Home > Uncategorized > Class before Trumponomics, part 2 (10 graphics)

Class before Trumponomics, part 2 (10 graphics)

from David Ruccio

In the first installment of this series on “class before Trumponomics,” I argued that the recovery from the crash of 2007-08 created conditions that were favorable to capital at the expense of labor—and that trend represented a continuation of the class dynamic that had characterized the U.S. economy for decades, going back at least to the early 1980s.

There are, of course, many details that were left out of that story, and I want to present a more fine-grained class analysis of the U.S. economy prior to Donald Trump’s election in this post.

Let me start with labor. In the first post, my analysis actually understated the capital share and overstated the labor share. That’s because a large share of the surplus was actually included in wages, and thus attributed to labor, when in fact it properly belongs in the share captured by capital. The idea is that high-level executives and others (e.g., CEOs and those working in finance), while much of their income is reported as “wages,” are actually receiving a cut of the surplus from their employers. Therefore, their wages are actually part of the capital share, while the incomes of the rest of workers form the basis of the labor share properly understood.

This is clear in the chart below (modified, from a paper by Michael W. L. Elsby, Bart Hobijin, and Aysegül Sahin [pdf]), where the labor share is split up by income fractiles. Based on a rough class analysis of the U.S. labor force, the labor share actually includes the first two components (making up the bottom 95 percent of the labor force), while the other fractiles (those making up the top 5 percent) represent a distribution of the surplus from capital. As is evident from a quick glance at the chart, the share of total wages going to the working-class has been declining since the early 1970s, while the share representing distributions of the surplus has grown. 

l-fractiles

 

The consequence of making such a distinction is that the fall in the labor share and the rise in the capital share are actually much more dramatic—both in the decades leading up to the crash and during the so-called recovery—than when we look just at wages and corporate profits.

1980 2007 2016

 

The U.S. working-class has also changed over time, especially in the decades leading up to the crash, as the economy itself was fundamentally transformed by a combination of automation, the offshoring of production, and imports from abroad. In terms of sectors and thus types of jobs, the biggest change that can be seen in the charts above was the decline in Manufacturing, which took place mostly between 1980 and 2007—from 21 percent of total employment to only 10 percent—with a further decrease (to 8 percent) by 2016. The sectors that grew as shares of total employment include Leisure & Hospitality, Education & Health, and Business Services. Mining and Logging, which was never more than a sliver of total employment, began and remained small. And Government jobs, as a share of total employment, actually declined. The result is that, over time, American workers have been forced to sell their ability to work less to employers in the production of goods (who have offshored production and automated many of the manufacturing jobs that remain) and more to those involved in the production of services (who are already engaged in a new round of automation, thus threatening service-sector jobs).

The U.S. working-class has also changed in many other ways over the course of the past few decades.

union

For example, union membership has steadily declined in the United States. In 1983, 20 percent of all workers in the United States belonged to unions, which negotiated wages and benefits on their behalf. By 2015, however, only 11.1 percent of all U.S. workers were union members. The decline has almost entirely been driven by a large decrease in private-sector union membership. In 1983, union members accounted for 16.8 percent of private-sector workers, and in 2015 they only accounted for 6.7 percent. Public-sector unions, meanwhile, remain quite prevalent among government workers. In 2015, 35.2 percent of government workers were union members, which is virtually unchanged from 1983.

13484

source

Not only do U.S. workers enjoy less protection as a result of the decline in labor unions; the wage floor, represented by the minimum wage, has also fallen over time. The real value of the federal minimum wage is now less than it was in 1968 (when it was equal to $9.63 in today’s dollars)—and it is now much less than what it would be had it grown at the same rate as average wages and, especially, the growth in productivity.

foreign

Another change in recent decades has to do with foreign-born workers (both legal and undocumented), which increased dramatically from 1970 through 2010—from 4.3 to 24.7 million workers and, as a percentage of the U.S. labor force, from 5.2 to 15.8 percent. After the crash, however, the growth in both the number and the percentage slowed considerably.

12065

What about other segments of the U.S. working-class? As is clear from the chart above, wages “for all groups of workers (not just those without a bachelor’s degree), regardless of race, ethnicity, or gender,” have (since 1979) have lagged the growth in economy-wide productivity. The gender gap has close somewhat in recent decades—in part because women’s real wages have risen but also because men’s real wages have fallen. Still, white women have narrowed the wage gap with white men to a much greater degree than black and Hispanic women. Black and Hispanic men, for their part, have made no progress in narrowing the wage gap with white men since 1980, in part because the real hourly earnings of white, black or Hispanic men have all fallen over this 35-year period. As a result, black men earned the same 73 percent share of white men’s hourly earnings in 1980 as they did in 2015, and Hispanic men earned 69 percent of white men’s earnings in 2015 compared with 71 percent in 1980. We also need to consider the other side of that relationship—that increased racial and ethnic disparities reinforce the growing gap between productivity and the wages of all workers. Black workers are paid less than their white counterparts (of both genders), and all workers’ wages are as a result less than they otherwise would be. Thus, wealthy individuals and large corporations, who capture the resulting surplus, are the only ones who benefit from racial and ethnic wage disparities.

fredgraph

The final major change I want to draw attention to is the increasing precarity of the U.S. working-class. They’re increasingly employed in part-time jobs (as can be seen in the chart above, which tracks the ratio of part-time to full-time workers) and in “alternative” work arrangements. As Lawrence Katz and Alan Krueger (pdf) have shown, just in the past decade, the percentage of American workers engaged in alternative work arrangements— defined as temporary help agency workers, on-call workers, contract workers, and independent contractors or freelancers—rose from 10.1 percent (in February 2005) to 15.8 percent (in late 2015). And, it turns out, the so-called gig economy is characterized by the same unequalizing, capital-labor dynamics as the rest of the capitalist economy.

What is clear from this brief survey of the changes in the condition of the U.S. working-class in recent decades is that, while American workers have created enormous wealth, most of the increase in that wealth has been captured by their employers and a tiny group at the top—as workers have been forced to compete with one another for new kinds of jobs, with fewer protections, at lower wages, and with less security than they once expected. And the period of recovery from the Second Great Depression has done nothing to change that fundamental dynamic.

thanksgiving-on-wall-street.jpg

  1. November 29, 2016 at 3:48 pm

    Please keep us posted, David, when the mainstream media interviews begin flowing in…you’ve got some great graphics to go with the good text. Why, it’s not so hard for me to imagine the AFL-CIO making this part of a future “Labor Day Address” – after the current leadership resigns.

    (Only slightly tongue in cheek here.)

  2. November 30, 2016 at 9:03 am

    I am likely a sort of outlier, but alot of the wealth created over last decades (as measured by GDP) I view as at least partly a waste of resources—luxury developments, sprawl, casinos, golf courses, weapons, prisons, a huge healthcare sector alot of which seems to treat preventible diseases (addiction, obesity, heart disease…)>

    There are things created i value—eg computers, much better bicycles, sometimes relativiely good networks of public transport, some pretty god ibraries, arts spaces, non-junk food eating spots. And they go together with the stuff i don’t like (just the way nowadays some members of traditionally oppressed groups can enjoy the ‘spoils’ of the system which previously oppressed them—including womyn, LGBT, racial/ethnic and other groups. )

    Part of wealth created is the often intense technical scientific knowledge (as well as methods like the above graph that make understanding ‘big data’ accessible to many)

    but at he same time there are huge numbers of people producing ‘fake news’, disinformation, advertizing, these megachurches which seem to be mostly spectacles and about money (‘prosperity bible’), media and entertainment of varying quality/interest.

    Herman Daly of course had his own ‘Genuine Progress Indicator’ as opposed to GDP—from that view alot of that wealth is decreased by subtracting some things he sees as losses of wealth. (Its possible one could include ‘social stress’ as one such loss—-possibly measured by rise of drug addiction in usa, and people needing money to purchase psychological services. It may be these are neccesary prts of the modern world—if you want to live in a world with computers and work a job at a computer, you also need a psychologist or addiction counselor. Just as if people wanted to live in cold climates, they had to invest in warm clothing. It would be hard to measure whether these kinds of advances left people better off—likely its a distribution.

    I have met some libertarian types who think all modern developments (including trade) are best things that ever happenned, but i also know people who basically have been left by the wayside of progress and have to settle for low paid jobs —the only aspects of modern prgoress they get is a cell phone and wide screen TV so they can see how the other half live (or top 1% or 20% ….) or trravel aroud the world watching nature videos.
    .

    • November 30, 2016 at 12:24 pm

      How completely I agree with this analysis! Perhaps its most significant point is “methods like the above graph that make understanding ‘big data’ accessible to many”. I wonder where we would be if Al Khorismi had not invented his arabic number system?

      Around 1690 the great John Locke marvelled at the intelligence of the primitive Red Indians he met in America, putting it down to their number system getting far as the number of their fingers and thereafter “as many as the hairs on their heads”. That perhaps is the root of Hume’s conception of science c.1740: “Does it contain any abstract reasoning concerning quantity or number? No. Does it contain any experimental reasoning concerning matters of fact and existence? No. Commit it then to the flames. … “.

      Which on the second count is, I suppose, the right thing to do will most of these unreal economic books out there. But don’t include Polanyi’s “The Great Transformation” along with that lot. Read it – hard work though that is – especially the section on Speenhamland, which lays bare the origins of equilibrium, class warfare and the Washington consensus.

      What I’ve just learned from it was that Robinson Crusoe’s island was not just a fiction. Traders put goats on it to supply meat for passing ships, and when they goats multiplied to the point of threatening the vegetation they put foxes on it to keep down the goats. Hence the 1% getting fat on the 99%, who without them would have died of starvation. Huh! For of course this is to treat intelligent humans as if they were animals. But read Polanyi’s history with Trump in mind. Its scary!

  3. November 30, 2016 at 9:17 am

    p.s. Some parallells might be drawn with era 1800’s–1930. With industrial revolution, railroads, cars, etc. many people could aquire a ‘modern lifestyle’ to an extent—a car, city job, radio. At the same time Ford, Carnegies, Mellons, and other robber barons were creating huge fortunes and aquiring vast wealth. It is often pointed out that US Capital was built in part (likely to a large part) by slaves.

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