Tough times for the American worker

Over Labor Day weekend I read Steven Greenhouse’s The Big Squeeze: Tough Times for the American Worker. It was published in 2008, so it doesn’t deal with the results of the current Great Recession.  Rather it covers the condition of the working class of the United States in supposedly good times – the alleged prosperity we’re trying to get back to.

I knew the story in broad outline – the erosion of the U.S. manufacturing base, wage stagnation, the loss of job security, rising debt – but Greenhouse’s reporting, with many poignant individual stories and backed up by statistics, brought home to me just how bad things are.

Samuel Gompers, the founder of the American Federation of Labor, famously said that what American workers want is “more.” What they are getting is more stress, more hours of work, more unpaid overtime, more insecurity, more debt, more years to work until retirement, but not more pay or benefits.

I was surprised, which may show my naivete, at the amount of lawbreaking by employers.  Greenhouse tells story after story of workers being forced to work overtime and through their lunch hours without pay, of workers being dismissed on trumped-up charges because they were injured on the job and became financial liabilities, of workers being locked in to their workplaces like the women who died in the infamous Triangle Shirtwaist Fire

There are two aspects to the story.  There is what I call the Adam Smith story, which is about the need to adapt to a highly competitive global economy, and the Karl Marx story, which is about class warfare and redistribution of income upward.

You can’t ignore either aspect.  American industry did grow complacent after World War Two.  The United States had the world’s only intact industrial base, and, for about 30 years, our industries had no serious competitors. There used to be an urban legend about the city of “Usa, Japan” which existed for the purpose of being able to stamp products “Made in USA.”  Corporate management grew complacent, as did government and organized labor.  The U.S. government, instead of trying to strengthen international competitors such as Eastman Kodak Co., Xerox Corp. and IBM Corp., broke up their market power through anti-trust suits.  Organized labor, all too often, resisted new technology and clung to outmoded job classifications and work rules.

But in fact the U.S. economy is not doing all that badly.  It is just the human beings in the economy who are struggling.   Corporate profits, national output and productivity continued to grow in the 2000s, as do the incomes of Americans in the highest brackets.  But wages were flat, benefits were eroding and the majority of workers were under increased pressure to work harder and longer, even in a time of economic expansion.

Greenhouse’s interview with Lee Scott, the CEO of Wal-Mart, illustrates the problem.  Based on Greenhouse’s description, Scott seems like a genuinely decent human being who is doing everything he can to change bad practices that have gotten Wal-Mart bad publicity – violations of health and safety laws, knowingly hiring illegal immigrants, forcing employees to work overtime without pay.  Scott is willing to do everything he can to improve Wal-Mart’s practices – right up to the point where it would cut into the company’s dividends and return on equity, which represents a stone wall.

Steven Greenhouse

What this means is that the people who create value for Wal-Mart are being cheated in order to increase the incomes of shareholders.  This has not, in fact, worked, as Greenhouse noted.  Wal-Mart’s stock price was lower than other companies with comparable earnings; this was probably because of the company’s bad reputation.

Greenhouse also gives examples of profitable businesses that treat employees less in terms of the cost of their wages, and more in terms of the value they can create. One is Wal-Mart’s competitor Costco.  Another is the Las Vegas hotel and casino industry and Culinary Workers Local 226, which represents its employees.  After a strike and protracted struggle, the casino industry decided it could not break the union and decided to work with it.  This has worked out well for both sides.  Guests encounter cheerful, loyal workers, not exhausted, resentful ones.  Union and management have set up a school where employees can upgrade their skills and pay, to the benefit of both.  Class struggle need not be the American business model.

During the years I reported on business here in Rochester, I always found that the union leaders were willing to work with management for the betterment of the company when they thought managers were acting in good faith.  During the brief period that the W. Edwards Deming philosophy was in vogue, both union and non-union workers were happy to cooperate with management in quality teams.  What was then the Rochester Products division of General Motors negotiated wage concessions with the United Auto Workers local here in order to keep the division competitive; UAW leaders and members felt betrayed when GM executives then proceeded to take big wage increases and bonuses for themselves.

The United States has everything necessary to be a thriving and prosperous nation.  We have a working population with an ethic of an honest day’s work for an honest day’s pay.  We have a rich and abundant land.  We are leaders in scientific research.  We have a culture that attracts smart, achievement-oriented people from all over the world.  Corporate and governmental policy, not force of circumstances, are what holds us back.

Click on The Big Squeeze for an interview with Steven Greenhouse.

Click on Steven Greenhouse for recent and archived New York Times articles.

Click on CEOs who cut jobs got paid more for a San Francisco Chronicle article about a study about CEO pay.  It says that CEOs who cut the most jobs in the recession got paid the most, regardless of the profitability of their companies. [Added 9/8/10]

Click on The Great Divergence for a long but excellent series on growing income inequality in the United States. [Added 9/8/10]

Click on Why Does Mark Hurd Get $50 Million Severance? for a report on the firing of Hewlett Packard’s CEO for filing false expense reports.  While the economy is increasingly unforgiving to people on the middle and lower levels, people at the very top seem to be able to get away with anything.

Tags: Books, The Big Squeeze, Tough times, Work, Workers