The Troubled State of Labor

Stephanie Luce

The State of Working America, 12th Edition
By Lawrence Mishel, Josh Bivens, Elise Gould and Heidi Sheirholz
Washington, DC: Economic Policy Institute and Ithaca, NY:
Cornell University Press, 2012, $24.95 paper.

IN THE 1970s, conservative funders and thinkers began pouring money into think tanks designed to influence public opinion and Capitol Hill. By the 1980s groups such as the Heritage Foundation, the American Legislative Exchange Council (ALEC) and the Manhattan Institute were in full-bloom, making an impact from the media right down to actual legislation.

Into the fray stepped the Economic Policy Institute (EPI), formed in 1986 with support from the AFL-CIO, as a small effort to challenge the conservative onslaught. The EPI brought together economists and analysts who attempted to provide an alternative view on economic policy: one that was centered on working people. One of the first major products was the The State of Working America, published in 1988, and filled with data and charts describing the real trends facing U.S. workers.

While newspapers reported on Gross Domestic Product and inflation, The State of Working America showed the trend in hourly wages and work hours. Even NPR focuses on stock prices and how the Dow Jones performed for the day; The State of Working America tells us what is happening to poverty rates. Long before Occupy Wall Street, the folks at EPI were sounding the alarm about growing inequality in the country.

Twenty-five years later, the EPI is still at it with the 12th edition. While there are now a variety of progressive think tanks out there, EPI continues to set the standard by providing thorough and in-depth analyses of the economic trends and policies that impact working people. This newest edition maintains its commitment to high quality analysis, offering a wealth of data on inequality, income, mobility, wages, jobs, wealth and poverty.

These are not the numbers you normally hear when economists talk about “growth.” For example, Chapter 5 gives an in-depth evaluation of the jobs picture. Instead of a simple monthly report that tells only the unemployment rate or number of jobs created, this book gives detail on the nature of those jobs.

It’s not enough just to have job creation; for people to have a decent quality of life, they should also have access to “good jobs.” Using a simple measure of a “good job” (pays at least $18.50 per hour, provides health benefits and a pension), we see that good jobs as a share of all jobs have steadily declined for male workers since 1979, while improving somewhat for women. But the overall trend is a decline in “good jobs,” all while the average value of output per worker rose significantly.

We see this relationship in another way in Chapter 4, which focuses on wages. Here the authors present charts to show the growing divergence between productivity and hourly wages since the 1970s.

For example, productivity from 1973 to 2011 increased by 80.4%, while average hourly compensation rose only 39.2%. This shows clearly that there was potential for raising wages or creating better jobs: instead, employers absorbed most of the gains from that productivity gain. Workers create, and employers take.

This kind of data blows apart the theory that wages are determined by workers’ worth, or productivity. Instead, we see the real story: wage rates are strongly conditioned by power.

Neoliberal Failures

In fact, one of the great values of this resource is that the numbers show clearly not only the ways in which neoliberal policies have failed to raise the standard of living for most people, but also how neoclassical economics itself is deeply flawed.

Over the last 30 years, with deregulation, expanded “free trade” and tax cuts for the wealthy, we should have seen job growth, a reduction in the informal sector, and a drop in poverty. Instead, even in periods of relatively strong growth, such as the mid-2000s, job creation was weak, and there was a rise in the informal economy.

These trends worsened considerably due to the Great Recession, but they are not just a product of bad times. Rather, they represent deeper structural problems with our capitalist economy.

This is not a Marxist text: the analysis and policy prescriptions are decidedly from a Keynesian tradition. Yet the data are clear: there is no automatic link between GDP and workers’ well-being, no guarantee that workers’ hard labor will translate into wage gains. As the AFL-CIO summarizes their analysis of the EPI charts: “We [the workers] make it, they [the employers] take it.”

The State of Working America is particularly valuable because the authors give you access to the data they use: you can download most of that from their website, and they provide an extensive methodological section. But the authors do not just show you data: they give you their analysis, putting the trends into context.

The 12th edition contains a short discussion of the causes and consequences of the Great Recession. They also provide some of their own explanation as to why inequality is rising so rapidly: it is not just the recession, and not just a passing phase, but the direct consequence of deliberate policy choices, from industry deregulation to tax policy and a failure to raise the minimum wage.

Since EPI formed, a host of “baby EPIs” developed around the country, focusing on city and state economic policy. Some of those produce their own reports, such as “The State of Working Ohio” from Policy Matters Ohio, http://www.policymattersohio.org/sowo-sept2012, and “The State of Working New York,” from the Fiscal Policies Institute, http://fiscalpolicy.org/state-of-working-new-york-2012-data-show-a-disappointingly-weak-recovery. These “baby EPIs” are now connected through a national network, Economic Analysis and Research Network (EARN).

Progressives have been slow to catch up to the conservative think tanks focusing on national and state policy (one estimate suggests that conservatives raised over $1 billion for those think tanks in the 1990s).(1) But the EPI pioneered the trail, and The State of Working America established a framework: progressives need to understand and dissect the data; economic policy must be understood according to its impact on working people.

The richness of the data can be overwhelming, and those new to the topics or uncomfortable with numbers may find the book intimidating. But EPI now provides summary factsheets online to go with the book. In fact, one exciting feature of the 12th edition: it is all available online — the book, charts and summary factsheets. See http://stateofworkingamerica.org/ to read the book and get links to the data.

Notes

1. David Callahan. “$1 Billion for Conservative Ideas; growth of power, influence and funding of conservative think-tank organizations.” The Nation. No. 15, Vol. 268; 21, April 26, 1999.
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September/October 2013, ATC 166