Daniel J. Leffler
We hear daily news reports of the stagnant economy, the decline of the middle class and the debate over minimum wage increases. I believe there is a general discontent among average Americans over their existing economic conditions and particularly those in the lower socio-economic group. The wealth gap continues to grow, opportunities for advancement continue to decline and the average American is disillusioned and frustrated by the stagnation. The government is mired in gridlock with multi-millionaires bickering over a $.25 increase in the minimum wage. Corporate profits soar and the stock market rises on the backs of the American worker. As a purely anecdotal observation, it would seem not unlikely that this general American discontent will be sparked into protest and civil unrest.
“It used to be that when the U.S. economy grew, workers up and down the economic ladder saw their incomes increase, too. But over the past 25 years, the economy has grown 83 percent, after adjusting for inflation — and the typical family’s income hasn’t budged. In that time, corporate profits doubled as a share of the economy. Workers today produce nearly twice as many goods and services per hour on the job as they did in 1989, but as a group, they get less of the nation’s economic pie. In 81 percent of America’s counties, the median income is lower today than it was 15 years ago.”
Bloomberg conducted an analysis that “compared the disclosed CEO compensation mandated by the SEC — including salary, bonus, perks, changes in pension accruals, and the value of stock-based awards — with U.S. government data on average worker pay and benefits by industry.” “The AFL-CIO’s average CEO-to-worker multiple at big U.S. companies is 357. Bloomberg’s average ratio for Standard & Poor’s 500 companies is 204; the average of the top 100 companies [that Bloomberg studied] was 495. That is, CEOs of the companies on that table averaged 495 times the income of nonsupervisory workers in their industries.” The companies that Bloomberg studied were all publicly traded companies (as compared to privately held companies where owners receive the profits). For example, depending on the average ratio used, if the average worker in a particular industry made $50,000 per year, the CEOs of that industry were paid $17,850,000, according to the AFL-CIO, or $10,200,000, according to Bloomberg. A ridiculous disparity exists between the rank-and-file-worker pay and CEO pay. “Peter Drucker, the celebrated management theorist, certainly thought the CEO-to-rank-and-file multiple mattered. Starting with a 1977 article and until his death in 2005, Drucker considered 25-to-1 or even 20-to-1 the appropriate limit. Beyond that, he indicated, it’s bad for business.” In Drucker’s view, the excessively high CEO-to-employee ratio undermines teamwork and promotes a winner-takes-all culture.
Further troubling is the gap between worker pay and company revenue based on productivity. In an interview with Jan W. Rivkin, an economist and senior-associate Dean for research at Harvard Business School, the question was asked about the decline of unions and the affect on the middle class. Rivkin replied, “From the end of WWII until the 1970s productivity in the U.S. and median wages grew in lockstep. But from the late 1970s until today we've seen a divergence, with productivity growing faster than wages. The divergence indicates that companies and the people who own and run them are doing much better than the people who work at the companies. If the U.S. economy was healthy and competitive, we'd see firms able to do two things: win in the global marketplace and lift the living standards of the average American. Large businesses and the people who run them, and invest in them, are thriving but working and middle-class Americans are struggling — as are many small businesses. When asked what role the decline of collective bargaining played in creating the gap, Rivkin replied that there are several causes, one of which “is shifts in institutions and politics and bargaining power, which is embodied in the decline in collective bargaining and the weakening of labor unions. There’s no question that that is part of the story.”
In 1983, the CEO to worker gap was 46-to1. The average two-parent American family worked more hours – 26 percent more hours – in 2009 than in 1973; however, earned only 23 percent more in pay in 2009 than it did in 1973, after adjusting for inflation. “Take away the extra time on the job and wages haven’t gone up at all for the median family in more than 40 years.”
“In 1983, the first year in which comparable union membership data are available, 20 percent of employees were unionized. By 1990, 16 percent of employees were unionized. The unionized share currently stands at 11 percent. This prolonged decline has been driven by a sharp drop in private sector unionization rates. Today, only 7 percent of private sector workers are union members.”
According to Forbes Magazine, “the decline of unions and worker bargaining power has hurt the middle class more than they know.” Forbes’ study showed that the middle class share of income almost mirrors the decline of union membership and that there is a high correlation between union membership and middle class income. Forbes noted that, “There are of course other factors that affected middle class income but the decline of unions and their wages was certainly a big factor. The long term goal of the corporations to get rid of unions was part of a larger goal of reducing labor costs. The economist Joseph Stieglitz has asserted that, ‘strong unions have helped reduce inequality, whereas weaker unions have made it easier for CEOS, sometimes working with market forces that they have helped shape, to increase it. The decline in unionization since World War II in the United States has been associated with a pronounced rise in income and wealth inequality.’”
Yet, 93% of private sector employees, through largely their own choice, have no bargaining power to demand better wages and benefits. Consider that million and billion Dollar corporations have teams of the brightest lawyers in the Country ready to suppress any worker demands and abolish a united workforce. Imagine what bargaining power a lone employee making $10.00 an hour has to demand better wages from his/her employer. That employee is likely to be shown the exit door. It is time to swing the pendulum back in favor of the working American.
As a public employee, you may ask, “why do I care?” 1) The “Right-to-Work” trend in the United States is specifically designed to reduce the bargaining power of public sector labor associations just as the government and corporations have stripped private sector employees of bargaining power; 2) the decline of the middle-class and the tax Dollars associated with it will reduce local government revenues, which public sector wages are based on; 3) the future of civil unrest will continue to grow and as Police Officers, you are on the front lines. If the anti-union advocates are successful in stripping public sector bargaining rights, the same decline in worker pay, benefits and job security will surely ensue.
It matters little whether you are Republican, Democrat, independent, conservative, liberal or of any other political philosophy, the present reality is that the wave of worker suppression affects every average American. The only way to maintain the present bargaining rights of public sector employees and to reassert the rights of private sector employee is to stand united. Police Officers, Firefighters and all public employees must speak with one voice and stand against the private interest groups and politicians seeking to strip our rights. Private sector employees, your spouses, neighbors, and friends, should be encouraged to work together to improve their terms and conditions of employment.
Prophetically, John F. Kennedy said 55 years ago, “We are going to have over 300 million people living in this country in the year 2000. Many of them will live in this state. We are going to have to make sure that we pass on to our children a country which is using natural resources given to us by the Lord to the maximum; that every drop of water that flows to the ocean first serves a useful and beneficial purpose; that the resources of the land are used, whether it is agriculture or whether it is oil or minerals; that we move ahead here in the West and move ahead here in the United States. *** Pittsburgh, Wyoming, Montana, Wisconsin are all tied together. A rising tide lifts all the boats. If we are moving ahead here in the West, if we are moving ahead in agriculture, if we are moving ahead in industry, if we have an administration that looks ahead, then the country prospers. But if one section of the country is strangled, if one section of the country is standing still, then sooner or later a dropping tide drops all the boats, whether the boats are in Boston or whether they are in this community.”
 Tankersley, Jim, Why the Middle Class Is Lost, The Washington Post, December 12, 2014.
 Smith, Elliott Blair and Phil Kuntz, Disclosed: The Pay Gap Between CEOs and Employees, Bloomberg Business, May 2, 2013.
 White, Gillian S., Why the Gap Between Worker Pay and Productivity Is So Problematic, The Atlantic, February 25, 2015.
 Wong, Vanessa, Top CEOs Make 331 Times the Average Worker. Does Anyone Care?, Bloomberg Business, April 18, 2014.
 Tankersley, Jim, The Devalued American Worker, The Washington Post, December 12, 2014.
 Meyer, Jared, Why 78 Million Millennials Are Choosing Non-Union Jobs, The Fiscal Times, April 14, 2015.
 Collins, Mike, The Decline Of Unions Is A Middle Class Problem, Forbes, March 19, 2015.
 Senator John F. Kennedy in Cheyenne, Wyoming, September 23, 1960 – Lazere, Donald, at: http://historynewsnetwork.org/article/73227#sthash.ac93JuuV.dpuf