“Power And Paychecks”: There’s No Excuse For Wage Fatalism; We Can Give American Workers A Raise If We Want To
On Wednesday, McDonald’s — which has been facing demonstrations denouncing its low wages — announced that it would give workers a raise. The pay increase won’t, in itself, be a very big deal: the new wage floor is just $1 above the local minimum wage, and even that policy only applies to outlets McDonald’s owns directly, not the many outlets owned by people who bought franchises. But it’s at least possible that this latest announcement, like Walmart’s much bigger pay-raise announcement a couple of months ago, is a harbinger of an important change in U.S. labor relations.
Maybe it’s not that hard to give American workers a raise, after all.
Most people would surely agree that stagnant wages, and more broadly the shrinking number of jobs that can support middle-class status, are big problems for this country. But the general attitude to the decline in good jobs is fatalistic. Isn’t it just supply and demand? Haven’t labor-saving technology and global competition made it impossible to pay decent wages to workers unless they have a lot of education?
Strange to say, however, the more you know about labor economics the less likely you are to share this fatalism. For one thing, global competition is overrated as a factor in labor markets; yes, manufacturing faces a lot more competition than it did in the past, but the great majority of American workers are employed in service industries that aren’t exposed to international trade. And the evidence that technology is pushing down wages is a lot less clear than all the harrumphing about a “skills gap” might suggest.
Even more important is the fact that the market for labor isn’t like the markets for soybeans or pork bellies. Workers are people; relations between employers and employees are more complicated than simple supply and demand. And this complexity means that there’s a lot more wiggle room in wage determination than conventional wisdom would have you believe. We can, in fact, raise wages significantly if we want to.
How do we know that labor markets are different? Start with the effects of minimum wages. There’s a lot of evidence on those effects: Every time a state raises its minimum wage while neighboring states don’t, it, in effect, performs a controlled experiment. And the overwhelming conclusion from all that evidence is that the effect you might expect to see — higher minimum wages leading to fewer jobs — is weak to nonexistent. Raising the minimum wage makes jobs better; it doesn’t seem to make them scarcer.
How is that possible? At least part of the answer is that workers are not, in fact, commodities. A bushel of soybeans doesn’t care how much you paid for it; but decently paid workers tend to do a better job, not to mention being less likely to quit and require replacement, than workers paid the absolute minimum an employer can get away with. As a result, raising the minimum wage, while it makes labor more expensive, has offsetting benefits that tend to lower costs, limiting any adverse effect on jobs.
Similar factors explain another puzzle about labor markets: the way different firms in what looks like the same business can pay very different wages. The classic comparison is between Walmart (with its low wages, low morale, and very high turnover) and Costco (which offers higher wages and better benefits, and makes up the difference with better productivity and worker loyalty). True, the two retailers serve different markets; Costco’s merchandise is higher-end and its customers more affluent. But the comparison nonetheless suggests that paying higher wages costs employers a lot less than you might think.
And this, in turn, suggests that it shouldn’t be all that hard to raise wages across the board. Suppose that we were to give workers some bargaining power by raising minimum wages, making it easier for them to organize, and, crucially, aiming for full employment rather than finding reasons to choke off recovery despite low inflation. Given what we now know about labor markets, the results might be surprisingly big — because a moderate push might be all it takes to persuade much of American business to turn away from the low-wage strategy that has dominated our society for so many years.
There’s historical precedent for this kind of wage push. The middle-class society now dwindling in our rearview mirrors didn’t emerge spontaneously; it was largely created by the “great compression” of wages that took place during World War II, with effects that lasted for more than a generation.
So can we repeat this achievement? The pay raises at Walmart and McDonald’s — brought on by a tightening job market plus activist pressure — offer a small taste of what could happen on a vastly larger scale. There’s no excuse for wage fatalism. We can give American workers a raise if we want to.
By: Paul Krugman, Op-Ed Columnist, The New York Times, April 3, 2015
“A Tsunami Of Anti-Union Legislation”: The GOP’s State And National Assault On Labor Rights
The past 15 months have seen a remarkable assault by the GOP on federal labor rights.
Republicans have introduced numerous bills designed to undermine the National Labor Relations Act, all with wonderfully deceptive names suggesting they would strengthen the rights of ordinary workers: Workforce Democracy and Fairness Act, Protecting Jobs from Government Interference Act, Employee Rights Act, Jobs Protection Act, Employee Workplace Freedom Act, Secret Ballot Protection Act, National Right to Work Act, Truth in Employment Act, National Labor Relations Reorganization Act, and others.
Republicans on the federal level have also attempted to defund and abolish the National Labor Relations Board, subjected its Democratic members to repeated subpoenas and requests for information, protested President Obama’s recess appointments to the board, joined lawsuits by corporate and anti-union organizations and threatened Congressional Review Acts – which could happen within weeks – to block the implementation of new board rules streamlining union certification elections and requiring notice posting on federal labor rights.
Rarely, if ever, has the board, and the rights it enforces, been subjected to such relentless attacks. And the attacks continue. While impressive, this assault on federal labor rights pales in comparison to what has been happening – occasionally in full view, but mostly with little notice – at the state level. Almost everyone knows about the 2011 legislation stripping public sector workers of collective bargaining rights in Wisconsin and Ohio, and Indiana’s 2012 “right-to-work” (RTW) legislation, which outlaws union security agreements.
However, the sheer number of anti-union bills supported by GOP-controlled legislatures demonstrates the breadth and depth of the party’s anti-unionism. So what is happening in the states?
In addition to Indiana, at least 18 other states have considered RTW measures. South Carolina and Tennessee passed bills strengthening RTW legislation that has been on the books for six decades, while another RTW state, Virginia, attempted to write RTW into its constitution. And last week, the New Hampshire House passed a RTW bill identical to one vetoed last year by the state’s Democratic governor. Other states that may act on RTW this year — sometimes over the wishes of the GOP establishment — through legislation or ballot initiatives include Maine, Michigan, Minnesota and Ohio.
In addition to high-profile bills in Wisconsin and Ohio, at least 13 other states have considered legislation that would eliminate or restrict public sector collective bargaining. New Jersey eliminated public sector bargaining over health benefits, Oklahoma outlawed collective bargaining for municipal employees, and Tennessee replaced bargaining for public school teachers with “collaborative conferencing.” And at least 14 states have considered legislation that would ban public employers from deducting union dues from employees’ paychecks, thereby making it difficult for unions to finance their basic activities. Last week, Michigan Gov. Rick Snyder signed a measure prohibiting public schools from deducting union dues from the paychecks of teachers and other employees.
Many Republican legislatures have promoted bills that, while not directly attacking labor rights, are clearly intended to weaken unions, including unions in the building trades and public schools. 14 states have introduced legislation restricting Project Labor Agreements, and 11 have bills attacking prevailing wage laws, both of which protect building trades standards.
At least 28 states have considered charter school and voucher bills that would weaken public school unions, and others have bills privatizing most schools services, along with bills privatizing transportation, water supply, port authorities, airport security, liquor distribution, prisons and prison medical services, Medicaid delivery, state park vendors, kindergarten development and evaluation, and every municipal service imaginable.
At least 10 states have introduced so-called “paycheck protection” measures, which are designed to place strict limits on the use of union dues money for political purposes, while placing few, if any, restrictions on corporate political spending. Alabama, Arizona and North Carolina passed paycheck measures in 2011 – though all three bills have been challenged in the courts – while California and New Jersey have upcoming paycheck ballot initiatives.
Deception dominates in the messaging on state bills. California’s paycheck ballot initiative is ludicrously misnamed “Stop Special Interest Money Now.” Backers of the bill, the ultra-conservative Lincoln Club of Orange County, co-produced “Hillary: The Movie,” which led to the Supreme Court’s Citizens United decision. The Lincoln Club welcomed Citizens United as a “victory for free speech,” but now claims that its measure is a balanced effort to remove all special interest money from state elections, to the extent allowed by federal law. In reality, it would undermine the ability of unions to engage in core political activities but have almost no impact on corporate political spending.
This type of obfuscation is central to Republicans’ anti-union strategy. If the party were unable to hide behind deceptive messaging, it would be exposed as a front for the American Legislative Exchange Council and other extreme organizations.
And finally: not one new job has been created by this tsunami of anti-union legislation.
Does Right To Work Actually Lead to More Jobs?
A study by two economists sheds doubt on whether right-to-work laws are all they’re cracked up to be.
Most people watching the Super Bowl last night probably had no idea that only a few days before, in the same city of Indianapolis, Governor Mitch Daniels signed a law that will cripple unions. As I’ve written before, Indiana is the first Rust Belt state to pass a right-to-work law, which prohibits both mandatory union membership and collecting fees from non-members. The news, however, has hardly gotten the attention the labor-minded might have expected. Blame it on the big game or the GOP presidential primary. Or blame it on the loss of union power that allowed the law to pass in the first place.
Whatever the reason, this lack of stories has meant little discussion of the actual impact of right-to-work legislation. Daniels, along with many proponents of such measures, argues that companies choose to locate in right-to-work states rather than in states with powerful unions. And the Indiana governor says he’s already seeing the fruits of the newly passed law. Union advocates, meanwhile, say the laws decrease not only union power but also wages and workplace protections. According to conventional wisdom, it seems, the choice is between fewer good jobs and more cruddy jobs.
But according to Gordon Lafer, an economist at the University of Oregon’s Labor Education and Research Center, that’s a false choice. In fact, he says, there’s no evidence that right-to-work laws have any positive impact on employment or bringing back manufacturing jobs.
While 23 states have right-to-work legislation, Lafer says that to adequately judge the law’s impact in today’s economy, you have to look at states that passed the law after the United States embraced the North American Free Trade Agreement (NAFTA) and free trade in general. “Anything before the impact of NAFTA started to be felt in the late ’90s is meaningless in terms of what it can tell us,” he says.
Because of free-trade agreements, companies can go to other countries and get their goods made for a fraction of the cost. Even in the most anti-union state in the country, there are still basic worker protections and a minimum-wage law to deal with. Such “roadblocks” to corporate profit can disappear if the business relocates overseas. “The wage difference that right to work makes … is meaningless compared to the wage savings you can have leaving the country,” Lafer says.
Only one state has passed right to work since NAFTA: Oklahoma in 2001. (Before that, the most recent was Idaho in 1985.) About a year ago, Lafer and economist Sylvia Allegretto published a report for the Economic Policy Institute* exploring just what had happened in the decade since Oklahomans got their “right to work.” The results weren’t pretty.
Rather than increasing job opportunities, the state saw companies relocate out of Oklahoma. In high-tech industries and those service industries “dependent on consumer spending in the local economy” the laws appear to have actually damaged growth. At the end of the decade, 50,000 fewer Oklahoma residents had jobs in manufacturing. Perhaps most damning, Lafer and Allegretto could find no evidence that the legislation had a positive impact on employment rates.
“It will not bring new jobs in, but it will result in less wages and benefits for everybody including non-union workers,” says Lafer.
*Full disclosure: I was a writing fellow at the Economic Policy Institute in 2008.
By: Abby Rapoport, The American Prospect, February 6, 2012
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