Populareconomicsblog

The Financial FAQs

Reagan Budget Director David Stockman and even President Obama have called it the reverse the Robin Hood effect, or taking the meager wealth from the poorest to give to the wealthiest. Because the Tea Party has created the Republican election platform, their agenda has been laid bare, which is a blatant effort to suppress the wages and salaries of 80 percent of our workforce. This after more than 200 years of government working for both the advantaged and disadvantaged.

The Republican platform no longer even tries to hide what they want to do–make the poor and middle classes even poorer by shrinking the social safety net, as well as restrict or outright ban collective bargaining of both public and private sector employees.

It is unbelievable, but true. Their platform even includes removing all restrictions on assault rifles, with no limits on magazine sizes, and taking away a woman’s freedom to choose her own health care options, including contraception.

They are doing it in their time-tested way, playing the blame game again. As Rick Santorum said in his convention speech—“Almost half of Americans are on some form of government assistance,” implying that the poorest among US are too lazy to work. But most who receive government aid have retired on social security and Medicare, with very few on welfare, thanks to Clinton’s welfare reform that required welfare recipients to find work.

In fact, playing the blame game is their attempt to direct attention away from their own wholesale draining of the public coffers with tax breaks for the wealthiest that continue to increase the federal deficit, while income inequality is already at record levels. They would even make it worse under the Paul Ryan’s budget proposals by continuing to cut taxes, as well as social security, Medicare, education, and environmental protection programs.

Meanwhile defense spending would increase from some $500 trillion to over $900 trillion in 10 years by some estimates, if we follow Ryan’s prescription,  when we are the only super-power. This includes 9 super-carriers when no other country has even one.

What best confirms the Republican Party’s outright suppression of wages and salaries is the change in labor laws that have happened since at least 1980, when President Reagan disbanded the FAA Air Traffic Controllers Union, after only 4 days of negotiations.

In a just released report by the Center for Policy and Research, “Protecting Fundamental Labor Rights: Lessons from Canada for the United States,” begins with a comparison of the current state of organized labor in the United States and Canada.  It notes that, from the 1920s to about 1960, Canada and the United States had roughly the same unionization rates. But in 1960, the two began to diverge. As of 2011, the unionization rate in Canada stood at 29.7 percent, compared to less than half that in the U.S., at 11.8 percent.

While Canada and the U.S. both have elections as one route to forming unions, Canadian workers in several provinces also have the much faster option of card-check certification. Under card check, once a majority of employees signs cards in support of unionizing, an employer is required by law to recognize their union. . While the United States, however, workers must first file a petition showing support for unionizing and then vote to unionize in an election before an employer is required to recognize their union, unless an employer voluntarily recognizes a union.

And this can take months, during which companies are able to employ tactics to intimidate their workers. “During this time, U.S. employers usually engage in anti-union campaigns, often committing illegal acts – such as threatening to close the workplace or threatening to fire workers – to discourage them from voting to form a union,” said the report . “In fact, workers were illegally fired in about 30 percent of certification elections in 2007. Unfortunately, the legal response to such practices is slow and ineffective.”

Even more damning is the direct suppression of wages in the 23 right to work states  that say workers don’t even have to join a union, or outright banning collective bargaining of public workers, such as teachers, police and fireman, in Wisconsin, which other states are attempting to emulate.

For instance, A February 2011 Economic Policy Institute study found:

• Wages in right-to-work states are 3.2 percent lower than those in non-RTW states, after controlling for a full complement of individual demographic and socioeconomic variables as well as state macroeconomic indicators. Using the average wage in non-RTW states as the base ($22.11), the average full-time, full-year worker in an RTW state makes about $1,500 less annually than a similar worker in a non-RTW state.
• The rate of employer-sponsored health insurance (ESI) is 2.6 percentage points lower in RTW states compared with non-RTW states, after controlling for individual, job, and state-level characteristics. If workers in non-RTW states were to receive ESI at this lower rate, 2 million fewer workers nationally would be covered.
• The rate of employer-sponsored pensions is 4.8 percentage points lower in RTW states, using the full complement of control variables in [the study’s] regression model. If workers in non-RTW states were to receive pensions at this lower rate, 3.8 million fewer workers nationally would have pensions.

The damage to economic growth is considerable when the 80 percent of Americans who are wage and salary earners have not been able to boost their incomes sufficiently to grow the economy. The facts are daunting. Income inequality has been growing since the 1970s—so much so that economic growth will continue to suffer, unless workers have sufficient bargaining power to begin to grow their incomes again.  But that can’t happen unless/until they recognize who is blocking their path to greater prosperity.

Harlan Green © 2012