In Seattle, Calls for a Higher Minimum Wage are Calls for Democracy

Mar 28, 2014Felicia Wong

Roosevelt Institute President and CEO Felicia Wong spoke yesterday at the Income Inequality Symposium in Seattle, where she gave the closing remarks, calling on our memories of President Franklin D. Roosevelt and the New Deal to urge Seattle into action on raising the minimum wage. Her prepared remarks are below.

Roosevelt Institute President and CEO Felicia Wong spoke yesterday at the Income Inequality Symposium in Seattle, where she gave the closing remarks, calling on our memories of President Franklin D. Roosevelt and the New Deal to urge Seattle into action on raising the minimum wage. Her prepared remarks are below.

Thank you so much, Mayor Murray, David Rolf from SEIU 775NW, Howard Wright, and all of you who have served on the Mayor’s Task Force or spent so much of your time fighting for economic growth and economic justice.

Today – we feel like a nation at the crossroads, on the brink.  But let’s remember: we’ve been here before. The story is familiar. Poverty and income inequality are on the rise throughout the United States. Even if you’re fortunate enough to have a job, you’re struggling to make ends meet. Meanwhile, a select few do very, very well for themselves. The President, facing a critical midterm election, addresses the nation. Raise standards for workers, he says, and he calls for laws to raise the national minimum wage, too.

I’m talking about 1938, when the President was Franklin Delano Roosevelt. When FDR took office, there was no federal law guaranteeing a minimum wage for American workers – and in fact throughout the 1930s the President battled a recalcitrant and conservative Supreme Court, and conservative business establishment, on behalf of workers. In his 1938 address to Congress, FDR said such a law was long overdue. He said it was morally unacceptable and economically unsustainable for so many people in the United States to earn poverty wages. To quote Roosevelt: “Aside from the undoubted fact that the people thereby suffer great human hardship, they are unable to buy adequate food and shelter, to maintain health, or to buy their share of manufactured goods.”

That’s the key. FDR understood that the minimum wage was an issue for our hearts and for our wallets. Again and again, he returned to the point that businesses could not thrive unless workers did. Without workers, an economy cannot grow.

It was a tough fight, and FDR didn’t go it alone. He had what he called his Brains Trust -- lawmakers, academics, activists, and business leaders. Their job was to figure out economic policies under which everyone could prosper. FDR went to Congress with their proposals. The result: the Fair Labor Standards Act, a keystone of the New Deal, along with the Social Security Act. With the FLSA we got a federal minimum wage as well as the 40-hour workweek and standards for overtime pay. These underlie modern labor policy.  These are issues that are hotly debated even today.

As we’ve seen over the course of this day’s symposium, fixing our country’s inequality and wage problems will – once again – need the good ideas and expertise of a brain trust. We have been fortunate to hear from important partners such as Maud Daudon from the Chamber of Commerce, Saru Jayaraman from Restaurant Opportunities Center - United, and leaders from other cities such as Supervisor John Avalos from my hometown of San Francisco and Wilson Goode from Philadelphia.  Innovation is a team sport. FDR understood this, and so does Mayor Murray.

I work at the Roosevelt Institute in New York City.  And I am here today because Seattle is at the center of the nation’s most important fight.  

At Roosevelt, we think of ourselves as an ideas and leadership shop. I won’t claim that we ask ourselves “What Would FDR Do?” in every situation. But we certainly try to capture his spirit of innovation and collaboration in our work. We support public intellectuals like Dorian Warren, whom you’ve heard from today, and Mike Konczal, Joe Stiglitz, Annette Bernhardt, Richard Kirsch, and others. They plunge into all facets of the inequality problem – which President Obama has rightly called the defining problem of our time.  They envision solutions, including a new labor agenda for the 21st century.  This includes raising the minimum wage and providing paid sick leave, and also includes new standards for the right to organize, the enforcement of labor laws, and strategies to combat labor market segregation by race and gender.  At Roosevelt we also support some 10,000 undergraduates across the U.S. who dig in deep in their local communities – designing and fighting for policy solutions at the city level.

We at the Roosevelt Institute believe – as does everyone here – that we all do better when we all do better. But: wages have been backsliding for decades now. The typical American family makes less today than it did 25 years ago. I know we have heard a lot of statistics today, and they can seem overwhelming, but consider this for just a moment: 16 million children live in homes where their families are not sure where the next meal is coming from. Five years after the Great Recession officially ended, there are still three times as many Americans looking for work as there are job openings. And, as we’ve discussed today, new jobs aren’t good jobs.  The most recent BLS statistics forecast a low-wage trajectory through at least 2020.  Only one of the 20 occupations expected to add new jobs requires a college degree, and most of the kinds of jobs we will be creating offer low or moderate pay.

From FDR to President Obama to each and every one of us here today, whether right or left or center: we can all agree that no one should work a full-time job and worry about putting food on the table for their family.  

But this is not just about morality, not just about the “we should” and the “we shouldn’t.”  This is about economic fundamentals. When people can’t even buy groceries at the end of the month, they can’t do all of the things – go to a baseball game, go to dinner at a restaurant – that drive economic growth and make our towns and cities strong.

Now, consider the other half of the coin: times are not tough for everyone. In 2012 alone, the richest 1 percent of Americans took home more than 20 percent of all income – one of their biggest hauls since the Gilded Age. Corporate profits are at record levels, and corporations are sitting on huge cash reserves. Many will tell us that corporations and wealthy owners are the job creators, the engines of the economy.  Now, none of us begrudge real success. But the question is, if they’re doing so well, why isn’t the rest of the economy doing better?

And the answer is clear: As FDR once argued, the people – middle class, working families – are the real job creators. These aren’t just strangers, or statistics. I’m talking about our friends and family and co-workers. I’m talking about us. As more and more Americans struggle to keep up - businesses can’t function.  Companies need customers, people to spend money on those products and services. That’s why holding down wages is more than just unfair. It’s also bad economics.

Let me take a minute to tackle the arguments on the other side: that raising the minimum wage will cause unemployment, business flight, or higher prices.  But empirical research looking at decades of data – much of which we have heard today – shows that on balance raising wages has little or no negative employment effects, and in fact there is significant evidence to show that businesses – and cities and towns – flourish with higher wages, rather than lower.

This also should make sense to any of us who manage other people. Making decisions to pay employees enough so they aren’t stressed in the rest of their lives makes good business sense, and good common sense.

And, we are learning from very recent research.  I will cite just two important pieces.  The first is a massive study of 200 years of capital accumulation, incomes, and growth just published here in the United States.  The research suggests the problem is very big, and in fact lies in the structure of today’s entire global economy. Too much capital is concentrated in the hands of too few, and the global economy has gone awry.

The second piece is a recent IMF study of inequality and growth in hundreds of countries showing that many equality-enhancing redistributive policies – higher taxes, more public investment – can increase growth. Win-wins are possible.  

So these findings should give us courage. And should push us to act – because recalibrating the minimum wage is one very big step towards fixing the broken economic system and promoting growth in ways that will work for everyone.

Let me be clear: raising the minimum wage isn’t anti-democratic, isn’t anti-capitalist, isn’t anti-free market.  FDR saved capitalism from itself.  That is what you are trying to do here today.

It’s no surprise that we’re having this conversation in Seattle. Your city is a great hub of American business and social innovation. This city has brought to life trends and technologies, from Starbucks coffee to Excel spreadsheets, which revolutionize the way we live. And you in Seattle know that people are at the center of that innovation. Companies like Costco have built their business models on paying decent wages and benefits, retaining valued employees, and fostering strong communities.

It’s not a top-down, trickle-down proposition. Economies grow, as our friend Nick Hanauer said this morning, from the middle out.  You have seen it work in Seattle, and that’s why Seattle is the right incubator for the sound labor policies that will shape the American economy of the future.

By voting for a 15 dollar an hour wage floor, Seattle can move the entire region’s economy forward.  You can also set the trend for the whole country – in addition to possible federal legislation, at least eight states are considering minimum wage increases this year. You can show all of us how to build the kind of economy that grows, that is stable, and that spreads prosperity broadly.  It is a virtuous cycle.  

If adopted nationwide, the Economic Policy Institute estimates that the raise in the minimum wage proposed by President Obama could affect more than 28 million people and lift many of them out of poverty. 28 million people. At a time when the American Dream of opportunity for all is rapidly fading, those are 28 million reasons to support this proposal.

Beyond the potential economic impact, this policy would show what government can achieve when it responds to the needs of working families. As Justice Louis Brandeis once said, “We can have democracy in this country, or we can have great wealth concentrated in the hands of a few, but we can’t have both.” Individual companies, as great as they are, can’t do this alone.  Our fates are linked, and we have to act together.  By raising the minimum wage to fifteen-dollars-an-hour, Seattle can choose democracy and start to reverse the trends that have been crushing the middle class.

Let me close by urging the members of Seattle’s City Council to approve the 15 dollar an hour minimum wage. And as FDR told his own supporters, it is up to all of us to make them do it. A lot has changed about our country since the days of the New Deal, but one thing remains the same: Progress is possible when we commit to it and fight for it. Now is the time for us to decide what kind of economy, what kind of government, and what kind of future we want for ourselves. Now is the time for Seattle to lead the way. Thank you.

Felicia Wong is President and CEO of the Roosevelt Institute.

 

Share This

Daily Digest - March 28: How to Be a Better Anchor

Mar 28, 2014Rachel Goldfarb

Click here to receive the Daily Digest via email.

Click here to receive the Daily Digest via email.

New Student Initiative Asks Anchor Institutions to Rethink Their Communities (Community-Wealth.org)

The Democracy Collaborative interviews Alan Smith, Roosevelt Institute's Associate Director of Networked Initiatives, to discuss the Campus Network’s Rethinking Communities initiative, which uses the Collaborative’s Anchor Dashboard to examine how institutions like colleges affect local economies.

  • Roosevelt Take: Alan explains the ideas behind the Rethinking Communities initiative, and why this project makes sense for Millennials.

The PAC to End All PACs (Politico Magazine)

David Freedlander speaks with Roosevelt Institute Senior Fellow Jonathan Soros about his work on campaign finance reform. Soros says his aim is to help ensure lack of money doesn't shut candidates out.

Domino's Franchisees Settle Wage Theft Investigation In New York For $448,000 (HuffPo)

Dave Jamieson reports on the second major wage theft settlement in as many weeks out of New York Attorney General Eric Schneiderman’s office.

A Nation of Takers? (NYT)

Nicholas Kristof writes that there are, in fact, public welfare programs that are wasteful: subsidies for private planes and yachts, subsidies to hedge funds in the form of "carried interest," and the like.

New on Next New Deal

In Seattle, Calls for a Higher Minimum Wage are Calls for Democracy

In her remarks to the Seattle Income Inequality Symposium, Roosevelt Institute President and CEO Felicia Wong says that we should raise the minimum wage for the same reasons that President Roosevelt first implemented it.

Insurance Pays for Health Care. Who’s Providing It?

Following a congressional briefing last week, Roosevelt Institute Communications Associate Rachel Goldfarb emphasizes the distinction between insurance and care providers as a key reason to keep publicly funded family planning.

  • Roosevelt Take: Read Roosevelt Institute Fellow Andrea Flynn's remarks from the briefing here.

Share This

Daily Digest - March 27: Playing in the Big Leagues of the Labor Debate

Mar 27, 2014Rachel Goldfarb

Click here to receive the Daily Digest via email.

Click here to receive the Daily Digest via email.

Northwestern Players Get Union Vote (ESPN)

The Chicago district of the National Labor Relations Board has ruled that Northwestern's football players qualify as employees, in part because their scholarships are tied to performance, reports Brian Bennett.

Connecticut Senate Approves Bill to Raise Minimum Wage to $10.10 (Reuters)

The state legislature's lower house is expected to pass the bill as well, reports Richard Weizel, which would make Connecticut's minimum wage the highest of any state's.

Who Needs a Boss? (NYT)

Worker-owned cooperative businesses could be a key way to shift wealth from investors to labor and reduce economic inequality, writes Shaila Dewan. And such co-ops are on the rise again in the U.S.

Payday Loans Aren’t the Problem. The Problem is Poverty. (WaPo)

Lydia DePillis argues that when discussing regulations for predatory payday lending, it's important not to lose sight of the root cause. In the long run, fighting poverty will do far more than increasing regulations.

Taxpayer Subsidies and Too-Big-to-Fail Banks (NYT)

Teresa Tritch suggests that the Federal Reserve of New York's study on "too big to fail" ends without clarity, since the data only goes through 2009, before the biggest post-crisis reforms were even passed into law.

Piketty's Inequality Story in Six Charts (The New Yorker)

John Cassidy pulls six charts from Thomas Pikkety's book, Capital in the Twenty-first Century, to explain the book's narrative of inequality through shares of income and wealth of various groups.

New on Next New Deal

National Labor Law in the United States: Scanty Protections for Organizing Leave Out Many Workers

In the third post in his series on his new report on labor reform, Roosevelt Institute Senior Fellow Richard Kirsch examines the weaknesses of American labor law, particularly the National Labor Relations Act.

 

Share This

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.

Share This

Daily Digest - March 26: Worker Misclassification Leads to Missing Wages

Mar 26, 2014Rachel Goldfarb

Click here to receive the Daily Digest via email.

The Death of an Employer Scam (TAP)

Click here to receive the Daily Digest via email.

The Death of an Employer Scam (TAP)

Workers who are misclassified as independent contractors lose out on wages, benefits, and workplace protections - but Harold Meyerson says recent crackdowns could signal the end of industry-wide misclassification.

Unemployed, and Heading Toward Foreclosure (MSNBC)

More than half of the long-term unemployed live in owner-occupied homes, reports Suzy Khimm, and now they're struggling to keep their homes with no income and less-than-successful safety net programs.

America's Class System Across The Life Cycle (PolicyShop)

Matt Bruenig borrows charts from a wide variety of sources to look at how income inequality effects full lives, from childhood stress levels, to college completion rates, to age of death.

The Right's New "Welfare Queens": The Middle Class (The New Yorker)

George Packer says that Republican Senators at a recent committee hearing preferred to pin the economy's problem on adults choosing not to work instead of income inequality.

Democrats, as Part of Midterm Strategy, to Schedule Votes on Pocketbook Issues (NYT)

Jeremy W. Peters and Michael D. Shear report that the Senate Democrats' goals are less about passing legislation to fight inequality than getting Republicans on record opposing these bills.

U.S. Banks Enjoy 'Too-Big-to-Fail' Advantage: Fed Study (Reuters)

Emily Stephenson and Jonathan Spicer report on a new series of research papers by Federal Reserve economists that confirm that "too big to fail" advantages continued into 2009, after the financial crisis.

Will a For-Profit Degree Help You Get a Job? (The Atlantic)

Graduates of 72 percent of for-profit college career programs earn less than high school dropouts, reports Sophie Quinton. That's led to concerns that such schools waste federal financial aid, and calls for tighter standards.

New on Next New Deal

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

In the second post in his series describing his new report on labor organizing reform, Roosevelt Institute Senior Fellow Richard Kirsch looks at the era in which corporations began to shift profits away from workers.

Share This

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.

Share This

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.

Share This

Daily Digest - March 21: When Long-Term Unemployment Becomes Permanent

Mar 21, 2014Rachel Goldfarb

Click here to receive the Daily Digest via email.

Unemployed? You Might Never Work Again (NYT)

Click here to receive the Daily Digest via email.

Unemployed? You Might Never Work Again (NYT)

Binyamin Appelbaum reports on a new study from three Princeton economists, which looks at the relationship between inflation and unemployment. They conclude that prospects for the unemployed diminish rapidly.

Income Inequality isn’t About the Rich — it’s about the rest of us (WaPo)

Catherine Rampell writes that Americans are less concerned about inequality when they also experience upward mobility. So if the 1 percent are tired of being vilified, she notes some policies they could support.

An 87 Percent Vote for a $15-an-Hour Wage (The Nation)

In an advisory referendum, Chicago voters showed overwhelming support for a high minimum wage for large employers, reports John Nichols. Now it's a question for the Chicago City Council and the Illinois gubernatorial candidates.

Pixel and Dimed: On (Not) Getting By in the Gig Economy (Fast Company)

Sarah Kessler writes about her attempts to let work come to her through smartphone apps offering paid-by-the-gig opportunities. This form of "entrepreneurship," as the companies like to call it, turns out to be less than viable.

How public sector layoffs add to the racial income gap (MSNBC)

Recent layoffs in the public sector disproportionately affected black communities, writes Ned Resnikoff, with a "probability of displacement," or likelihood of getting fired, 2.8 percent higher for blacks than whites.

Learn to Love This Loophole (U.S. News & World Report)

Programs that qualify people for heating assistance and food stamps at once have new requirements, but some governors are just raising heat aid to match, reports Pat Garofalo. Boehner calls that cheating instead of feeding the hungry.

Share This

Daily Digest - March 20: The Safety Net - Government = ?

Mar 20, 2014Rachel Goldfarb

Click here to receive the Daily Digest via email.

The Voluntarism Fantasy (The Majority Report)

Click here to receive the Daily Digest via email.

The Voluntarism Fantasy (The Majority Report)

Sam Seder speaks with Roosevelt Institute Fellow Mike Konczal about Mike's new piece in Democracy Journal. Mike says the social safety net has always depended on the government.

The Tyranny of the On-Call Schedule: Hourly Injustice in Retail Labor (The Nation)

Michelle Chen explains the ways that retail scheduling has harmed workers' ability to plan their lives. On-call schedules mean not knowing how much you'll make or when you'll work, ever.

Journalists’ and Activists’ Strange Approach to Low-Wage Workers (WaPo)

Sarah Jaffe calls out the habit of representing low-wage workers as poor, unfortunate Others in need of our help. Any one of us could share the concerns and needs of low-wage workers.

Why Not Peg EITC Benefits to the Local Cost of Living? (PolicyShop)

David Callahan suggests President Obama could do better than simply increasing the earned income tax credit. For low-income workers living in high-cost areas, it would make a big difference.

Janet Yellen's Rookie Mistake: Speaking Too Clearly (Bloomberg Businessweek)

Janet Yellen, the new Federal Reserve Chair, needs to speak with less specificity, writes Peter Coy. Attaching a six-month timeframe to a vague written statement set off a market selloff.

The Key Question for Yellen: Is This Economy As Good As It Gets? (FiveThirtyEight)

Andrew Flowers considers the ways to measure economic potential, and what the Federal Reserve ought to do if we agree that the U.S. is still falling short.

Do We Need to Force People to Live in the Homes They Own? (Pacific Standard)

Real estate that isn't actually lived in may be a good investment, but it isn't good for a city, writes Kyle Chayka. He suggests that residency requirements could control rising rents.

New on Next New Deal

There's More to Fixing the Minimum Wage Than Just Raising It

Azi Hussain, Roosevelt Institute | Campus Network Senior Fellow for Economic Development, says that instead of tying the minimum wage to annual inflation, we should peg it to inflation over the business cycle to ensure flexibility.

Share This

There's More to Fixing the Minimum Wage Than Just Raising It

Mar 19, 2014Azi Hussain

Increasing the minimum wage on a sporadic basis isn't the right way to help low-income workers or the economy.

Increasing the minimum wage on a sporadic basis isn't the right way to help low-income workers or the economy.

Support for a minimum wage increase is running high. What’s more is that there is strong support to tie the minimum wage to inflation, which is good news. Inflation has slowly chipped away at the value of the minimum wage since the late 1960s, so tying the minimum wage to inflation will ensure that its real value is kept constant.

Tying the minimum wage to inflation has another advantage. Currently, the minimum wage is increased sporadically and rarely, resulting in larger increases that are more harmful to employment. By tying the minimum wage to inflation, increases are smaller, regular, and predictable, and therefore less harmful.

However, tying the minimum wage directly to inflation is a bit crude. It means the minimum wage will increase every year by at least 1-2% (approximately the same rate as inflation). There are at least two situations where this could be problematic. The first is that during a recession, businesses would have to deal not only with decreasing demand and poor economic conditions, but also a rising wage. A minimum wage increase along with a recession would hurt employment above and beyond that of just a recession. On the other hand, during good times the minimum wage would still only increase by 1-2%, whereas the economy may very well be able to absorb a larger increase.

How can we design the minimum wage so that inflation doesn’t chip away at its value over time, while still giving it enough flexibility in increases to accommodate current economic conditions? The best way would be to tie the minimum wage to inflation over the business cycle instead of on an annual basis. The idea is that the minimum wage would increase during booms and would stay constant or may even decrease during busts. Over the course of a business cycle, the increases would offset the decreases enough so that the minimum wage would keep up with total inflation during that cycle. A good example of a similarly designed policy is Sweden’s balanced budget rule, which requires the government to run a budget surplus over the course of a business cycle. This allows the Swedish government to spend more than tax revenue during busts, but forces it to spend less than tax revenue during booms, so that the net result is a budget surplus.

Yet having flexibility in choosing an annual minimum wage means someone will need to decide how much it should increase or decrease. That “someone” should not include politicians. Rather, an independent board should be set up to make the annual decision. A great example of this in practice is the UK’s Low Pay Commission, an independent body that conducts research and makes the recommendation for the annual minimum wage change. This board could be set up with a mandate to tie the minimum wage to inflation over the business cycle.

Too often, great ideas are rendered less effective or even harmful as they are designed as policy. The upcoming minimum wage legislation, an important tool in the fight against rising inequality, could end becoming one of these policies. But designing it right could mean long-term success, for the betterment of low-income workers and our economy.

Azi Hussain is the Roosevelt Institute | Campus Network Senior Fellow for Economic DevelopmentHe is a junior in the School of Foreign Service at Georgetown University majoring in International Political Economy.

Share This

Pages