Labor's Share

Years ago when I was in graduate school, there was another graduate student that I became so close to, we felt comfortable enough to put aside the political correctness of academia and have fierce, robust, and almost violent arguments about what we believed about political economy. We were basically like brothers; two leftist sociologists whose shared sentiment just tended to make the fighting more intense, because there is almost nothing worse than having a heretic in the family.While we both considered ourselves Marxists, he was a theory hating pure number cruncher, a type of person that we referred to as a "quantoid". On the other hand, I was in love with theory, and the more French the theory, the better. I considered him to be a vulgar Marxist with a two inch forehead whose knuckles made trails in the snow as he walked. I think that he considered me some sort of species of butterfly.One happy hour afternoon over cheap carafes of Margaritas and free chips and salsa at the Tres Banditos, we stumbled together into one of those spaces of total clarity that sometimes occur in drinking sessions just before the floor drops out from under. We decided that we needed to collaborate on an analysis and see if a butterfly could soar with a cave man on its back. Being young and stupid graduate students, we naturally chose a very ambitious proposition to test.Traditional Marxist theory held that as the power of capitalists and capitalism grew, workers would become steadily more impoverished. But in America (especially) as well as the rest of the developed world, the workers had not gotten poorer; they had gotten fatter. Anti-Marxists used this fact as a primary proof that Marx had been entirely wrong. Marxists at this time countered that capitalism was global and that while workers in the economic centers (the so-called First World) were relatively well off, the impoverishment was proceeding rapidly in the Third World. The anti-Marxists that still bothered to address Marxists would respond that this was nonsense; that all countries moving towards capitalism had to go through a development period, which was rather like a peasant who, tearing down his thatched hut and replacing it with a modern suburban split level had to spend some time sleeping in the dirt while the walls were going up. If it looked like billions of peasants were sleeping out in the rain, it was just that they had not yet had enough time to install the walls so that they could hang up their flat panels. So Marx was wrong. Also, he was ugly.My "Young Vulgarian" Marxist friend insisted that we look specifically at industrial workers in America over time to see whether or not they were being screwed. And what we found turned out to be so interesting that when we presented our paper at a conference, even the tenured professors stayed awake.

We used a cold dry census report called the Annual Survey of Manufactures. This comes out each non-census year; in a census year the data is gathered by the census itself. We looked at decades of data. I found this a pain, because we had to do a lot of this number crunching by hand since computers were not yet very common. (At Tres Banditos, the song on the Jukebox when we dreamed this all up was Addicted to Love).At my friends insistence, we "dredged" the data for a while to look for correlations. But after doing this for a month, we settled on a single idea. If we looked at industrial production as though it were a pie that labor and capital took slices out of, how big was labor's share?What we found first of all was that the American industrial pie grew very very quickly. Wages for workers, measured year over year, went up and this rather rapidly. However, labor's share of the pie got smaller and smaller every year.This was clearly shown by the data to my friend's satisfaction. And as simple as a observation as this was, I found it to tell a very interesting story.The Left was wrong about workers becoming more impoverished (at least at the time) because no one the in 19th century had any idea how large the capitalist pie would ultimately grow. The Left was right when they said that power in the form of relative control over the pie would gradually move towards the capitalists; it's just that as labor became more prosperous, it was hard to see this. And the Right, of course, was correct about Marx being ugly.When our current financial bubble broke, the economic pie suddenly got sharply smaller and incomes declined for workers and for members of the middle class (which you might see in this formulation are really just workers with more assets). We have seen statistic after statistic that says that wealth in the form of total ownership of assets has been moving into the hands of a smaller and smaller group of people. This is not just the rich getting richer. It is the rich getting a larger and larger percentage of a pie which is also getting bigger and bigger. The current economic crisis, however, was so sharp that it didn't just seriously trim the piece of pie that the workers get. It cut deeply into the part the rich have and it created a political situation where people were quite likely to start looking at the pie itself and how the slices were allocated. This wasn't simply a case where some kind of proletarian rabble might form and demand revolution. This was a case where the rich might conceivably lose a portion of their actual control of the pie to other parts of the rich. It wasn't the ripped off workers who demanded quick tax infusions to "save the banks". It was the rich who did (and this is why it was done so quickly and relatively effortlessly). Of course, the ultimate burden of this passes to the workers who pay most of the taxes.The reason that economic justice is so hard to talk about is that most people confuse what people are getting year over year (the size of the pie) with how much each group is getting (the cut of the pie). While I think it is a fact that in our history, the struggle between capital and labor moved over time from a struggle over control over percentages of the pie (the fight for socialism) to struggles over wages from the rapidly expanding pie, there is one other thing that tends to confuse things for people.This is the fact that in our corporate economic structure, the senior managers appear as a sort of worker just like the person who sweeps the floors. So when people talk about why the CEO has such a fat salary, the conversation often turns to the relative value of the CEO to the organization compared to the janitor. This framing of the argument has intensified over the years as we have come to refer to pay as "compensation", as though all pay is a compensation for some kind of equivalent loss. In this frame, it is true that CEOs and such have been getting increased pay more rapidly than the line worker. But this hides a more significant thing. The CEO is getting a bigger proportion of the pie. The control these people have over the system has been increasing. And of course, the more control they have, the more they can insulate themselves from their own mistakes and transfer the liabilities to those who are weaker; the workers.To be honest, I don't really care how much CEOs make as such. People who seem poor to us are living like kings compared to kings 2,000 years ago. The bar of what one should have in life keeps moving. While I think that the word compensation when looked at relative to pay is one of the biggest lies of the last 30 years, I don't lose any sleep over the idea that there are rich people out there getting richer. What I do think is important is that the rich are getting more and more overall control over the economic pie itself. The risk of impoverishment isn't so much on the money side as on the political side. The evil isn't that there are rich people as such but that the powerful continue to make everyone else systematically weaker.

unagidon is the pen name of a former dotCommonweal blogger.  

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