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The End of the American Dream

Working Harder; Falling Further Behind

by LEE SUSTAR

The American Dream is long gone.

The expectation of rising living standards for each generation of workers has given way to a low-wage economy in which young workers will struggle just to match their parents’ income–and are increasingly likely to end up worse off.

Even before the current economic crisis took hold, workers were working harder for less and carrying big debts to compensate for falling income. Record numbers of workers endured long and fruitless searches for employment, while those who had jobs are plagued with insecurity over their employment, health care and retirement.

Employers routinely violate labor laws, combining 21st century surveillance technology that monitor workers’ every movement with 19th century management practices like locking in workers on the night shift at Wal-Mart, and forcing them to work off the clock.

Two new books reflect the increasingly difficult lives of U.S. workers today. The forthcoming State of Working America 2008-2009, published by the Economic Policy Institute (EPI), marshals a mass of statistical material to show how workers are slipping further behind on virtually every score. Complementing the EPI study is The Big Squeeze: Tough Times for the American Worker by New York Times reporter Steven Greenhouse, who gives a voice to those who struggle mightily just to get by–and, all too often, fail.

Together, the books portray a society in which class lines are more rigid than the nations of Western Europe, once dominated by a wealthy aristocracy. Some 26.4 percent of U.S. workers receive poverty wages, and–in the economic expansion just ended–workers’ productivity grew by 11 percent, while real wage gains (after inflation is taken into account) amounted to nothing.

At the other end of the spectrum, the richest 1 percent has seen its share of annual earnings almost double from 7.3 percent in 1979 to 13.6 percent in 2006, the most recent year for which figures are available. And the top 0.1 percent did far better–its annual earnings increased 324 percent from 1979 to 2006, to more than $2.2 million.

The liberal writer Thomas Frank wrote about this trend earlier this year: "The landmark political fact of our time is the replacement of our middle-class republic by a plutocracy."

* * *

WITH THIS dramatic rise in class inequality comes increased burdens on African Americans and women. Some 40 years after the height of the civil rights movement, 34 percent of Black workers still earn poverty wages, as do 41.8 percent of Latino workers. Women, whose mass entry into the workforce since the 1960s seemed to be an unstoppable trend, have suffered a decline in workforce participation of 1.8 percent as a result of anemic job creation in the 2000s.

In the recovery that began in 2002, "we saw a really dramatic break in the trend in employment by gender," said Heidi Shierholz, who, along with Lawrence Mishel and Jared Bernstein, is a co-author of the State of Working America. "Women have been making huge gains, decade by decade. But the women’s employment rate actually declined over the 2000s. The economy wasn’t strong enough to bring more women in to the workforce, but actually shed women."

What’s notable about that trend, Shierholz said, is that "women historically are less buffeted by the business cycle, since they are overrepresented in industries that are less cyclical, like health care and education. But this business cycle was so hard for working people that it really hit everyone."

In fact, according to estimates in the State of Working America, some 1.4 million people who could have held jobs dropped out of the labor market altogether even as the economy expanded. The authors estimate that if job creation in the 2000s had kept pace with the increase in jobs in the 1990s boom, an additional 7 million jobs would have been created.

The lack of jobs–particularly good-paying ones–has contributed to a rise in poverty compared to the 1990s. According to U.S. government statistics, 12.3 percent of the population, or 36 million people, were under the poverty line in 2006. But the State of Working America, relying on a more realistic measure, says that the real poverty rate was actually 17.7 percent–another 16 million persons.

Being poor doesn’t necessarily mean being unemployed, as Greenhouse points out in The Big Squeeze, "The annual pay for Wal-Mart’s full-time hourly employees averaged $19,100 in 2007–some $1,500 below the poverty line for a family of four."

Even better-paid workers find their lives precarious at best, forced to accept jobs that lack decent benefits. The number of workers covered by employer-provided health insurance declined from 69 percent in 1979 to just 55 percent in 2006.

Millions more workers–some 30.6 percent–are "nonstandard" employees, hired as day laborers, part-time or temporary workers, or so-called "independent contractors" who are employees in all but name. The State of Working America authors note that just 20.8 percent of nonstandard workers receive health care insurance from their jobs.

Corporate America has increasingly turned to such workers in the name of "flexibility." Greenhouse recounts the story of Jean Capobianco, a driver for FedEx Ground outside Boston.

Like all FedEx Ground independent contractors, she had been forced to buy her own truck as a condition of employment–and even to pay for substitute drivers in order to have a vacation. But when she was gravely ill following surgery for cancer in 2004, FedEx Ground abruptly sent her a letter informing her that she was terminated. As Greenhouse writes:

Fired and with no income, Jean saw no option but to stop paying the monthly installments on her truck. She had already paid more than $40,000 on it, but now she was powerless to prevent the truck from being repossessed.

"I was devastated," Jean said. "Ten years of beating my brains out for them, and they throw me away like I was a piece of garbage. I’m devastated to think that any human would do that to somebody who doesn’t know whether she’s going to live or die."

FedEx Ground officials said they had sympathy for Jean’s plight, but said they had to terminate her under the company’s rules–she was no longer covering her route and hadn’t found a replacement driver. "I had tried finding a replacement, and then I was on the damn operating table," Jean said. "My hands were tied. How was I supposed to find a replacement?"

* * *

CENTRAL TO the decline in working-class living standards is a 30-year-old attempt to drive down wages. It began with the recession of 1974-75 and continued in economic booms as well as slumps.

As measured in today’s dollars, the State of Working America authors note, "from 1979 to 2007, wages are up only slightly, from $16.88 in 1979 to $17.42 in 2007, a growth of just 0.1 percent per year over nearly 30 years–virtually stagnant, despite some rapid growth in the late 1990s."

In the recovery of the 2000s, the share of national income going to profits reached a 40-year high. This change in the distribution of national income, the authors estimate, is "the equivalent of transferring $206 billion annually from labor compensation to capital income."

A major factor in the expansion of low-wage work is the weakness of organized labor. Unions represent just 12.1 percent of workers, down from about 35 percent in the 1950s. The reason is simple: Employers, whose anti-worker policies have reduced unionization in the private sector to its weakest state in a century, are prepared to go to almost any extreme to keep workers from getting organized.

"In the 1960s, there were perhaps 100 ‘union-avoidance’ consultants; today, there are some 2,000, ranging from shady outfits that routinely break the law to some of the nation’s most respectable law firms," writes Greenhouse.

His book contains several stories of workers who tried to organize a union, but faced reprisals and terminations–such as Marie Sylvain, a nursing home worker who was fired for organizing and only got her job back after four and a half years, and the workers at EnerSys, a South Carolina battery manufacturer that fired union leaders, imposed pay cuts and ultimately closed the plant rather than tolerate unionization.

Weak unions means lower wages for all workers, according to the findings in the State of Working America. Workers covered by a collective bargaining agreement have wages that are 14.1 percent higher than nonunion workers–while African Americans and Latinos have union premiums of 18.3 percent and 21.9 percent.

In the era when unions were stronger, employers in nonunion companies were compelled to raise wages as well, in order to try and pre-empt organizing drives. Today, by contrast, nonunion employers are setting the pace for unionized employers, who demand concessions, like lower, second-tier wages for new hires.

Caterpillar, the heavy machinery manufacturer, is a case in point. Greenhouse tells the story of lower-tier workers at a Caterpillar plant outside Peoria, Ill., where workers are represented by the United Auto Workers:

Under the two-tier contract at Caterpillar, the most Arnold can ever earn is $14.90 an hour or $31,000 per year–so little, he says, that some of his coworkers are living at home with their parents. "Some," he said, "are even on food stamps."

A 52-year-old who works alongside Arnold, doing the exact same work, earns $19.03 an hour, or just under $40,000 a year, because employees who started before Arnold began in 1999 are on a higher wage scale. "I don’t like it," Arnold said. "I wish I was at least able to get to the pay scale that the guys who are right next to me are making."

Scott Wilcoxon, a 26-year-old Navy veteran who not long ago served as an electrician on a nuclear submarine, operates five computer-controlled metal-cutting machines at Caterpillar. The maximum he can ever earn is $19.84 per hour, 21 percent below the maximum for the 50-year-olds working next to him.

Wilcoxon said it’s a struggle to support his wife and three children. "We can buy our food and gas," he says. "But we can’t go out to eat at a nice restaurant. We can’t go to a movie. We can afford very few extras. The only way I can afford Christmas presents is by working seven days a week to make extra money."

Even better-paid workers have seen their incomes stay–at best–flat, even as inflation zeroed out hourly pay raises and employers cut back on work hours, the EPI found:

For the first time since the Census Bureau began tracking such data back in the mid-1940s, the real incomes of middle-class families are lower at the end of this business cycle than they were when it started. This fact stands as the single-most compelling piece of evidence that prosperity is eluding working families.

* * *

ADDED TO this picture in recent months are the rising cost of food and fuel, the disappearance of affordable health care and the wipeout of working-class homeowners’ wealth in the mortgage crisis. The U.S. working class, having endured an economic boom in which all the increase in national income went to capital, now faces a recession in which living standards are being cut at an extraordinarily rapidly pace.

All this means that class inequality in the U.S., entrenched over the last 30 years through union-busting, tax cuts for the wealthy and cuts in social spending, is likely to become even greater.

According to the State of Working America, statistics have belied the great American myth of upward mobility for hard-working people of modest or poor beginnings. "About 60 percent of families that start in the bottom fifth [on the income scale] are still there a decade later," the authors note. "At the other end of the income scale, 52 percent of families start and finish in the top fifth." And from one generation to another, the authors note, "there is considerably more mobility in most of the developed economies of Europe and Scandinavia than in the United States.

Greenhouse makes a similar point. "In the United States, it was always assumed that your children would earn more and live better than you do," he writes. "For the first time, however, many Americans are worried that their children’s generation will actually live worse than they do. Those fears…are fully justified."

For more than three decades, Corporate America has waged what a 1970s union leader famously called a one-sided class war. And as the U.S. enters its worst economic crisis in decades, those attacks will intensify even further.

No union can avoid confrontation with rapacious employers determined to make labor bear the costs of the recession. No worker can be certain that his or her job or health benefits are secure. No working-class parents can be confident that their children will have better opportunities in life than they had. There’s little alternative other than to fight back–or accept being pushed down even further.

LEE SUSTAR writes for the Socialist Worker.

 

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