A Different Ponzi Scheme

If nothing else, our current economic crisis has exposed the financial system’s rotten core. The various claims of efficiency, dynamism, and innovation spouted by its most ardent boosters were, it turns out, simply a façade hiding unbridled greed, unethical lending, and unfathomable financial assets. The fallout has been widespread and the pain acute—lost jobs, lost savings, and lost houses—with more to come. And while the system’s collapse has been quick and dramatic, the problems were brewing for a while in the form of legal changes and deregulation that began decades ago.

It would be remarkable if structural economic decay were limited to the financial sector alone. It turns out that it is not. The light shined by Steven Greenhouse’s new book, The Big Squeeze: Tough Times for the American Worker, reveals a labor market rife with the ill treatment of workers, a market that conjures up Dickens and the worse excesses of the industrial revolution. Hard times indeed.

Things were not always this way. In the two decades after World War II, the economy grew, productivity increased, and workers throughout the income distribution reaped proportional shares of the benefits. But starting in the 1970s, the economy followed a new direction. The fruits of expanding output increasingly and disproportionately went to those with the highest incomes. Meanwhile, it became harder for the average worker to earn a decent living.

The reasons for the change are complex. Market fundamentalists suggest that workers’ woes arose from impersonal and unstoppable forces like “technological change.” Yet all market transactions occur within a juridical framework. And as with the financial markets, it was the growing power of business leaders to influence how rules are written, interpreted, and enforced that had the biggest effects. Free-trade agreements like NAFTA, government hostility to unions, opposition to minimum-wage increases, cuts in the social-safety net, and reductions in the number of Occupational Safety and Health Administration inspectors all paved the way to higher profits by enhancing corporate bargaining power and diminishing the economic and social standing of labor. The end result has not been pretty.

Greenhouse, a labor reporter for the New York Times, uses a mixture of first-hand employee accounts, government statistics, and academic studies to tell the tale. The individual stories of harried, overworked, underpaid, injured, and insecure employees are both heartbreaking and maddening. And while it may appear that he has cherry-picked his subjects to suit his needs, the data and analyses he cites confirm that his examples are indicative of a much broader trend. This approach allows one to see both the forest and the trees, to connect the individual experiences with the larger social forces that have brought them about. The elements are woven tightly together to produce a very readable and compelling narrative. Greenhouse is clearly sympathetic to the workers’ plight, although at times he also offers management’s viewpoint. To his credit, he avoids suggesting a false equivalence between the terrible predicament of workers and the profitability concerns of business. And if there is any bias, he can surely be forgiven, as the workers’ brief is rarely given a full and fair hearing.

In Greenhouse’s thinking, “The Big Squeeze” is essentially composed of five related squeezes. The first is a wage squeeze. During the past thirty years, average wages have stagnated and inequality has risen with no corresponding increase in social mobility. This alone is cause for concern. But, as Greenhouse documents, corporations have further reduced already meager pay through “time theft”—business strategies that force individuals to work without pay. Managers in some companies, for instance, compel workers to arrive early to prepare work stations or complete paperwork before they clock in. Others simply go into their computer systems and erase hours worked. At times, workers are literally locked in a store or factory until work is finished. The government has added to the problem by redefining job categories so that some jobs no longer merit overtime pay.

Workers have also been subject to a benefit squeeze. Through the years, benefits have been reduced or eliminated, effectively cutting worker pay. Employees have been forced to pay increasing shares of health-insurance premiums or have seen insurance disappear entirely. Likewise, pensions have shifted from defined-benefit to defined-contribution plans whose returns are subject to the whims of the market. Pensions have also become more precarious as courts have accommodated companies’ requests to default on pension plans as part of reorganization strategies. Vacation days, sick days, and other time off are all in short supply.

Stagnant wages and reduced benefits have contributed to a debt squeeze. With insufficient income to afford necessities, and the consumerist vision of the American Dream constantly being hawked, families borrowed with the now familiar consequences. Higher health-care, housing, and education costs all played a role in driving families into debt. Meanwhile, banks and businesses were all too willing to offer supplicants an endless supply of credit cards, subprime loans, lease-to-buy arrangements, and payday lending centers. And once workers committed to the periodic and often oppressive loan payments, they were more firmly locked into their jobs, however awful and debasing the conditions.

Low pay and mounting financial commitments led to a time squeeze for many workers, who were forced to put in more hours to make ends meet. Some households had to send more family members to work. The result has been less time for leisure and recuperation, less time spent with kids and spouses. Effects on family life at all levels have been profound.

Finally, there has been a squeeze on worker dignity. Along with the ascendancy of market logic that has encroached on all aspects of modern life, workers have come to be viewed not as human beings but simply as factors of production that cost companies money. This view has justified an array of harsh treatments such as an unreasonable pace of work, mind-numbing tasks, dangerous working conditions, physical abuse, and actual and symbolic degradation. Greenhouse tells stories to illustrate how a basic sense of decency toward employees has been slipping from the workplace. In one, an employee is summarily fired in front of his child on Bring Your Child to Work Day. In another, RadioShack fired four hundred workers by e-mail. In a third, Northwest Airlines suggested in a pamphlet to laid-off workers that, given their financial straits, they should not be shy about pulling things out of the trash.

Not all corporations are guilty of such callous practices. In one chapter, Greenhouse writes about firms, such as Costco and Patagonia, that treat employees well and still generate a reasonable profit. In theory, these companies and CEOs can serve as role models and help transform business, but in practice individual CEOs can only do so much. Workers are being squeezed because the game is rigged against them. Greenhouse understands this, and uses his final chapter to lay out systemic strategies for improving the lot of employees. These include national health insurance, legal and administrative changes to support union formation, better educational access and quality, and government-supported retirement accounts to supplement Social Security. These ideas are not new or original, but that does not mean they aren’t worthwhile. With a new president and Congress, perhaps some of them might actually be implemented, and workers might once again get something closer to their fair share.


Related: Mugged by the Boss, by Steven Greenhouse

Published in the 2009-02-27 issue: 

Robert DeFina is a professor in the Sociology Department at Villanova University. His teaching and research interests include labor markets, poverty, and social inequality. He is co-editor of the Journal of Catholic Social Thought.

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