September 2006 SGE Monthly Luncheon
Review of Talk by Ron Blackwell, AFL-CIO, "Reclaiming the American Dream
Ron Blackwell, Chief Economist of the AFL-CIO, spoke at the September 22nd SGE/NEC lunch meeting on “Reclaiming the American Dream.” In the speech, Blackwell outlined trends in U.S. productivity, income, and inequality over the last six decades and offered his interpretation of the political and social shifts that underlie these trends.
According to data compiled by the Economic Policy Institute, growth in median family income between 1947 and 1973 was relatively uniformly distributed throughout the income distribution: growth in income within earnings quintiles ranged from 85% for the highest earnings quintile to 116% for bottom-quintile workers. Over this period, family income and productivity rose roughly in line with one another. These facts reflected, according to Blackwell, the “rough balance of power” between business owners and workers in the postwar period.
In the mid-1970s, however, power shifted substantially to employers, and the next three decades saw very different patterns in income and productivity. Blackwell presented data showing that productivity stalled in the late 1970s before growing roughly 50 percent by 2004, whereas family income remained essentially flat on net between 1974 and 2004. In contrast to the broadly shared wage gains of the earlier period, median income of workers below the twentieth percentile rose only 3 percent, while the labor earnings of the top 20% of workers increased 64 percent. Even in this upper tail of earnings, the benefits of productivity growth accrued disproportionately to the highest earners: income for the top 0.1% and 0.01% of earners grew 181% and 497% respectively. According to Blackwell, the growing power of employers is also apparent in the widening gap in the earnings of corporate executives compared to workers: the ratio of median income for CEOs versus workers’ rose from 40 in 1980 to 431 in 1999.
Blackwell sees the relatively low rate of job growth during the most recent economic recovery and reductions in non-wage compensation as further evidence of the relative decline of workers’ economic security. Compared to earlier recessions, the post-2001 recovery has been characterized by an historically low rebound in job creation. Additionally, real median earnings conditional on education have fallen for both high school and college graduates during the recent recovery. Moreover, the availability of health care and workers’ retirement security have both declined over the last decade.
The driving force behind these changes has been a fundamental shift in the prevailing policy consensus, Blackwell maintained. The new consensus consists of widespread support for four concepts: 1) “small government;” 2) “globalization;” 3) “labor market flexibility;” and 4) “economic stability.” Blackwell compared these four principles to the four sides of a box that is squeezing workers, “boxing them into the corporate agenda.” He added that pressures from financial markets to immediately increase shareholder value have further eroded workers’ bargaining power.
These policy priorities are shared not only by business and financial leaders but also by members of both major political parties in the United States, Blackwell argued. Moreover, the consensus is pervasive at the international level, resulting in a growing number of national and international movements to challenge these views.
Countering this consensus, he asserted, requires increasing unionization. Because neither major political party appeared willing to do so, the task of shifting the policy agenda fell to unions. The fraction of workers covered by a union, however, has declined from roughly 30 percent in the mid-1950s to about 12 percent today. In response to a question from one luncheon attendee, Blackwell suggested that challenging the current consensus may depend in part on effectively reframing the policy debate to show that increasing workers’ bargaining power and compensation are consistent with what Blackwell deemed shared values, such as the view that children should not have to live in poverty and that those who work hard should have access to health care.