Do America’s Corporations Care How Much American Workers Earn?
September 17, 2012
There is little disagreement that consumer spending is a critical driver of American economic growth. The recession that began in 2007, while precipitated by the meltdown in the financial sector, is at root a crisis of aggregate demand. The halting recovery has been punctuated by disappointing monthly job reports and—just as important—by gloomy predictions from the Conference Board’s monthly survey of consumer confidence. Even business surveys admit (here and here) that anemic consumer demand (not “job-killing regulations”) is holding back new job creation and economic recovery.
Yet, despite worries about sagging consumer confidence and shrinking paychecks, business leaders seem unconcerned about the declining standard of living of middle-class America, or about the growing number of American families slipping into poverty. Over the last generation, wages for middle-class workers haven’t budged, while compensation for corporate executives and owners is reaching stratospheric levels. Middle-class Americans are having a harder and harder time making ends meet. Most have little savings to take them through a bad patch. They are saddled with skyrocketing health care and education costs. They are underwater on their mortgages. Indeed, borrowing (on credit cards beginning in the 1980s, on home equity in more recent years) is often the last-best option to cling to a higher standard of living. Worse yet, most jobs created today don’t bring workers into the middle class. Nearly three-quarters of the jobs added during the recovery are in lower-wage occupations, like cashiers, stocking clerks, or food preparation workers.
Higher wages mean more consumer spending and more growth, but corporate America is focused, with increasing intensity, on driving wages further down. Important wage-stabilizing policies—minimum-wage laws and collective bargaining, among others—are under assault. Republican governors have declared war on unionized teachers, firefighters, and police officers—all solidly middle-class jobs. And they are looking to extend the reach of so-called “right-to-work” laws that strip private-sector workers of the ability to bargain for decent wages and benefits. Hostility to unions has become so intense that a simple proposal for workplaces to post information about the right to collectively bargain under federal law (as they already must do for minimum-wage, OSHA, and other worker protections) unleashed a torrential assault by the Chamber of Commerce.
It wasn’t always this way.
To be sure, business lobbies throughout the twentieth century fought minimum-wage laws and unions. But this opposition was tempered by business voices that articulated the importance of American purchasing power through higher wages and the stabilizing force of union collective bargaining. As early as 1914, Henry Ford famously raised his workers’ wages so that they could purchase his cars. How, Ford wondered, could we make “20,000 men prosperous and contented rather than following the plan of making a few slave-drivers in our establishment multi-millionaires?”
Ford’s experiment was short-lived but instructive. In the decade after the First World War, as in our own time, productivity steadily outpaced wages, slowly eroding (as the Brookings Institution titled its 1934 study) America’s Capacity to Consume. “The chief point is this,” the economist Irving Fischer wrote in 1933: “the total value of products is greater; the total national wage bill is smaller. Then how can the wage- and salary-earners of the country buy back what they produce? They cannot.”
This dilemma was acutely appreciated by many business interests, especially the nation’s retailers who needed customers with enough income to purchase their goods. Boston-based retailer Edward Filene argued tirelessly for policies that would not only sustain a floor under wages but give workers the bargaining clout to bid them up. “We cannot operate this American machine,” reasoned Filene during the debate over the National Labor Relations Act in 1935, “…unless the masses can buy on a scale which was never before heard of.” And this was clearly not possible, in his view, unless “wages are removed from competition and organized business and organized labor cooperate on seeing how high those wages can be made.”…