Labor Today: Wages and Salaries Still
Lag as Corporate Profits Surge
NY TIMES EDITORIAL
AUG. 31, 2014
In the months before Labor Day last
year, job growth was so slow that economists said it would take until 2021 to
replace the jobs that were lost or never created in the recession and its
aftermath.
The pace has picked up since then;
at the current rate, missing jobs will be recovered by 2018. Still, five years
into an economic recovery that has been notable for resurging corporate profits, the number and quality of
jobs are still lagging badly, as are wages and salaries.
In 2013, after-tax corporate
profits as a share of the economy tied with their highest level on record (in
1965), while labor compensation as a share of the economy hit its lowest point
since 1948. Wage growth since 1979 has not kept pace with productivity growth, resulting
in falling or flat wages for most workers and big gains for corporate coffers,
shareholders, executives and others at the top of the income ladder.
Worse, the recent upturn in growth,
even if sustained, will not necessarily lead to markedly improved living
standards for most workers.
That’s because the economy’s
lopsidedness is not mainly the result of market forces, but of the lack of
policies to ensure broader prosperity. The imbalance will not change without
labor and economic reforms.
For instance, new research from the Economic Policy Institute
shows that from the first half of 2013 to the first half of 2014, hourly wages,
adjusted for inflation, fell for nearly everyone. An exception was a small gain
for the bottom 10 percent of wage earners, which was because of minimum-wage
increases in 13 states this year.
That’s clear evidence that raising
the federal minimum wage, while only a first step toward better pay, would have
a powerful effect. A lift from the current $7.25 an hour to the modest $10.10
called for by President Obama and Democrats in Congress would put an estimated
additional $35 billion in the pockets of affected workers over a three-year
phase-in period.
Unionization is also associated
with higher wages and benefits, especially for low-wage workers, which argues
for greater legal enforcement of the right to organize without retaliation.
Similarly, stronger enforcement of
both labor laws and antitrust laws is needed to ensure against wage theft. Once
assumed to be mainly an issue of unpaid overtime or other wage violations, wage
theft became a white-collar issue this year, when it was revealed that collusion among the biggest
companies in Silicon Valley had suppressed the pay of software engineers by an
estimated $3 billion.
The pay of middle-income workers
has also been diminished. Decades of outsourcing government jobs to the private
sector has undercut public employment, once a mainstay of middle-class life,
even as evidence has mounted that outsourcing often
does not save money or improve services. What’s needed is a systematic review
of government contracts with the private sector and a willingness to end those
that are counterproductive.
Another threat to middle-class
wages is rampant misclassification — of employees as independent contractors
and of workers as supervisors — a tactic that employers use to deny pay and
benefits that would otherwise be due. In a promising development,
a federal appellate court recently ruled that drivers for FedEx in California
are employees, not independent contractors, an example of the courts stepping
in when the other branches of government have let an injustice persist.
There has been progress since last
Labor Day. Mr. Obama has signed executive orders to improve the pay and working conditions of employees of federal
contractors. The Labor Department is revising rules on overtime pay; simply updating them
for inflation would make millions of additional workers eligible for
time-and-a-half for overtime.
What is still lacking, however, is
a full-employment agenda that regards labor, not corporations, as the center of
the economy — a change that would be a reversal of the priorities of the last
35 years.