The Plight of the U.S. Working Class

Modern capitalism, sociologist Max Weber famously observed early in the twentieth century, is based on “the rational capitalistic organization of (formally) free labor.” But the “rationality” of the system in this sphere, as Weber also acknowledged, was so restrictive as to be in reality “irrational.” Despite its formal freedom, labor under capitalism was substantively unfree.1

This was in accordance with the argument advanced in Karl Marx’s Capital. Since the vast majority of individuals in the capitalist system are divorced from the means of production they have no other way to survive but to sell their labor power to those who own these means, that is, the members of the capitalist class. The owner-capitalists are the legal recipients of all the value-added that is socially produced by the labor in their employ. Out of this the owners pay the wages of the workers, while retaining for themselves the residual or surplus value generated by the social process of production. This surplus then becomes the basis for the further accumulation of capital, leading to the augmentation of the means of production owned by the capitalist class. The result is a strong tendency to the polarization of income and wealth in society. The more the social productivity of labor grows the more it serves to promote the wealth and power of private capital, while at the same time increasing the relative poverty and economic dependency of the workers.

A crucial element in this process is what Marx called “the reserve army of labor” or “relative surplus population.” With the exception of extraordinary situations such as major wars that mobilize millions of people or epoch-making expansions resulting from special historical factors, the capitalist economic system does not produce enough jobs for everyone. Although there are certainly better times, during upturns, and worse times, during downturns, there are almost always large numbers of people who need jobs but who cannot easily find employment. Many of the jobs that are created pay low wages—below those necessary to afford basic needs like decent housing and a good diet.

The unemployed, the underemployed, and those with only tenuous holds on their jobs, constitute the reserve army of labor, necessary to the functioning of capitalism. The reserve army is created and maintained as a means to capital accumulation, which requires that a surplus labor force be constantly available to facilitate expansion and at the same time to hold down the wages of workers and to make them less recalcitrant.2

Workers in the reserve army are characterized by “extremely irregular employment.”3 They are easily fired if the economy slows a bit, but ready for hiring when the economy picks up. This group of workers includes all those that have given up looking for jobs in weak labor markets, along with those working part-time but wanting full-time employment—on top of those officially designated as unemployed. It also includes the chronically impoverished.4 It is the existence of this reserve army of “surplus” workers that makes it difficult for those in the active labor army to increase their wages or improve their working conditions without a united effort involving labor union struggles.

Marx defined the general condition of workers, particularly those in the reserve army, as one of precariousness. As he put it, “the higher the productivity of labour, the greater is the pressure of the workers on the means of employment, the more precarious therefore becomes the condition for their existence, namely sale of their own labour-power for the increase of alien wealth, or in other words the self-valorization of capital.” With the current mobility of capital and modern material handling and rapid shipping techniques, the reserve army available to capital in any one country has become truly global in scope.5

There have of course been periods of time when strong union movements or pro-labor political parties (especially in Europe) have allowed for improved working conditions and higher wages. Although capital gave nothing away without a struggle by workers, the Cold War added a new dimension. Governments in the wealthy countries at the center of the capitalist world economy that needed to ensure the support of their workers as part of a Cold War compact were a bit more likely to take labor’s wishes into account. This was later reversed. While there have been ups and downs since the late 1970s the conditions of labor have generally deteriorated over the period as a whole.

Workers in the United States are currently under extreme pressure—unlike any other period since the Great Depression of the 1930s. Conditions in today’s phase of monopoly-finance capital, dominated by neoliberal policy, are the culmination of a long process of lopsided class war—with capital continually gaining strength in its battle to limit and control labor. During this period, and especially since the beginning of the Great Recession, capital has squeezed labor ever harder—doing more with less, as they say—in order to increase profits.

At the same time, the economy has been characterized by deepening stagnation—with real GDP growth declining from around 4 percent a year in the 1950s and ‘60s to around 3 percent a year in the 1970s–1990s to 1.8 percent a year for the last decade (2002–2012). Financialization, arising in response to deepening stagnation from the 1970s to the present, has served to preserve and promote wealth at the top and temporarily to lessen stagnation in the economy as a whole—but at the cost of even greater economic instability over the long run.

As economic growth has slowed so has net job creation—from around a 2 percent increase per annum in the 1970s and ‘80s to less than 0.3 percent per year for the last decade, 2002–2012 (and 1 percent a year over the last two decades).6 The economic trend toward greater stagnation and capital’s response to it—including the turn to finance, outsourcing and offshoring, and increasing pressure on workers and their organizations—have combined to undermine the overall condition of the U.S working class.

Open War on Labor

The decline in circumstances of workers in the United States goes back to long before the Great Recession—to capital’s concern over the upsurge of labor militancy following the Second World War, specifically a wave of strikes in 1946. Some 4.5 million workers went on strike during that year—from the Hawaiian sugar plantations to Oakland (a general strike) to General Motors to the railroad, steel, and coal industries. The Taft-Hartley Act, passed by a Republican Congress with some Democratic support in 1947 over President Truman’s veto, was a clear offensive against labor. Workers and unions had been given a boost by the Depression-era National Labor Relations Act (1936), which restricted a number of anti-union employer practices such as interfering with workers trying to form a union. Taft-Hartley, however, placed severe restrictions on labor—for example, outlawing the very effective sympathy strikes and boycotts. It also required union leaders to submit affidavits indicating that they were neither Communist Party members nor had any connection with what were considered to be subversive organizations, thereby excluding some of the most militant leaders.7

Taft-Hartley commenced a new phase of the class war of capital against labor, which was interrupted briefly in the 1960s, but was ramped up again with the economic slowdown of the 1970s. A full-scale, organized class war against the U.S. working class and against all progressive government policies was unleashed beginning on August 23, 1971, with corporate lawyer Lewis Powell’s confidential memorandum to the U.S. Chamber of Commerce (only two months before he was nominated by President Nixon to the U.S. Supreme Court) calling on corporations and their CEOs to organize a concerted attack on labor, the left academy, and the liberal media—and to use their financial leverage to dominate government. The memo, which came to light only after Powell’s Supreme Court appointment, galvanized business and the wealthy, leading to what Jacob Hacker and Paul Pierson in Winner-Take-All Politics described as a “domestic version of Shock and Awe.” As Bill Moyers has written, “we look back on it now as a call to arms for class war waged from the top down.” It inspired the establishment of the powerful Business Roundtable (which has only CEOs as members), the American Legislative Exchange Council (ALEC), the Heritage Foundation, the Cato Institute, and Citizens for a Sound Economy (the forerunner of Americans for Prosperity). Within a decade the number of firms with lobbyists expanded by almost fifteen-fold. Corporate PACs quadrupled in number between 1976 and the mid–1980s.8

Next to Powell the most influential figure in initiating the new corporate-based assault on workers during the l970s was William E. Simon, Treasury Secretary in the Nixon and Ford administrations and a former top executive at Salomon Brothers. Simon’s 1978 book, A Time for Truth, included a preface by Milton Friedman and a foreword by Friedrich von Hayek, and called for a business crusade against labor, environmentalists, and the left. Simon insisted that “multimillions” of dollars were needed for conservative causes to overthrow the legacy of the New Deal. These attacks set the stage for President Carter’s sharp turn to the right in 1979, marked by the appointment of Paul Volcker as Chairman of the Federal Reserve Board.9

President Reagan’s 1981 breaking of the PATCO (air traffic controllers’) strike contributed a major blow to the prestige and power of organized labor. National Labor Relations Board and court appointees became yet more favorable to the view of capital and less inclined to adopt even the appearance of neutrality. Other aspects of the class war today include the attack on pensions of public workers at the city and state level and the decline in workplace safety enforcement. At present Occupational Safety and Health Administration inspectors are estimated to be able to visit each workplace in the United States once every ninety-nine years. It had been more than a quarter-century since inspectors made their last visit to the Texas fertilizer plant where an April 2013 explosion killed fourteen and injured over two hundred.10

In the aftermath of the Great Financial Crisis, and the rise of the Tea Party as a right-wing adjunct to the Republican Party, the assault on workers intensified still further. A report by the Economic Policy Institute that reviewed state-level legislative changes in labor policy and labor standards since 2010 found that “the changes undermine the wages, working conditions, legal protections, or bargaining power of either organized or unorganized employees…. The consequence of this legislative agenda is to undermine the ability of workers to earn middle-class wages and to enhance the power of employers in the labor market. These changes did not just happen but were the results of an intentional and persistent political campaign by business groups.”11

Multibillionaire Warren Buffet, who is in a position to know a thing or two about what has been happening, declared in 2006: “There’s class warfare, all right, but it’s my class, the rich class, that’s making war, and we’re winning.”12 With unions crushed to the point that they now account for only 6.6 percent of private-sector employees, the lowest level in a century, the class war from above has shifted more and more to attacking state and local government workers, particularly teachers’ unions, which are seen as standing in the way of the privatization of public education.13

This class war from above has taken on a toxic dimension in the form of an open attack on the officially designated “poor,” now encompassing about 50 million people, according to government figures. There has long been a dimension of racism and blaming the poor for their condition, but it has now become a continuous refrain. After all, the argument goes, if they would only have done this, that, or the other thing—usually gotten more education, not had children, or not had children out of wedlock—then they would not be poor. It is their own fault, so why should society help them? In this distorted logic children are made to suffer for the alleged mistakes their parents made. Twenty-one Republican state governors have refused to accept the part of the Affordable Care Act that expands health-care access for the poor through extension of Medicaid. Since this starts out as fully funded by the federal government and then becomes 90 percent federally funded, the explanation for their actions seems to be something other than not wanting to spend money. As John Kasich, the Republican Governor of Ohio, who is implementing the enhanced Medicaid program, put it, “I’m concerned about the fact there seems to be a war on the poor. That, if you’re poor, somehow you’re shiftless and lazy.”14

International Agreements Against Labor

The various bilateral and multilateral trade agreements that are now in effect—such as NAFTA, CAFTA, and the WTO—did not spring up out of thin air in response to a new ruling-class ideology. Rather they are the result of a continuing process in which imperial capital has created a post-Second World War, post-colonial economic structure favorable to its interests. Designed to give maximum flexibility to capital, it has ensured a more docile workforce, rightfully afraid that jobs could be “offshored” to countries with lower wages and other costs of production. An earlier trend that happened within the United States, in which factories from the Northeast (textiles) and Midwest (automobiles) moved to the South, now occurs on an international scale.

What is referred to in financial circles as “the global labor arbitrage,” or the increasing shift of multinational-corporate production to the global South in order to exploit workers with the lowest worldwide unit labor costs, was made possible through an international political process, spurred by U.S. imperialism, that opened up the periphery of the world system to unrestricted flows of global capital.15 This meant a two-pronged attack on labor and its political power in both the global South and in the global North—of which the 1994 North American Free Trade Agreement (NAFTA) was to emerge as emblematic.

Writing in Monthly Review in 1998, Harry Magdoff described the developments as follows:

There were numerous indications of the decline of organized labor’s fortunes and power relative to capital in the United States from the 1970s to the onset of the Great Recession in late 2007. For example, there was a decreased percentage of the workforce that was unionized, a decreased esteem in which union workers were viewed by many in society, and a lower frequency of major strikes (only a few per year compared to literally hundreds per year in the 1950–1980 period). There is no doubt that the increased surrender of workers in the face of the assault by capital was due to the fact that they were understandably concerned that the bosses would either hire replacement workers or close the facility and move the jobs to another location in the United States or to another country.

Given the pre-existing problems and negative trends for labor, the Great Recession (officially considered to have run from December 2007–June 2009) and the deep stagnation that followed have made the situation of workers in the United States ever more precarious. As far as workers are concerned the Great Recession has turned into the Great Stagnation, the slowest “recovery” from a downturn in the post-Second World War era. Wages have stagnated, with the real median family income in 2012 below that of 1996, and the economy has yet to produce enough activity to regain all the jobs lost during the Recession.

The effects of the Great Recession and the Great Stagnation have thus only served to worsen the conditions associated with the loss of worker power under the prolonged attack on labor. There are a number of important trends occurring simultaneously in this respect—(1) the decline of employment, (2) erosion of health associated with job loss, (3) wage stagnation, (4) growth of the working poor, (5) increased exploitation of labor on the job, and (6) the drop in the labor share of income. It is important to discuss these separately, but also in relation to each other, in order to get a better grasp of the extent of the problems.

The Decline of Employment

Workers do not need anyone to tell them that the general employment situation is bad. The overall condition is best depicted not in term of official unemployment data, where the unemployment rate is now hovering around 7 percent, but by looking at the numbers of those without jobs as a share of the civilian non-institutional population. This is sometimes known as the “jobless rate” or as the “non-employment rate” (not to be confused with the common reference to the unemployment rate in these terms, and hence here referred to as the “real jobless rate”). Some of those who are jobless may not want to work or may not be able to do so. There are those raising families on a spouse’s income or others who are students and some who are disabled—plus of course a very few who are independently wealthy. Nevertheless, long-term data on the real jobless rate allows one to capture more broadly the actual employment gap, as compared to more limited unemployment data (which excludes a wide variety of those without work).17

As shown in Chart 1 (using five-year moving averages) the percentage of the total male civilian non-institutional population, ages twenty-five to fifty-four—constituting prime working ages—lacking employment of any kind has trended upward from 5 percent in 1968 to 18 percent in 2013.

Although women’s labor force participation rose steadily over the last decades of the twentieth century, and hence the real jobless rate for women declined for decades, this trend has now reversed. For women ages twenty-five to fifty-four in the 1990–2013 period (shown in Chart 2 with five-year moving averages) the real-jobless-rate trend takes the form of a sharp V-curve, dramatically reversing in the early 2000s, and increasing to over 30 percent in 2013. As compared to two decades ago many more of these jobless women are in a position where they need jobs simply to maintain themselves and their families.

For younger workers, the picture is even worse. Chart 3 shows the trends in the real jobless rates for men and for women ages eighteen to twenty-four since 1990. These rates rose to 44 percent for men in 2013 and 46 percent for women. Increasingly young people are being driven out of the job market altogether. They are finding themselves in a particularly untenable situation with it being so difficult even to enter the ranks of the employed. About 15 percent of people aged sixteen to twenty-four—some 6 million of them—are neither working nor in school.18 And their future prospects are questionable given the findings of studies showing that once workers get behind their cohort in the job market they rarely catch up.

The situation for the long-term unemployed—“now one of the defining realities of the American workforce”—is truly discouraging. A New York Times article, describing one woman’s quest for a job after being laid off from a university professional position, quoted her as follows: “I’ve been turned down from McDonald’s because I was told I was too articulate…I got denied a job scrubbing toilets because I didn’t speak Spanish and turned away from a laundromat because I was ‘too pretty.’ I’ve also been told point-blank to my face, ‘We don’t hire the unemployed.’ And the two times I got real interest from a prospective employer, the credit check ended it immediately.”19

At the depths of the Great Recession, some 8.6 million jobs had been lost. However, the situation was actually even more serious than that—since even though there were more than 11 million full-time jobs lost, the increase in part-time employment during the Recession made the job-loss situation appear less severe than it was (Chart 4). At the time of this writing, there are still about 2 million fewer employed workers today, four years after the official end of the Great Recession, than were employed before the recession began. But there are some 5.5 million fewer full-time jobs. At the same time that millions of jobs lost in the Great Recession have still not been regained, the population has also been growing—so many more jobs are now needed than before. In 2007–2012 the number of people ages twenty-five to fifty-four, most of whom presumably need jobs, increased by about 6 million.

The precarious employment conditions affecting workers in the United States are even more apparent if we look at the data derived from what the Bureau of Labor Statistics (BLS) refers to as “alternative measures of unemployment,” encompassing part-time workers desiring full-time work and workers who are discouraged, having given up looking for work—along with those who are otherwise “marginally attached.” Such data gets closer to what Marx meant when he wrote of the reserve army of labor.

Although the population of working age people has increased in what is still a very weak labor market, a large number of people have stopped looking for work while others have taken part-time employment although desiring full-time work. Therefore, the number of those classified as unemployed (you must be actively looking for work to be counted as officially unemployed) is a vast under-assessment of the jobless situation. The 7.2 percent official unemployment rate in September 2013 increases to 13.6 percent unemployed when “discouraged” and other workers “marginally attached to the labor force,” and part-timers wanting full-time jobs, are included. (It should be noted that even by the narrow gauge of official unemployment accounting, 15 percent of the labor force was unemployed at some point during the year in 2011.)20

The increase in discouraged workers began even before the onset of the Great Recession, going back to the previous recession (2001) following the bursting of the dotcom bubble. The percent of the population that is actually employed or looking for work (the labor force participation rate) dropped from 67.3 percent in 2000 to 63.2 percent in September of 2013. Although the population is aging and increasing numbers are retiring (the baby boomers are reaching retirement age), even when looking at only those considered to be in the prime working ages of twenty-five to fifty-four years old, participation rates dropped from 84.6 percent in 1999 to 80.4 percent in September 2013. Although these percentage-point changes may seem small, the implication is that there are nearly 10 million extra people, including 1.5 million in the twenty-five to fifty-four year old age group, who would have been in the labor force if participation rates had not declined.

The BLS’s estimate of those “marginally attached” to the labor force plus people working part-time but wanting full-time work is approximately another 9 million people. Thus there are over 20 million people who are “officially” unemployed, or “marginally attached,” or working part-time but wanting full-time jobs (Table 1). But the BLS counts in its alternative measurements of unemployment merely 1.2 million of those not in the labor force—including among the marginally attached only those who looked for work in the last year (but not during the last four weeks). But what about people who gave up looking for work more than a year ago or, if young, have never looked for work because they feel that they will not find a job?

One way to get at this issue is to use the estimate (in Table 1) of the number of “missing workers” that would have been in the labor force if the labor force participation rate had remained at its 2000 level.22 If they are added in (minus those already counted by the BLS in their estimate of un- and underemployment), the total number of jobs needed to reach full employment is close to 30 million (Table 1). To put this into perspective, the total private-sector employment (in September 2013) was 113 million. Thus the jobs needed for full employment by this count represent more than a quarter again as many as the private sector currently provides.

It is important to recognize that enormous levels of racial/ethnic inequality lie hidden behind aggregate figures on unemployment and underemployment. Approximately one in five Hispanic (18.9 percent) and black (22.4 percent) workers are either officially unemployed, part-time wanting full-time work, or “marginally attached.”23

Increasing use of part-time workers commonly occurs during recessions and decreases with recoveries. However, since the 1960s there has been a general upward trend in the use of part-timers, increasing from about 14 percent of all employed workers in 1970 to close to 20 percent in 2013. During and after the Great Recession some 36 percent of all new jobs were part-time jobs. Although some people prefer to work part-time jobs, many (and indeed a rapidly growing proportion) of part-timers desire full-time work—with a significant percentage of part-timers, given the shortage of full-time employment, trying to hold down multiple part-time jobs. (There is some concern that hiring part-time employees is being made even more common by implementation of the new Affordable Care Act, which obligates businesses with more than fifty employees to participate in providing health care options for full-time employees. However, there is currently no evidence to support this assertion. The large increase in the percent of workers in part-time employment occurred during the early stages of the Great Recession.)

Another growing phenomenon is the increased use of nonpermanent workers, hired for a specified time period or to complete particular tasks. Referred to as contingent employees—a category that includes temporary hires (frequently from temp agencies), contract workers, freelancers, and consultants—their number has risen sharply and is now estimated at upwards of one-third of all employees; some believe it will rise to one-half of all workers as soon as 2020.24 What this means is described in some detail in the Time magazine article, “The 4 A.M. Army”:

The Health Effects of Job Loss

About 16–18 million workers losing their jobs each year is about “normal” (this rose to 25 million at height of the Great Recession)—though most quickly find work. This number does not include those that quit or leave for other reasons such as retirement. The private sector, as previously noted, has only about 113 million workers altogether. Thus, although those precariously attached to the economy (essentially the reserve army) lose their jobs more frequently than others, over a period of a few years a high percentage of all workers either have experienced unemployment or know someone who has.

Studies in both the United States and Europe have documented severe health effects associated with losing one’s job. Some of these occur even if the unemployed person quickly gets another job. A study funded by the U.S. National Institutes of Health concluded “that unemployment was associated with a substantially increased risk of death among broad segments of the population.”26 Compared to people who have not lost their jobs, heart disease, high blood pressure, and diabetes occurs more frequently in the unemployed (even if it was only a short duration of unemployment).27 In a summary of data from Sweden, despite its strong social safety net, researchers found that “becoming unemployed [in] 1992–4 and experiencing 90 days or more of unemployment was…significantly associated with an increased risk of all-cause mortality from natural causes, including CVD [cardiovascular disease], as well as from external causes, both from suicide and from causes other than suicide.”28 Another study in Europe found that:

Wage Stagnation

Increased unemployment and underemployment affects workers as a whole, not just those lacking work or full-time jobs—pulling down wages, leading to a decline in the labor share, and resulting in increased exploitation on the job. Starting with the lowest paid workers, approximately 75 million workers (out of approximately 128 million wage and salary earners) are paid on an hourly basis. Some 3.5 million of these were paid at or below the federal minimum wage of $7.25 an hour. Another 5 million are estimated to earn wages not far above the minimum wage. A person working for forty hours a week for a full fifty-two weeks at this wage would earn only $15,080, less than the 2013 poverty threshold for a two-person family. The federal minimum wage is not indexed for inflation and is raised only sporadically by Congress. The real minimum wage (adjusted for inflation) is lower today than it was in 1956 during Eisenhower’s first administration.30

Real wages for all workers, corrected for inflation, have actually declined since the 1970s and are more than 10 percent below their level over forty years ago. Even when considering real median family income that includes many two-earner households there has been a decrease of around 9 percent from 1999 to 2012.31

Even when employed, many workers are struggling just to get by. Part of the explanation as to how people manage is the dependence of low-income working people on social (government) programs such as Medicaid, Children’s Health Insurance Program, the earned income tax credit, Supplemental Nutritional Assistance Program (which replaced food stamps), as well as on private charities, especially for food assistance. It has been estimated that about 50 percent of all the fast food workers participate in government programs—amounting to a $7 billion annual subsidy to the fast food industry.32 But it is not just fast food workers that need to participate in social programs in order to get by—other sectors with high rates of worker participation in government social programs include restaurants and food services (44 percent of workers with families are enrolled), agriculture, forestry, and fisheries (35 percent), construction (30 percent), retail trade (30 percent), and other leisure and hospitality (30 percent). All told, some 63 percent of the total amount of families’ benefit-programs funds (about $240 billion) goes to worker families.33

Senator Bernie Sanders, an independent from Vermont, explained the situation with Walmart workers as follows:

The wealthiest family in this country is the Walton family. They are worth about a hundred billion dollars. That’s more wealth than the bottom 40 percent of the American people. One of the reasons that the Walton family, the owners of Walmart, are so wealthy is that they receive huge subsidies from the taxpayers of this country…. When you pay, at Walmart, starvation wages, you don’t provide benefits to your workers, who picks up the difference? The answer is that many of the workers in Walmart end up getting Medicaid, they get food stamps, they get affordable housing paid for by the taxpayers of this country while the Walton family remains the wealthiest family in America.34

Thus while profits of the fast food industry and giant companies that use mainly low-wage labor like Walmart are definitely private, a portion of their labor costs—the difference between what they pay and what a person needs to survive in this country—have been socialized. In Marx’s terms, private companies are not paying the full value of labor power (the cost of reproduction of the worker) but are requiring society to pick up the tab through a welfare system that is at the same time punitive and demoralizing.

The Working Poor

Given the long-term pressure on labor generated by the one-sided class warfare from above, the result has been that many in the United States—both working and nonworking families—are simply unable to make ends meet. As discussed previously, there are large monetary costs for social programs to support workers earning inadequate incomes to support their families. But the uncounted costs of poverty in terms of quality of human lives, and health and life expectancy, are enormous.

The sheer number of poor people in the United States, and the number that are near poverty—perhaps a single paycheck away from losing housing or from hunger—is truly staggering. About 15 percent of the population, 46 million people, live below the poverty level, which is around $14,000 for a two-person household and $23,492 for a four-person household.35 Twenty million of those living in poverty (close to half) are relying on an income that is less than 50 percent of the poverty level—$7,000 for a two-person household and $12,000 for a family of four. Over 100 million people (one-third of the U.S. population) are existing below twice the poverty income, close to $47,000 for a family of four.

The poor include a large number of individuals or family members that are working while not earning enough to escape poverty because of low wages and/or lack of full-time hours. The BLS estimates that 10 million individuals were among the “working poor” in 2011. This is defined as a person who spent at least twenty-seven weeks in the labor force (that is, working or looking for work), but whose income still fell below the official poverty level. In 2011, the working-poor rate—the ratio of the working poor to all individuals in the labor force for at least twenty-seven weeks—was 7 percent.36

Minorities have the highest rates of working people living in poverty. One BLS report said, “Blacks and Hispanics were more likely than Whites and Asians to be among the working poor. In 2011, 13.3 percent of Blacks and 12.9 percent of Hispanics were among the working poor, compared with 6.1 percent of Whites and 5.4 percent of Asians.”37

Increased Exploitation of Employed Workers

The Great Recession resulted in a drop of aggregate output of U.S. industry by about 7 percent in 2007–2009. But at the same time aggregate hours worked declined by 10 percent. This meant that labor productivity (or output per labor hour) shot up. According to a 2013 study by the National Bureau of Economic Research (NBER), this was because workers, afraid of losing their jobs, were compelled to work harder, producing greater economic surplus and profits for their employers. In the language of establishment economics, workers who see a decline in the overall demand for their labor—who recognize that there are fewer jobs, but more unemployed workers looking for them—have responded by increasing their “supply of effort” on the job. According to the NBER study, “When the alternatives are poorer, say because the job search is less likely to result in success, it is optimal for a worker to respond with increased effort.” Indeed, in economic hard times, the report indicated, it is not necessary for management to use higher wages as incentives to get workers to increase their productivity, since the lack of any viable alternative jobs will do just as well—and increase profit margins even faster.38 As the Washington Post stated in 2010: “Workers were in a panic of their own in 2009. Fearful of losing their jobs, people seem to have become more and more willing to stretch themselves to the limit to get more done in any given hour of work. And they have been tolerant of furloughs and cutbacks in hours, which in better times would drive them to find a new employer.” Facing continuing economic stagnation (including a long jobless recovery), a vast reserve army of the unemployed and underemployed, wage stagnation, household debt, and the loss of health insurance if unemployed—the alternatives to employed workers continue to shrink and hence they have no choice but to submit to higher levels of exploitation in their present jobs.39

Labor’s Declining Share

In a previous article (“Class War and Labor’s Declining Share”) we discussed the falling share of the GDP “pie” that goes to workers.40 As we pointed out, there are many ways to approach this concept and different sources of data that can be used. Nevertheless, it is clear from a number of government sources—publications of the Cleveland and San Francisco Federal Reserve Banks, the Congressional Budget Office, and the Economic Report of the President, 2013, written by the president’s Council of Economic Advisers—that not only is the labor share declining, but that it has capitalists and their representatives concerned, perhaps because they fear that the inequality of wealth and income that has accompanied the decline might lead to political instability at some future time.41 Even Wall Street is beginning to worry about the lopsided income and wealth: “Some big investors have worried increasing income and wealth gaps threaten the economy’s ability to expand. They also fret that public anger over it, which Democrat Bill de Blasio tapped in his successful run for New York City mayor, is creating dangerous political tensions.”42

In our previous article on this topic we showed that the decline in wages and salaries as a percent of the GDP is especially severe for those approximately 80 percent of private-sector workers that are classified as “production and non-supervisory” employees. But research recently published by the Federal Reserve Bank of San Francisco indicates that just removing the highest of earners is sufficient to change things drastically: “The measured decline in the labor share [including all forms of compensation of wage and salary earners] would be much larger if not for the gains of the top 1 percent of payroll and self-employment income. By 2010, the labor share of the bottom 99 percent of taxpayers had fallen to approximately 50 percent from just above 60 percent prior to the 1980s.”43 In other words, including the compensation of the highest paid people—literally, the top 1 percent—adds enough to national labor compensation to skew the data for the entire labor force and make it appear that the declining share of the economy going to labor is not really that dramatic. This makes sense when we consider that in 2012 the top 1 percent took home an income estimated at eighty cents to “almost a dollar out of every $4 generated by the American economy.”44

So, while the share of income going to most workers is declining in the stagnating economy, the wealthiest are receiving an increasing share of the pie. It should come as no surprise to Monthly Review readers that corporate profits account for an increasing proportion of total income (which, of course, mainly end up in the pockets of the rich). Between 1986 and 2012, after-tax corporate profits increased over 7 percentage points in relation to GDP. In 2012 corporate profits reached a record high for the last half-century of 10.8 percent of GDP (domestic corporate profits alone set a record of 8.2 percent of GDP).45

During the economic recovery from the Great Recession the top 1 percent of income earners in the United States has captured 95 percent of the total growth of income in the economy. In 2002–2012 the bottom 90 percent of the population saw their average family income (excluding capital gains) drop by 11 percent, while those in the top to 0.1 to 0.01 percent saw theirs rise by 30 percent and those in the top 0.01 percent, that is, one in every ten thousand people, enjoyed a 76 percent increase in average family income (excluding capital gains).46

The Class War: Is it Necessarily One-Sided?

In the present period of monopoly-finance capital the U.S. economy has been increasingly prone to stagnation. This is reflected in stunted growth rates, coupled with rising unemployment, underemployment, and unutilized productive capacity. Similar conditions exist throughout the triad of the United States/Canada, Europe, and Japan.

With the increased financialization of the economy the fates of the haves and the have-nots have more and more diverged. For a large portion of the working class, these are the worst of times. However, for the 1 percent in general, the 0.1 percent more specifically, and especially for the exclusive 0.01 percent at the very top of society, these are the best of times. And it has not been too bad for those near the upper echelons, even somewhat below the top 1 percent. Unable to prevent the deepening stagnation of the monopoly capitalist economy, the wealthy were nonetheless able to transform it to meet their own “needs” by financializing the system and their own wealth, and diverting more and more of the monetary flows of the economy, including state-sector funds, into their own deep pockets.

The enormous expansion of the reserve army of labor over the last thirty years, which has weakened the working class and undermined its traditional organizations such as labor unions, coupled with an organized, one-sided class war from above, has resulted in a massive and continuing redistribution of income and wealth to the top of the pyramid. Even before the Great Recession, between 2001 and 2006, more than half of the income gains in the United States were going to the top 1 percent of income earners, and around 20 percent to the top 0.1 percent.47 Under these circumstances, economic growth can slow down and yet the rich can get relatively (and absolutely) richer faster—precisely because the poor are getting relatively (and absolutely) poorer faster. The combination of stagnation, financialization, and austerity all work to reinforce the power and wealth of capital and to place workers in a weaker and more dependent position. The economy as a whole may not be doing well but the rich are seeing their income and wealth rise hand over fist.

This situation—one in which the amassing of wealth at the top is no longer as directly dependent on the growth of capital accumulation/investment or of production (which increasingly take second place to financial speculation)—is bound to create ever larger contradictions in the system as a whole. This is related within the world economy to the relative shift in industrial production to the global South, with multinational corporations in the center gaining the lion’s share of the surplus generated through the global labor arbitrage, or the migration of production worldwide to regions with the lowest wages (and safety and environmental protection) costs—the highly exploited export zones in the global South.

What should the response of the U.S. working class and the working class in the rest of the advanced capitalist world—not to mention the rapidly emerging working-class of the periphery—be in these circumstances? It hardly needs to be said. The only possible answer to capital’s unlimited decades-long assault on labor is to unleash a class struggle from below in response. But economic resistance alone is never sufficient; and all the less so in those cases where workers are economically hemmed in as at present. The “very necessity of general political action,” Marx wrote in Value, Price and Profit, “affords the proof that in its merely economic action capital is the stronger side.”48 The revolt of the underlying population therefore must take the form of a general political offensive against what is an unequal and irrational system. If the future of humanity and that of capitalism can be said to have coincided at one time, this is certainly no longer the case today. All reality and all hope demand a new system of production and consumption, beyond capital and beyond mere wage labor.

Notes

1. ↩Max Weber, The Protestant Ethic and the Spirit of Capitalism (New York: Charles Scribners, 1958), 21, and Economy and Society (Berkeley: University of California Press, 1978), 85–86, 138, 1156.
2. ↩Karl Marx, Capital, vol. 1 (London: Penguin, 1976), 781–802.
3. ↩Marx, Capital, vol. 1, 796.
4. ↩Broader conceptions of the reserve army would include most of those incarcerated and in the military since these soak up the surplus labor of society and show how far the society is from using the productive labor at its disposal.
5. ↩Marx, Capital, vol. 1, 798; Harry Braverman, Labor and Monopoly Capital (New York: Monthly Review Press, 1998), 264–77. For a detailed empirical discussion of the modern reserve army of labor see Fred Magdoff and Harry Magdoff, “Disposable Workers: Today’s Reserve Army of Labor,” Monthly Review 55, no. 11 (April 2004). On the global aspects of the reserve army see John Bellamy Foster and Robert W. McChesney, The Endless Crisis (New York: Monthly Review Press, 2012), 125–54. For a recent dissertation on Marx’s reserve army and its significance for the sociology of unemployment see R. Jamil Jonna, “Toward a Political-Economic Sociology of Unemployment: Renewing the Classical Reserve Army Perspective,” PhD dissertation, University of Oregon, June 2013.
6. ↩Calculated from St. Louis Federal Reserve FRED database, series PAYEMS, all nonfarm employees.
7. ↩See David Milton, The Politics of U.S. Labor (New York: Monthly Review Press, 1982), 154–67.
8. ↩Lewis Powell, “Memo to U.S. Chamber of Commerce,” August 23, 1971, http://reclaimdemocracy.org; Bill Moyers, “How Wall Street Occupied America,” Nation, November 21, 2011, http://thenation.com; Jacob S. Hacker and Paul Pierson, Winner-Take-All Politics (New York: Simon and Schuster, 2010), 117–20.
9. ↩William E. Simon, A Time for Truth (New York: McGraw Hill, 1978), 195–201, 219–21, 230–38; Moyers, “How Wall Street Occupied America”; Hacker and Pierson, Winner-Take-All Politics, 123–24; W. Carl Biven, Jimmy Carter’s Economic Policy (Chapel Hill: University of North Carolina Press, 2002), 237–52.
10. ↩Kris Maher, “House Bill Would Boost Federal Authority Over Workplace Safety,” Wall Street Journal, April 18, 2013, http://online.wsj.com.
11. ↩Gordon Lafer, The Legislative Attack on American Wages and Labor Standards, 2011–2012, Economic Policy Institute Briefing Paper #364, October 31, 2013, http://epi.org.
12. ↩Ben Stein, “In Class Warfare, Guess Which Class Is Winning,” New York Times, November 26, 2006, http://nytimes.com.
13. ↩See Doug Henwood and Liza Featherstone, “Marketizing Schools,” Monthly Review 65, no. 2 (June 2013): 58–70.
14. ↩Paul Krugman, “A War on the Poor,” New York Times, October 31, 2013.
15. ↩On the global labor arbitrage see Foster and McChesney, The Endless Crisis, 137–43.
16. ↩Harry Magdoff, “A Letter to a Contributor: The Same Old State,” Monthly Review 49, no. 8 (January 1998); 1–10.
17. ↩See Floyd Norris, “Many More Are Jobless Than Are Unemployed,” New York Times, April 12, 2008, http://nytimes.com. Related to the real jobless or non-employment rate is the employment-population ratio. See Paul Krugman, “The Employment Situation,” New York Times Opinion Pages, September 7, 2012, http://krugman.blogs.nytimes.com.
18. ↩Philip Elliott, “Study: 15 percent of US Youth Out of School, Work,” Associated Press, October 21, 2013, http://bigstory.ap.org.
19. ↩Annie Lowrey, “Caught in a Revolving Door of Unemployment,” New York Times, November 16, 2013, http://nytimes.com.
20. ↩Heidi Shierholz, “A Projected 13.1 Percent of Workers Will Be Unemployed at Some Point in 2013,” Economic Policy Institute, December 19, 2012, http://epi.org.
21. ↩Bruce Western, Jeffrey Kling, and David F. Weiman, “The Labor Market Consequences of Incarceration,” Crime & Delinquency 47, no. 3 (2001): 410–27; Bureau of Justice Statistics, “Prisoners in 2012,” http://bjs.gov; Hannah Holleman, Robert W. McChesney, John Bellamy Foster, and R. Jamil Jonna, “The Penal State in an Age of Crisis,” Monthly Review 61, no. 2 (June 2009): 1–17.
22. ↩On this topic see Heidi Shierholz, “The Missing Workers: How Many Are There and Who Are They?,” Economic Policy Institute, April 30, 2013, http://epi.org.
23. ↩Heidi Shierholz, “Roughly One in Five Hispanic and Black Workers are ‘Underemployed,’” Economic Policy Institute, August 22, 2013, http://epi.org.
24. ↩Carol Hazard, “Hiring Explodes in Part-time and Contract Work,” Richmond Times-Dispatch, September 2, 2013, http://timesdispatch.com.
25. ↩Michael Grabell, “The 4 A.M. Army,” Time, June 27, 2013, http://nation.time.com.
26. ↩David J. Roelfs, Eran Shor, Karina W. Davidson, and Joseph E. Schwartz, “Losing Life and Livelihood: A Systematic Review and Meta-Analysis of Unemployment and All-Cause Mortality,” Social Science and Medicine 72, no. 6 (March 2011): 840–54, http://ncbi.nlm.nih.gov.
27. ↩Kate W. Strully, “Job Loss and Health in the U.S. Labor Market,” Demography 46, no. 2 (May 2009): 221–46.
28. ↩A. Lundin, I. Lundberg, L. Hallsten, J. Ottosson, and T. Hemmingsson, “Unemployment and mortality—a longitudinal prospective study on selection and causation in 49321 Swedish middle-aged men,” Journal of Epidemiology and Community Health 64 (2010): 22–28.
29. ↩Marina Karanikolos, Philipa Mladovsky, Jonathan Cylus, Sarah Thomson, Sanjay Basu, David Stuckler, Johan P Mackenbach, and Martin McKee, “Financial Crisis, Austerity, and Health in Europe,” Lancet 381 (2013): 1323–31.
30. ↩“Federal Minimum Wage Rates, 1955–2013,” http://infoplease.com.
31. ↩Calculated from St. Louis Federal Reserve FRED database, Real Median Household Income in the United States (MEHOINUSA672N).
32. ↩Sylvia Allegretto, Marc Doussard, Dave Graham-Squire, Ken Jacobs, Dan Thompson, and Jeremy Thompson, Fast Food, Poverty Wages: The Public Cost of Low-wage Jobs in the Fast-food Industry, University of California, Berkeley, Center for Labor Research and Education and the University of Illinois at Urbana-Champaign Department of Urban & Regional Planning, October 15, 2013, http://laborcenter.berkeley.edu.
33. ↩Carl Bialik, “Public Cost of Fast-Food Industry’s Low Pay Remains Unclear,” Wall Street Journal, November 1, 2013, http://online.wsj.com.
34. ↩David Ferguson, “Bernie Sanders: Walmart Family’s ‘Obscene’ Wealth Subsidized by Taxpayers,” Raw Story, August 3, 2013, http://rawstory.com.
35. ↩“Poverty,” U.S. Census, http://census.gov.
36. ↩A Profile of the Working Poor, 2011, U.S. Bureau of Labor Statistics Report 1041, April 2013, http://bls.gov.
37. ↩A Profile of the Working Poor, 2011.
38. ↩Edward P. Lazear, Kathryn L. Shaw, and Christopher Stanton, “Making Do With Less: Working Harder During Recession,” NBER Working Paper No. 19328, National Bureau of Economic Research, August 2013, http://nber.org; “Why Productivity Increased During the Downturn,” CNN Money, October 3, 2013, http://management.fortune.cnn.com/.
39. ↩“Workers’ Awesome Output,” Washington Post, March 31, 2010, http://washingtonpost.com.
40. ↩Fred Magdoff and John Bellamy Foster, “Class War and Labor’s Declining Share,” Monthly Review 64 no. 10 (March 2013): 1-11. It should be noted that our article contained a small error. In the comparison of private-sector employees and all employees in Charts 1 and 2 the difference between the two was incorrectly said to be government workers instead of government and non-profit workers. However, this did not materially affect the argument in any significant way, because the argument clearly was that the small decline in the wage share in the 1970s did not occur within the private/profit sector and was instead attributable to the growth of non-private/non-profit sector employment.
41. ↩Margaret Jacobson and Filippo Occhino, “Labor’s Declining Share of Income and Rising Inequality,” Commentary, Federal Reserve Bank of Cleveland, 2012, http://clevelandfed.org; Michael W.L. Elsby, Bart Hobijn, and Aysegul Sahin, The Decline of the U.S. Labor Share, Federal Reserve Bank of San Francisco Working Paper 2013-27, 2013, http://frbsf.org; Congressional Budget Office, What Accounts for the Slow Growth of the Economy After the Recession? , 2012, http://cbo.gov, 14; Economic Report of the President, 2013, http://gpo.gov, 60–61.
42. ↩Justin Lahart, “Worry Over Inequality Occupies Wall Street,” Wall Street Journal, November 10, 2013, http://online.wsj.com.
43. ↩The Decline of the U.S. Labor Share, 31.
44. ↩Eduardo Porter, “Rethinking the Rise of Inequality,” New York Times, November 12, 2013, http://nytimes.com; “How the 1 Percent Won the Recovery, in One Table,” Washington Post, September 11, 2013, http://washingtonpost.com/; “Worry Over Inequality Occupies Wall Street.”
45. ↩Calculated from NIPA Tables 1.1.5. Gross Domestic Product and 6.19D. Corporate Profits After Tax by Industry, U.S. Department of Commerce, Bureau Economic Analysis, http://bea.gov.
46. ↩“Worry Over Inequality Occupies Wall Street.”
47. ↩Hacker and Pierson, Winner-Take-All Politics, 3.
48. ↩Karl Marx, Value, Price and Profit (New York: International Publishers, 1935), 59.