The State of American Labor – More Productive, Yet More Insecure

Dear All:

With the Labor Day weekend upon us, it is a good time reflect on the state of the productive classes here in America. But first, a little Labor Day trivia.

Labor Day was created in 1894 by an Act of Congress. According to the Department of Labor website, “Labor Day, the first Monday in September, is a creation of the labor movement and is dedicated to the social and economic achievements of American workers. It constitutes a yearly national tribute to the contributions workers have made to the strength, prosperity, and well-being of our country.”

Truly it is our workers and savvy entrepreneurs who have strengthened the country and created prosperity in the course of the nation’s history. I write often of the high productivity of American workers and, in particular, our tech workers. However, as productive as we have been and continue to be, our workers have been losing ground in terms of real wages and benefits.

According to the Economic Policy Institute (EPI):

“Since 1979, ‘real’ (inflation-adjusted) hourly pay for the vast majority of American workers has diverged from economywide productivity, and this divergence is at the root of numerous American economic challenges. After tracking rather closely in the three decades following World War II, growing productivity and typical worker compensation diverged. From 1979 to 2018, productivity grew 69.6 percent, while hourly compensation of production and nonsupervisory workers grew just 11.6 percent. Productivity thus grew six times as fast as typical worker compensation.”The question to ask with so much productivity gain, while worker compensation stagnated for the last 40 years, is where did the money go?

Surely someone profited in terms of dollars, as it wasn’t the workers. EPI suggests it was the owners.

“A significant portion of it went to higher corporate profits and increased income accruing to capital and business owners (Bivens et al, 2014). But much of it went to those at the very top of the wage distribution. The top 1 percent of earners saw cumulative gains in annual wages of 157.8 percent between 1979 and 2018 – far in excess of economywide productivity growth and over six times as fast as average growth for the bottom 90 percent (23.9 percent). Over the same period, top 0.1 percent earnings grew 340.7 percent.”

This kind of divergence between compensation and productivity is exactly what one would expect to see where management views workers as expensive, undeserving and disposable and then asks them – before firing them – to train the far less expensive and less skilled H-1B visa replacements. To paraphrase Harvard Professor George Borjas, the biggest winners from immigration are owners of businesses that employ a lot of immigrant labor. The other big winners are the immigrants themselves.

We will over time see a hit to productivity as innovation becomes stymied due to all this outsourcing and offshoring. But for now, it continues to be open season on our workers, and Wall Street loves to see firings, rewarding companies that offload workers with higher valuations.

To date, corporations have been very effective at picking off tech workers. When the decision to outsource 1,300 workers at Vanguard was made, it’s not like there was a “team member” representative in the room. However, there was a workers’ representative at the Tennessee Valley Authority (TVA), and we know what happened there.

In closing, this Labor Day let each and every one of us explore ways to come together and work collectively to defend our livelihoods and make the case that, in the long run, it is in the best interests of corporate America to invest in its citizen workforce. Together we can turn this around and make not just our own lives, but America, more secure and prosperous.

Happy Labor Day!

In Solidarity.