Underpaid Workers, Bloated Corporations
Gordon, David M.
There are two tendencies in the American economy that many have noticed as isolated phenomena but that few connect with each other. The first is the enduring decline of most U.S. workers' real...
...Who are all these millions of managers and supervisors...
...Figuring out] which half is the difficult problem...
...Where the stick strategy prevails, the bureaucratic burden should be relatively high and real wage growth relatively stagnant...
...Between 1989 and 1995, however, employment in this category accounted for almost one quarter of total net employment growth...
...trade unions...
...This accounted for almost a quarter of all national income...
...Notes I Elinor Langer, "The Women of the Telephone Company," New York Review of Books, March 12, 1970, p. 16...
...Conflictual systems are likely to rely on legions of stick-wielders, supervisors and managers saddled with the responsibility for ensuring that production and nonsupervisory workers don't "shirk," as many economists call it, slacking off on the job every time one of their bosses turns his or her head...
...More generally, those with the most rapid real wage growth appear to be able to get by with the least burdensome corporate bureaucracies...
...It presents the annual average percentage change in real hourly compensation for all manufacturing employees in the United States (on the far right) and in eleven other advanced economies over the period from 1973 through 1993...
...It is true that many managers and supervisors have been laid off in recent years...
...6.6 8.7 11.4 13.0 Ratio, U.S...
...In an economy with stronger unions, workers could presumably have resisted this squeeze...
...If the Swedish percentage had applied, only 3.1 million would have worked at that level...
...This does not necessarily imply, as Krugman and Lawrence insist, that we should pursue "free trade" policies...
...He followed by joking: "The chances are [that] half of it is...
...economy, I pointed to the mammoth size of U.S...
...In late 1994, for example, in a front page story in the New York Times, Sylvia Nasar claimed that wage changes during the early 1990s appear to suggest a turnaround, with the majority of new jobs paying above-average wages...
...At the same time, the managerial and administrative shares in the other three countries remained relatively flat...
...5 John Stuart Mill, Principles of Political Economy [1848] (London: Longmans, Green & Co., 1920), p. 979...
...Except for the single case of the United Kingdom, there is a fairly strong negative association between the bureaucratic burden and real wage growth...
...I estimate that between 1973 and 1993 this distributional shift amounted to roughly 8 percent of total national income...
...In the mid-1970s, colleagues and I began to get involved in outreach educational work with local union officials and rank-and-file workers...
...When we were talking about some of the structural sources of stagnant productivity in the U.S...
...Now, what about wages and bureaucracies...
...According to these International Labor Organization (ILO) comparisons, there were fifteen million managers and administrators in the nonfarm sector in the United States in 1989...
...In 1960 the United States had the highest share of managerial and administrative employees, but the gap was not particularly pronounced...
...It's not just that the pace of real wage growth for the vast majority of workers has slowed...
...In the first phase, the share of nonproduction/supervisory employees grew rapidly through the late 1950s and then somewhat more slowly during the 1960s...
...Thus, stagnant wages contribute to the creation and reproduction of top-heavy corporate bureaucracies and top-heavy corporate bureaucracies contribute to strong downward pressure on wages...
...It may make the most sense, further, to think of the countries as falling into two groups— rather than falling on a continuum...
...Thirteen percent of total nonfarm employees in the United States in 1989 worked in managerial and administrative occupations...
...It is the only country with wage change close to zero...
...As the number of layers in the management hierarchy grows, communication and coordination becomes more difficult, so additional support personnel are required...
...The horizontal axis presents the same data as in Figure 2, the average annual real wage change for all employees in manufacturing between 1973 and 1989...
...One system relies on the carrot, the other on the stick...
...Bureau of Labor Statistics had kept track of the living standards of the average American worker with published data on spendable earnings...
...In the immediate postwar era, with rapid productivity growth, U.S...
...Consequences, Counter-Arguments, and Policy Implications I will close with some final observations about consequences, counter-arguments, and policy implications...
...Based on the most recent survey data, thirty million U.S...
...If U.S...
...firms...
...34 • DISSENT...
...Our discussion roamed widely over the economy's problems in the early 1980s and alSPRING • 1996 • 25 Wages and Management ternative prescriptions for their solution...
...Those of us who decry the wage squeeze will apparently have to tackle not only that problem but also the interconnected issue of top-heavy corporate hierarchies...
...In this regard I'm sympathetic to recent arguments by Paul Krugman and Robert Lawrence, among others, who point out that wage stagnation in the United States is at least as pronounced in "non-tradable" sectors that are not exposed to global competition and that present evidence that intensifying global competition has contributed fairly little to wage stagnation in the United States...
...SPRING • 1996 • 29 Wages and Management The Stagnant Wages/Bloated Corporations Connection Now I want to turn to the most important part of my argument—that the wage squeeze and the bureaucratic burden are integrally connected, that each contributed heavily to the other...
...And so there has been a massive income shift—within the total category of wage-and-salary employee compensation—from production/ nonsupervisory earnings to nonproduction/supervisory salaries...
...In Sweden it scarcely changed...
...I assumed that my co-participants would rise to the bait, defending the citadels of U.S...
...We can look, finally, at wage trends by levels of education...
...As a result, there is a strong tendency in topdown bureaucratic hierarchies for steady increases in total compensation to managerial and supervisory personnel...
...The data show a clear pattern...
...This was a period in which U.S...
...Of these 16.6 million, roughly three-fifths worked as managers and two-fifths as supervisors...
...The one major exception to the trends involved patterns by gender...
...For example, recent studies have provided suggestive evidence that, controlling for other factors such as capital intensity, those economies with more cooperative systems of labor relations also have more rapid productivity growth rates...
...What is the nature of this connection...
...Nasar was proclaiming a penetrating glimpse into the obvious—that many nonproduction and supervisory employees, especially at the top, have continued to enjoy rising hourly compensation...
...Only two other countries— Canada and Denmark—feature wage growth rates of less than 1 5 percent a year...
...I might add that among twelve of the leading advanced economies, the United States also has substantially the highest bureaucratic burden...
...The Wage Squeeze Since the mid-1970s, more and more U.S...
...One attributes it to the so-called "skills mismatch," to a rising demand for highly skilled workers...
...If we look back at the trends portrayed for the United States in Figure 3 more closely, it appears that there are two phases in the general rise of the bureaucratic burden...
...4 David Card and Alan B. Krueger, Myth and Measurement: The New Economics of the Minimum Wage (Princeton: Princeton University Press, 1995...
...But all these stories do not by themselves establish that the problem of corporate downsizing is being addressed...
...With the less cooperative approach, a basic conflict over workers' labor effort is likely to persist...
...Here, we can concentrate on employment changes from 1988 to 1993—the period over which stories of downsizing have been most widely reported...
...Judging from the household survey data, it would appear that the requiem for middle management has been premature...
...It's not as easy as one might suppose to trace this tendency...
...Labor-management systems relying on the stick appear to be more costly and less effective than those relying on the carrot...
...Careful compilations by the U.S...
...workers have been enduring steady downward pressure on their hourly take-home pay...
...It's the most important source of many of the spreading social problems confronting the United States...
...But I ought at least to be able to find evidence that there is an inverse relationship between the two...
...It is not just that the United States has the slowest real wage growth and the most top-heavy corporate bureaucracies among these leading economies...
...and in Japan it actually increased some through 1980 and then declined...
...co 10 • U.K...
...and managers to watch the higher-level supervisors . . . and higher-level managers to watch the lower-level managers...
...4. Corporate Bureaucracies and Real Wage Growth 12 • U.S...
...So more than a decade ago, my collaborators Sam Bowles, Tom Weisskopf, and I proposed an alternative version of the spendable earnings index, with modifications designed to address each of the specific problems raised about the traditional indicator...
...The one country in this group with relatively slower real wage growth is Denmark...
...And for those who worry about the possibly negative employment consequences of such a move, the recent work of David Card and Alan Krueger provides striking evidence that recent increases in the minimum wage did not have employment-displacing effects.' • We need substantial changes in labor law to make it much easier for employees to form unions...
...households...
...households...
...Real hourly take-home pay has been declining for years...
...Although the United Kingdom does feature sharply conflictual labor relations, as befitting its high relative bureaucratic burden, many of its unions have remained strong and have been able to sustain rapid real wage growth nonetheless...
...The story doesn't end with the 1980s...
...Not only the supervisors but also the bulk of the managers are directly or indirectly involved in overseeing and 26 • DISSENT Wages and Management monitoring the work of their subordinates...
...In no other country do we find anything like the U.S...
...The bureaucratic burden experienced a new upward burst, a new moment of more rapid growth, increasing from 17 percent in 1973 to 19 percent in 1982 before leveling off in the 1980s...
...One obvious way to test this hunch, once again, is to pursue international comparisons...
...Some simple procedural changes, such as automatic union certification upon an ample majority's signing declaration cards, could make a huge difference in the United States...
...capitalism...
...As a result, the share of managers in total private nonfarm employment has increased over those six years, to roughly 13.6 percent, rather than declining as the recurring and sometimes sensational stories have implied...
...First, consequences...
...In his Principles of Political Economy, almost one hundred and fifty years ago, he wrote: 5 Even in the best state which society has yet reached, it is lamentable to think how great a proSPRING • 1996 • 33 Wages and Management portion of all the efforts and talents in the world are employed in merely neutralizing one another...
...They go together like horse and carriage...
...The story of the bureaucratic burden is primarily a story of relative overweight, of the proportion of total employment in managerial and supervisory jobs...
...And with intensifying global competition, it would be dangerous to try to pass these costs on to the consumer through higher prices...
...A few observers have recently tried to present a sunnier weather report...
...What guarantees that those supervisors won't be in cahoots with their charges...
...1. The Wage Squeeze Real spendable hourly earnings ($1994), production/nonsupervisory employees private nonfarm sector, 1948-94 $11 $10 $9 $8 $7 $6 1948 1952 1956 1960 1964 1968 1972 1976 1980 1984 1988 1992 Wages and Management worker's real after-tax pay grew rapidly through the mid-1960s...
...Since the Great Depression and the spread of the union movement, the U.S...
...The other two participants were Felix G. Rohatyn, senior partner in the Wall Street firm Lazard Freres...
...Because the employment share of nonproduction workers is sensitive to the business cycle, I focus on 1989, the most recent year in which all four economies were more or less at their business cycle peaks...
...They report to the Chief of the Southern Division, himself a soldier in an army of division chiefs...
...The conclusion seems fairly clear...
...And both targets seem to have suffered body blows: net investment has stagnated and so have workers' earnings...
...But the past twenty years have also witnessed a shrinkage and a weakening of U.S...
...It has exacerbated poverty, created pressure on living standards, and forced millions to work more jobs or longer 32 • DISSENT Wages and Management hours...
...corporate bureaucracies...
...The combination of stagnant wages and bloated corporate bureaucracies has two main effects: • The wage squeeze continues to have devastating effects on the well-being of the vast majority of U.S...
...The United States and Canada, two of the three more adversarial economies represented here, lie in the upper left...
...Quite to the contrary, the most striking conclusion that emerges from comparing wage trends in the advanced countries is how isolated, how unusual the U.S...
...Most dramatically, real spendable hourly earnings had fallen back to below the level they had last reached in 1967...
...2 Thomas A. Kochan, Harry C. Katz, and Robert B. McKersie, The Transformation of American Industrial Relations (Ithaca, NY: Cornell ILR Press, 1994), p. 47...
...This would create upward pressure on wages, push corporations to make more effective use of their employees, and, presumably, create stronger counter-pressure to the expansionary push for more and better-paid corporate bureaucrats...
...Robert H. Hayes and Steven C. Wheelwright, from the Harvard and Stanford business schools respectively, analyze this tendency: 3 Since managers usually feel that the number of people reporting to them ought to be less than some maximum number (generally 8 to 12), organizations tend to grow like pyramids: as the base of the pyramid (representing the number of workers) grows, so does the number of layers of managers—each of whom probably requires at least one support person (a secretary, assistant, etc...
...Because for some unaccountable reason the Reagan administration ignored our advice and persisted in providing no official record of trends in workers' take-home pay, we have ourselves continued to maintain and update what we consider to be the most telling available indicator of workers' earnings...
...How is it possible that so many people spend at least some of their time bossing others...
...Wage stagnation in the United States stands out like a sore thumb...
...These two tendencies are neither accidental nor coincidental but structurally linked and mutually interdependent...
...In 1994, according to the U.S...
...They complained that their supervisors were always on their case, that bureaucratic harassment was a daily burden...
...They do not even establish, indeed, that the weight of the bureaucratic burden itself is being reduced...
...corporate bureaucracies...
...This was almost as many employees as those working in the entire public sector, in all occupations at all levels of government...
...Here too, though the phenomenon is certainly real, the contribution of global competition to the wage squeeze is probably quite weak...
...As a result," she concluded, "average hourly pay for all employees, adjusted for inflation, is slowly rising...
...Almost twelve million workers would have been freed up to perform different kinds of tasks...
...And when those incentives are in place, workers seem to be able to coordinate many of their own activities in production, relieving their corporate owners of the need for intensive supervision...
...We can look to the Bureau of Labor Statistics' surveys of households, which provide more detailed occupational breakdowns, for some important clues...
...In 1989, "executive, administrative, and managerial" workers accounted for 12.6 percent of private nonfarm employment...
...corporations began to adopt a much more aggressive stance toward their workers and toward trade unions, a period in which "an alternate nonunion system of industrial relations," to quote from an important study by Kochan, Katz, and McKersie, was beginning to emerge...
...Workers in Japan and Germany, our two major trading competitors, fared markedly better than U.S...
...Twenty years ago I didn't have a clue...
...As a result, if managerial and supervisory compensation was to continue to grow, it had to come principally out of investment funds or production workers' earnings...
...But recent work casts very serious doubt on that as a sufficient or even as a very persuasive explanation...
...In order to justify a superior's authority over a subordinate, salary differentials become important...
...Only the United Kingdom departs substantially from this pattern...
...One group, including Germany, Japan, Sweden, and six other countries, clusters in the lower right corner of the graph...
...Table 1 traces changes in the bureaucratic burden for Germany, Japan, Sweden, and the United States over the decades since 1960, allowing us to glimpse when and how the huge gap between the United States and the other three countries emerged...
...Who keeps the supervisors honest...
...If the Japanese proportions had applied in the United States, there would have been only 4 7 million in that occupational group...
...Since the beginning of the 1990-1991 recession we've been hearing a lot about corporate "downsizing...
...By the mid-1980s, the paunch was protruding...
...I recognize that unemployment rates have been higher in many of these countries than in the United States...
...And, as many have pointed out in recent years, the United States tends to represent the archetype of the latter system, joined by the United Kingdom, Canada, and Australia...
...The cost of all these carrots appears to be offset by savings in managerial and supervisory salaries...
...One of the principal carrots of the cooperative approach is the promise of relatively reliable increases in real earnings, with implicit if not formally bargained sharing of dividends from rapid productivity growth between owners and workers...
...Production and nonsupervisory workers made up 82 percent of total employment in 1994 and represent that group in the labor force that is most clearly dependent on wage and salary income...
...We get some feel for this pyramid effect from Elinor Langer's classic 1970 article about her brief career as a customer sales representative in the New York Telephone Company:' [My supervisor] is the supervisor of five women...
...0) E 0 8 • Canada E 6 • • Japan 08 ie 4 • 'C • • Germany • 2 2 • Sweden 0 0.0 1.0 2.0 3.0 4.0 % Change, Real Wages, Manufacturing, 1973 -89 SPRING • 1996 • 31 Wages and Management These are simple but fairly strong hypotheses...
...The average SPRING • 1996 • 23 Fig...
...The slightly less obvious effect is macroeconomic...
...Despite the recovery from the recession of 1990-1991, real spendable hourly earnings were lower in 1994 than they had been in the business-cycle trough of 1990...
...workers' real wages...
...Most U.S...
...The greater the number of bureaucratic layers, the greater the number of sal30 • DISSENT Wages and Management ary differentials that system must sustain...
...At least as stunning is the amount of money we pay to cover the salaries and benefits of these executives and supervisors...
...Those of us who have long pointed to the wage squeeze have never denied that the top 10 percent to 20 percent of the earnings distribution has fared much better than everyone else...
...I am grateful to Maurizio Franzini and Samuel Bowles for bringing this quote to my attention...
...Figure 1 charts the level of average real spendable earnings for production and nonsupervisory employees in the United States from 1948 to 1994...
...A test across the advanced countries seems more important...
...workers and the aggregate economy itself pay a very heavy price as a result...
...I wouldn't know" if expenditures for executive personnel are "wasted," Walter Wriston replied...
...Copyright ©1996 by David M. Gordon...
...We need strong positive investment incentives to firms with more democratic labor relations and less top-heavy systems of corporate management...
...But then we must ask: in a globalizing economy with intensifying import competition, may we assume that this pressure has affected workers in the other advanced countries as well...
...When did our corporations begin to put on so much weight...
...It's fair to conclude that the wage squeeze has assumed epidemic proportions...
...Cooperative systems don't need so many bosses...
...One approach features relatively cooperative labormanagement relations—including a large degree of employment security, positive wage incentives, often with a fair amount of employee involvement and also with strong unions...
...The wage squeeze has afflicted not merely the poor and the disadvantaged but the vast majority of U.S...
...many economists view Denmark's system of labormanagement relations as a kind of hybrid case, with a mix of cooperative and conflictual features that result in higher inflation and unemployment than in most of the more cooperative examples...
...But since the 1960s, as productivity growth has slowed, corporate budgets have less easily afforded such costs...
...If a labor-management system relies on hierarchical principles for managing and supervising its front-line employees on the shop and office floors, then it needs more than just the front-line supervisors who directly oversee these workers...
...Both the vast majority of U.S...
...If I had my druthers, I would endorse three initiatives: • We need a sharp increase in the minimum wage...
...The Bureaucratic Burden More than a decade ago I participated in a small roundtable discussion on "The Ailing Economy" sponsored by the New York Times...
...and Walter B. Wriston, then chair of Citicorp and Citibank—not the sort of company I usually keep...
...It's the dirty secret of the U.S...
...At that point almost one in five private nonfarm wage-and-salary employees were employed as managers and supervisors of one sort or another...
...There is empirical support for this basic linkage between conflictual labor-management systems and top-heavy corporations...
...These wage incentives reinforce other dimensions of the cooperative approach, such as strong employment security...
...I cited some recent management consultant studies that had suggested that as many as 50 percent of corporate management and supervisory personnel were simply redundant, pure fat that could be trimmed without loss of productiveness...
...What about the connection running in the opposite direction...
...And the vise has tightened on workers' earnings much more severely in the United States than in other advanced economies...
...I call it the "bureaucratic burden"—the massive size and cost of the managerial and supervisory apparatus of private U.S...
...Those who've experienced the vise most directly have no illusions about the consequences...
...And with more rapid productivity growth, there is room for financing more productive investments, for affording more rapid wage growth, and for maintaining a competitive edge in the global economy...
...1980 is used here in order to provide a measure for the level of bureaucratic burden that lies in the middle of the time period being examined...
...Wages have been declining alongside enduring topheavy corporate bureaucracies in the United States to a considerable degree because our production, labor, and managerial relations continue to rely on the stick rather than the carrot...
...there are many grounds on which to prefer "managed trade...
...62-63...
...Data from the Current Population Survey over the period from 1979 to 1993 show that it was indeed the entire bottom 80 percent of wage earners, not just the poor and disadvantaged, who experienced actual real wage decline...
...workers have been experiencing a wage squeeze, with real hourly take-home pay in 1994 falling back to the levels of the late 1960s...
...Perhaps it is inevitable that we need legions of managers and supervisors to oversee complex production systems, spur product and process innovations, conquer markets at home and abroad, and plan for the future...
...corporations could absorb many of these growing costs of doing business bureaucratically...
...It wouldn't be easy to define the kinds of systems and changes that would warrant subsidy and support, but it wouldn't be beyond our reach either...
...Figure 2 provides one glimpse into this comparison...
...By the early 1980s, it was widely perceived that large corporations in other leading economies such as Germany and Japan were competing at least as effectively in global markets as U.S...
...Since this early work came on the heels of the sharp recession of 1973-1975 and in the throes of that strange new phenomenon called "stagflation," we expected that the workers in our classes would steer the conversations toward problems of job security and inflation...
...It is not at all easy to test them, because there are many influences on wage growth and many influences on bureaucratic staffing requirements...
...What happened to the managerial employment share over those years...
...Where a more cooperative approach to labor management holds sway, the bureaucratic burden should be lower and real wage growth more rapid...
...In 1993, according to these data, 16.6 million worked in various occupations labeled as either "managerial" or "supervisory...
...Stagnant wages contribute to the need for legions of managers and supervisors, and top-heavy corporate bureaucracies have a dramatically dampening effect on production-worker earnings...
...But then the bureaucratic burden in the United States began to grow quite steadily...
...On balance, I think there's little doubt that these have been rough times for the vast majority of U.S...
...This wage collapse has affected not only the unskilled and disadvantaged but a remarkably wide spectrum of employees...
...q This article is based on a lecture presented on the occasion of the inauguration of the Dorothy H. Hirshon Professorship of Economics at the New School for Social Research in New York City, April 5, 1995, and on material from Fat and Mean: The Corporate Squeeze of Working Americans and the Myth of Managerial "Downsizing," by David M. Gordon...
...The trends revealed by international comparisons show a similar pattern...
...That would be like saying that a man of 350 pounds no longer suffered from obesity because he had stopped gaining weight...
...economy could continue to live beyond the means, as it were, to which its production system would otherwise have condemned it...
...3. The Bureaucratic Burden Rises Nonproduction and supervisory employees as percent of total private nonfarm sector, 1948-94 20 19 18 17 16 15 14 13 12 11 1948 1952 1956 1960 1964 1968 1972 1976 1980 1984 1988 1992 and mean...
...Fig...
...Here, with the ILO data, we can only go back as far as 1960...
...We've read that corporations are paring their managerial staffs, that they're becoming "lean Table 1. Taking on Weight Administrative and managerial employees as percent of nonfarm employment 1960 1970 1980 1989 Germany 2.6 2.5 2.8 3.9 Japan 3.9 5.9 5.2 4.2 Sweden 2.1 2.6 2.9 2.6 U.S...
...Let me first consider the connection running from stagnant wages to top-heavy corporate bureaucracies...
...Twenty cents of every dollar we paid for goods and services went to cover the salaries and benefits of the corporate bureaucracy...
...Much to our surprise, they were more interested in talking about problems they were constantly experiencing with their bosses on the job...
...Germany, Sweden, and Japan provide examples of the former approach—even though there are important differences among their labor-management systems...
...corporations...
...It is the proper end of government to reduce this wretched waste to the smallest possible amount, by taking such measures as shall cause the energies now spent by mankind in injuring one another . . . to be turned to the legitimate employment of human faculties, that of compelling the powers of nature to be more and more subservient to physical and moral good...
...There are many possible causes of wage stagnation and many possible explanations of the wage squeeze with which I'm less than fully sympathetic...
...Hundreds of thousands of production and nonsupervisory employees have also been fired or laid off in recent years...
...A second phase appears to have emerged as the economy began recovering from the recession of 1973-1975...
...With the black stuff oozing from the sea throughout most of this period, the U.K...
...changing labor-management relations seem to have been much more important...
...bureaucratic burden eventually reached...
...With this one exception, however, the remaining countries seem to support the hypothesis...
...It could be, of course, that this massive bureaucratic burden is part of the cost of doing business in a sophisticated, increasingly globalized economy...
...2 And this was the period, indeed, in which some observers began to note the bulge around the corporate middle...
...This discrepancy is one of the most interesting stories of the 1980s— which unfortunately I cannot explore here...
...Do we find that stagnant wage growth is associated with top-heavier corporate bureaucracies...
...3 Robert H. Hayes and Steven C. Wheelwright, Restoring Our Competitive Edge: Competing Through Manufacturing (New York: John Wiley and Sons, 1984), pp...
...Why would top-heavy corporations tend to create downward pressure on production workers' earnings...
...Once the supervisory workers are in place, they acquire a hierarchical logic all their own...
...But there are places to start...
...But they scarcely batted an eyelash...
...In the absence of strong wage benefits and employment security, what provides the workers with the incentive to work hard...
...And stronger unions are a necessary though hardly sufficient antidote to the problems I've been reviewing here...
...Only those with a college degree or better were able to gain some measure of protection against the unfriendly winds over the past fifteen years...
...These incentives could be provided through the tax system or through special investment banks set up for these purposes...
...in Germany it remained quite low until a bit of growth in the 1980s...
...We can compare the percentage of nonfarm employment in managerial and administrative occupations for the United States and for three other advanced economies—Japan, Germany, and Sweden—which are widely regarded as representing different approaches to corporate organization and labor management...
...Bureau of Labor Statistics allow us to compare wage trends across twelve of the leading advanced economies...
...After a postwar peak in 1972, our measure of earnings declined fairly steadily, through the rest of the 1970s and 1980s...
...Unlike the data presented in Figure 1, which cover production and nonsupervisory employees, Nasar was looking at wage trends for all workers, including top-level executives whose total compensation has continued to soar straight through the early 1990s...
...A fat corporation is still a fat corporation...
...For example, I have found evidence suggesting that among sixteen advanced economies, the more conflictual the labor-management system, the higher the percentage of managers and administrators...
...Figure 4 presents some basic data exploring that relationship...
...It shows that in 1948 it began at a postwar low of 12 percent of all private nonfarm employees working in nonproduction and supervisory jobs...
...Finally, on policy implications: my argument obviously suggests that attacking these problems will be far from easy...
...While blacks fared less well than whites, what is nonetheless striking is that the vast majority of whites as a group were almost as adversely affected...
...The second is the top-heavy, bloated scale of U.S...
...this, too, is part of the story that I can't explore here but discuss at length in my forthcoming book...
...While the bottom 80 percent of male workers experienced devastating declines in the real hourly earnings, the bottom 80 percent of women workers actually enjoyed modest real wage growth, with a net increase from 1979 to 1993...
...About counter-arguments...
...But in 1981 the Reagan administration discontinued the index, citing conceptual and measurement problems...
...And if top-level executives quite naturally try to push up their salaries, they typically find that they have to allow for upward creep in the salaries of their managerial and supervisory subordinates as well...
...Across the advanced capitalist economies, there appear to be two fairly different types of systems of capital-labor relations, reflecting sharply contrasting approaches to managing production workers and encouraging productive performance...
...Reprinted by permission of Martin Kessler Books at The Free Press, an imprint of Simon & Schuster, Inc...
...I will close with a simple quotation from a not entirely likely source, John Stuart Mill...
...The chickens might have come home to roost much earlier— perhaps resulting in slower real wage growth— had Britain's real wage growth not been greased by the steady flow of oil from its North Sea oil fields...
...If the United Kingdom is removed momentarily on the grounds that it seems to be so anomalous, the simple correlation between the two variables is -0.78 (statistically significant at 1 percent...
...This led me to look for the first time at some of the data I have presented here...
...There will be an upper class and a lower class, and I know where [my boys] will be...
...case has been...
...And those of us who are similarly offended by corporate waste need to pay attention to the need for alternative systems of wage compensation and incentives...
...The source of Nasar's conclusions is not hard to find...
...to average of other three 2.3 2.4 3.1 3.6 28 • DISSENT Wages and Management Fig...
...pattern of steady expansion, much less the massive levels that the U.S...
...corporations and their competitors...
...Bureau of Labor Statistics, 17.3 million private nonfarm employees worked in nonproduction and supervisory jobs—mostly as managers and supervisors at all levels of the corporate hierarchy...
...In such a hierarchy, you need supervisors to supervise the supervisors . . . and supervisors above them...
...Indeed, the average for the other eleven countries is 2.1 percent per year, seven times more rapid than for the United States over the same period...
...In 1994 nonproduction and supervisory employees in the private nonfarm sector were paid $1.3 trillion in total compensation...
...Figure 3 traces SPRING • 1996 • 27 Wages and Management the percentage of nonproduction and supervisory workers in total private nonfarm employment...
...private-sector workers who are not now union members would prefer union representation to their present circumstances...
...The data suggest some dramatic differences between U.S...
...Its growth then slowed, with some fluctuation, until the early 1970s...
...corporations were already suffering by the mid-1980s "from gross overweight around the midriff," should we conclude that they had solved their problems once the bureaucratic burden reached a more or less level plateau...
...workers, with real wage growth at 2.2 percent and 3.1 percent respectively...
...Why is the United Kingdom so anomalous...
...for the bottom 80 percent of white workers, as well, real hourly wages declined between 1979 and 1993...
...And the most recent trends have been harsh even for that group...
...As anticipated, the United States stands out for its swollen bureaucratic burden and for its virtually flat real wage growth...
...in the U.S...
...The basic principle is simple...
...Were their bureaucratic armies as massive as ours...
...We can also look at wages by race...
...By this measure, our corporate bureaucratic burden in 1989 had reached more than three times the levels of Japan and Germany and more than four times the level of Sweden...
...Documentation and sources for all data in this piece are provided in the book...
...She reports to a Manager who manages four supervisors (about twenty women) and he reports to the District Supervisor along with two other managers . . . A job identical in rank to that of the district supervisor is held by four other men in Southern Manhattan alone...
...Our index of real spendable hourly earnings provides a straightforward measure of the average production or nonsupervisory worker's real take-home pay—a measure of hourly earnings controlling for both inflation and taxes...
...The costs of these anomalously rapid wage gains appear to have been rising unemployment and declining competitive advantage...
...It increased substantially as the postwar period progressed, leveling off at roughly 19 percent in the 1980s...
...From 1989 to 1993, for example, male workers with just a college degree, but no postgraduate education, were hit with declining real earnings...
...context, it appears that you can't have one without the other...
...A union activist in the labor struggles at Caterpillar in Illinois last year looked down the road toward the turn of the millennium and saw hardship: "If we don't put an end to this drift of the country to drive wages down," he said, "there's no future for my three boys...
...The other builds upon much more conflictual labor-management relations—relatively little employment security, reliance on the threat of job dismissal as a goad to workers, rarely providing strong wage incentives, sometimes featuring weak unions...
...It's not easy to find evidence of this relationship within the United States because the stick strategy is so pervasive among firms and across industries...
...Another attributes the wage squeeze to intensifying global competition, especially from low-wage developing countries...
...What matters most, in short, is whether or not corporate "downsizing" in the past several years has actually reduced the bureaucratic burden itself...
...Once top-down bureaucracies are in place, they tend to acquire an expansionary dynamic— one might even call it the "iron law of bureaucracies...
...For the past two decades, more and more workers have had to adjust their expectations, reconciling themselves to toil at 24 • DISSENT Wages and Management what are sometimes derisively called "McJobs...
...The vertical axis represents the percentage of total nonfarm employees working in administrative and managerial occupations in 1980...
...Peter Drucker commented around this time, "Middle managements today tend to be overstaffed to the point of obesity . . . . A good many businesses, large and small, [have become] equally bureaucratic and equally suffer from gross weight around the midriff...
Vol. 43 • April 1996 • No. 2
