Reports from the Economic Front

a blog by Marty Hart-Landsberg

Monthly Archives: February 2011

A New American Labor Movement?

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The times are definitely getting interesting and increasingly hopeful.  Many people are even starting to make comparisons between the struggles in Egypt and those in Wisconsin, Ohio, and Indiana. 

Egyptian workers are offering their support to U.S. workers.   Some Egyptians are even sending pizza’s to those demonstrating in Madison.    By the way, if you want to do the same, you can call Ian’s Pizza at 608-257-9248. It has shut down its regular operations and is only doing protest deliveries.  It reports orders from 45 states and 12 countries. 

Representative Paul Ryan, in a revealing comment on Wisconsin events, said “It’s like Cairo has moved to Madison.”  Gives you a good sense how those on the right view popular movements for democracy.

The events in Wisconsin were triggered by Republican Governor Scott Walker, who hoped his bill to strip all Wisconsin public sector workers of their union rights would launch a broader rightwing offensive against public sector unions everywhere, much as Ronald Reagan’s 1981 attack on PATCO (the air-traffic controllers union) was the opening salvo in a major (and successful) offensive against unions in general.

Walker sought to hide the true meaning of his effort by arguing that he was only working to balance the budget.  The Wisconsin state budget is in fact out of balance; the state faces a deficit of some $3.6 billion over the next two years.  But Walker is not only proposing that public sector workers greatly increase their contributions for health care and pensions, he is also proposing changes that would end the ability of the unions to collect dues and engage in collective bargaining over non-wage issues.  Moreover, the amount the State would collect from his proposed budgetary changes amount to no more than $300 million over the next two years, nowhere near what is needed to close the deficit.  Significantly, Wisconsin public sector workers have even communicated their willingness to accept the higher health care and pension costs if the Governor would drop his attempt to destroy their unions—and the Governor has refused.

Missing from the discussion of the budget deficit are the following points made by Joshua Holland in his article, “12 Things You Need to Know About the Uprising in Wisconsin“: 

At the beginning of this year, the state was on course to end 2011 with a budget surplus of $120 million. As Ezra Klein explained, newly elected GOP Governor Scott Walker then ” signed two business tax breaks and a conservative health-care policy experiment that lowers overall tax revenues (among other things). The new legislation was not offset, and it turned a surplus into a deficit.” Walker then used the deficit he’d created as the justification for assaulting his state’s public employees.

Wisconsin’s public workers have already “made sacrifices to help balance the budget, through 16 unpaid furlough days and no pay increases the past two years,” according to the Associated Press.

There are already 13 states that restrict public workers’ bargaining rights and it hasn’t helped their bottom lines.  As Ed Kilgore notes, “eight non-collective-bargaining states face larger budget shortfalls than either Wisconsin or Ohio,” and ” three of the 13 non-collective bargaining states are among the eleven states facing budget shortfalls at or above 20%.”
 
Health-care costs, rather than workers’ greed, are what has driven up the price of employees’ benefits. But generally speaking, those public sector health-care costs have grown at a slower clip than in the private sector.
 
Last year, more working people belonged to a union in the public sector (7.9 million) than in the private (7.4 million), despite the fact that corporate America employs five times the number of wage-earners.  37 percent of government workers belong to a union, compared with just 7 percent of private-sector employees.
 
Whether in the public or private sector, union workers earn, on average, 20 percent more than their non-unionized counterparts. They also have richer retirement and health benefits — the “union compensation premium” rises to almost 30 percent when you include those bennies. That workers can still negotiate from a position of strength somewhere in the U.S. is simply unacceptable to the right, and that’s what this is about.

Public sector workers have, on average, more experience and higher levels of education than their counterparts in the private sector (they are twice as likely to have a college degree). When you adjust for those factors, they make, on average, 4 percent less than their private-sector counterparts. Like any group of workers with a high union density, they have better benefits, on average. But even including those benefits, state and local employees still make less in total compensation than they would doing the same work in the private sector.

Of course, the main cause of state budget deficits is the economic crisis, which drove down tax revenues at the same time it caused an increase in the demand for services.   But it is precisely the causes of the economic crisis—the policies of deregulation, liberalization, and privatization—that those in power don’t want to discuss.  

In reality, the anti-union policy proposals of governments in Wisconsin and the other states have very little to do with budget issues–they are driven by the quest for power—the power to promote a vision of the economy.  Right now corporate forces have power and they are eagerly using it to pursue changes that will further strengthen their ability to generate profits at the public expense.  Weakening unions, especially public sector unions, is clearly a key part of their strategy.  That is why shortly after Walker proposed his legislation, governors and legislatures in other states quickly followed with similar bills

The New York Times captures the moment this way:

To gaze upon the world of American corporations is to see a sunny place of terrific profits and princely bonuses. American businesses reported that third-quarter profits in 2010 rose at an annual rate of $1.659 trillion, the steepest annual surge since officials began tracking such matters 60 years ago. It was the seventh consecutive quarter in which corporate profits climbed.

Staring at such balance sheets, you might almost forget that much of the nation lives under slate-gray fiscal skies, a place of 9.4 percent unemployment and record levels of foreclosures and indebtedness.

And as John Stewart correctly notes—the corporations want to permanently remake the American economy and they are pressing their advantage to force U.S. workers into doing the work for them

One can only hope that what is happening in Wisconsin is the start of a new American labor movement.  We desperately need one, and better now than latter.

The Anti-Union Offensive

Decades of attack on the trade union movement have succeeded in lowering the union membership rate for private sector workers to only 6.9 percent.  The union membership rate for public sector workers, while also in decline, still remains significantly higher at 36.2 percent. 

Not surprisingly then, anti-union forces are seeking to take advantage of the current economic crisis to destroy public sector unionism as well.  Perhaps the most aggressive attack is taking place in Wisconsin, where newly elected governor Scott Walker is basically seeking to end all collective bargaining rights for Wisconsin state, county and municipal workers.  The bill Walker is pushing in the Republican dominated state legislature begins:

Under current law, municipal employees have the right to collectively bargain over wages, hours, and conditions of employment under the Municipal Employment Relations Act (MERA), and state employees have the right to collectively bargain over wages, hours, and conditions of employment under the State Employment Labor Relations Act (SELRA). This bill changes MERA and SELRA with respect to all employees…

It then goes on to say: “This bill limits the right to collectively bargain for all employees who are not public safety employees…”   Here are some examples of what the bill would do:

  • COLLECTIVE BARGAINING. Make various changes to limit collective bargaining for most public employees to wages. Total wage increases could not exceed a cap based on the CPI unless approved by referendum. Contracts would be limited to one year and wages would be frozen until a new contract is settled. Collective bargaining units are required to take annual votes to maintain certification as a union. Employers would be prohibited from collecting union dues and members of collective bargaining units would not be required to pay dues. Changes effective upon expiration of existing contracts. Law enforcement, fire employees and state troopers and inspectors would be exempt from the changes.
  • STATE EMPLOYEE ABSENCES AND OTHER WORK ACTIONS. Authorizes appointing agencies to terminate any employees that are absent for three days without approval of the employer or any employees participating in an organized action to stop or slow work if the governor has declared a state of emergency.
  • QUALITY HEALTH CARE AUTHORITY. Repeals the authority of home health care workers under the Medicaid program to collectively bargain.
  • CHILD CARE LABOR RELATIONS. Repeals the authority of family child care workers to collectively bargain with the state.
  • UW HOSPITALS AND CLINICS BOARD AND AUTHORITY. Repeals collective bargaining for UWHC employees. State positions currently employed by the UWHC are eliminated and incumbents are transferred to the UWHC Authority.
  • UW FACULTY AND ACADEMIC STAFF. Repeals authority of UW faculty and academic staff to collectively bargain.
  • PENSION CONTRIBUTIONS. Require that employees of WRS employers and the City and County of Milwaukee contribute 50% of the annual pension payment. The payment amount for WRS employees is estimated to be 5.8% of salary in 2011.
  • HEALTH INSURANCE CONTRIBUTIONS. Requires state employees to pay at least 12.6% of the average cost of annual premiums.

Walker has even announced that he is prepared to call out the National Guard to repress union resistance.

Indiana and Ohio are moving in the same direction.  For example, bills are moving through the Indiana legislature to outlaw teacher collective bargaining.  Here is what the Senate bill (which is considered better than the House bill) proposes:

  • Repeal of collective bargaining by allowing school boards to unilaterally adopt their own prior offer if teacher bargainers don’t agree to the board’s last offer before the contract expires eliminating continuation of the existing (status quo) contract until a new one replaces it and negating any bargaining progress made in current negotiations.
  • Repeal of the statute that bases salaries on teacher qualifications (credentials) and experience;
  • Prohibition of bargaining on school calendar, teacher evaluation and dismissal procedures and criteria; school restructuring and contracting out dual-credit and other post-secondary-credit courses;
  • Prohibition of inclusion of discussible items in the contract;
  • Deletion of working conditions from discussible items;
  • Repeal of the majority teacher organization’s right to appoint all teacher representation on school committees. Administrators would appoint all representatives to school committees.
  • Prohibition of teacher-bargained input into school restructuring options for schools failing to meet state or federal accountability standards; and
  • Expansion of reasons for which an employee can be suspended without pay.

These bills are generating opposition.  In Wisconsin some 15,000 workers turned out to demand that the legislature reject Walker’s bill.  Here is a short video that gives a sense of the turnout.  

Significantly, several past and present Green Bay Packer players have issued a public statement in defense of Wisconsin public sector workers.

Wisconsin does face a serious budget deficit of $3.6 billion.  But Walker is unwilling to acknowledge that this deficit owes much to years of corporate tax cutting (some 2/3 of all Wisconsin corporations currently pay no taxes) and a devastating economic crisis generated by a structually unbalanced economy.  His attack on public sector unions has far more to do with breaking the unions than it does closing the budget gap.  His plan to make workers pay half the costs of their pensions and at least 12.6 percent of their health care premiums would save the state no more than $30 million by June 30 and $300 million over the next two years.  

Make no mistake about the seriousness of what is going on right now—all workers lose if this anti-union offensive currently underway in several states succeeds.  All unions need to acknowledge that this attack is part of a bigger class war against working people and organize accordingly.  If they fail, we can expect that the political forces moblizing to gut social programs and empower corporations will be emboldened to push ever harder.  

Egypt And The United States

Perhaps like me, you are watching the events in Egypt wondering if the popular forces in the streets and squares can develop the organizational force and political clarity needed to push out the existing regime and remake Egyptian society.  Initially, it seemed that their number and determination would be enough.  Now, it is less certain.

The elites within Egypt are showing great staying power and appear to have secured the support of elites in the U.S. and Europe.  Increasingly, it appears that they are willing to sacrifice some of their own, in a civilized manner of course, and implement some reforms, to ensure the survival of the regime.  Will that be enough to demobilize the people?   How should the movement for change respond?

We in the United States faced our own moment of possibilities, although it passed so quickly and so quietly few remember.  We had a huge economic crisis, a crisis brought on by an economic system that generated ever growing profits at ever greater social cost.  People came out into the streets demanding change. There were calls for restructuring the financial system, the tax system, labor markets, trade policies, government spending priorities, foreign policy,  . . . the list goes on. 

But U.S. elites held strong and we never managed to develop the force and clarity necessary to move events in a progressive direction.   The government quickly came to the rescue of the banks and other corporations, bailing them out at a cost of trillions of dollars of public money.  As a consequence, the economy has stabilized (at least for the present), a few reforms have been made, and . . . well, the same economic structure remains in place. 

The government tells us that thanks to its intervention things will soon return to “normal.”  In short, there is no need for major change.  Such a message conveniently overlooks the fact that this normal, marked by the period 2001-2007, was not very good for the great majority of people.  Real income declined, economic insecurity grew, poverty increased, investment stagnated, debt exploded—the only positive was the rapid increase in profits captured by the top 1-5 percent.  Should this really be our standard?

Given how little change has taken place, it should not surprise us that the economy is performing pretty much as it did before the crisis.   The following three charts come from the Michael Roberts Blog.  As the first chart shows, profits have recovered quite nicely since the crisis.  Although the ratio of profits to GDP has not quite reached its pre-crisis peak, it is definitely on the way.  

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Unfortunately, much as in the pre-crisis period, this profit recovery has done little to support healthy economic growth.  One indictator: The chart below shows that non-residential private investment remains at relatively depressed levels. 

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Another indicator: The chart below shows that labor conditions also remain depressed.  The pink line shows the employment to population ratio.  In many ways it is a better indicator of the employment creation potential of the economy than the unemployment rate.  Despite the so-called economic recovery, this ratio has yet to show any meaningful improvement.  The male participation rate, illustrated by the green line, continues to hit record lows.  

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The recent crisis was trigger by the collapse of the debt driven housing bubble.   It was overcome largely because of massive government spending.  Elites are now pressing for cutbacks in this spending.  If they succeed, we will likely face a new downturn–and a new moment of possibilities.

While contemplating the options facing the Egyptian people, we would do well to begin thinking about how best to prepare ourselves for what lies ahead in this country.

The State Of Working America

The Economic Policy Institute has, for many years, published a very useful annual volume detailing “The State of Working America.” 

This year, it has created a State of Working America web page to make it easier for people to access its many (more than 200) charts on various economic and social trends, including income, jobs, poverty, productivity, unionization, access to health care, economic mobility, wealth, and more.   It is well worth checking out.

There is also an interactive chart, When Income Grows, Who Gains, that “tracks income trends from 1917 through 2008 and lets users compare patterns of income distribution for any period within that 91-year time frame. Between 1986 and 2000, for example, the richest 10% of Americans saw 77% of the country’s average income growth, but in recent years they have captured much more. Between 2000 and 2007, all of the country’s income growth went to the top 10%, while average incomes for the lower 90% actually declined.” 

If current policies remain in place one can only imagine a continuation, if not sharpening, of these income trends.  And given that President Obama has appointed William Daley, a former banker for JP Morgan Chase, as his chief of staff, and Jeffery Immelt, CEO of General Electric, as head of his outside panel of economic advisers, there is little reason to expect anything else.