THE DECLINE OF WORKERS' INCOMES, THE WEAKENING OF LABOR'S POSITION
Brand, H.
Notwithstanding the vigorous economic upswing that began early in 1983 and continues at this writing, if at a slower pace, the American labor movement remains on the defensive. Its wage...
...V The ascendancy of Federal Reserve policy in the late 1970s and early 1980s turned out to be enormously damaging to the interests of labor...
...partly because of industry resistance...
...True, the effects of these policies have not been uniformly consistent with their aim...
...nor was it advised by "mainstream" economists...
...but fewer than two-fifths of all wage and salaried workers hold jobs there...
...For sources, see Note 17...
...Significantly, the Bulletin article focuses upon unions and the erosion of "traditional" wage practices, thus implicitly measuring the central bank's success with disinflation...
...The explanation must be sought on two levels, one forming the context of the other...
...This proposition, preposterous as it may sound, has lent theoretical justification to proposals to restrict and reduce unemployment benefits...
...The productivity gap between the United States and other countries has thus greatly narrowed...
...Wage pressures, responding to earlier increases in living costs, now began to mount again...
...Interest payments go mostly to high-income recipients: in 1976, 50 percent of all bonds and 37 percent of all other debt instruments were held by the top 1 percent of all persons in the United States...
...We have pointed to import penetration in connection with employment in the capitalgoods industries...
...9 Philip Ross, "The Role of Government in Union Growth," Annals, p. 80...
...Some economic policy-makers within the Federal Government are reluctant to ratify 8 percent wage inflation...
...Economists generally reject the idea that structural shifts—for instance, locational changes, changes in consumer preferences, new technologies—give rise to serious employment problems...
...In late 1932, Professor George Barnett, dean of Johns Hopkins University's labor economists, addressed the convention of the American Economic Association and asserted that trade unionism was of lessening importance...
...The "oldtime religion" was now imposed, and it appeared to confirm the validity of the Phillips curve...
...All these developments—higher unemployment, a declining minimum wage, a growing number of job-seekers, as well as deliberate wage-reducing policies—have undermined the standards shaped by the unions...
...provisions that would have 292 mandated prevailing wage standards for such jobs, would have stipulated the planning process mentioned above, and therefore would quite likely have restricted monetary policy...
...Thus the labor movement has not yet been able to adapt to the social and economic changes that these employment patterns indicate...
...Here we concentrate upon policies with a direct bearing on employment and wages...
...The central bank must indeed facilitate the financing of these deficits, but it can also limit the creation of credit elsewhere in the banking system...
...In its early versions, its authors sought, not merely to restate full-employment goals, but to create institutions to ensure their attainment...
...Let us pursue this point...
...Nor has it substantially lowered interest rates: these have declined from their historic highs in the early '80s, but yields on long-term corporate bonds remain some 50 percent above 1977 levels (a stage of the business cycle roughly comparable with the present one...
...Such resistance to unionization has resulted in a steady decline in the proportion of representation elections resulting in certification— from 68 percent in 1955 to 53 percent in 1971 and 43 percent in 1981...
...Perhaps all this is so...
...14-24...
...even failed organizing drives result in improved benefits for the workers who rejected the union...
...Possibly so...
...Robert E. Hall, "The Process of Inflation in the Labor Market," Brookings Papers on Economic Activity, 2:1974, Pp...
...Unemployment data comes from the Bureau of Labor Statistics...
...The meagerness of the ratios derives in part from the high proportion of part-time workers here—more than one-third of total employment in trade, and more than two-fifths in services...
...Committee on Banking, Housing, and Urban Affairs, United States Senate, Full Employment and Balanced Growth Act of 1978...
...It can become a "life raft . . . for skilled workers" and other relatively privileged but small numbers of employees...
...Whether the central bank has succeeded— through sheer persistence in enforcing tight credit—in establishing a new Phillips curve cannot yet be said...
...Unemployment rates, even for experienced male workers in the cyclical recovery of the late '70s, were higher than in earlier recession years, and then reached postwar records in the early '80s...
...The statistics bespeak the true "industrial policy" of the United States, which seeks to invigorate competition by depressing wages and, where possible, prices...
...The biggest single debtor now is the state, while the cost of neutralizing the effects of high debt is largely shifted to the worker...
...Solomon Barkin and Albert A. Blum, Annals of the American Academy of Political and Social Science (hereafter Annals), November 1963...
...The scaling-back and, in many collectivebargaining situations, the elimination of productivityimprovement factors have been important elements in vanishing real-wage gains...
...4) Notes and footnotes should also be typed double-spaced, on a separate sheet...
...They were not imposed without some consultation with labor...
...If there's a delay, it's because a few editors are reading your article...
...The decentralized nature of establishments in these industries, even where ownership is concentrated, adds to the difficulties...
...All these conditions are sadly lacking today...
...the number of trade-union members had returned to about its 1958 level, after having increased by about one-fifth in the late '70s...
...Hearings, May 8, 9, and 10, 1978, p. 213...
...22 Freeman and Medoff, What Do Unions Do?, pp...
...Its wage settlements have shrunk—in 1984, major collective bargaining contracts provided the lowest average wage adjustments in the 17 years for which the data have been reported by the Bureau of Labor Statistics...
...Monetary policy has been directed, in part, to neutralize these pressures...
...Rather, as Axilrod admits, "the cost of the reduction of inflation was a substantial recession with relatively high rates of unemployment...
...This has had the virtue of aiding in the financing of the budget deficit, yet its effects on export and import industries recall the revaluation of the British pound to gold parity in the early 1920s—subsequently a source of intractable unemployment, lower wages, and great social strife...
...Since the 1950s, management resistance to unions has increased, and has been successful, in the context of government policies inimical to the interests of labor, organized or not...
...banks—subjects beyond the compass of this article...
...hence unions are the targets of "flexibility...
...The influx of vast amounts of foreign capital attracted by high interest rates, the sound-money policy of the central bank, and the political safety of the United States, all have offset the crowding-out effect that might otherwise have occurred...
...This would be "unprecedented" for what it implies for economic institutions, the author held...
...Congress of the United States, Congressional Budget Office, Major Legislative Changes in Human Resources Programs Since January 1981 (Washington, D.C.: U.S...
...The controls were instituted in 1971 after wage hikes in organized manufacturing industries had begun to average more than 7 percent annually despite recession the year before...
...The conservative trend has many other facets that vitally affect wages and working conditions, including deregulation, the reduction of social welfare, restrictions on unemployment compensation, privatization of what should be public services, and so forth...
...We have already alluded to union/nonunion wage differentials...
...The result is remarkable: one in 20 workers who favored the union got fired...
...It is an attitude devoid of a sense of equity, let alone sympathy, which one had come to expect from so-called liberal economists...
...Yet employment policy always had to balance the objective of high employment against its wage-raising effects...
...According to Jeffrey D. Sachs, writing on "Real Wages and Unemployment in OECD Countries"— One school of thought holds that much of the unemployment problem in Europe, and to a lesser extent in the United States and Japan, results from real wages at inappropriate levels, and thus the problem cannot be ameliorated by adjusting demand-management policies...
...Close to three-fifths of trade-union members are employed in the goods-producing industries, transportation, and public utilities...
...It is a sign of the trade unions' weakened position that wage gains—and, by extension, gains in total compensation—have lagged behind nonunion gains...
...This has surely been a development unforeseen in its dimensions, as have its consequences for the value of the dollar and the impact on foreign trade...
...The problem of inflation," said Charles Schultze, the CEA chairman, "is much too serious to be given second place among our priorities," and he expressed satisfaction that the final version of the bill "puts inflation control as a major objective of national policy...
...Thus in reviewing a book favorable to unions, Michael Wachter, an economist associated with the Brookings Institution, writes: The unstated implication is that the negotiated wage in collective bargaining represents the marketclearing wage and perhaps the "just wage," while the lower wage in the nonunion sector symbolizes a kind of exploitation...
...Only 60 percent of these 5.1 million had found reemployment by early 1984, "many at lower pay" (perhaps 45 percent, with a large proportion of these taking pay cuts of 20 percent or more...
...See Employment and Earnings, January 1985 issue, pp...
...The overarching pursuit of a "macroeconomic" policy would be facilitated, so it was thought, by the guidelines...
...It can demand meaningful work...
...and they excluded from their purview the lowest-paid workers...
...6) Please bear with us—we have accumulated quite a backlog of material, and you may have to wait for a few issues before you see your article in print...
...There has been a virtual consensus among economists that wages are too high, and that greater labor-market "flexibility" would introduce greater "flexibility" into wage patterns...
...The labor movement has yet to reattain earlier peaks in membership or to widen its share of the employed work force...
...In economic theory, all wage premiums represent excess costs and mean that competition has been repressed, and with it efficiency...
...It enabled the states to prohibit the closed shop...
...labor force...
...Japan, South Korea, Switzerland, and even Hungary are merely the more striking examples of self-created comparative advantage...
...Immigration was often viewed as a threat to living standards, but the threat was mitigated by economic expansion and trade-union organizing...
...And please remember that we can't return articles unless they're accompanied by a stamped, self-addressed envelope...
...This argument has become hollow in recent years because of the "influence of distressed bargaining...
...Yet, as David Brody has documented, within six months the resurgence of labor commenced, recovering its earlier losses within two Notes Brian Heshizer and Harry Graham, "Are Unions Facing a Crisis...
...And it includes workers who lost their jobs because of such factors as "the growing interdependence of the U.S...
...I see no reason to believe that American trade unionism will so revolutionize itself within a short period as to become in the next decade a more potent social influence than it has been in the past decade...
...Look at our last few issues to see if your idea fits in...
...Similar contract modifications have at one time or another occurred in the past, but "the recent episode clearly involved unprecedented numbers of workers and industries...
...National Labor Relations Board, Annual Report, 1981, Chart 12, p. 17...
...They take place within the system of private capital accumulation and competition...
...But management has power over jobs and working conditions, it is an interested party in the contest, and when it voices its views, intimidation is implicit...
...But, in fact, no such crowding-out has occurred...
...377, 378...
...The attack on unions' wage practices that is implicit in the Federal Reserve's disinflationary measures thus represents an attack on all of labor and its wage standards.23 VI I n recent years, Federal Reserve representatives have emphasized the huge federal budget deficit as a source of inflationary pressures...
...And they viewed anti-inflationary action largely from the conventional angle of increasing supplies and labormanagement arrangements for improving productivity...
...But it is evident that international reaction has remained favorable because of the hitherto undeviating consistency of the central bank's actions in repressing wage claims...
...Government Printing Office, August 1983), p. 64...
...and the Administration has cut precisely those budgetary expenditures that would alleviate structural unemployment problems...
...And where states adopted the prohibition, organizing was impeded, with wage levels more closely controlled by the employers...
...who would quarrel with it...
...1° Brookings Papers on Economic Activity, 1:1983, p. 255...
...Of the 11.5 million, 5.1 million workers had been at their jobs three years or more, and these workers' experiences were more closely studied...
...Accommodation would mean "basic changes in economic institutions...
...Quoted in David Brody, "The Expansion of the American Labor Movement: Institutional Sources of Stimulus and Restraint," The American Labor Movement, David Brody, ed...
...This sounds like advocating motherhood...
...First of all, the increase in the differentials between the late 1960s and the late '70s and early '80s reflects in part generally sluggish employment conditions that kept wages of nonunion workers from rising as much as wages of union workers...
...The CEA Report then addresses the problem of foreign competition: If foreign firms can continue to produce goods at lower costs than U.S...
...John L. Lewis, the coal miners' leader, said, "The labor movement is organized upon a principle that the strong shall help the weak...
...The Report then discusses structural unemployment, which encompasses youthful workers who supposedly lack training but must receive at least the minimum wage...
...such penetration is higher still and more pervasive in soft-goods industries...
...The Report proposes specific adjustment measures reducing the minimum wage in combination with certain job-training programs (whose funding has been declining...
...and "constant or even declining wages in the industry subjected to structural changes (such as primary metals, motor vehicles, mining, lumber, construction...
...But this did not happen...
...There are also broader economic forces that do this— forces encouraged but not necessarily controllable by economic policy...
...they were no longer mandated...
...firms, either domestic production will contract, forcing workers to leave the affected industries, or workers will have to accept constant or even declining real wages...
...This has given the forces of em290 ployer-dominated labor markets free play, to the detriment of unemployed workers...
...Public employees have accounted for whatever growth in membership occurred between the late '60s and the late '70s...
...The result is an overall pattern of higher rates of unemployment in the U.S...
...Wage premiums became a concern of economists in the '70s, when union/nonunion differentials widened...
...152, 153, 156, 160...
...Also, the minimum wage declined relative to the overall nonfarm average...
...The] underlying problem facing displaced workers," it is said, "does not involve employment difficulties or shortage of jobs...
...That is its foremost duty, the condition of its renewed vigor...
...Specialized employment programs and low unemployment rates were now to be desired...
...From Statistical Abstract 1984, 104th edition [Washington, D.C.: Government Printing Office, 1984], p. 4.) The Reagan administration's tax reductions have spelled a further shift of income to highincome recipients...
...The Employment Act of 1946 carefully delimited the means by which high employment (the term "full employment" was avoided) was to be attained...
...Although discredited in the early and mid'70s, this Phillips-curve conception was subsequently revived with a vengeance...
...Without these protections, however, wage levels would surely be driven down, as current policies—monetary, fiscal, trade, education— plus corporate action join to do...
...In strictly economic logic, workers' wages could be driven to subsistence levels (consonant, say, with the living standard implied by the "lower" family budget defined by the Bureau of Labor Statistics several years ago...
...Even on its traditional turf, manufacturing, the labor movement has organized only about one-fourth of all workers, although this ratio is raised to twofifths when only production workers are considered...
...IT is, from my perspective, an ironic comment on the success of the central bank's policy and the self-confidence with which it has executed it, that the most complete available discussion to date of the wage restraints and concessions necessitated largely by the results of that policy can be found in an article in the monthly Federal Reserve Bulletin (December 1984...
...Exports from one developing country to another have also grown rapidly, tending to displace exports from industrialized nations...
...Unions have always prided themselves on achieving higher gains than nonunion labor and this, of course, encouraged organizing...
...We are encouraged...
...Basing themselves on the declining trend in unions' organizing expenditures 287 per nonunion worker, they claim that a sizable part of the unions' contraction is the result of reduced organizing efforts...
...Whether wage hikes at the time were "excessive" in some sense—because they presumably threatened a radical redistribution of income— I will leave aside...
...it is reduced to advantageous labor costs...
...The CEA defines "structural unemployment" as the part of unemployment that falls below what it calls an "inflationary threshold level" of 6-7 percent, which is presumably not susceptible to stimulative policy measures (such as continuing budgetary deficits or easing credit), without engendering inflation...
...economy with that of the rest of the world...
...The distributional shift Haberler calls for has, to an extent, been made...
...Persistent high unemployment also was not acceptable in terms of the demand-side credo of Keynesian economics, which required high consumption, hence high income levels, to keep the system going...
...See this statement: A policy of aggregate demand that maintained unemployment at the equilibrium rate of about 5.5 percent of the total labor force would ratify the current level of wage inflation of around 8 percent for the indefinite future...
...the decline of major industries, particularly in metalworking...
...We can better assess this survey by comparing it with one conducted 20 years earlier by Solomon Barkin and Albert Blum.' In "Is There a Crisis in the American Trade A Detailed Account of the Trend in Today's America Union Movement...
...The American pattern is linked to economic policies that were little constrained by the kinds of sympathetic labor or social democratic parties that prevailed elsewhere...
...In general, "unionism may have much more pervasive effects on the economy than indicated by our estimates," although the possibility that less skilled, "secondary" workers lose from unionism is conceded...
...In a recent publication of the American Enterprise Institute, Haberler writes— In recent years more and more economists have reached the conclusion that a full and sustained recovery from the present recession will require a moderate reduction of real wages, in all industrial countries (with the possible exception of Japan), to bring about a shift in the income distribution from wages and salaries to profits for the purpose of stimulating investment and growth...
...Whatever its internal causes, the decline of the American labor movement has in large measure resulted from external causes...
...The right to organize and bargain collectively has not been openly challenged, but the exercise of this right has been increasingly frustrated by management, and charges of unfair labor practices against management have soared...
...s The courts and the National Labor Relations Board (NLRB) have so interpreted the "free speech" provision of the Taft-Hartley Act as to strengthen managementopposition...
...in American economic organization...
...5) We're usually quick in giving editorial decisions...
...It has also succeeded in neutralizing the otherwise inflationary impact of federal budget deficits...
...Unions reduce wage inequalities," and this reduction "dominates" the occasional "monopoly" effect of unions...
...Gottfried Haberler, "The International Monetary System in the World Recession," Essays in Contemporary Economic Problems: Disinflation, William Fellner, project ed...
...The manufacturing exports of the developing to the industrialized countries grew at an average annual rate of 11.2 percent between 1968 and 1978...
...None of these versions survived the opposition of the Federal Reserve, of President Carter and his advisers, private-industry proponents, or academics...
...Structural] factors increase or decrease the difficulty of organization but do not determine unionization," Freeman and Medoff write...
...The employment decline of several large industries with strong unions is cited in the Bulletin article as another reason for wage concessions...
...Whether and when such resistance will stiffen and what forms it will assume, no one can say...
...The inflation rate could not be lowered while holding a "given" unemployment rate steady...
...There is no doubt that the prescription is effective...
...The high wage levels that American workers have enjoyed by comparison with workers elsewhere arose from a combination of higher productivity in the United States and labor scarcity...
...Check all your figures, dates, names, etc.—they're the author's responsibility...
...the share of wages and salaries dropped from 64 percent to 60 percent...
...Where fiscal and monetary measures were applied to restrain inflation, they were quickly reversed when unemployment threatened to rise too high...
...in many cases it has delayed bargaining with the union that had won, or countered with decertification proceedings...
...In the service industries, where it had been rising too—if to quite low levels, 13 percent in 1978—it declined, to an estimated 8 percent in 1984...
...They looked to a planning process involving the CEA and an advisory board of private parties to spur economic growth...
...quite the contrary...
...The wage-price controls of the early '70s did not differ in intent from the guideposts of the '60s...
...Richard Freeman and James Medoff reject "structural" factors, such as those just noted, in explaining the unions' decline.' Such factors, they argue, are liable to change rapidly, causing unforeseeable changes in the size and composition of the labor movement...
...Indeed, labor is still making concessions, especially with regard to entry-level pay and an insidious two-tier wage system...
...3) Type your ms double-spaced, with wide margins...
...In this sense, the credit requirements of private industry are to an extent "crowded out...
...The know-how, experience, and physical capital that provide the basis for American plenitude are surely diminished by these developments...
...What fundamentally determines unionization is the effort made by unions to organize, and the degree of management resistance...
...In 1983, many more respondents cited the first two factors than in 1963...
...years, and striding to ever higher levels of membership and influence...
...New York: Basic Books, 1984...
...Had the authors mentioned this fact, their argument would have been strengthened...
...Today it is the factory worker who is crucified upon the cross of the overvalued dollar...
...Labor scarcity was overcome by immigration in the 19th and early 20th centuries...
...Until passage of the act, the Federal Reserve had seen itself to some extent bound by the Employment Act of 1946, which was not centrally concerned with price stability...
...The sense of unease that pervades the labor movement's leading strata, beginning perhaps with the passage of the Taft-Hartley Act in 1947 and documented in the 1963 survey, has thus greatly deepened—and with good reason...
...Note the attitude here expressed, which led to the advocacy of unemployment as a means to hold wages in line...
...The article further as294 serts that a "crisis" in an industry is not recognized by a union until the jobs of senior employees are threatened...
...Furthermore, management has often disputed the results of certification elections under NLRB auspices...
...But by cheapening imports, the higher dollar value has contributed to downward pressure on prices and wages, and about this more later on...
...In this view, unions essentially generate and protect wage premiums, defying the dictates of labor and product markets, thereby causing inequities and unemployment...
...31, 1978...
...CEA Report, p. 46] Implicit in this passage is the notion of the wage premium—when its amount, given wage rates, exceeds the average rate for a job-specific skill, training, or other "human-capital" investment...
...What can be said is that its policy has been a major factor in exacerbating unemployment, and in causing wage and benefit improvements to shrink dramatically or to turn into cutbacks...
...563-79...
...Ibid., p. 191...
...208-13...
...In its final form, then, the act gravely weakened the legislation's original intent...
...and the insecurity of labor's future...
...Plenitude and even job security thus are increasingly put at risk for large strata of America's working people...
...The comparative brevity of all the postwar recessions, excepting only the one that may be said to have begun in mid-1979, attests to that...
...9 Union growth has largely depended on a favorable political climate...
...The industry profile of American labor unions differs considerably from that of the nonfarm work force...
...Or take a chance and send us your article...
...However, the linkage between sustainable economic growth with stable prices derives from the restrictive wage and employment assumptions we noted earlier...
...equally important, there arose an audacious leadership, backed by cadres of radicals devoted to the cause of labor...
...Additional aspects of these differentials need to be discussed if the wage premiums of union workers are to be viewed in perspective...
...Such "export-led growth" has been explicitly promoted by the United States, perhaps because exports are believed to have been the engine generating post-World War II economic growth in Western countries...
...the weakening of labor's collective bargaining power...
...Undeniably, deficits of the size experienced since the early '80s corrupt the value of money unless "sterilized" by central-bank action...
...Displaced workers, reluctant to accept a lower "opportunity" wage, suffer lengthy periods of unemployment in search of a job that pays the accustomed wage...
...As TO WHY the labor movement is in retreat, we have to consider two factors—one, the relations between unions and management, the other, the government's economic policies...
...Traditionally, the U.S...
...7 Management has deliberately violated provisions of the National Labor Relations Act by firing pro-union workers or by other acts of intimidation, as evidenced by the near doubling, to nearly 11,000, of unfair labor cases settled (or "adjusted" prior to a final administrative-law judge decision) between 1971 and 1981.8 To obtain [an] indication of the risk faced by workers desiring a union [write Freeman and Medoff], one may divide the number of persons fired for union activity in 1980 by the number of persons who voted for a union in elections...
...But it has another choice, limned by the AFL–CIO's forthright support of the Democratic presidential candidate in the 1984 elections...
...At first, the freezes, reductions, and work-rule changes were confined to financially troubled firms, but — [by] 1982, wage freezes and pay cuts had become as commonplace as wage increases in collective bargaining settlements...
...Conversely, a sufficient rise in the unemployment rate would slow or halt the increase in prices...
...This "density ratio" also decreased in the wholesale and retail trades, although until recent years membership there had been rising...
...With the decline of the working farmer, to whose debt burden the metaphor applied, the debtor-creditor relation has lost much of its class content...
...To the extent that the Federal Reserve succeeds in halting the devaluation of money, it contributes to the polarization of society...
...One labor observer has written that "during the period of greatest strides in union growth [the years following passage of the Wagner Act in 1935], the number of employees voting in board-conducted elections was far less than the number of new union members...
...Eventually the controls failed, partly because of exploding raw material, fuel, and grain prices in world markets, whose impact on domestic prices was not and perhaps could not be controlled administratively...
...And employment policy was no longer to be institutionalized, even while the conduct of monetary policy by the Federal Reserve, an institution removed from democratic control, continued to be safeguarded...
...For services, trade, finance and insurance, and public administration, proportions are reversed: just over two-fifths of union members are employed in these industries, which, however, account for more than three-fifths of total nonfarm employment...
...It can, as Mark Perlman suggests, address its voice "to management decision-makers directly rather than through some congressional or administrative network," and join management in a "bipartite assertion" that social reform (including environmental protection and civil rights) legislation be amended to minimize the government's present role, so as to lower its costs for job creation...
...q To Our Contributors: A few suggestions: (1) Be sure to keep a copy of your ms—the mails aren't always reliable...
...In their authoritative study What Do Unions Do...
...23-25...
...The total number of such workers had risen 73 percent over that 26-year period...
...2) Please don't write to ask whether we're interested in such and such an article—it makes for useless correspondence...
...Because wages in these industries are substantially greater than wages in other manufacturing industries, workers find it difficult to locate suitable alternative jobs...
...Freeman and Medoff, What Do Unions Do?, p. 233...
...The overvaluation of the dollar, in addition, has necessarily dampened the export of capital goods and its consulting and servicing components, as well as of grains...
...Needed capital has often been furnished by American firms...
...First, union wage changes began to shrink long before nonunion ones did...
...The proportion of families that require at least two earners to maintain a given living standard has risen significantly over the past 15-20 years...
...Such workers are less likely to join unions than fulltime workers...
...But the political climate altogether favored the labor movement...
...Perhaps most important in terms of the economic strategy of the United States as the leading...
...Since 1968, when Hubert Humphrey, then the presidential candidate of the Democratic party, was defeated, the trade unions have had to cope with an increasingly hostile political 286 climate, as well as with economic policies and conditions that placed labor's advances at greater risk...
...Paradoxically, it was the "Full Employment and Balanced Growth Act of 1978" (HumphreyHawkins) that gave the Federal Reserve license to impose the job-destroying anti-inflationary tight-money measures—measures that either clearly conflicted with the act's employment objectives or outranked them in order of importance...
...has imported goods in which the exporting country had a comparative advantage...
...reducing unemployment compensation so that the search for a "more attractive job than might otherwise be found" will not be prolonged...
...and lower increases in real hourly compensation than in other major industrial countries...
...Japan U.S...
...union work rules and procedures governing labor relations . . . spill over to large nonunion firms...
...Kyklos (Basel, Switzerland), vol...
...It is noteworthy, nevertheless, that in a survey of union presidents and research directors conducted in 1983, about half of the respondents contended that organized labor was facing a crisis.' These respondents attributed this mostly to internal causes, such as the shortsightedness of the leadership and its policies, and to a lesser extent to economic conditions and management hostility...
...That comes to roughly 10 percent of the total U.S...
...More important, this attitude was to have powerful consequences...
...They specified employment programs, at prevailing wage rates, for youths and others victimized by structural unemployment...
...Based on tables in Jeffrey D. Sachs, "Wages, Profits, and Macroeconomic Adjustment: A Comparative Study," Brookings Papers on Economic Activity, 2:1979, p. 273...
...If, however, as other economists argue, the union wage is above the market-clearing wage, then success on the part of corporations to break out of the pattern of paying wage premiums would improve economic efficiency and increase employment...
...Economic necessity has been a major factor drawing women into the work force, and while this has unquestionably helped safeguard the real value of household incomes, it has also kept real wages in many fields from rising...
...The table below will illustrate this...
...Moreover, where changes in industry structure have tended to reduce the unionized proportion of the work force, they have had no comparable effect in other major Western economies...
...And these we shall examine here...
...The act had been formulated during a time of high unemployment and high inflation, and this aroused much controversy about its purpose and provisions...
...Yet policy has fostered these developments—and policy can also constrain them, and lessen the risks...
...and director (Washington, D.C.: American Enterprise Institute, 1984), p. 95...
...Indeed, Federal Reserve spokesmen have insisted that their aim is "sustainable economic growth with stable prices...
...I n 1958, 39 percent of all employed nonsupervisory, nonfarm wage and salaried workers were members of trade unions...
...Department of Labor, "BLS Reports on Displaced Workers," news release, November 30, 1984...
...Work stoppages run at record lows, reflecting a loss in combativeness...
...Imports have in recent decades to an extent taken the place of immigration in keeping wages in check...
...Wages of organized workers frequently rose more rapidly than those of the unorganized, so that in 1979 auto workers, for example, earned 51 percent more than all workers in nonfarm industries (exclusive of government), compared with a 40-percent "premium" for the years 1964-69...
...Because it is unable to realign its industrial and occupational makeup with that of employment generally, it cannot overcome a major hindrance to its growth...
...They are not easily organized along conventional lines and their job attachment is often not very strong...
...Given the low labor costs in developing countries—their chief "comparative advantage"—their exports to the United States and elsewhere tend to depress wage levels, unless full employment is safeguarded, which of course it is not...
...Second, wage "inflation" declined more rapidly in the union sector than outside it...
...See Guy Standing, "The Notion of Voluntary Unemployment," International Labour Review (Geneva, Switzerland), September-October 1981, pp...
...THE EDITORS...
...According to a recent survey conducted by the Bureau of Labor Statistics (BLS), 11.5 million workers were displaced between 1979 and 1984 because of plant shutdowns or abolition of jobs...
...These industries have also been weakened by high interest rates, which determine the purchasing cost of capital goods and construction...
...They would help ensure the attainment of high employment (then defined in terms of a 4 percent unemployment rate) free or nearly free of inflation (that is, a rise in the price level of considerably below 4 percent a year...
...The same view is stated by the Council of Economic Advisers (CEA) in its February 1983 Report...
...It has failed to recapture most of the concessions that have marked its retreat since the early 1980s...
...The Federal Reserve's monetary policy must therefore take some account of this possibility...
...These controls implemented, and put on an industry-by-industry basis, the wage-price guidelines that had first been advanced by the CEA in 1962, and subsequently supported by "jawboning," with mixed results...
...Of course, it is the unions that guard wage floors and wage rigidity and seek to take wages out of competition...
...The former option is particularly painful in industries like automobiles and steel, where workers have become accustomed to high standards of living...
...and so on...
...It is significant because, although widely and falsely denounced as a "special interest," the labor movement has been in the forefront of the struggle for a more equitable distribution of income, and of defending wage levels, job security, and tolerable working conditions...
...9 NLRB, Annual Report, 1981, Chart 7, p. 12...
...Employment in capital-goods industries has declined—and output in many instances has remained relatively weak—in the context of contracting investment opportunities caused by worldwide overcapacity in basic industries, as well as by institutional barriers to aid in the expansion of effective worldwide demand...
...52-63...
...This may be good news for high finance, but it devitalizes much of American industry...
...12 Michael L. Wachter and William L. Wascher, "Labor Market Policies in Response to Structural Changes in Labor Demand," Symposium, Federal Reserve Bank of Kansas City, Mo., 1983, p. 178...
...According to this article, since 1979 one out of every six trade-union members, or about three million workers, have had to accept contracts that "freeze or reduce wages and fringe 293 benefits or alter work rules...
...That same overvaluation has promoted large-scale imports of capital goods, so that import penetration— the share of imports in the total domestic consumption of a given product—of metalcutting machine tools, for example, rose from 8 percent in 1972 to 29 percent in 1981...
...It can work to organize the unorganized...
...For example, since about 1980 the brutally disinflationary credit restrictions of the Federal Reserve have, by raising the exchange value of the dollar, made American exports costlier, hence less competitive...
...As the latter fell below a certain critical level, prices would rise...
...But they represented a much stiffened resistance to wage and benefit increases that would Rates of Increase in Real Hourly Compensation...
...by the deletion of some of the major inflationary features of the previous bill," stated the representative of the Federal Reserve's Board of Governors, J. Charles Partee...
...Union membership in manufacturing industries declined in these years by 12 percent, and it has declined still more since then, with some offsetting gains recorded chiefly in service industries.' The decline of union membership in manufacturing was associated with a sharp contraction in the proportion of organized production workers, from an estimated 63 percent in 1968 to 39 percent in 1984...
...A rising proportion of this country's public 295 debt is owned by foreigners...
...That is generally true, and some economists have concluded that unemployment is really voluntary, its duration being a matter of "looking...
...291 exceed productivity gains in individual industries...
...unorganized white-collar workers in organized companies obtain improvements not far out of line (if at all) with the blue-collar work force...
...Recall how it broke the strike of the traffic controllers and their union, signaling its profound hostility to organized workers generally, and its sympathy for management...
...American labor now finds itself exposed as never before to international wage competition...
...Reasons for 289 these widening differentials include the better protection against inflation that organized workers enjoyed, and the lower responsiveness of negotiated wages and benefits to cyclical swings because contracts normally extend over several years...
...whose producers invest heavily in capital goods...
...and no specific level or rate of employment or of unemployment was legislated...
...But corporations will seek lower labor costs regardless of employment effects or economic efficiency...
...in 1984, 27 percent...
...But comparative advantage can be deliberately created for many goods and services by government policy...
...Price movements were viewed as proxies for wage movements, and as a function of movements in the unemployment rate...
...Many of labor's fundamental rights were gained and basic economic advances made during the '30s, a period of much higher unemployment than the present...
...Monetary Policy in Recent Years: An Overview," Federal Reserve Bulletin, January 1985, pp...
...Rising import penetration reflects, beyond dollar exchange-rate changes, an underlying policy favoring American-controlled multinational corporations and the international network of U.S...
...However valid in itself the objective of sound money, the countervailing force of a resolutely pursued employment policy and the planning proceis it presupposed were eliminated...
...New York: Harper & Row, 1971), p. 120...
...It prepared for the fundamental changes in employment policy that were set in motion when the Federal Reserve imposed "the old-time religion" by harsh credit restrictions and steeply ascending interest rates beginning in late 1979—changes also made explicit in the more specific steps taken or proposed by the Reagan administration after it took office in 1981...
...such a climate has been far more important than the mechanics of labor law, which have as often damaged as promoted the unions' objectives...
...Were they to decline further, a capital outflow might ensue, in turn causing them to rise once again...
...There is a historical dimension to this effect of soundmoney policies in the United States, as capsulized in William Jennings Bryan's "cross of gold" metaphor...
...The Trade Unionists' View," they noted that a majority of respondents56 percent of union presidents, and 82 percent of staff persons—believed that "a crisis was at hand...
...Freeman and Medoff, again, provide ample evidence for the unions' role as pacesetters . 4 They write that "the gains won by union workers . . . affect wage-setting in large nonunion firms [that is, positively...
...Nearly the entire bibliography and a summary of the article are in English...
...The goal of low unemployment has been abandoned, not because it cannot be attained 288 but as a result of attempts to reduce the level of wages (including benefits), particularly in manufacturing...
...As we're not an academic journal, we prefer that they, wherever possible, be dropped altogether or worked into the text...
...A number of such policies have evolved over the past 15 years, not all explicitly hostile or damaging to labor, but all aimed at maintaining and enlarging the competitiveness of American industry in domestic and foreign markets...
...Most of the industries listed had failed to reattain their prerecession employment peaks as of July 1984...
...Such thinking delicately avoids the ugly reality in which the social costs of structural shifts are borne by individual workers, while the benefits, if any, go elsewhere...
...Richard B. Freeman and James L. Medoff, What Do Unions Do...
...They include the growing differentials in wage rates between union and nonunion labor...
...They did fear that inflation threatened their project, but the earlier versions of the act focused on employment...
...Workers may indeed lose their jobs because of such shifts, but it is because they decline lower wages even if jobs of some sort may be available...
...If the American labor movement finds itself at a turning point, as much of its leadership believes, then it has two choices...
...the evidence for this part of their argument, however, has recently become questionable.' Developments in labor law or, better, in the administration of labor law and in its circumvention by management, detailed by Freeman and Medoff, remain the primary factors in the unions' decline...
...But was wage restraint the primary goal of the monetary authorities...
...This system, while benefiting some, disregards the incurred social costs in lost jobs and skills...
...Germany U.K...
...Historically, NLRB elections have not played a major role in organizing...
...This also disposes of doubts as to the true focus of that policy...
...The Bulletin article represents—or so I interpret what it says—the failure of employment recovery as a failure of unions to modify traditional wage formulas and work-rule demands...
...See also the appended bibliography of Kurt W. Rothschild, "Arbeitslose: Gibt's Die...
...see also Union Membership and Employment, 1959-1979, prepared by the AFL—CIO Department of Research, February 1980...
...of motor vehicles from 14 percent to 24 percent...
...The quotation of John L. Lewis at the end of this article comes from that essay, p. 127...
...wage pressures intensified because of the spread of part-time work and the massive growth of the number of women and teenage job-seekers, spurred perhaps by the decline in one-earner real family income...
...Whether or not the wage premiums— let us call them that for brevity's sake— were excessive in certain instances is not central to the argument...
...Moreover, the concept of economic efficiency Wachter has in mind ignores the social and psychological costs imposed by unrestrained corporation decisions...
...else there would be no need for unions, wage-hour legislation, unemployment insurance, and other protective legislation...
...A parallel pattern can be found in nonmanufacturing industries...
...But the reaction to these pressures became far less tolerant than it had been during the '60s...
...What are the limits of such concessions...
...Of these 5.1 million workers, 25 percent were still looking for work, and the remaining 15 percent had left the labor force...
...This retreat from a progressive employment policy has been marked by a resurgence of theories about "labor-market clearing" wage rates—meaning wage rates low enough to eliminate unemployment (or nearly so...
...In pending representation elections, management may freely voice its views to its employees, so long as it does not "intimidate...
...Moreover, despite the rebound in economic activity and in profits since late 1982, managements have continued to press for cost reduction measures, and wage cuts and freezes remained prominent features of union negotiations in 1984...
...The two-tier wage system also tends to bring real wage levels closer to subsistence...
...It can struggle to regenerate American politics...
...The Federal Reserve's "policy adaptation," writes Stephen Axilrod, a high official of the central bank, "represented an effort to improve the tradeoff between unemployment and the rate of inflation, by itself leading to a shift in attitudes in labor and product markets that would bring the Phillips curve back down,"21—to levels where, for the same unemployment rate, wage increases would be lower...
...No government in the industrial countries outside the Soviet bloc has been able to pursue an essentially employer-oriented employment policy as freely as it has been pursued in the United States...
...IV ntil the 1970s, the deliberate creation of unemployment as a means of putting pressure on wages was not politically feasible...
...It explains this failure by the small number of jobs that would likely be gained from wage concessions in industries where nonlabor costs dominate...
...Partee referred to provisions that would have required the federal government to become the employer of last resort...
...A "mismatch" in the labor market follows from the discrepancy between displaced workers' wages in their old jobs and their "opportunity" wage on new jobs...
...Germany U.K...
...Wage cuts and freezes were particularly prevalent in manufacturing, construction, and transportation, and these industries also showed the greatest deceleration in average wage changes, especially after 1981...
...the undermining of labor's ability to obtain higher wages and benefits...
...There also is no evidence that lower wages expand employment in the aggregate...
...The underlying conservative trend in these policies is demonstrable, notably in how the goal of low unemployment has been surrendered...
...Paul B. Voos, "Trends in Union Organization Expenditures, 1953-77," Industrial and Labor Relations 297 Review, October 1984, pp...
...For example, employment in construction was still 5 percent below its previous peak, in primary aluminum 24 percent, in motor vehicles 17 percent, in steel 21 percent, in metalworking machinery 19 percent, and so on, for 14 industries...
...The Humphrey-Hawkins Act, however, was...
...n Michael Beenstock, The World Economy in Transition (Winchester, Mass.: Allen & Unwin, 1984), p. 66...
...Were there not broader designs...
...Japan 1962-69 3.4 5.4 2.9 8.0 4.5 0.7 2.9 1.3 1969-73 2.7 8.2 4.6 11.6 5.0 0.8 3.5 1.2 1973-75 -0.3 5.7 6.3 5.3 6.3 2.0 3.6 1.5 1975-78 1.9 3.3 -1.3 2.2 7.4 3.4 5.8 2.1 Comparisons with France and Italy would show similar patterns...
...of woodworking machinery from 8 percent to 19 percent...
...From "Union Settlements and Aggregate Wage Behavior - in the 1980s," Federal Reserve Bulletin, December 1984, p. 849...
...rather, it involves wages...
...Only the fourth elicited less disagreement in the later study...
...It can grope its way "toward a new phase of down-to-earth job-conscious negotiations...
...The notion that structural unemployment can be resolved by reducing wages is raised to the more general level of the relation between wages and property income by Gottfried Haberler, an influential economist at Harvard University...
...and increasing import penetration...
...21 "U.S...
...These passages, written in 1974, were accompanied by a table showing how an unemployment rate of 4 percent would raise wages by 10 percent annually, while one of 6 percent would raise them by only about 3 percent...
...The limits will be determined chiefly by political factors, and these are notoriously unpredictable...
...In both the 1963 and 1983 studies, we find four major areas of concern: the labor movement's lack of vitality...
...They defined full employment in terms of a 3 percent unemployment rate, to be reached at the end of a specified period...
...For "the newly strengthened posture of management [is] to press harder for even greater concessions large enough to restore American dominance in its own, to say nothing of some external, markets...
...Comparative advantage ceases to be in products or services...
...The Steelworkers' "premium" rose from 40 percent to 66 percent over the same period...
...The] likelihood that an outspoken worker exercising his or her legal rights under the Taft-Hartley Act gets fired for union activity is, by these data, extraordinarily high...
...It has entirely regressive implications for the economic growth of the countries whose capital owners now seek American objects...
...But Freeman and Medoff neglect to mention the impact of the political environment, which elsewhere in Western countries is (or has been) far more favorable to unions than here in the United States, and has been largely shaped in those countries by social democratic parties in alliance with labor...
...Increasingly, their unhappy experience with price and wage controls has convinced them that the "old-time religion" of contraction in the aggregate economy is the only way out...
...Mark-Perlman, "Collective Bargaining and Industrial Relations: The Past, the Present, and the Future," Essays in Contemporary Economic Problems, American Enterprise Inst., p. 313...
...But it is not an acceptable explanation for the employment decline "after one and onehalf years of economic recovery...
...capitalist power, it has, by building upon the credibility of its sound-money policy, restored the dollar to world supremacy as a medium of exchange and store of value...
...Whether this economic logic will prevail depends on the degree of labor's resistance to the deterioration of wages and working conditions...
...Might they recur, can they be recreated in some updated version...
...All Economic Sectors Unemployment Rate in Percent of Labor-Force Period Average Annual Rates, in Percent: Average for Period: U.S...
...The TaftHartley Act, in effect, circumscribed the unions' ability to repeat the massive drives for higher wages and better working conditions of the '30s and mid-'40s...
...The] givebacks we have seen are likely to be only the forerunners of what is to come," observes Mark Perlman in a recent essay...
...Labor Officials Are Divided," Monthly Labor Review, August 1984, pp...
...It can become the first-line defender of minorities and their rights...
...2 See "The Crisis in the American Trade Union Movement," special eds...
...I believe that the secondary-worker phenomenon is another manifestation of wage-cheapening employment policies...
...These American policies were reinforced by wage-price controls during the early 1970s...
...For instance, who could have forecast the swift rise of public-employee unions...
...But in reality competitive labor markets do not have the uniformly benign results postulated by economists...
...Such creation depends chiefly on a government's willingness to educate and train the work force in given manufacturing and service 296 industries...
...U.S...
...In 1983 and 1984, collectivebargaining settlements raised wages and salaries in manufacturing by 3.6 percent and 3.9 percent, while nonunion pay rose 4.7 percent and 4.3 percent...
...The "wage deceleration" since about 1981 contrasts with the experience of previous postwar downturns in two respects...
...All but one of these may be classed in the capital-goods sector...
...The share of personal interest payments in total personal income rose from 10 percent in 1977 to 14 percent in 1983...
...American Labor in Crisis" might have served as a title for this article, had not the word "crisis" been debased through overuse...
...of industrial machinery from 4 percent to 9 percent...
...Managerial] opposition to unionism has increased by leaps and bounds...
...Not all unions were subject to "distressed bargaining," yet wage improvements here, too, withered because of high unemployment...
...Michael Wachter reviewing The Deindustrialization of America, by B. Bluestone and B. Harrison, Journal of Economic Literature, March 1984, p. 137...
...In addition to the wage effects of the long cyclical downswing, the Federal Reserve Bulletin article discusses a number of longer-term changes behind labor's retreat...
...22 "The direct influence of distressed bargaining . can be seen in wage data by industry...
Vol. 32 • July 1985 • No. 3
