So technological change is an old story. What’s new is the failure of workers to share in the fruits of that technological change.
I’m not saying that coping with change was ever easy. The decline of coal employment had devastating effects on many families, and much of what used to be coal country has never recovered. The loss of manual jobs in port cities surely contributed to the urban social crisisof the ’70s and ’80s.
But while there have always been some victims of technological progress, until the 1970s rising productivity translated into rising wages for a great majority of workers. Then the connection was broken. And it wasn’t the robots that did it.
What did? There is a growing though incomplete consensus among economists that a key factor in wage stagnation has been workers’ declining bargaining power — a decline whose roots are ultimately political.
Most obviously, the federal minimum wage, adjusted for inflation, has fallen by a third over the past half century, even as worker productivity has risen 150 percent. That divergence was politics, pure and simple.
The decline of unions, which covered a quarter of private-sector workers in 1973 but only 6 percent now, may not be as obviously political. But other countries haven’t seen the same kind of decline. Canada is as unionized now as the U.S. was in 1973; in the Nordic nations unions cover two-thirds of the work force. What made America exceptional was a political environment deeply hostile to labor organizing and friendly toward union-busting employers.
For Whom the Economy Grows
If Jeff Bezos walks into a bar, the average wealth of the bar’s patrons suddenly shoots up to several billion dollars — but none of the non-Bezos drinkers have gotten any richer.
.. Since the 1970s, however, the link between overall growth and individual incomes seems to have been broken for many Americans. On one side, wages have stagnated for many; adjusted for inflation, the median male worker earns less now than he did in 1979. On the other side, some have seen their incomes grow much faster than the income of the nation as a whole. Thus C.E.O.s at the largest companies now make 270 times as much as the average worker, up from 27 times as much in 1980.
.. similar disconnect between overall growth and individual experience seems to lie behind the public’s lack of enthusiasm for the current state of the economy and its disdain for the 2017 tax cut. G.D.P. numbers have been good in recent quarters, but much of the growth has gone to soaring corporate profits, while median real wages have gone nowhere
.. But how do facts like these fit into the overall story of economic growth? To answer this question, we need “distributional national accounts” that track how growth is allocated among different segments of the population... Producing such accounts is hard but not impossible. In fact, the economists Thomas Piketty, Emmanuel Saez and Gabriel Zucman have already produced estimated accounts with considerable detail over the past half century. The main message is one of growth going disproportionately to the top and not shared with the bottom half of the population, but there are also some surprises in the other direction. For example, the middle class, while still lagging, has done better than some common measures indicated thanks to fringe benefits.
.. In a reasonable world, then, something like the Schumer-Heinrich bill would become law in the near future. In the real world, of course, the proposal will go nowhere for the time being — because Republicans don’t want anyone to know what distributional national accounts might reveal.
.. By now everyone knows that conservatives routinely yell “socialist!” whenever anyone proposes doing something to help less fortunate members of our society — which is a key reason so many Americans now think favorably of socialism: If guaranteed health care is socialism, bring it on. But the right doesn’t just cry foul at any attempt to limit inequality; it does the same thing whenever anyone tries to talk about economic class, or measure how different classes are faring.
.. My favorite example here is still former senator Rick Santorum, who denounced the term “middle class” as “Marxism talk.” But that was just an especially ludicrous version of a general attempt on the right to suppress talk about and research into where the economy’s money goes. The G.O.P.’s basic position is that what you don’t know can’t hurt it.
And to be fair, progressives like the idea of distributional accounts in part because they believe that more knowledge in this area would help their own cause.
Why you can’t fix retirement without fixing wages
Millennials needn’t worry about retirement, Alicia Munnell, 75, writes, as long as they “are willing and able to work longer than their parents and grandparents did.”
It may not be surprising that younger Americans, who will largely be responsible for cleaning up the financial wreckage the boomers are leaving behind, are not particularly enthusiastic at the prospectof working longer and harder for the same quality of life enjoyed by previous generations.
.. the proximate causes of millennials’ financial difficulties, such as the Great Recession and the dot-com bubble: “Millennials entered the labor market during tough times.
.. The “good news,” as she calls it, is that retirement is a long way off and that simply by working into their 70s, millennials will be able to make up a lot of lost ground.
.. Between 1989 and 2016, the real median income of houses headed by people younger than 35 increased by just 4 percent. That’s just about enough to keep pace with overall inflation.
.. The problem is, however, that many prices have been rising much more rapidly than the pace of inflation. Prices are rising fastest for the things that are absolute necessities: Health care. Food. Housing. Education. Things you literally need to survive. As a result, households have to take on more debt to make ends meet.
.. Overall compensation has been largely stagnant since the 1970s, even as productivity has increased. Median household debt has roughly doubled since 1989.
.. By asking millennials to work to age 70 you’re treating the symptom, not the underlying disease.
.. Selling American elites, who tend to be older and wealthier, on the notion that the young just need to work harder is easy. But the idea that workers urgently deserve an across-the-board pay raise — a raise that would come, often, from higher payments from those same older and wealthier people — is a much tougher sell.
A Ford Exec Who Took the Long View
Populism could intensify if corporate tax cuts don’t yield benefits for workers.
Miller made Ford take automobile safety seriously while General Motors lagged behind. The choice cost Ford sales because some customers balked at paying for innovative equipment such as seat belts. Miller defended his policy as the right thing to do and said corporate leaders should always ask themselves whether they were willing to have their decisions publicly reported. Volkswagen executives have paid dearly for ignoring this advice, and they are not alone.
.. I wonder how many of today’s executives would be prepared to sacrifice sales and profits to do the right thing. Most of them have been taught that maximizing shareholder value is their sole responsibility—and if this means ignoring the needs of workers and the well-being of local communities, so be it.
.. The bills’ drafters are assuming that executives will use these funds to invest in their businesses.
But that’s not what happened the last time this was done, in 2004, when corporations were allowed to bring back overseas assets if they paid a tax of only 5%. During the next three years, the 15 companies that repatriated the most raised salaries for senior executives, cut more than 20,000 jobs, decreased investment in research, and expanded dividends and stock buybacks. All this happened despite the letter of the law, which specified that the funds be used for investing in research and the workforce and prohibited their use for compensating executives and repurchasing stock.
.. If these bills pass, average Americans will expect something in return—higher wages, better working conditions, and more opportunities for their children. If corporations take the money and run, public retribution will be severe.
.. America needs a new era of broad-minded, socially aware corporate leaders who understand the long-term relationship between the well-being of their companies and the well-being of their country.
.. An environment in which profits soar while wages stagnate may make for satisfied shareholders. But the revolt against the arrangements that sustain this imbalance is already under way. Today the targets are immigration and trade treaties. Tomorrow the demands could include restrictions on the ability of corporations to shutter plants and fire workers at will. The day after tomorrow, if massive corporate tax cuts yield no benefits for workers, we could see an intensified revolt against elites, not only cultural elites, but the captains of industry and finance as well.
Taking the long view is self-interest rightly understood. It means refraining from squeezing the last bit of profit out of your business right now in order to secure a flow of profit over time. The economy rests on a set of political arrangements that the people can revise and—if things get bad enough—upend.