US: Class War and Labor’s Declining Share

Published on Monthly Review, by Fred Magdoff and John Bellamy Foster, March 2013.

… Labor’s Share:

James K. Galbraith examined the “squeeze on wages from the 1950s–1990s,” discovering that the wage and salary share of personal income declined every decade on average throughout this period.8 Recently, a number of studies by quite “reputable” sources have appeared—especially one by staff at the Cleveland Federal Reserve Bank and one by the Congressional Budget Office—showing the decline in the share of the economy going to labor seen in the last half of the twentieth century has continued into the present century.9 Using different assumptions and approaches they developed three different calculations, all of which indicated that labor’s share has been declining for some time. 

Determining labor’s share of the pie obviously raises a number of methodological questions, as there are various ways to calculate this. Labor’s share of income can be estimated on the basis of either (a) wages and salaries received by workers or (b) total compensation. The latter includes, in addition to wages and salaries, benefits provided by employers—both legally required insurance entitling the employee to benefits in the event of ill-health, unemployment, disability, and old-age retirement, and also voluntary benefits such as paid leave and life insurance. These benefits differ considerably. Some, such as Social Security and Medicare, are genuine social insurance programs. Others, such as the Health Management Organizations (HMOs) in which workers are enrolled by their employers, are private insurance programs, where workers are required to pay a large and increasing portion of the cost, generating high profits to insurance companies and offering diminishing use-value per benefit dollar to employees.10

It is important to recognize that benefits received by employees—distinguishing total compensation from mere wages and salaries—are very unevenly divided in the U.S. economy. They vary by (a) whether the worker is full time or part time—benefits represent 31 percent of total compensation for private sector full-time workers but only 21 percent for part-time employees; (b) union or nonunion—benefits are approximately 41 percent of all compensation for unionized goods-producing employees versus 31 percent for nonunion employees doing similar jobs; and (c) job type—for example, benefits represent 34 percent of total compensation for full-time “information” employees versus 29 percent for full-time service employees 11 … //

… A Look at Class Divisions and Wages:

The labor share of income as depicted above in terms of both total employee compensation and wages and salaries as shares of GDP is of course a very crude indicator of what is happening to the working-class income, downplaying the actual fall in working-class wages and salaries as a share of GDP. This is because the aggregate data also includes the compensation going to CEOs and other upper-level management, which ought to be counted as income to capital rather than labor. The wages and salaries (and benefits) of higher management positions have been rising in leaps and bounds in recent decades while workers’ wages at the bottom have lost ground. Consequently, the actual decline in wages as a share of GDP is much sharper where the working class itself is concerned. An examination of real hourly wages 1979–2011 by income decile (up to the 95th percentile) shows that the real hourly wage of the bottom decile shrank in absolute terms over the period, while that of the top decile increased by more than 35 percent.20 Thus, although the wage share of income has sharply dropped in the U.S. economy, this decline has not been shared equally, and applies mainly to what is properly called the working class, i.e., the bottom 80 percent or so of wage and salary workers.

We should add, parenthetically, that the term “working class” is hardly used in the dominant discourse in the United States today. Many workers conceive of themselves as part of the “middle class” because they have come to think of their income as providing them with a “middle-class lifestyle”—and because they consider themselves above “the poor,” who have been converted in the ruling ideology into the entire lower class (or underclass), leaving out the working class altogether. Nevertheless, from a perspective that focuses on class as a power relation the working class rightly includes all those who work for wages or salaries and are not in a management or predominantly supervisory position—and who are also not high-level professionals, such as doctors, lawyers, and accountants. Some members of the working class might be paid very well, but they still have the same basic relationship of worker to capital or “the boss.”21

There is no routine collection of statistics on the entire working class. The closest that the official statistics come to in this respect is in the standard private-sector reporting category called “production and nonsupervisory” workers, which includes “production workers in the goods-producing industries and nonsupervisory workers in the service-providing industries.” Although comprising some 90 million employees (about 80 percent of private-sector workers), it is a very rough approximation of the U.S. working class, leaving out many who should be counted.22 The residual group of private-sector employees not considered in this category, which we refer to in this article as “management, supervisory, and other nonproduction employees,” undoubtedly includes many employees who might well be considered part of the working class. Moreover, the production and nonsupervisory workers category applies only to the private sector and thus leaves out all government workers, many of whom, such as those who work in the post office, public schools, and local police, should be included within the total working class. So while the data tells us a lot, we must recognize its inadequacies. Still, it is the best statistical basis available for looking at the working class as a whole, as inadequate as it may be.

Chart 3 provides data related to production and nonsupervisory employees. While the share of the GDP going to the wages and salaries of all private employees has, as we have seen, decreased dramatically (lower line in chart 2), the drop in the wage income of production and nonsupervisory workers as depicted here has been even more startling. Chart 3 shows that private-sector production and nonsupervisory workers have remained a fairly constant percentage of all private employment from the mid–1960s to the present. (See the top line in the chart, indicating that these workers represented around 83 percent of all private sector workers in both 1965 and 2011.) Nevertheless, the share of production and nonsupervisory workers in the total private sector payroll dropped from over 75 percent in 1965 to less than 55 percent during the Great Recession, and has only risen slightly since … //

… (full long text, 4 charts and notes 1 to 25).

Links:

Great Recession;

Who Won the Great Recession
? on Foreign Policy, March 9, 2013;

Great Depression;

Timeline of the Great Depression: on PBS.org; and on en.wikipedia;

Europe at a Dark Crossroads: Letter from France, on New Politics, by Richard Greeman, Winter 2013.

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