The War on the Wage Earning Middle-Class

The establishment, the elite, the rich or whatever you want to call those who have the money and call the shots, are at war with the American wage earning middle-class. This war is real and at the moment the near bankruptcy of state and local governments is being used as an excuse to attack the public-sector unions.

Make no mistake. The rich do see this as a war. The newly elected Republican governor of Wisconsin, Scott Walker, without any provocation threatened to call out the National Guard "if there is worker unrest" or "problems with workers" when he imposes his austerity budget. Austerity is the code word for attacking public-sector unions on a spectrum of issues. These range from defaulting on contractual wage and benefit agreements to taking away most of the union's ability to negotiate.

The anti-union narrative goes like this.The public sector unions and their political enablers conspired during the good times to negotiate overly generous wage settlements and absurdly expensive healthcare and retirement benefits. These wages and benefits are now way out of line with the private sector and the states can no longer afford to coddle these workers. Austerity is now necessary to make up for the decades of wasteful spending.

The crisis is really just an excuse. The strategic goal, which is much older than this crisis, is the destruction of the labor movement, the most significant remnant of which is the public sector unions. The private sector unions have, for the most part, already been crushed and can no longer put upward pressure on wage levels. More telling, the unions were not able to hinder the greatest upward redistribution of income in our history.

The rich are winning what was until recently a war of attrition. The union movement as a whole is no longer large enough to matter. In the 1940s, the high point of the labor movement, the total union membership reached as high as 40 percent of the workforce, with the public-sector then only about 10 percent. By 2010, things had reversed and total union membership fell to only 11.9 percent. Now the private sector is only about 6.9 percent unionized and the much smaller public-sector has grown to 36 percent.

The private/public benefit packages are indeed out of line. But that is because private sector workers are underpaid, not because public-sector workers are overpaid. Private sector workers were more vulnerable to attack and could be fired more easily for union organizing. But wage earners have lost most seriously in regard to income.

From 1946 to 1980, when America was building the great middle class, the richest 10 percent of Americans received 32 percent of the income increase while the other 90 percent received 68 percent of that increase. That ratio remained constant for 30 years and the country prospered. Then around 1980 the war on the middle class began and the great upward redistribution of income occurred. Between 1980 and 2008, GDP grew, in constant dollars, from $5.8 trillion to $13.3 trillion, an increase of $7.5 trillion. The workers received just 14 percent of that increase. The top 10 percent got 86 percent.

In the years 2000 to 2007, GDP increased by a total of $2 trillion. The richest 10 percent of Americans received all of that; the other 90 percent received absolutely nothing. Had the previous 62/38 ratio continued, the wage earners would have received $1.2 trillion additional in income. That $1.2 trillion, about $8000 per worker, is the booty that the top 10 percent seized as a result of their looting in the war on wage earners.

The war on the middle class is more than an attack on unions and is being waged on a number of fronts. For instance, the Federal Reserve made the goal of full employment subservient to fighting inflation. The real minimum wage is falling because it is not indexed. Deregulation – of money, of the workplace, of food and consumer products and across our economy – shifts the cost of public goods to the working class. Federal tax policy, globalization and trade/investment agreements encourage passing that $1.2 trillion to off-shore investment or foreign tax havens. The working class has born virtually the entire cost of this financial crisis and the Great Recession.

The states have to close their budget gaps. The real austerity option is to increase taxes on those who have all the money. Our politicians will talk about that but the cheap shot is accusing the public-sector unions. Wage earners will then be the docile workers and citizens the corporations want.