Richard Kirsch

Roosevelt Institute Senior Fellow

Recent Posts by Richard Kirsch

  • How the Weakening of American Labor Led to the Shrinking of America’s Middle Class

    Mar 26, 2014Richard Kirsch

    This is the second in a series of posts summarizing a new Roosevelt Institute report by Senior Fellow Richard Kirsch, entitled “The Future of Work in America: Policies to Empower American Workers and Ensure Prosperity for All”.

    This is the second in a series of posts summarizing a new Roosevelt Institute report by Senior Fellow Richard Kirsch, entitled “The Future of Work in America: Policies to Empower American Workers and Ensure Prosperity for All”. The report provides a short history of how the rise and decline of unions and then explores reforms in labor policy to empower American workers to organize unions and rebuild the middle class.  Today’s post describes the corporate effort beginning in the 1970s to grab more of the nation’s wealth, at the expense of workers.

    When General Motors President Charles Wilson told a U.S. Senate Committee in 1953 that what was good for General Motors was good for the country, he captured an era in which the good wages and benefits earned by the workers at U.S. manufacturing companies powered the nation’s economy and built the middle class.

    But sixty years later, what is good for the GM of our day – Walmart – is clearly not good for America, as a comparison between the biggest private employers of both eras underscores. While the American auto industry operated on the premise of one of its founders, Henry Ford, that workers should get paid enough to buy its costly products, Walmart operates on the premise that its workers should get paid so little that the only place they can afford to shop is at their low-priced employer.

    A General Motors plant was the anchor of a community. It became the hub of a supply line for auto parts manufactured by other unionized companies. Its managers and factory workers earned enough to shop at local businesses and pay taxes to support public services. They had the resources and time to participate in the life of the community. They expected to stay with GM for their entire careers and to retire on a pension earned while working at the firm.

    How very different from Walmart. When a Walmart opens up, local businesses close. Wages decline throughout the community. Many of the items in a Walmart store are made outside of the country, part of a global supply chain built in search of lower wages in order to meet Walmart’s low pricing demands. Workers often earn so little that they qualify for government benefits. Many Walmart employees are hired part-time or as temps. They lack job security and retirement security, other than the small Social Security checks their wages will accrue.

    There are stark differences between prospects for organizing workers into a union between the auto factories of the 20th century and the Walmarts of today. The GM plant in which workers staged the famous sit-down strike in Flint, Michigan in 1937 employed 47,000 workers. The average Walmart store employs 300 workers. It would be too expensive for an auto manufacturer to shutter a factory threatened by a strike. But when workers voted to unionize a store in Canada, Walmart closed down that location, a small loss for a company with 4,200 stores.

    How did the transition from the manufacturing economy to the Walmart economy occur? The breakdown of the union and government enforced New Deal social compact, in which major corporations shared their profits with their workers, began in the mid-1970s. The resurgence of economies around the globe and the shocks of oil price increases threatened the dominance and profitability of American business. The U.S. began bleeding manufacturing jobs, a loss of 2.4 million jobs between 1979 and 1983.

    U.S. corporations responded in a number of ways. One was to insist that, in the words of a 1974 Business Week editorial, “Some people will have to do with less…so that big business can have more.”

    Corporations increased their focus on rewarding shareholders with short-term profits, rather than investing in their workers or in long-run growth. General Electric, for example, slashed its workforce and cut investment in research, and its stock price soared.

    When Chrysler faced bankruptcy in 1979, the United Auto Workers agreed to an end to annual wage increases tied to productivity. These concessions were then extended to unionized workers at Ford and General Motors. As Harold Meyerson writes, “Henceforth, as the productivity of the American economy increased, the wages of the American economy would not increase with it.”

    Corporations also began exploiting weaknesses in U.S. labor law, which allowed corporations to hire replacements for striking workers. In 1981, a period of high unemployment, President Ronald Reagan fired the nation’s air-traffic controllers for going out on strike. Major firms in a host of industries followed Reagan’s precedent: they demanded that their workers accept lower wages, which precipitated strikes, and then hired replacement workers at lower wages. The strike - the central tool that workers had used to win their fair share of economic growth - virtually evaporated over the next few decades. In the 1960s and 1970s, workers staged an average of 286 strikes a year. That declined to 83 strikes a year in the 1980s and finally to 20 a year since 2000.

    In the early 1970s, after major consumer and environmental legislation was enacted by Congress over the objections of big business, Corporate trade associations moved their offices to the nation’s capital and made big investments in lobbying and campaign contributions. The policies they pushed included gutting trade protections for American manufactured goods. This eased the way for the loss of 900,000 textile and apparel jobs in the 1990s and 760,000 electronics manufacturing jobs in the past two decades.

    Corporations pressed for the appointment of national labor law regulators who were antagonistic to unions. The combination of weak labor laws and hostile regulators enabled businesses to resist union organizing more aggressively. Unions lost members, and their political clout declined relative to surging corporate political power. Their efforts to win labor law reform fizzled, even in Democratic administrations from Carter to Clinton to Obama.

    As major banks and Wall Street firms went public, they too became focused on short-term profits. They drove the businesses to which they loaned money or invested in to maximize their short-term profits by cutting pay and benefits and by firing workers. A hot private equity industry saddled businesses with huge debts and drove firms to slash labor costs.

    While the labor movement as a whole was slow to respond, there were some major unions that refocused resources on organizing new members. These unions won some victories in a few sectors, notably health care and in the public sector. But the gains were not enough to reverse the decline of union membership in traditional strongholds like manufacturing and construction. Today, unionized workers make up 11% of the workforce, the lowest level in 97 years. With only 7% of private sector workers in unions, the labor movement can no longer play an effective role in raising workers’ wages throughout the economy.

    American workers remain among the most productive in the world; productivity in major sectors like manufacturing continues to rise. But in industry after industry, the share of revenues going to wages has dropped, while the share going to profits has soared. Labor’s share of national income has plummeted, while the share taken by capital is at a record high. If median annual income had kept up with productivity, it would now be $86,426. But the current median income is actually $50,054, the lowest it has been since 1996 when adjusted for inflation.

    Today, unemployment is stuck at high levels. Millions of workers are trapped in part-time jobs or jobs for which they are over-qualified. Most of the new jobs that have slowly emerged after the recession are low-wage jobs, but the proportion of high-wage jobs is also on the rise. It is the share of middle-wage jobs that is shrinking.

    Economies will always face challenges. But the crushing of America’s middle-class over the past forty years was not inevitable. It was the result of decisions made directly by corporate America to advance public policies that enabled them to take more of America’s wealth and to share less with American workers. One of the most significant of these corporate strategies was to weaken the ability of unionized workers to demand a fair share of the nation’s growing wealth, whether they demanded their fair share at the bargaining table or in the halls of Congress.

    Rebuilding the engine of our economy - the middle class - requires us to re-imagine how organized workers can once again exercise power to recreate an America in which prosperity is broadly shared.

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  • The Future of Work in America: Policies to Empower American Workers and Secure Prosperity for All

    Mar 25, 2014Richard Kirsch

    Download the report (PDF) by Richard Kirsch

    Download the report (PDF) by Richard Kirsch

    The Future of Work is bringing together thought and action leaders from multiple fields to re-imagine a 21st century social contract that expands workers’ rights and increases the number of living wage jobs. The Future of Work is focusing on three areas: promoting new and innovative strategies for worker organizing and representation; raising the floor of labor market standards and strengthening enforcement of labor laws and standards; and assuring access to good jobs for women and workers of color.

    Under the sponsorship of the Roosevelt Institute, the Future of Work is a collaboration between the Roosevelt Institute and the Columbia Program on Labor Law and Policy. The project is organizing a series of meetings, policy papers, and a conference, that aim at generating, debating, and communicating multiple approaches to empowering American workers to build an economy of broadly shared prosperity.

    This report, Policies to Empower American Workers and Secure Prosperity for All, is an introduction to the first area: policies to invigorate worker organizing. The paper is in four parts:

    • A history of how organized workers fueled America’s broadly shared prosperity;
    • A history of how the weakening of American labor led to the shrinking of America’s middle class;
    • A primer on American labor law;
    • Policy ideas to reform and transform worker organizing.

    Read "The Future of Work in America: Policies to Empower American Workers and Secure Prosperity for All," by Roosevelt Institute Senior Fellow Richard Kirsch.

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  • The New Deal Launched Unions as Key to Building Middle Class

    Mar 25, 2014Richard Kirsch

    This is the first in a series of posts summarizing a new Roosevelt Institute report by Senior Fellow Richard Kirsch, entitled "The Future of Work in America: Policies to Empower American Workers and Ensure Prosperity for All." The report provides a short history of how the rise and decline of unions and then explores reforms in labor policy to empower American workers to organize unions and rebuild the middle class.

    This is the first in a series of posts summarizing a new Roosevelt Institute report by Senior Fellow Richard Kirsch, entitled "The Future of Work in America: Policies to Empower American Workers and Ensure Prosperity for All." The report provides a short history of how the rise and decline of unions and then explores reforms in labor policy to empower American workers to organize unions and rebuild the middle class. Today's post describes how union organizing before and after World War II led to the broadest shared prosperity in modern American history.

    Americans are split and confused about the role of unions in our economy and society. On the question of the role of unions in the economy, the most recent poll in 2011 found that 45% saw unions as generally helping the economy, while 49% thought unions hurt the economy. As more and more Americans see their hopes for the future dimmed, and as income inequality becomes a defining issue, it is essential that Americans understand how workers organizing unions to demand a fair share of the wealth we generate is essential to rebuilding the middle-class, the key driver of our economy.

    For that understanding, we need a history lesson. Before and after World War II, organized workers built a powerful middle class by taking direct action and advocating for government policies to give workers a fair share of economic wealth. But over the past four decades, this pattern was reversed as corporate owners and managers have taken an increasing share of America’s wealth rather than sharing it with workers. As a result, the American economy has sputtered, and more and more Americans are struggling to meet their basic needs.

    The Roosevelt Institute draws inspiration from the New Deal and Franklin Roosevelt's achievements in responding to a harsh industrial economy and an immediate economic crisis by building the foundations of a very different economy. The Roosevelt era fundamentally transformed the nature and conditions of work in America, from one in which workers had virtually no voice, power, job security or personal safety to a robust social contract, cemented by law and social norms.

    New Deal labor law provided legal protections that enabled workers to organize unions and to negotiate for higher wages and benefits and for safe working conditions. New Deal legislation put a floor under labor standards, establishing a minimum wage and overtime protections that lifted the incomes of workers across the wage spectrum. The New Deal’s social insurance programs, including Social Security, unemployment insurance, government guarantees for home mortgages, and financial support for poor families with children, worked hand in hand with labor organizing and wage standards to build a broad middle class.

    Corporate benevolence did not hand working people good wages. It took a massive movement of striking workers, who faced decades of government suppression, to win the right to organize in 1935. After government spending on World War II finally ended the Depression by creating a full-employment economy, it took another massive wave of strikes to secure agreement from some of the nation’s largest corporations to share post-war industry profits with workers.

    With the United States standing alone with a strong economy after World War II, and with pent up demand at home and huge needs to meet in a devastated world, many large corporations reached a truce with unions, enforced by the continued strikes, in which the profits from the surging economy were shared with shareholders and workers. From 1947 through the early 1970’s, worker income rose in lockstep with productivity. As the value of output produced by workers increased, so did their compensation. Hourly wages grew steadily until 1972. The share of employers who provided health coverage increased to more than 70%. Pensions became a standard practice in larger corporations.

    Outside of the South, there was a public consensus in favor of unions. Republican President Dwight Eisenhower once said, “Only a fool would try to deprive working men and working women of their right to join the union of their choice.” In this context, millions of teachers and local, state, and federal workers joined unions alongside workers who labored in private industries. In 1956, three-out-of four Americans had favorable views of unions.

    The higher wages and better benefits won by unions boosted wages at non-unionized companies as well. The wages of workers at non-union firms got a 7.5% boost when at least one-fourth of the workers in that industry belonged to unions.

    The New Deal reforms were far from perfect. They left out broad swaths of the American public, largely along lines of race and gender. Domestic workers and farm workers – jobs held widely by African Americans and women in the 1930s – were excluded from the new federal labor rights, from most minimum standards, and from Social Security. New Deal rights were even further restricted in the 1940s, when a major roll-back of labor law enabled states to put up legal walls against increased unionization. These walls were primarily adopted by Southern states, which had the highest proportions of African American workers.

    Even with these flaws, unions played a major role in increasing the economic security of women, people of color and the poor. Many unions – although not all –were major backers of the New Deal’s social insurance programs and the anti-poverty programs of the 1960s, including Medicare and Medicaid. As African American workers began to join unions in larger numbers, many were finally able to join the middle class. Even today, union membership boosts the wages of African-Americans by 12%. Other groups who have traditionally suffered from lower wages also benefit from union membership with boosted wages: women by 11%, and Latinos by 18%.

    These higher wages and better benefits helped to build a huge middle class in the United States and to level income inequality. When union membership reached its peak between 1943 and 1958, income inequality dropped, as you can see in the chart below. The share of income that went to the wealthiest ten percent of Americans dropped to near 30%. But as the proportion of union members fell, the share of income taken by the wealthiest began to rise again. By 2010, the wealthiest were taking home almost 50% of the nation’s income.

    The story of how we got from unions representing one-third of American workers to barely one-in-ten, is told in the next post.

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  • Florida Election Shows Danger and Promise in Obamacare Debate

    Mar 17, 2014Richard Kirsch

    Democrats may have lost the special election for Florida's 13th congressional district, but the polling shows a path to success in 2014 with the Affordable Care Act.

    Democrats may have lost the special election for Florida's 13th congressional district, but the polling shows a path to success in 2014 with the Affordable Care Act.

    As pundits debate the impact of Obamacare on the special Congressional election held in Florida on March 11, a headline from a new Bloomberg national poll actually does as good as any describing what happened in the Sunshine State: “Americans Stick with Obamacare as Opposition Burns Bright.” That national finding also describes what happened in Florida, where swing voters supported the ACA, but more opponents turned out to vote.

    The Bloomberg survey found the “highest level of acceptance for the law yet” in Bloomberg’s polling, with almost two out of three (64 percent) of those surveyed saying they supported either retaining the Affordable Care Act (ACA) with “small modifications” (51 percent) or as it is (13 percent).

    The troubling result in the survey for the political prospects of the ACA is that the one-third (34 percent) who want to repeal the law are much more likely to vote. No news here. We’ve known that the ACA is a highly motivating issue for Republican voters, who turn out at a much higher rate in off-year elections than Democrats and independents.

    The real news is in the first set of findings, the growing popularity of Obamacare outside the Republican base. These findings were confirmed in the Florida election, when Alex Sink, the Democratic candidate, pushed back against attacks on the ACA from David Jolly, the Republican candidate, and independent groups supporting him.

    Jolly’s position was clear:  “I’m fighting to repeal Obamacare, right away.” So was Sink’s: “We can’t go back to insurance companies doing whatever they want. Instead of repealing the health care law, we need to keep what’s right and fix what’s wrong.”

    The key part of Sink’s message was to remind voters why people wanted health care reform in the first place. As one of Sink’s TV ads said, “Jolly would go back to letting insurance companies deny coverage.” That’s an effective reminder of the huge problems Americans have had for decades, when insurance companies could deny care because of a pre-existing condition, charge people higher rates because they were sick, even charge women higher rates than men. The ACA ended all that.

    As would be expected in Florida – and even more so in a special election – the candidates worked especially hard for the votes of seniors. In their ads for Jolly, the Republican Congressional Campaign Committee repeated their misleading charge from 2010, trying to scare seniors into opposing the ACA by saying that it cut $716 billion from Medicare. But unlike 2010, when Democrats did not respond to attacks on the ACA, Sink pushed back. She reminded seniors that the ACA actually provides important new Medicare benefits, including closing the infamous prescription drug “donut hole.” Sink’s ads accurately said, “His [Jolly’s] plan would even force seniors to pay thousands more for prescription drugs.”

    By Election Day, voters had a clear contrast between the positions of the candidates on the ACA. It was a close election, with Jolly winning by a small margin (48.4% to 46.5%) in a district with an 11-point Republican advantage, one that has been represented by the GOP for nearly 60 years. But polling found that independent voters in the district supported the “keep and fix” position over the “repeal” position by a margin of 57% to 31%. Sink actually gained ground over Jolly during the election on the question of which candidate had a better position on the ACA.

    The narrow margin is encouraging in a district with this large a Republican voter advantage, but still falls short of the turnout in 2012, when President Obama narrowly carried the district. Democrats will need to do better in November, if they are going to hold on to contested Senate races and have a chance of picking up House seats.

    Fortunately, unlike in 2010, the Democratic Senate and Congressional campaign committees at least understand that they can’t run away from Obamacare. Doing so will cede independent voters to Republicans, just when those voters are becoming very supportive of the “keep and fix” message. While Democrats would prefer to keep the focus on the economic pressures being faced by American families – highlighting issues like the minimum wage – they’ll only be heard if they also engage aggressively in the fight over the ACA.

    In fact, the ACA is an economic issue; just ask anyone who has lost her job and her health coverage. Or the millions of low-wage workers who can’t afford to go to the doctor, or are trying to pay back medical bills from the visit they could not put off. As millions more Americans get coverage – 11 million as of the end of February between the new exchanges, the expansion of Medicaid and young people under 26 – Democrats should incorporate the ACA into their overall economic message.

    Supporters of the ACA have consistently believed that once the ACA began to be implemented, it would become more popular. We’re starting to see that shift. The challenge now will be turning that popularity into votes in November. 

    Richard Kirsch is a Senior Fellow at the Roosevelt Institute, a Senior Adviser to USAction, and the author of Fighting for Our Health. He was National Campaign Manager of Health Care for America Now during the legislative battle to pass reform.

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  • The Simple Solution to Obamacare's Employer Mandate Problems

    Mar 3, 2014Richard Kirsch

    Requiring employers to offer insurance to all employees or pay an additional payroll tax would eliminate the problems with the employer mandate, and start a shift toward broad tax-based coverage.

    Requiring employers to offer insurance to all employees or pay an additional payroll tax would eliminate the problems with the employer mandate, and start a shift toward broad tax-based coverage.

    In the last month, two more misleading headlines – one on lost jobs and the other on premiums for small businesses – have further roiled the overheated debate about the impact of the Affordable Care Act (ACA) on business and jobs. The question of how to deal with our employer-based health system continues to provide fodder for attacks on Obamacare. And it has proven to be  – and promises to continue to be – the basis for the most potent attacks against Republican proposals to replace the ACA. But in terms of policy, there is a simple solution, which would rationalize the contradictions in the Affordable Care Act and ease the way for the long-term goal shared on the left and right of separating health coverage from employment.

    The general approach taken in the Affordable Care Act was to require most employers to provide coverage. The specific proposal in the final legislation, shaped by compromises with and pressure from both small and big business lobbying groups, required employers with more than the equivalent of 50 full-time workers to pay a portion of health coverage for employees who work 30 hours a week, or pay a fine. This is the employer mandate, which was delayed a year by the Obama administration and will be phased in starting in 2015.

    The employer mandate does accomplish much of the prime goal of reform. Most employers have incentives to continue to provide coverage, or expand coverage. New coverage options are available for most people who do not get coverage at work, which was virtually all of the 50 million people who were uninsured when the ACA became law in 2010. People are not locked into jobs just because of health coverage, which was the real finding of the Congressional Budget Office report projecting 2.3 million people would retire or reduce their hours of work. Ending job lock opens up those hours to people who want to work and is a huge boon to entrepreneurship.

    But the problems with the structure of the employer mandate are obvious. The law creates incentives for employers to keep workers’ hours under 30. It also establishes the potential for a business with a growing number of employees, when it exceeds the 50-employee threshold, to suddenly have to pay for health coverage.

    The existence of incentives to cut hours or limit employees does not at all mean that employers will adjust for them. The accusations that the ACA is creating a part-time economy are belied by the facts: part-time employment is going down as the economy accelerates. In addition, employers that are adding workers rapidly as their businesses grow are not going to stop expanding  – or establish dozens of very small corporations – to avoid paying for health coverage. Still, we are seeing examples of some employers, including public employers and universities, limiting workers’ hours to less than 30. Others, like Trader Joe’s, are establishing different employment tracks for part and full time employees, with health care as a key factor. As this is all new – with the mandate not yet in effect – it is impossible to measure the future impact, but the incentives are certain to shape some business decisions.

    There is a simple solution, one that was included in the version of the ACA enacted by the House in 2009. Employers that decide not to provide health coverage for their employees would be required to pay a percentage of payroll as a tax to cover health care, just like employers do now for FICA (Social Security and Medicare). Instantly, the cliff impact is gone, both in terms of hours and number of employees. Employers could either provide coverage to all employees, or pay for health coverage in the same manner as FICA, a regular cost of adding an employee, with a marginal increase in cost for each hour someone works. There is no advantage to hiring someone for less than 30 hours or keeping under 50 employees.

    Paying a percentage of payroll also has another huge advantage over both the ACA and the current system of employer-provided coverage. Right now, the cost of health insurance premiums does not vary with an employee’s income. This creates a much bigger disincentive to hiring lower-wage workers. For example, a $6,000-a-year policy is 20% of the wages of a $30,000 a year employee but only 5% of the pay of a $120,000 a year employee. Paying a percentage of payroll instead would make it much more affordable to hire low-and-middle income wage earners than it is now. And while it would make it more expensive to employ higher-wage workers, most employers with high-wage workforces already provide health coverage and would be likely to continue to do so, rather than pay the payroll tax. If they did choose to pay, the cost is more easily absorbed for high-wage employees. Besides, that is not where we have an employment problem in the U.S.

    This solution mimics the structure of union-employer benefit funds, which are typically found in industries where workers have fluctuating hours. Under these “Taft-Hartley” funds, employers and workers pay into the fund based on the number of hours an employee works. The loudest opponents from the left of the employer mandate in the ACA have been unions whose members get health coverage through such funds now. The unions have said that the ACA encourages employers to stop paying into the funds, now that government will provide subsidies for many workers. But if the current employer mandate were replaced by a payroll tax, the status quo that has worked well for these funds would be maintained.

    Historically, the biggest opponent of a payroll tax for coverage has been the small business lobby, which is why the ACA does not require small employers to provide coverage. That is why the House version of the ACA phased in the payroll contribution based on payroll size, with no contributions required for payrolls under $500,000, increasing gradually to an 8% contribution for payrolls over $750,000.  This eases the burden on small employers.

    Slowly, the employer-based health coverage system in the United States is dissolving. Over the past 30 years, the share of workers with ESI has shrunk from 70% to 57%. Recently we have seen employers who traditionally have wanted to take responsibility for structuring employee coverage begin to use private exchanges, in which their workers get a fixed amount of money to choose from a choice of health plans. These trends hasten the broadly shared goal of separating employment from health coverage.

    As the debate over the ACA turns from repeal to fixing the law, progressives should make the payroll contribution proposal a central focus, our response to problems with the employer mandate. If enacted, as more employers choose to pay into the fund rather than provide their own coverage, we would move closer to ideal of a broad-based tax for coverage, not tied to an individual employer. And while a payroll tax is not progressive – it is proportional – it is much more progressive than the very regressive system we have now of fixed premiums regardless of income. The result would be evolution toward a relatively broadly based tax for health coverage, a key to making health coverage a right. 

    Richard Kirsch is a Senior Fellow at the Roosevelt Institute, a Senior Adviser to USAction, and the author of Fighting for Our Health. He was National Campaign Manager of Health Care for America Now during the legislative battle to pass reform.

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