by Roger Martin
I imagine that labor is feeling quite wistful about Labor Day 2014. It has been a while since labor, especially organized labor, has had much to celebrate. And the prospects going forward aren’t particularly bright.
Real wages for production and non-supervisory workers have declined since the mid-1970s. The share of jobs that are unionized has plummeted back almost to the level it was before 1935 when the National Labor Relations Act (NLRA) facilitated a huge increase in unionization. High unemployment has persisted in the jobless recovery. For those fortunate enough to have full time employment, job security is down, and pension and health benefits are shrinking. No trend for labor is positive.
Worse still, it is arguable that its longtime friend in Washington has abandoned traditional labor.
Throughout most of the 20th century, labor could count on having the Democratic party squarely in its corner. President Roosevelt rode to the rescue of labor in 1935 with the NLRA to fight back against the corporations who were subjecting labor to hostile, dangerous, insecure and low-paying workplaces. Throughout most of the rest of the 20th century, a Democratic presidential hopeful could not dream of winning the party’s nomination without gaining the endorsement of the President of the AFL-CIO – who always had a key speaking role at the Democratic Convention.
Meanwhile, the Republican Party battled on behalf of capital, supporting right-to-work states, deregulating industries, and lowering tax rates. That was the 20th century alignment.
It began to change at the end of the 20th century. A key marker occurred in 1992 when President Bill Clinton signed into law a tax change that allowed only the first $1 million in CEO compensation to be deducted for corporate income tax purposes. It was supposed to discourage corporations from paying their CEOs more than what was then thought to be an excessive $1 million (imagine that!) – and failed spectacularly as they were given stock options instead, which made them wealthier than ever before.
But in whose favor was this measure intended? Labor? Hardly. There was no obvious benefit to them. Capital? Yes indeed. Shareholders were complaining about CEOs demanding ever-higher compensation – and the Democrats responded to help capital reign in CEO talent. Arguably the attention to the needs of capital has continued in the Obama administration. This administration featured enthusiastic embrace of the TARP bailouts of banks that protected their shareholders first and foremost and the continued low interest policies that favor capital owners. Of course, the argument can be made that these policies help labor too, by avoiding a recession/depression. But the careful attention to capital first is a relatively new behavior for the Democrats.
Meanwhile, the Republican Party has increasingly shifted its allegiance to high-end talent, a tiny offshoot of labor that began to emerge around 1960. During the Reagan era, for instance, they cut the top marginal income tax rate from 70% in 1980 to 50% just two years later. By 1988 it was 28%. In seven years, an executive earning a million-dollar salary went from keeping $340,000 after federal taxes to keeping $725,000. That’s quite a raise. (The marginal rate for labor — median-income families — fell only about 10% over the same time-span.)
Republicans have also defended private equity investment managers in maintaining the favorable capital gains treatment that their carried interest fees are accorded by the tax system. While hedge fund managers and the like are often seen as representatives of capital, in fact they ought to be considered high-end talent: their investor-customers are in fact the representatives of capital. The GOP even went as far as putting forward a card-carrying member of the high-end talent class, ex-strategy consultant and private equity manager Mitt Romney, as its Presidential candidate in 2012.
So in the modern economy, capital has the Democratic Party as its friend and high-end talent has the Republican Party as its new BFF. But who wakes up in the morning thinking first of labor, even Monday morning on Labor Day? Arguably it is no one. Labor is on its own politically in America in the 21st century – and that can’t feel too comforting.
I imagine that labor is feeling quite wistful about Labor Day 2014. It has been a while since labor, especially organized labor, has had much to celebrate. And the prospects going forward aren’t particularly bright.
Real wages for production and non-supervisory workers have declined since the mid-1970s. The share of jobs that are unionized has plummeted back almost to the level it was before 1935 when the National Labor Relations Act (NLRA) facilitated a huge increase in unionization. High unemployment has persisted in the jobless recovery. For those fortunate enough to have full time employment, job security is down, and pension and health benefits are shrinking. No trend for labor is positive.
Worse still, it is arguable that its longtime friend in Washington has abandoned traditional labor.
Throughout most of the 20th century, labor could count on having the Democratic party squarely in its corner. President Roosevelt rode to the rescue of labor in 1935 with the NLRA to fight back against the corporations who were subjecting labor to hostile, dangerous, insecure and low-paying workplaces. Throughout most of the rest of the 20th century, a Democratic presidential hopeful could not dream of winning the party’s nomination without gaining the endorsement of the President of the AFL-CIO – who always had a key speaking role at the Democratic Convention.
Meanwhile, the Republican Party battled on behalf of capital, supporting right-to-work states, deregulating industries, and lowering tax rates. That was the 20th century alignment.
It began to change at the end of the 20th century. A key marker occurred in 1992 when President Bill Clinton signed into law a tax change that allowed only the first $1 million in CEO compensation to be deducted for corporate income tax purposes. It was supposed to discourage corporations from paying their CEOs more than what was then thought to be an excessive $1 million (imagine that!) – and failed spectacularly as they were given stock options instead, which made them wealthier than ever before.
But in whose favor was this measure intended? Labor? Hardly. There was no obvious benefit to them. Capital? Yes indeed. Shareholders were complaining about CEOs demanding ever-higher compensation – and the Democrats responded to help capital reign in CEO talent. Arguably the attention to the needs of capital has continued in the Obama administration. This administration featured enthusiastic embrace of the TARP bailouts of banks that protected their shareholders first and foremost and the continued low interest policies that favor capital owners. Of course, the argument can be made that these policies help labor too, by avoiding a recession/depression. But the careful attention to capital first is a relatively new behavior for the Democrats.
Meanwhile, the Republican Party has increasingly shifted its allegiance to high-end talent, a tiny offshoot of labor that began to emerge around 1960. During the Reagan era, for instance, they cut the top marginal income tax rate from 70% in 1980 to 50% just two years later. By 1988 it was 28%. In seven years, an executive earning a million-dollar salary went from keeping $340,000 after federal taxes to keeping $725,000. That’s quite a raise. (The marginal rate for labor — median-income families — fell only about 10% over the same time-span.)
Republicans have also defended private equity investment managers in maintaining the favorable capital gains treatment that their carried interest fees are accorded by the tax system. While hedge fund managers and the like are often seen as representatives of capital, in fact they ought to be considered high-end talent: their investor-customers are in fact the representatives of capital. The GOP even went as far as putting forward a card-carrying member of the high-end talent class, ex-strategy consultant and private equity manager Mitt Romney, as its Presidential candidate in 2012.
So in the modern economy, capital has the Democratic Party as its friend and high-end talent has the Republican Party as its new BFF. But who wakes up in the morning thinking first of labor, even Monday morning on Labor Day? Arguably it is no one. Labor is on its own politically in America in the 21st century – and that can’t feel too comforting.
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