Labor Day looms, and with it the official end of summer.[1] Labor Day – the day we celebrate the strength and importance of American labor. But in truth, on this Labor Day what will there be to celebrate – certainly not the strength and importance of American labor.

Things, after all, are not good for labor in America these days.

Unemployment is currently running at 9.1 percent, with the latest small drop in the rate almost entirely the product of workers choosing to opt out of the labor force. If the three million workers who have stopped looking for work is included in the total, the unemployment rate is currently 10.7 percent. If workers stuck in part-time employment are added, the rate is 16.1 percent.[2] Lay-offs abound: in May 2011, “U.S. public and private employers shed 1.78 million workers, the highest level since August 2010.”[3] Public sector employment is currently in free-fall, with 300,000 jobs lost since January alone. Since most of those laid-off are teachers, the full-time employment of women has taken a particular hit.[4]  (76 percent of teachers are women.) The number of American workers without employment for more than a year – at 4.4 million in July – encompassed one unemployed worker in three,[5] in an economy with 5 percent fewer jobs in total – some 6.8 million fewer – than before the recession.  The ratio of job seekers to job openings in April 20111 was 4.6:1[6]

Wages for the employed remain stuck or falling.[7] Even before the recession, to the degree that the typical American family was able to increase its income, that increase “was almost entirely because parents [were] working more – not because they [were] earning more per hour.”[8] In 2009 indeed, the typical two-parent family worked 26 percent longer than the typical family in 1975, at the end of a decade in which the median family income had actually shrunk – for the first time in any decade since the Great Depression – by 4.9 percentage points. If income inequality had remained at its 1980 level right through to 2011, that median family income would have been $12,500 higher.[9] But of course inequality has not remained unchanged. In the contrary, both income and wealth inequality are now at record levels, and corporate profits have bounced back to pre-2007 proportions.[10]

Meanwhile, the ranks of the poor continue to swell, and continue to show the continuing impact of American racism. The wealth gap between whites and minorities is now at its greatest in a quarter century, [11] and unemployment rates among ethnic minority populations continue to outstrip those of white America by a ratio of at least 2:1. In 2009, 14.3 percent of all Americans – some 43.6 million people – lived at or below the poverty line; and maybe one in three Americans struggled on incomes that were less than double that level.[12] One white American in ten lived in poverty in 2009. One African-American in four lived in poverty. So too did one Hispanic-American in four.  Four million more children live in poverty now than was the case just a decade ago.[13] This at the very moment when the OECD was recording the United States as having the fourth greatest level of income inequality per head in all the countries it surveyed, and when the median pay for top executives in the 200 largest U.S. companies was rising (in 2010 from 2009) by a staggering 23 percentage points, to reach $10.8 million per executive.[14] Don’t let anyone tell you there is only one America. There are definitely two!

Union membership continues to slide. The number of American workers in trade unions peaked at over 20 million in the early 1980s, and is now down to 15 million. The unionization rate peaked early – at 25 percent in 1954 – and is now down to 12 percent. In the private sector it is down to 7 percent, as employer resistance and “right to work” laws in 22 mainly southern states have taken their toll.[15] These are staggeringly low numbers on any meaningful international comparison, which is why it is perhaps not surprising that the United States remains the only major industrial economy without any statutory paid vacation time or paid public holidays, or that it is this economy which scores highest among leading industrial economies in the numbers of weeks worked per year (45.9 in 2007, the German figure was 41)[16] and lowest in the real rate of corporate taxation.[17]

It was not always so. In the depths of the Great Depression, trade union support and industrial militancy sustained a New Deal that brought unemployment insurance, disability pay and basic pensions to large sections of the American labor force long before those were generally available elsewhere in the industrialized world. In the first of the two great periods of post-war American economic growth (between 1948 and 1973) trade union strength at the heart of the manufacturing sector sustained consumer demand, blocked off any return to interwar recession, and ensured that productivity and wages rose together: so giving unionized American workers a living standard that in Western Europe in those years was available only to the professional middle class. But now things are otherwise. American wage rates are lower than those in much of northern continental Europe; and the UK apart,  northern European workers enjoy bargaining rights and welfare payments far in excess of those enjoyed here. Yet it is Germany, not the United States, that these days maintains a healthy trade balance and a strong manufacturing base; and it is German trade unions, granted strong bargaining rights under American military leadership in the immediate wake of World War II, that remain major players in industrial and social policy-making in the EU’s major economy. The temporary stagnation of the German economy should not blind us to the continuing truth that labor strength, generous welfare provision and international competitiveness remain intact there but not here[18] It is worth asking, as we approach another Labor Day, why that should be so.

The key difference lies less in the character of trade unions on each side of the Atlantic than in the nature of the employers and the political climate that they face. The defeat of the air traffic controllers union by Ronald Reagan in 1981[19] ushered in here – as Margaret Thatcher ushered in in the UK – an epoch of labor retreat.[20] Private section union membership fell. Wages stagnated. Inequality grew. Welfare reform thinned benefits. Personal consumption, for the mass and generality of American workers, came to rest increasingly on credit-card debt. And the myth was spread about – behind the euphemism of a defense of “the right to work” – that it was trade union and worker rights, rather than excessive CEO salaries and their culture of hire-and-fire, which were holding back American enterprise and robbing the U.S. economy of its global competitive edge. So entrenched has the myth become, indeed, that Republican governors in blue-collar states such as Wisconsin, Ohio and New Jersey have been able to take advantage of a crisis triggered by the inadequate regulation of private banks and mortgage lenders to launch in 2010 a co-ordinated attack on public sector unionism:[21] as though it was the modest pay and pensions of teachers and firefighters, rather than the inflated bonuses and unchecked arrogance of Wall Street bankers, that were responsible for the unemployment and misery of so many of our fellow citizens.[22]

Republicans and blue-dog Democrats regularly wax lyrical on the wonders of unregulated markets, and on the evils of institutions like trade unions that seek to regulate them. But in doing so, conservatives conflate markets for goods and markets for people, and miss the unique characteristics of labor markets in a privately-owned economy of the kind we have in America.[23] Labor markets in such economies are always stacked heavily against workers. There is an asymmetry of power between the individual employee and his/her employer that can only be leveled if workers act together; and even when they do, the vulnerability of entire workforces to the complete loss of their income and benefits through unemployment always gives employers the edge. The current weakness of American trade unions makes the power gradient operating against labor here already steep, and Republican governors now want to steepen it more. But that intensification of the gradient makes sense only if you believe that, to achieve long-term economic growth, the United States needs even more inequality and poverty than it currently possesses, and an even greater degree of concentration of power and reward at the top of our largest corporations. Such a belief flies in the face of both economic reason and basic decency.

In the right-wing litany, trade unions stand accused of causing unemployment by inflating wages, of generating inequality by disadvantaging the non-unionized, and of blocking productivity growth and investment by defending outmoded working practices and staffing levels. The claims would be laughable were they not so dangerous. The main cause of unemployment in this country is not trade union power. It is recession caused by Wall Street excess. Low wages among the non-unionized are not caused by trade unionism elsewhere. They are caused by “right to work” laws that block collective worker action,[24] and by right-wing resistance to a higher minimum wage. And productivity growth and investment have stalled in the United States, not because wages here are excessive compared to our major industrial competitors, but because wages are lower in large parts of the non-industrialized workers and American corporations are free to outsource jobs without domestic penalty.[25]

It is therefore not surprising – though it is rarely mentioned in the mainstream US press – that unemployment levels are currently lower in heavily-unionized Holland and Germany than they are in either the United States or the United Kingdom. (Unemployment rates adjusted to U. S. concepts are currently 4.2 percent in Holland and 6.6 percent in Germany, as against 7.8 percent in the U.K. and 9.1 percent here.[26]) For what the critics of trade unionism so readily forget is that US styles of labor flexibility (what in the academic literature is termed “external” flexibility: people hired and fired at will) can be and often is less productive of successful industrial change than western European “internal” flexibility (where firms cannot easily dismiss employees, and where managers and workers therefore have a shared interest in maintaining the competitive viability of their firms).[27] Republican lawmakers and their corporate backers would do well to educate themselves in the “theory of beneficial constraints,”[28] the body of academic scholarship demonstrating that strong trade unionism actually triggers industrial productivity by blocking off short-term sweat-shop routes to profitability. Firms facing strong trade unions have to compete by becoming more efficient, not by cutting labor costs to the bone. Tea Party conservatives, and indeed the rest of us, would also do well to recognize that the only route back to sustained prosperity for the bulk and generality of American workers is the creation of an economic growth strategy based on the recreation of well-paying jobs. In this political climate that route will only come into being if the one institution committed to good pay, namely the American trade union, grows in strength as well.

We are at the brutal end of a period of economic growth in the United States that was based on an increasingly unequal social contract – one of high salaries for the few and stagnant wages for the many. The personal debt that alone sustained consumption (and therefore employment) under that social contract now weighs like a nightmare on the living standards of the median American. The over-riding focus of public policy in the wake of a debt crisis of this kind has therefore to be the creation of a new social contract – one based on greater equality, and on higher wages for the many. In the creation of that new contract, the role of a strengthened labor movement will be vital.[29]

First posted, with commentary, on www.davidcoates.net

[1] Labor Day has been an official national holiday since 1894, adopted then by the Cleveland Administration as a counterweight to May Day, the international day of labor solidarity adopted by the First Congress of the Second Socialist International in 1889 to commemorate the Haymarket Massacre in Chicago in 1886. It was adopted to appease class tensions after the crushing of the great Pullman strike. Labor Day from its outset was meant to symbolize the official American labor movement’s commitment to a more moderate form of politics!

[2] Data in “Political Roots in U.S. Economic Crisis,” The New York Times, August v5, 2011: available at http://www.nytimes.com/2011/08/06/opinion/americas-economic-crisis-has-p...

[3] Conor Dougherty, “Layoffs Deepen Gloom,” The Wall Street Journal, July 21, 2011: available at http://online.wsj.com/article/SB1000142405311190346110457645832298790046...

[4] Lynn Parramore, As Women Lose Ground in Latest Round of Job Numbers, Can We Stop Talking About the ‘Mancession’? posted on Alternet June 9, 2011: and available at http://www.alternet.org/story/151257

[5] Sara Murray & Phil Izzo, “Job Search Stretches Past a Year for Millions,” The Wall Street Journal, July 22, 2011: available at http://online.wsj.com/article/SB1000142405311190423340457646017166222869...

[6] Elise Gould, “A lack of want ads: the job market deteriorates,” Economic Policy Institute, June 7, 2011: available at http://www.epi.org/publications/entry/a_lack_of_want_ads_the_job_market_...

[7] Robert Reich, The Wageless Recovery, posted on The Huffington Post April 26, 2011: available at
http://www.huffingtonpost.com/robert-reich/the-wageless-recovery_b_85400...

[8] Michael Greenstone and Adam Looney, The Great Recession May Be Over, but American Families Are Working Harder than Ever, Brookings July 11, 2011: available at http://www.brookings.edu/opinions/2011/0708_jobs_greenstone_looney.aspx

[9] Data calculated by Paul Buchheit and cited in Joshua Holland, Why the Wealthiest Americans Are the Real Job Killers, posted on Alternet July 19 2011: available at http://www.alternet.org/economy/151705/why_the_wealthiest_americans_are_...

[10] Jared Bernstein, The Upstairs, Downstairs Economy, posted on The Huffington Post, August 5 2011: available at http://www.huffingtonpost.com/jared-bernstein/the-upstairs-downstairs-e_...

[11] Hope Yen, Wealth Gap Between Whites, Minorities, Widens To Greatest Level In a Quarter Century, posted on The Huffington Post, July 26 2011: available at http://www.huffingtonpost.com/2011/07/26/wealth-gap-whites-minorities_n_...

[12] Brandon Roberts et al, “Great Recession Hits Hard At America’s Working Poor: Nearly 1 in 3 Working Families in United states Are Low-Income,” The Working Poor Families Project, available at: http://www.aecf.org/KnowledgeCenter/Publications.aspx?pubguid={8DCBC7A7-12CD-4DC3-86FC-E5EAFC955DDE}

[13] Charles L. Blow, ‘The Decade of Lost Children,” The New York Times, August 5, 2011: available at http://www.nytimes.com/2011/08/06/opinion/the-decade-of-lost-children.ht...

[14] Pradnya Joshi, “We Knew They Got Raises. But This?” The New York Times, July 2. 2011: available at http://www.nytimes.com/2011/07/03/business/03pay.html?pagewanted=all

[15] Alejandro Reuss, ‘What’s Behind Union Decline in the United States?’ Dollars & Sense, May/June 2011 pp. 25-6: available at http://www.dollarsandsense.org/archives/2011/0311reuss.html

[16] Arin Karimian, “Work and leave policies,” The Economic Policy Institute, June 22, 2011: available at http://www.epi.org/economic_snapshots/entry/work_and_leave_policies/

[17] Data at http://thinkprogress.org/economy/2011/07/05/260535/graph-corporate-tax-s...

[18] Terrence McNally, Why Germany Has It So good – And Why America Is Going Down The Drain, interview with Thomas Geoghegan posted on Alternet October 14 2010: available at http://www.alternet.org/economy/148501/why_germany_has_it_so_good_--_and...

[19] Details from Joseph A. McCartin, “The Strike That Busted Unions,” The New York Times, August 2, 2011: available at http://www.nytimes.com/2011/08/03/opinion/reagan-vs-patco-the-strike-tha...

[20] As Robert Reich recently put it: ‘For three decades after world war II – I call it the “Great prosperity” – wages rose in tandem with productivity. Americans shared the gains of growth, and had enough money to buy what they produced. That’s largely due to the role of labor unions. In 1955, over a third of American workers in the private sector were unionized. Today, fewer than 7 percent are. With the decline of unions has come the stagnation of American wages.” (Robert Reich, Why the Republican War on Worker rights Undermines the American Economy, posted June 14, 2011 and available at http://www.businessinsider.com/why-the-republican-war-on-workers-rights-...

[21] For the anti-union case, see Don Bellante et al, Why Public sector Unionism is a Bad Deal for Taxpayers and Representative Government, Cato Institute Policy Analysis No. 645, September 28, 2009; and Michael Barone, “The Fall of the Midwest Economic Model,” The Wall Street Journal, August 16, 2011: available at http://online.wsj.com/article/SB1000142405311190339290457650999260531642...

[22] Jeffrey Keefe, Debunking The Myth of the Overcompensated Public Employee: The Evidence, Economic Policy Institute Briefing Paper #276, September 15, 2010: available at http://www.employmentpolicy.org/topic/402/research/debunking-myth-overco...

[23] The argument is developed further in David Coates, Models of Capitalism, Cambridge UK: Polity Press, 2000, pp. 102-3

[24] See John Miller, “Wrong about Right-To-Work,” Dollars & Sense July/August 2011, pp. 11-12: available at http://dollarsandsense.org/archives/2011/0711miller.html

[25] It is worth remembering that “right now, labor costs at Chrysler - $49 an hour in salaries and benefits according to the Center for Automotive Research – are even lower that Toyota and Honda.” (The New York Times, July 28, 2011). Toyota and Honda are not unionized. Chrysler is.

[26] For the international unemployment data, see http://www.bls.gov/ilc/intl_unemployment_rates_monthly.htm

[27] Ralph Atkins & Matt Steinglass, “A fix that functions,” The Financial Times, August 4, 2011: available at http://www.ft.com/intl/cms/s/0/09ef5154-be11-11e0-ab9f-00144feabdc0.html...

[28] See http://www.jrank.org/business/pages/103/beneficial-constraints.html

[29] See also Robert Creamer, Why Americans Need Unions Now more than Ever, posted February 23, 2011; and available at http://www.huffingtonpost.com/robert-creamer/why-americans-need-unions_b...