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The Devaluation of American Labor


“An honest day’s work for an honest day’s pay.” This folk saying is frequently used to summarize the ideal American work ethic. Every able-bodied adult, in the absence of spouse or some other independent means of financial support, is expected to carry their own weight by working one or more jobs in exchange for a wage or salary. It’s a simple concept, and of course it’s a basic principle of our economic system.

Over time, however, while Americans have been putting in their “honest day’s work,” the “honest day’s pay” has fallen out of favor. Middle class workers have been falling into the lower class for 15 years. It’s not that Americans suddenly stopped working hard–it’s that our economy and politics have shifted, in some ways quite dramatically.

An important indicator of these trends has been the decline in union membership. As a share of the overall workforce, union membership peaked in 1954 at 35%. While never close to a majority, the prevalence of unions had a tremendous influence on working conditions and pay rates: unions drove wages up. Strikes were a bargaining tactic with real power. Workers, at least, had some ability to set the terms of their employment beyond the fiat of employers.

Since the early 1970s, however, union membership has been in significant decline, and the fortunes of American workers have fallen in tandem. This does not necessarily mean that declining union membership by itself drove pay lower–correlation is not always causation–but that these trends coincide with a gradual, ongoing shift in economic forces in the United States.

What does that shift consist of, exactly? There are multiple factors:

  1. More women entering the workforce. About 35% of women were in the labor force in 1954, compared with about 60% in 2000. (Participation has declined a few percent since then.) Men went from about 85% participation in 1954 to 75% in 2000, and 70% today. Taking the gender pay gap into account--that is, the fact that women, on average, make 79 cents for every dollar a man makes--we can pin at least some of the decline on the shakeup of the labor force's gender ratios. With more women and fewer men, and a significant pay gap between them, wages are going to be lower.
  2. The deindustrialization of America. This point in particular is not the least bit controversial, as a statement of fact. Industrial production, which was once the centerpiece of our economy, has been in decline for decades. As a share of total employment, manufacturing peaked during World War II, at 38%. Following a sharp postwar adjustment to about 33%, a long, slow decline ensued. Despite occasional talk of a "manufacturing renaissance," manufacturing jobs have steadily eroded. At this point, they make up less than 10% of overall employment.
  3. The factors driving this erosion in our industrial base are technology and globalization. Technology has increased manufacturing output and productivity many times over while requiring less and less labor. It has also helped enable management of a globalized workforce. That globalized workforce, combined with free trade pacts aimed at eliminating international trade barriers, permits employers to seek out the cheapest possible sources of labor, wherever in the world they might be. The effect on countries with highly-valued labor is obvious: that value is swiftly destroyed.
  4. The reorienting of the American economy around intangible services. For some, this has been a tremendous boon, as the information technology and financial sectors can attest. But there are not enough such jobs, nor enough people qualified to hold them, for those to make up for all the lost manufacturing work. Most service jobs pay poorly, especially in comparison to what blue collar manufacturing jobs paid in their heyday.

Putting aside the effects of shifting gender ratios on the overall compensation structure, as that could fill a post in itself, let’s focus on the double-whammy of deindustrialization and globalization. While proponents of globalization casually claim that “a rising tide lifts all boats,” the evidence for this viewpoint is lacking. Many communities throughout the US have been devastated by this trend, especially in the South, as Paul Theroux recently documented in the New York Times. There is no bailout or rescue package being assembled for these people, whose livelihoods have been shipped overseas with no hope for anything to replace it. Because our unemployment benefits are inadequate to deal with long-term unemployment, and as a result of welfare reforms that makes it an untenable option for many needy families, the disability system has been forced to step in and fill the gap. This is the end result of the erosion of labor’s value: the relegation of potentially productive workers to the margins of society, left to subsist on what meager scraps of government assistance and charity they are able to obtain.

The economic numbers only look good because this externality has been sliced out of the official calculations. Unemployment looks low since workers who’ve gone on disability aren’t counted as part of the workforce any longer. As for those who remain gainfully employed, their incomes are less impressive than the official numbers would indicate, thanks in part to rampant wage theft.

Instead of focused efforts by businesses to train employees, training activities have been redirected to the college and university systems. This is another way in which workers are undervalued: instead of being invested in by their employers, workers are expected to invest in themselves. As few have the immediate resources to do so, and as a college education becomes seen as an ever more necessary requirement for even the most basic jobs, a cost that could be more efficiently socialized is instead individualized, shoving a large financial burden onto people who already face diminishing economic prospects. With over a trillion dollars (and counting) in outstanding student loan obligations and stagnating or declining incomes for college graduates, even the traditional (though, in actuality, Boomer-era) wisdom of “go to college, get a good job” now rings hollow.

The trends are both clear and troubling. Income and wealth inequality in the US are poised only to grow worse.  For most, obtaining a college education represents either a poor long-term investment, or the metaphorical equivalent of bailing out buckets of water from a boat that’s rapidly sinking. There are, of course, the lucky ones who manage to find security and even prosperity, but such tales of American success, if current trends hold, are going to become more and more the exception. This is to say nothing of the racial dimensions of economic deprivation–the current situation and future prospects are much more dire if you aren’t white. It is rare that we see these seemingly disparate yet deeply intertwined issues presented as the systemic crisis they are. If the American dream isn’t dead, it’s at least in critical condition.

Though not all of these problems can be laid at the feet of neoliberal economists and their political agents, deindustrialization and globalization are the great exacerbators, and those are the philosophical children of neoliberals. We have been promised growth and prosperity for decades, driven by low taxes, free markets, higher education, and a mobile labor force. Private investment is expected to fill the gaps left when public investment is eviscerated. Somehow, this never comes to pass. The reality in this country has instead been an increase both of poverty and of the burdens on those _in _poverty. It’s expensive to be poor, and the situation is only getting worse.

This all may sound hopeless, but it isn’t. Labor still has value, even when firms fail to recognize it and pay what it’s worth. But, as a culture, we must also begin to value labor again. Too much of our work ethic is bound up in the “goodness of work” as a value unto itself–a decidedly Protestant outlook that may be good for the soul but does a poor job of ensuring a full belly and a roof to put over it. Challenging the moral value of work likely deserves its own article and is beside the point here. But the moral value of work–whatever it is meant to do for your “soul,” for your character–is no substitute for the economic value of that work, for which we should all be paid fairly. If we truly believe in an honest day’s pay for an honest day’s work, then we must fight for it, as generations past did. Apathy helped labor down this road to oblivion; more of the same has no hope of redeeming it.