By RICHARD RISEMBERG
There’s been a long run of labor bashing recently in this journal. The harbor commission’s clean air plan (described as a ploy to facilitate union organizing) and the city’s intent to expand the living wage ordinance have been causing the usual wailing and gnashing of teeth among business folk. And recent articles headlined the formation of a business federation that described its role in terms of, in effect, a combat operation against its own employees.
I think the time has come to stop belaboring labor, because there is reason to believe that high wages and strong unions are, in fact, good for business.
I know this is blasphemy to many, but let us look at a few bits of recent history to see what has happened to labor, business and the economy since 1950.
The 1950s and 1960s are generally seen as a time of unprecedented prosperity a real prosperity that reached deep into the middle class, affecting almost everyone. Labor was in a good position with 33 percent of nonagricultural workers belonging to a union.
By 2003, union membership embraced only 12 percent of nonagricultural workers. By then, real wages, adjusted for inflation, had dropped drastically: According to John Miller, economics professor at Wheaton College (writing in 2004), “The average real earnings of nonsupervisory workers remain far below those of 30 years ago, despite healthy wage gains in the second half of the 1990s expansion. …”
At the same time, productivity went up, along with corporate profits and C-level earnings. While some of this was the result of technological advancements, much of it came from employees working harder, and often longer hours, for less pay (adjusted for inflation).
Workforces now are often composed largely of part-timers exempted from most labor protections and benefits. In some enterprises, every employee, down to the fellow who replaces the toilet paper in the bathroom, is a “manager,” and hence exempt from receiving overtime pay. Many businesses use “contractors” who work 40 to 60 hours a week for a single “client,” sans benefits.
The result has been that real wages have fallen in lockstep with the decline in union power.
Business owners think it proper to organize into federations; combine, collude and coordinate their actions; lobby politicians; and merge into gigantic entities to protect their own interests yet they cry and moan should workers likewise wish to combine to protect themselves.
That sort of thinking and the suppression of labor over the last 30 years have been bad for business.
Look at the correlation between prosperity and Republican vs. Democratic federal administrations. From the Stock Trader Almanac’s editor Jeffrey Hirsch: “Since 1930 (the first year decent data is available), GDP growth was 5.4 percent for Democratic presidents and 1.6 percent for Republicans.” While Republicans are reputed to be “business-friendly,” Democrats have the habit of protecting and supporting labor. And the all-holy GDP says that Democrats’ efforts also benefit business.
Recent years have not been good to business. Why? Simply, the vast majority of the population just doesn’t have enough money to live. If you don’t have enough money to buy shelter, food and transport, let alone little luxuries, the only way you can get by is to steal or to borrow.
The little guy can’t compete in theft with the Enrons of the world, and businesses need to sell the services and goods their workers generate, however little the latter may earn. Our solution: an economy founded on eternal debt.
That is never sustainable. The mortgage meltdown is only the beginning. Americans have a “negative savings rate,” an odd phrase meaning they owe money left and right. When people spend more than they make to live day to day, eventually they will have to stop borrowing, and stop buying. And they have. And wage-slaves in China and India won’t take up the slack.
Managing and investing don’t create wealth; they manipulate wealth. Workers create wealth by making something valuable (say a refrigerator) out of something cheap (iron ore); or, like the Hollywood writers who recently went on strike, creating value (movies) out of nothing at all.
But making something means nothing if you can’t sell it. If consumers don’t have money to spend, and can’t take on more debt, wealth will vanish, because the refrigerator or the movie is worth only what people are willing to pay for it.
No less a hard-shell conservative than Henry Ford understood this when he voluntarily doubled the wages of his factory hands. His fellow industrialists reacted with horror, but Ford knew his workers would now be able to afford to buy the very products they were making.
So let’s ease up on labor in Los Angeles. The harbor air needs to be cleaned; right now transport operators are subsidizing their slim profits with the deaths of their neighbors, and that cannot go on. And if a side effect of the commission’s plan is that the Teamsters can organize the truckers, then truckers will make more money, and spend most of it with local businesses.
Likewise the living wage ordinance. The unions aren’t asking much: just a few bucks to lift them over poverty level. When they have this money, they will spend it here in L.A. for the most part.
History has shown that labor strength is good for business. Let’s not stand in the way of initiatives that increase the spending power of Los Angeles consumers.
Richard Risemberg is co-editor of the urban sustainability webzine the New Colonist, publisher and editor of bike commuter webzine Bicycle Fixation, and owner of a small business that designs and manufactures clothing for bicycle commuters. He lives and works in Los Angeles.
