Yes, America Is Rigged Against Workers

By

Mr. Greenhouse writes about labor.

 

 

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CreditCreditIllustration by Alvaro Dominguez; Photographs by Chris Clor and Classen Rafael/EyeEm, via Getty Images

The United States is the only advanced industrial nation that doesn’t have national laws guaranteeing paid maternity leave. It is also the only advanced economy that doesn’t guarantee workers any vacation, paid or unpaid, and the only highly developed country (other than South Korea) that doesn’t guarantee paid sick days. In contrast, the European Union’s 28 nations guarantee workers at least four weeks’ paid vacation.

Among the three dozen industrial countries in the Organization for Economic Cooperation and Development, the United States has the lowest minimum wage as a percentage of the median wage — just 34 percent of the typical wage, compared with 62 percent in France and 54 percent in Britain. It also has the second-highest percentage of low-wage workers among that group, exceeded only by Latvia.

All this means the United States suffers from what I call “anti-worker exceptionalism.”

Academics debate why American workers are in many ways worse off than their counterparts elsewhere, but there is overriding agreement on one reason: Labor unions are weaker in the United States than in other industrial nations. Just one in 16 private-sector American workers is in a union, largely because corporations are so adept and aggressive at beating back unionization. In no other industrial nation do corporations fight so hard to keep out unions.

The consequences are enormous, not only for wages and income inequality, but also for our politics and policymaking and for the many Americans who are mistreated at work.

To be sure, unions have their flaws, from corruption to their history of racial and sex discrimination. Still, Jacob S. Hacker and Paul Pierson write of an important, unappreciated feature of unions in “Winner-Take-All Politics”: “While there are many ‘progressive’ groups in the American universe of organized interests, labor is the only major one focused on the broad economic concerns of those with modest incomes.”

As workers’ power has waned, many corporations have adopted practices that were far rarer — if not unheard-of — decades ago: hiring hordes of unpaid interns, expecting workers to toil 60 or 70 hours a week, prohibiting employees from suing and instead forcing them into arbitration (which usually favors employers), and hamstringing employees’ mobility by making them sign noncompete clauses.

America’s workers have for decades been losing out: year after year of wage stagnation, increased insecurity on the job, waves of downsizing and offshoring, and labor’s share of national income declining to its lowest level in seven decades.

Numerous studies have found that an important cause of America’s soaring income inequality is the decline of labor unions — and the concomitant decline in workers’ ability to extract more of the profit and prosperity from the corporations they work for. The only time during the past century when income inequality narrowed substantially was the 1940s through 1970s, when unions were at their peak of power and prominence.

Many Americans are understandably frustrated. That’s one reason the percentage who say they want to join a union has risen markedly. According to a 2018 M.I.T. study, 46 percent of nonunion workers say they would like to be in a union, up from 32 percent in 1995. Nonetheless, just 10.5 percent of all American workers, and only 6.4 percent of private-sector workers, are in unions.

Corporate executives’ frequent failure to listen to workers’ concerns — along with the intimidation of employees — can have deadly results. On April 5, 2010, a coal dust explosion killed 29 miners at Massey Energy’s Upper Big Branch coal mine in West Virginia. A federal investigation found that the mine’s ventilation system was inadequate and that explosive gases were allowed to build up. Workers at the nonunion mine knew about these dangers. “No one felt they could go to management and express their fears,” Stanley Stewart, an Upper Big Branch miner, told a congressional committee. “We knew we’d be marked men and the management would look for ways to fire us.”

The diminished power of unions and workers has skewed American politics, helping give billionaires and corporations inordinate sway over America’s politics and policymaking. In the 2015-16 election cycle, business outspent labor $3.4 billion to $213 million, a ratio of 16 to 1, according to the nonpartisan Center for Responsive Politics. All of the nation’s unions, taken together, spend about $48 million a year for lobbying in Washington, while corporate America spends $3 billion. Little wonder that many lawmakers seem vastly more interested in cutting taxes on corporations than in raising the minimum wage.

There were undoubtedly many reasons for Donald Trump’s 2016 victory, but a key one was that many Americans seemed to view him as a protest candidate, promising to shake up “the system” and “drain the swamp.” Many voters embraced Mr. Trump because they believed his statements that the system is rigged — and in many ways it is. When it comes to workers’ power in the workplace and in politics, the pendulum has swung far toward corporations.

Reversing that won’t be easy, but it is vital we do so. There are myriad proposals to restore some balance, from having workers elect representatives to corporate boards to making it easier for workers to unionize to expanding public financing of political campaigns to prevent wealthy and corporate donors from often dominating.

America’s workers won’t stop thinking the system is rigged until they feel they have an effective voice in the workplace and in policymaking so that they can share in more of the economy’s prosperity to help improve their — and their loved ones’ — lives.

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The Trump administration continues to attack workers and rollback worker rights.

April 1, 2019 Sophie Weiner Splinter
The Labor Department announced a proposal today that would limit the ability of workers to sue big companies for violations made by franchises or contractors, according to the New York Times. This would affect workers who fall under the category of joint employment, in which more than one company directly or indirectly controls their working conditions.

The new regulation would make it harder for workers to sue companies like McDonalds for failing to comply with laws like those governing minimum wage or overtime pay. Instead, they’d be forced to sue the individual franchise.  “This proposal will reduce uncertainty over joint employer status and clarify for workers who is responsible for their employment protections,” labor secretary Alexander Acosta said in a statement.  Whatever Acosta says, the reasons for this rollback are pretty obvious. Clearly, it’s harder to extract money from your local franchise for violating your labor rights than it is to get a settlement from an international corporation. This should make big companies happy.

In 2016, the Obama administration tried to help franchise workers by implementing regulations that would hold big companies accountable for the violations of their franchisees and contractors. Under the Obama-era regulations, a company like Dunkin’ Donuts would be liable for wage theft committed by a franchisee, even if the company didn’t directly supervise staff. Providing tools like software or creating policies for the franchisees was enough to prove the companies exerted control over the workplace.

Now, Acosta and Trump are veering back in the other direction.

From the Times:

The new proposal substantially restricts the situations in which a franchiser like McDonald’s would be considered liable. In an example laid out by the Labor Department, a global hotel brand would not be held liable for minimum-wage and overtime violations that a local franchisee committed, even if the franchisee relied on a variety of material provided by the hotel chain, such as sample employment applications and sample employee handbooks.
“Through this proposal, the Department of Labor has the chance to undo one of the most harmful regulatory actions from the past administration and replace it with a rule that creates certainty for America’s 733,000 franchise businesses,” International Franchise Association senior vice president Matthew Haller said in a statement. “An expanded joint employer standard has held back tens of billions of dollars in economic output each year due to a proliferation of frivolous lawsuits, precipitating significant changes to the way franchise brands interact with their local owners.”

Unsurprisingly, those who aren’t part of the International Franchise Association have a less positive view of this new proposal. Some say it gives companies a guide to avoiding wage theft lawsuits.

“It has provided such an obvious road map for employers to evade liability,” Sharon Block, a former Obama Labor Department official, now the executive director of the Labor and Worklife Program at Harvard Law School, told the Times. “But that’s going to introduce tremendous uncertainty into the lives of American workers who are subject to these business models.”

Block says that like almost every Trump administration change, this proposal is likely to be challenged by the courts as it goes into effect, after a 60 day commend period. Courts may still decide to disregard it when hearing lawsuits.

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Workers’ Shrinking Piece of Global Pie

Posted on April 10, 2017 by Peter Bakvis
New research points to globalization as a key driver of labor’s declining share of national income, particularly in developing countries.
A just-released International Monetary Fund paper warns policymakers about the risks of ignoring labor’s shrinking share of national incomes in many countries around the world.

“The decline in labor share has been concomitant with increases in income inequality,” the report notes, a trend which “can fuel social tension and … harm economic growth.”

The paper, “Understanding the Downward Trend in Labor Income Shares,” will be a chapter in the IMF’s flagship World Economic Outlook report, to be released April 18.

The report documents a decline in the share of national income going to labor (wages) versus capital (profits) in advanced economies starting in the 1980s and emerging and developing economies a decade later. While some countries have not followed the general trend, the IMF finds that for a sample of 89 economies for which it has sufficient data, those representing 78 percent of advanced economy GDP and 70 percent of emerging-developing economy GDP experienced declines in labor share between 1991 and 2014.

Countries representing 78% of advanced economy GDP had declines in labor share of income between 1991 and 2014.
Among developing-emerging economy countries, the IMF report attributes most of the decline in labor share to “global integration,” notably participation in global value chains. For the advanced-economy group, the paper attributes one-half of the decline to the impact of technology, and a quarter to global integration, comprising financial integration and participation in global value chains.

The report also acknowledges that these factors are all strongly interlinked. Trade, financial integration, and the application of new technologies have all been expedited by the removal of restrictions on trade and capital mobility.

The IMF paper explains the role of trade and financial integration, which intensified as a result of international agreements on trade and investment liberalization, by noting that “offshoring — or the threat thereof — lowers labor’s bargaining power.”

The report also notes the contribution of domestic policy decisions regarding product and labor market rules to the decline: “Changes in policies (such as declining corporate income tax rates) may have strengthened incentives to substitute capital for labor, while changes in institutional arrangements (such as unionization rates) may have contributed to the decline in labor’s share of income by lowering labor’s bargaining power.”

The report’s policy recommendations can be summarized as ‘training, training, and more training.’
Additionally, it states that policy changes allowing for “increased [corporate] concentration across a number of industries” have contributed to increased profit and reduced labor shares in national income.

The section on policy implications is short and disappointing. It can be summarized as proposing ”training, training, and more training” to facilitate the reallocation of displaced workers, although it concedes that “longer-term redistributive measures might be required as well.”

Although the report notes that policy decisions, both domestic and international, have played an important role in weakening labor’s bargaining power relative to capital’s and contributing to the decline of labor’s income share, it proposes nothing to change those policy directions.

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