Almost 80% of US workers live from paycheck to paycheck. Here's why

https://www.theguardian.com/commentisfree/2018/jul/29/us-economy-workers-paycheck-robert-reich

Robert Reich
July 29, 2018

The official rate of unemployment in America has plunged to a remarkably low 3.8%. The Federal Reserve forecasts that the unemployment rate will reach 3.5% by the end of the year.

But the official rate hides more troubling realities: legions of college grads overqualified for their jobs, a growing number of contract workers with no job security, and an army of part-time workers desperate for full-time jobs. Almost 80% of Americans say they live from paycheck to paycheck, many not knowing how big their next one will be.

Blanketing all of this are stagnant wages and vanishing job benefits. The typical American worker now earns around $44,500 a year, not much more than what the typical worker earned in 40 years ago, adjusted for inflation. Although the US economy continues to grow, most of the gains have been going to a relatively few top executives of large companies, financiers, and inventors and owners of digital devices.

America doesn’t have a jobs crisis. It has a good jobs crisis.

When Republicans delivered their $1.5tn tax cut last December they predicted a big wage boost for American workers. Forget it. Wages actually dropped in the second quarter of this year.

Not even the current low rate of unemployment is forcing employers to raise wages. Contrast this with the late 1990s, the last time unemployment dipped close to where it is today, when the portion of national income going into wages was 3% points higher than it is today.

•••••

Two fundamental forces have changed the structure of the US economy, directly altering the balance of power between business and labor. The first is the increasing difficulty for workers of joining together in trade unions. The second is the growing ease by which corporations can join together in oligopolies or to form monopolies.

•••••

antitrust enforcement has gone into remission. The US government has essentially given a green light to companies seeking to gain monopoly power over digital platforms and networks (Google, Apple, Amazon, Facebook); wanting to merge into giant oligopolies (pharmaceuticals, health insurers, airlines, seed producers, food processors, military contractors, Wall Street banks, internet service providers); or intent on creating local monopolies (food distributors, waste disposal companies, hospitals).

This means workers are spending more on such goods and services than they would were these markets more competitive. It’s exactly as if their paychecks were cut. Concentrated economic power has also given corporations more ability to hold down wages, because workers have less choice of whom to work for. And it has let companies impose on workers provisions that further weaken their bargaining power, such as anti-poaching and mandatory arbitration agreements.

•••••

Another consequence: corporations and wealthy individuals have had more money to pour into political campaigns and lobbying, while labor unions have had far less. In 1978, for example, congressional campaign contributions by labor Political Action Committees were on par with corporate PAC contributions. But since 1980, corporate PAC giving has grown at a much faster clip, and today the gulf is huge.
Advertisement

It is no coincidence that all three branches of the federal government, as well as most state governments, have become more “business-friendly” and less “worker-friendly” than at any time since the 1920s.

•••••

The more recent shift in bargaining power from workers to large corporations – and consequentially, the dramatic widening of inequalities of income, wealth, and political power – has had a more unfortunate and, I fear, more lasting consequence: an angry working class vulnerable to demagogues peddling authoritarianism, racism, and xenophobia.