workers, but what happened with the middle class during this period?
Larry Mishel: Good question. Well, I mean, wages for a middle class workers as well as well as low wage workers is what we described when we talk about wage suppression. But it’s also been true that in the early 1990s, mid 1990s, wage suppression stagnation really started going to the white collar college educated workers.
And in the 2000s, the wages of college grads, someone with a four year degree, did not grow at all in between around 2002 and until the last few years. And if you look at the bottom 70 to 80% of college grads, their wages are really no higher now than what they were in 2000.
Essentially, it’s first they came for the blue collar workers, then they came for the white collar workers and they were very successful. Management has been very successful in maintaining, keep the wages down of their white collar workforce.
Nick Hanauer: Yeah, so this brings us to my favorite labor protection, the overtime threshold. Larry, you and I have worked together on this for a long time. The overtime threshold being essentially to the middle class with the minimum wage is to low wage work.
And as you know that at the peak of the middle class, the overtime threshold, the pot apply to a 63% of salaried workers today and it’s now down to I think just under 7%, $23,600. And that has been another huge contributor to the stagnation of wages in particular for middle class salary workers.
Larry Mishel: Absolutely. I like to think of it in terms of a manager at a dollar store, Dunkin’ Donuts or whatever earns $35,000. Tends to oversee a cashier for a part of their time. They could end up spending a lot of their time unloading trucks, stocking shelves, being at the cash register themselves.
But when they work more than 40 hours, they get no additional money, that’s what this means. It’s not that they don’t get the time and a half, they don’t even get time, they get zero. The 41st hour is free.
It’s not surprising that managers love to be able to make these people not eligible for overtime. And that’s what our legal standards have essentially allowed. Now, of course, president Obama tried to raise that and did, but between the courts and the Trump administration, that’s been taken away.
Jessyn Farrell: Yes, and we should argue that what has been done is not high enough. And that when you look at the threshold in the 1960s and the number of folks that covered what we were talking about in 2016 was inadequate, that we should have gone higher.
Larry Mishel: Well, president Obama should have listened better to Nick Hanauer.
Nick Hanauer: Yeah, that’s what I said. Whenever I talk to folks about wages and stuff like that, that conversation always goes to the minimum wage, which is a, the indispensable labor protection for working people, but also it’s the simplest thing to understand.
But folks often struggle to understand what the other dimensions of wage suppression have been. And it’s hard to explain the things that you can do to help people who are not at the bottom of the wage scale. To dimensionalize this, one of the things I love to talk to people about are non-compete agreements and those operate up and down the wage scale.
It’s not surprising for people to learn that like, if you work for a big software company or a senior developer that they’ll make you sign a noncompete, so you can’t basically ever leave the company and go use your skill someplace else.
This seems somewhat defensible, intolerable. But one of the most pernicious things that’s happened in the economy is that even places like Jimmy John’s, a sandwich shop is forcing low wage workers to sign non-compete agreements that make it impossible for them to go make sandwiches elsewhere.
Franchise agreements up until recently had non-poach agreements. Let’s say you were a really good employee at Burger King. Well, the franchise agreement precluded another Burger King from hiring you for instances in assistant manager at a higher wage.
All of these things, these are little things that sort of are in the background, but they serve to hold wages down and profits high. In my opinion, one great antidote to a lot of wage suppression would be to make all non-competes illegal.
There’s no earthly reason any employee should have to sign a non-compete. All it really is, is a license for corporations to consolidate earnings and power. You could easily envision a world in which you couldn’t force people to sign non-competes and in that world, workers across the board would have more money and corporate profits would be slightly lower.
Larry Mishel: Well, if you believe in them that the market should work for workers and not just managers, even in places though in California where they don’t have any legal sanction, they can’t be enforced. Companies still make people sign these agreements and people still abide by them because they don’t have faith that lawyers won’t come after them.
Well, let me give it at a picture of how I view an individual worker’s situation and how their wages are suppressed. If you’re on the job and you don’t think you’re getting a good deal, what can you do?
Well, you could try to change things on the job through a union, but that’s much harder. You can rely on a government standards to make sure that you’re being treated well, a high bit of a wage, overtime protection, safety and health. But those have been degraded, because they’ve been lowered and they’re not enforced.
What if you’re subjected to sexual harassment or discrimination or racial discrimination? Can you take your employer to court to try to get something? Well, those rights had been weakened by the pervasiveness of what’s called these forced arbitration agreements, which make people go to a private arbitration rather than the court and for the most part, this allows class action.
Let’s say you want to leave, well, you can only leave if there’s not high unemployment and you can go to a better job and you’re not subject to these anti poaching agreement and you’re not subject to the non-competes. What is really going on is that everyone’s situation is such that their better options are ruled out and people are stuck having, because people have to eat.
People don’t have many assets, they can only last a little bit with, if they have any kind of emergency. They can’t just quit and wait around for a while, they need another job. In that situation, you can see how people have to accept what the employers are offering and that’s where we are.
Jessyn Farrell: Larry, we have to hope that there’s something we can do, right. That there’s another way, that even though it’s so hard on people right now, it doesn’t have to be the way it is. What are you thinking in light of the degradation over the last 40 years for people’s wages? What do we do next?
Larry Mishel: Well, I think the hallmark has to be that we need policymakers and politicians to identify that making are getting robust wage growth is the top priority for economic policy.
I mean, setting aside climate change, which may be on a different order. But economic policy has to be organized around. What we really want is to raise the living standards of the vast working class, low wage workers, middle wage workers and white collar workers and their wages should grow.
And we do that by prioritizing low unemployment, we do that by having better labor standards. Everything from the overtime, everything from the minimum wage, preventing things that draw people back like the non-competes and the anti-poaching.
We need to make it possible that everybody, when they signed and when they come to work, they actually understand the agreement. When you get a mortgage, you’d get this big stack of things you have to sign. When a worker gets a job, they don’t even really know what the hourly wage rate is.
Are they eligible for overtime? What kind of money is being deducted by their paychecks? We don’t have transparency and an employment. We need to not have guest worker visas which undercut tech workers and other workers. We do that for landscapers, we do it for people in hotels, like Trump’s Mar-a-Lago.
There’s so many different things that we need to do. One more ask is we have undocumented workers in this country, it is around 5% of the workforce. If you can be exploited in this country, you will be exploited. And undocumented workers, we need to give them full legal rights. Right?
And that’ll help not only them, but it’ll help the workers that they work within the same industries that unless we should not avoid the topic of rebuilding collective bargaining. I mean, the biggest single factor that undercut the wages at least of middle class men was the attack on unions.
And I don’t think we’ll ever get robust wage growth in the middle unless we reestablish a collective bargaining system. I would also say, I don’t think we’re going to have a vibrant democracy unless we do that, so I want to put that on the table too.
Nick Hanauer: Yes, I would completely agree. This has been a tough 40 years for the American middle class and working people, but I do see glimmers of hope. Certainly the majority of candidates running for president on the democratic side in some way, shape or form, acknowledges problem. And the policy agendas of the majority of them are far more ambitious than anything I’ve seen in my lifetime.
And we have a bunch of younger voices within the party and within Congress they are calling into question the basic foundations of neoliberalism and the last 40 years of wage suppression.
And at least we’re beginning to have a more robust conversation about solving this problem. And look, I was always proud to have Obama as my president, but if we’re being honest, he was part of the problem too and the Obama folks could have been far more effective and ambitious.
Larry Mishel: Well, we had 16 years of democratic presidents in the ’90s and 2000s and the council of economic advisors did a report on the issue of worker power and dis-empowerment in the last year of the Obama administration, nothing had been done in all the prior years. It’s just hasn’t been a focus of Democrats.
And listen, this is about people needing to organize politically, about being active and organize. I think we are seeing bold plans. I really wish there was more focus from candidates on what I would consider wage issues.
I mean this is an odd situation for me, I spent many years writing and talking about documenting wage suppression, wage stagnation. Starting around 2016 even the Republicans started acknowledging it and in their presidential primary that year it was assumed that it’s the case, it used to be the case.
You still have a few dissenters in the conservative think tanks that deny that this is a problem. But politically, no one denies this as a problem, so it really is about people acknowledging the problem and having to rally behind proposals that can make things better.
And one reason why it’s a very hopeful thing to have this analysis that says, “It was policy decisions that suppressed wages.” Is that policy decisions are political. It means that things could be different. We may not have had productivity get to the vast majority in the last 40 years, but we certainly can do that for the next 40 years.
Nick Hanauer: We have to find a way to engage the vast majority of citizens, the bottom 90% of citizens who have been left behind by the last 40 years of economic growth.
And we have to find a way to gather their energy and interests and focus them on the political processing and to drag and by the way, both political parties, both Republicans and Democrats towards policies that benefit the majority of citizens.
And I think that is the indispensable work left to be done to make the economy work better and in my opinion, save the democracy too.
Larry Mishel: Yeah, I fully agree with that Nick and I think it resonates with people. I think one of the worst things that have happened over these 40 years is I think that sometimes people’s expectations of what is possible has been severely diminished.
I think victories and seeing some changes can help really light a fire. I mean, you can sort of see it with the teacher strikes, it works in one place and everybody starts doing it. I mean, anything that’s after that’s going to work for people they’re going to sign up for.
Nick Hanauer: That was a super interesting conversation, with both Larry and David and I think it points to one another one of the themes of our Pitchfork Economics podcast, which is that this isn’t just about the economy, it’s about the country and our democracy.
Because if you allow, the kind of an inequality that we have today and worse, see it continue to rise in the way that it is, you can pretty much kiss your democracy goodbye.
Jessyn Farrell: That’s right.
Nick Hanauer: Yeah, that is that rising inequality shreds the reciprocity norms that social cohesion and democracy require.
Jessyn Farrell: Right. And the stakes are really high. I mean, people are hurting, people are struggling to pay their bills, but our democracy is also hurting too. And there’s a real connection between the way people feel about their agency in our economy and the way they feel about their agency and our democracy.
And we have to protect and support both of those. And what I think was so inspiring about David is all of the work that he’s doing to build organizations that drive worker power. And of course, what’s so great about Larry is he’s been an observer and a documenter and a researcher on what has happened to the American worker for the last 40 years and no one has a better insight into that.
Nick Hanauer: Yeah and again as I talk to these folks and reflect on it, it’s so obvious to me why people are so pissed off and why that anger is so valid, right?
Jessyn Farrell: Yeah.
Nick Hanauer: Because they have just been so let down by leaders of both political parties.
Jessyn Farrell: By leaders of both political parties and that it is a choice.
Nick Hanauer: Yeah and that both political parties with Democrats and Republicans at all sorts of moments had choices about whether they should support work working families or rich people. And in virtually every case leaders from both political parties took the wrong side.
And as a consequence, there’s a reason why not that many people vote anymore, they feel like it’s pointless. And if you just look at what voting has brought them over the last 40 years, you can’t but conclude that they’re mostly right, that neither political party has delivered the goods for working for the typical American family and certainly not on economics.
I guess the thing to be optimistic about is certainly people who are in the democratic party are beginning to wake up to this. And as we speak there’s well, is it, I don’t know, 25 or 370 people, whatever it is a lot of people are running for president now.
Jessyn Farrell: More than you can count on both hands and feet.
Nick Hanauer: And almost all of them seem to understand the scale of the problem and are offering economic policy ideas that are way more ambitious and way more complete than anything we saw certainly from the Obama administration, who was as captured by neoliberalism is the Bush administration in many ways. And I think that’s a cause for optimism.
Jessyn Farrell: And if I could just add, I think another cause for optimism is the work people are doing to organize themselves to push for those policies. Not only is the thinking changing of people who are seeking political power, but there’s a recognition that without the force of people and organization behind those politicians, we’re not going to get anything better.
And so that’s what I’m inspired by in listening to Larry and David talked today.
Nick Hanauer: Yeah and I think there are signs of a lot of good stuff a foot. Hopefully, we’ll see some real progress over the next few years on a bunch of these important issues. There’s another big dimension of the stagnation of wages in wage suppression, which is contracting and misclassification in gig workers, right?
Jessyn Farrell: Yeah and there are whole business models like our friends at Uber who have created lucrative business models based on contract workers as opposed to traditional employment where people had access to wages and benefits.
Nick Hanauer: Yeah, so in the next episode of Pitchfork Economics we are going to explore what I like to call, our nation’s largest price fixing scheme, the healthcare system.
Speaker 1: Pitchfork Economics is produced by Civic Ventures. The magic happens in Seattle in partnership with Larj Media, that’s L-A-R-J Media and The Young Turks network. Find us on Twitter and Facebook at Civic Action. Follow our writing on medium at Civic Skunk Works and peak behind the podcast, scenes on Instagram at Pitchfork Economics.
And one more. You should definitely follow Nick on Twitter at Nick Hanauer. As always, a big thank you to our guests and thanks to you for listening from our team at Civic Ventures, Nick Hanauer, Zach Silk, Jasmine Weaver, Jessyn Farrell, Stephanie Ervin, David Goldstein, Paul Constant, Steven Paolini and Annie Fadely. See you next week.