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David R. Francis

Workers' share of America's pie is shrinking

For every dollar of goods and services produced in the US in 2009, American workers saw only about 55 cents. Globalization and a lack of support for unions in Washington are contributing factors.

By David R. Francis / February 22, 2010

US workers aren't seeing their wages increase in proportion to their hours and productivity.

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American labor isn't getting its full share of the nation's output.

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Indeed, its share is at a "record low," says Charles McMillion, chief economist at MBG Information Services, a Washington consulting firm. "Labor has no leverage." So wages have been "depressed, stagnant, or falling" for some 30 years.

Much of that lost compensation went to business and its owners. Last year, for example, businesses raised workers' hourly pay a little (2.2 percent) but cut their hours a lot (5.1 percent). The result? The remaining workforce became considerably more productive, creating more goods and services per hour worked.

Ideally, business and labor would share about equally in productivity gains. Over the past three decades, though, business has reaped the bigger share. For every dollar of goods and services the United States produced in 1974, all employees reaped about 59 cents. Last year, their share had fallen to 55 cents. In a $14 trillion economy, that amounts to hundreds of billions of dollars in lost wages every year.

One reason for that grim slide is the globalization of the American economy. Mr. McMillion estimates 1 billion people in the world are unemployed or grossly underemployed and thus willing to work for tiny wages in comparison with those paid to most Americans.

Another reason is the perpetual war against trade unions by much of business and many antiunion politicians of both parties. For example, Republicans on the House Committee on Education and Labor routinely dispatch an e-mail to the press attacking the Employee Free Choice Act (EFCA) or some White House appointment, such as a nominee to the National Labor Relations Board.

EFCA was the top priority of organized labor, which had high hopes for labor-law reform when President Obama took office a year ago. But "it's not going to go anywhere soon" in Congress, notes John Schmitt, an economist at the liberal Center for Economic and Policy Research in Washington. With solid Republican opposition and a few Democratic no votes, the bill could not reach the 60 votes needed to escape a Senate filibuster.

Opposition to EFCA, popularly known as "card check," centers on its provision that a union could get recognition in a factory or office if it got a majority of workers to sign a card saying they wanted union representation. The company then couldn't insist on a Department of Labor supervised secret ballot of the workers on the union question.

It sounds undemocratic. Not often mentioned, however, is that management under EFCA could override a card-check vote by convincing 30 percent of the workers to ask for an election. Given the extraordinary measures many employers use to avoid unionization – pressuring workers to vote no and firing pro-union leaders – that 30 percent threshold might not be particularly high.

Firing pro-union workers is illegal. But penalties are so small and company-instigated delays are so long that unions have a tough time winning organizing campaigns and sometimes a harder time negotiating a contract.

In 60 percent of the cases, it takes at least a year to get a contract, says Mr. Schmitt. In 30 percent of the cases, it takes at least two years. A judge may order a return to negotiations but has no power to impose a penalty for the delay.

Modifying labor law in favor of unions won't necessarily reverse large economic trends at work. But unions see it as a step toward stopping the steady erosion of worker pay.

David R. Francis writes a weekly column.

US workers aren't receiving a fair share of the nation's output, experts say. Tell us how you think your pay check stacks up on Twitter: @CSMecon

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