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As CEOs across the country complain about labor shortages and fear-mongers about inflation, it is becoming common to observe that American workers do relatively well through conventional measures. In the wake of an economic contraction that began by wiping out more than 20 million jobs, unemployment is falling, wages have risen nearly 5% in the past year, and Americans have more jobs. money in their savings accounts than they haven’t had in a generation.
The flip side is that large corporations, despite all the wails of their powerful lobbies, are doing even better, with corporate profits now reaching levels not seen since the 1950s. Profits have increased 37% since the 1950s. last year, according to data released last month by the Commerce Department – a staggering figure given the economic devastation caused by COVID-19. Worker compensation is also on the rise: around 12%, according to information from Bloomberg News.
At first glance, all of this paints a pretty rosy picture of American capitalism and seems to justify one of its myths that animate it: Profits are up, but workers are also better paid. Unemployment is falling, and despite concerns about inflation, both labor and capital seem to be engaged in a business for mutual benefit. It’s a tidy little story, and also one that distorts both America’s current economic situation and the developments leading up to it.
First of all, it is wrong to assume that corporate profits and improved working conditions are directly correlated. The aggregate share of labor in total economic output in the United States is still considerably lower than it steadily was between the late 1940s and early 2000s. Jobs may be easier to find and wages may be lower. be on the rise, but it’s hard to imagine either happening without the injection of pandemic benefits and direct cash payments to workers – both of which have forced employers to offer more money and given workers more bargaining power (these payments are also the main reason many Americans have been able to save more and keep more disposable income). Like the recent John Deere strike illustrated, the workers who raised their wages the most dramatically did so less while waiting for the benefits to trickle down than by withholding their labor and claiming a larger share, that is, by directly facing capital rather than than by aligning with it.
Second, outside of conventional economic measures, the outlook still looks bleak. A recent study from the Brookings Institution defines a low-wage worker as someone who earns less than $ 16 an hour. Seen against this standard, some 44 percent of American workers are low-paid. Even that, of course, sets the bar incredibly low. The National Low Income Housing Coalition estimates that the average worker needs to earn $ 20.40 / hour or $ 40,800 per year to rent a one-bedroom apartment. Before COVID, half of U.S. renters spent at least one-third of their income on housing, and a 2019 survey found that the poorest one-fifth of households spend nearly 13 percent of their income on water and utilities. sanitation. (Both numbers likely worsened amid the pandemic.) Tens of millions of Americans, meanwhile, have no health insurance to speak of.
Notably, then, American workers will have to earn much more before many achieve basic dignity or economic security. But more importantly, the country’s current economic outlook – prospects characterized by new jobs and higher wages – is largely the result of direct economic recovery and increased worker power. In the mid-1950s, the last time American companies made such large profits, union density reached a remarkable 35% at its peak, down from less than 11% last year. At this time, the share of labor in the economic pie also reached, unsurprisingly, its peak.
Thanks to unemployment benefits and an unprecedented series of cash injections, American workers have indeed seen their wages and bargaining power increase. But unless there is a longer-term shift in the balance of power between them and their employers, those gains could end up being eaten away by capital – and a business model that relentlessly prioritizes its interests.
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