Workers are being squeezed by three distinct but interlocking dynamics that are destabilizing the socioeconomic fabric of the country. Each had its origin in the 1980s and has gained traction over the last 30 years as conservatives relentlessly pursue them. They are unfettered capitalism, regressive taxation and slashing the social safety net by downsizing government. In a three-part series I’ll examine the elements of each. First, capitalism. Capitalism is humankind’s best opportunity to raise millions out of poverty but, as Pope Francis has intimated, that doesn’t mean it can’t use some help. The “rising tide” mantra of capitalism is no longer lifting all the boats, only the yachts and not the fishing skiffs. Capitalism has degenerated from the Adam Smith model of the transparent exchange of goods or services between relatively free and self-sufficient parties into rapacious dog-eat-dog greed in which the many are exploited for the benefit of the few.
During America’s heyday, the mid-1900s, labor had a respected place at the table. But what’s happened over the last three decades is that wealth has been disengaged from the labor that once produced it. Union-busting, robotics, downsizing, contracting, part-timing, offshoring and outsourcing have resulted in massive profits at the top but also led to a race to the bottom, particularly for workers whose skill sets are easily replicated; the cog effect. Even as worker productivity is up 200 percent since 1979, those workers have not shared equitably in the fruits of that productivity. From 1947 to 1979 wage increases consistently mirrored productivity gains. If that had continued for the past 30 years, middle-class workers would have earned approximately $15,000 more and the working poor $7,000 more in 2012. But instead their wages have flatlined while 160 percent of gains have gone to the richest 5 percent. What’s happening is the owner class is gaming the system by counting on the government to subsidize its low-paid workforce through social services, while pocketing the huge productivity gains from their labor. As the financial noose continues to tighten around workers’ necks, the country will come to resemble a second-world sweatshop filled with desperate, exploited workers with an ultra-rich plutocratic overclass. Capitalism is no longer working for the majority of Americans, but the 1960s aren’t coming back and the automation genie can’t be put back in the bottle. How to get more money into the hands of the workers? The government incentivizes business in hundreds of ways. Offer tax incentives to encourage employers to increase average wages by some formula based on skill sets, experience and profit margins. Let’s call it the Henry Ford Strategy — pay your employees enough that they can afford to buy your cars. The augmented incomes would create new economic demand, jolting the economy into long-term, sustainable and vigorous growth; and increased tax revenues would partially offset the costs. This is a viable alternative to both the supply-side, trickle-down policies that have devastated the middle class and working poor, and the burdensome social safety net needed to provide them the basics of life. Next: The social safety net.