40 Years of Declining Wages & Living Conditions

Huck/Konopacki Labor Cartoons

Increased productivity (i.e., goods and services produced per hour worked) is the theoretical basis for improved living standards under capitalism. This is because with increased productivity employees can work fewer hours to accomplish more and/or earn more money per hour worked since they are producing more. However, it is only in theory that their living standards improve since their compensation and working conditions (including the length of the workday and the amount of work they must complete each day) are determined by the bosses who could increase their wages as a reward for their increased productivity or, as is almost always the case, force them to work just as hard or harder for the same or less pay and pocket the extra profits themselves.

A new report from the Economic Policy Institute (EPI) analyzes how living standards have declined over the past 40 years as a result of increasing productivity combined with stagnant wages.

Between World War II and 1973, worker productivity and compensation increased in parallel (with both increasing roughly 100% during this period). Though the bosses took the lion’s share of the profits from their employees’ increased productivity, workers did see wages and living conditions rise significantly. However, starting in the 1970s, worker productivity grew at a much faster rate than their compensation. Between 1973 and 2010, productivity increased more than 150%, while the median hourly compensation increased only 10.7%. If the mid- to late ‘90s are excluded, the median hourly compensation went up less than 5% between 1973 and 2011.

This has contributed to a rapidly growing wealth gap, as employers reaped the benefits of increased productivity and profits without having to pay for it. It has also led to a deteriorating standard of living for the majority of Americans, as they are forced to work longer and harder without any commensurate increase in their incomes. Furthermore, the income increases they have seen have barely kept up with inflation. In many cases, the costs of consumer goods and services have far outpaced wage increases (e.g., higher education, housing and healthcare). This has led to a situation in which many Americans now have much more precarious and uncertain financial statuses than their parents and grandparents.

The decline of union power is a major reason why workers are now working longer and harder at equal or lower pay. According to Equal Times, unionized workers earn an average of 13.6% more than non-union employees, and they are 28.2% more likely to receive employer-provided health insurance and 53.9% more likely to have employer-provided pensions. Yet, between 1973 and 2011, union membership declined from 26.7% of the workforce to 13.1%. This has been responsible for roughly one-third of the entire growth of wage inequality among men and nearly one-fifth of the wage gap among women.

Yet it is not just that fewer workers have unions to defend them against wage cuts and longer hours. The unions that have survived have increased their willingness to cut onerous deals with the bosses in exchange for labor “peace.” The unions’ continued existence depends on having a critical mass of unionized workers. When the bosses threaten to down size or outsource, they are not just slashing jobs and throwing workers into the unemployment line, they are also threatening the existence of the unions themselves by eliminating dues-paying members. Therefore, a deal that reduces layoffs, like the one recently made by the UAW to help keep the auto industry solvent (see here, here and here) helps keep the unions solvent, too, even though these deals often include wage and benefits cuts and longer working hours and thus contribute to workers’ declining living standards.

Ultimately, if we want to reverse this trend and see improvements in our living conditions we need to stop focusing on saving or creating jobs and start demanding material security, more time and energy to spend with our families and friends and the ability to contribute to our communities in a way that is meaningful, empowering and not degrading. We need to recognize that the boss is not our friend or ally because he provides jobs. He is an adversary because he pays us only a fraction of the value of our labor and pockets the rest as profit, even though we do the work. We also need to realize that, despite the attacks by the right, the trade unions are essentially accepted  by the bosses because they fulfill the necessary role of helping to enforce labor peace and maintain the continuity of profits. As long as the unions continue in this role, workers’ living standards will continue to decline and the wealth gap will continue to widen.