If labor dies, what next? Authored by American Prospect.
As unions shrink, inequality will grow.
From 1947 through 1972, productivity in the United States rose by 102 percent, and median household income rose by an identical 102 percent. In recent decades, as economists Robert Gordon and Ian Dew-Becker have shown, all productivity gains have accrued to the wealthiest 10 percent. In 1955, near the apogee of union strength, the wealthiest 10 percent received 33 percent of the nation’s personal income. In 2007, they received 50 percent.
Today, wages and benefits make up the lowest share of America’s gross domestic product since World War II. Wages have fallen from 53 percent of GDP in 1970 to 44 percent today. Profits have been growing at wages’ expense. Michael Cembalest, J.P. Morgan’s chief investment officer, has calculated that reductions in wages and benefits were responsible for about 75 percent of the increase in corporate profits between 2000 and 2007.
What’s causing this decline in workers’ ability to claim more of the nation’s wealth? It’s not that they’re less productive. According to a Wall Street Journal survey of the S&P 500, the nation’s largest publicly traded companies, revenues per worker, which were $378,000 in 2007, grew to $420,000 in 2010. Businesses now produce more with fewer employees, but even those workers who’ve kept their jobs haven’t seen their wages rise.
Elite opinion insists that workers’ educational shortcomings are the root cause of declining incomes. In the years since 1979, however, the share of American workers with college degrees has increased from 19.7 percent to 34.3 percent, according to a new study by John Schmitt and Janelle Jones at the Center for Economic and Policy Research. Even so, the percentage of college graduates with good jobs, which Schmitt and Jones define as jobs paying at least $37,000 a year that provide health insurance and any kind of retirement plan, has fallen from 43 percent in 1979 to 41 percent in 2010. So workers are better educated and more productive. What they lack is real power.