The Eighty-Percent Solution and the Labor Market

I have been maintaining for several years now that in order to improve society we need a political process that recognizes the economic interests of the lower eighty percent of the population. Today that would be any household bringing in $100,000 or less.

There are many problems that face the modern worker but stagnant wages are among the most pronounced. Below I present my own view as to why this is, and I would submit that this has been the situation for the last forty years. The issues below do not present an exhaustive list of the problems as I see them. However, I believe that if these issues were addressed we would largely resolve many of the issues we now face, including some gender and racial issues.

In order to understand what the bottom eighty percent of wage earners already know–namely that it is growing more difficult to survive and/or maintain their lifestyles–one must have a clear-eyed view of how the labor market works. One must also forget the notion that the labor market is largely determined by market forces; were this true wages in the United States would be closer to those in Mexico  or China.

In order to understand why the U.S. labor market is the way it is we must consider the following:

First, work is organized by employer not the worker. This has far-reaching implications because the main reason work is organized as it is today is in order to keep employees as interchangeable as possible. Any employee integral to the operation of an enterprise has to be paid more because it is always possible their skills will be sought by competitors, so the more employees that can be swapped out easily with other readily available and eager flesh and blood automatons the better, because it suppresses the inflation of wages.

The general policy of looking for minimum competence in the labor market has a ripple effect when it comes to educational concerns because employers want people educated enough to do the simple jobs to which they are assigned but not educated enough to question what they are told to do. The present myth that there are millions of jobs that go unfilled because employers cannot find people with suitable skills is belied by the fact that professions that pay well and require heavy investments in time and money are often glutted markets.

Second, laws governing employer/employee relations are largely opposed by many of the most vocal and influential business interests. Businesses tend to oppose any laws that favor the laborer. Minimum wage laws are now front and center, and had they merely kept pace with inflation since 1968 would be approaching $13.00 an hour. By the way, $13.00 an hour is now the median wage, which means half of all workers make less than this.

Employers are also generally opposed to much of the regulation that government enforces. Worker safety rules are seen as impediments to productivity. Tax policy is just seen as a way of gaming the system, which many of the larger corporations have successfully done. Moving operations off-shore has been one trick used by companies to escape both the demands of regulation and taxes. Of course, the average laborer has no power to escape local labor market forces. Which leads us to the third general point.

Those who labor for wages have to negotiate for those wages within a certain environment, which is not always to their benefit. We have already mentioned how work is organized by employers, how businesses largely control the legislation concerning minimum wages, and how many can often resort to moving their operations off-shore. However, there are a lot of other ways in which employers can keep up the pressure. For example, keeping the worker guessing about what type of work is needed, hiding the prevailing wages for that work, and transferring the cost of basic and specific training to the employee are ways that employers not only keep labor in a constant state of anxiety but also make it much harder for them to move from job to job. In short, ignorance about how things might be better at company X keeps an employee locked into their employment, especially if that employee has made a significant investment in school and now has to pay off student loans.

A fourth way in which labor is kept in check is through the consistent destruction of collective bargaining. This is a problematic issue because of the perceived excesses of labor unions in the 1960s; however, it is clear that since the 1970s labor union participation has declined along with wages, especially for unskilled labor. Labor unions are the bete noire of the business class, not only because their existence may increase the cost of business but because it shifts power from management to labor. In short, labor unions not only allow wage earners to bargain for better wages but also for better working conditions, a voice in how work is organized, and possibly even a say in how the company operates financially. Right to work legislation is the euphemistic term used to describe the spearhead legislation used to gradually union-bust in a state. It has been an effective way for business interests to convince individual working class folk that they have nothing to gain from unionizing, except a reduction in pay when union dues are taken out each week from their check.

A fifth way in which labor is kept in check is by convincing a majority of people that they have an out through owning their own business, or what is called entrepreneurialism. The absurdity of this becomes immediately apparent to anyone who has ever written a business proposal or read statistics about business start-ups. Most new companies will go bust within the first five years of operation, largely because they are under-capitalized, but also due to bad planning and worse management. There are whole industries that are restricted to economies of scale well outside the means of the average laborer. For those few opportunities left, most of them involve small general merchandising or food service, the latter of which is a horribly unpredictable business. The myth of entrepreneurialism allows to the wage earner to fantasize about leaving his/her job and starting their own business. However, those who do so will likely be those least able to succeed since they will be the most dissatisfied at their jobs which means they will probably be the lowest paid. What does that mean? They will likely not be well capitalized enough to succeed, and the longer they have labored for others will likely not have given them the managerial skills they will need to run a successful business.

In the end the problem is relatively simple: while modern capitalism is highly mobile, labor is not. While I might be able to divest myself of a going business concern in a matter of weeks or a few short months, a laborer must give consideration to family issues, the potentially un-liquid house with a mortgage on it, or the undesirability of leaving a network of friends and family for uncertain economic opportunities hundreds or thousands of miles away. Unless you are a salaried employee with skills in high demand this is truly a crap-shoot. It gives evidence to the false notion that the labor market is anything but a level playing field; it is not.

At best the labor market is a mountain and most people reside at the bottom with very little chance of ever successfully climbing it. The few who do succeed are the exceptions not the rule, which is why an eighty-percent solution would be one in which government policies were directed at benefiting those who are inherently consigned to the base of the mountain. That means laws that support workers’ rights and a wage structure that makes it easier for the bulk of citizens to work and provide for themselves and their families. There is no market solution that will yield the kind of income distribution necessary for social and political harmony in this country.

Abraham Lincoln once asked how a nation divided against itself could ever stand. His concern was with a nation where millions lived in slavery. However, we can ask ourselves a similar question: how can a this nation continue to exist while tens of millions live in grinding poverty next to those who have so much income that they have to constantly think of new ways to dispose of it?

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