In his State of the Union address, President Obama asked us to consider how to rebuild America’s middle class. He talked about the need to bring manufacturing back to our shores, provide greater fairness in foreign trade, educate our workforce to compete in global markets, and train a new generation of skilled workers.
All of these are indeed critical elements in providing American workers and their families with the types of jobs that made many of our parents “solidly middle class.” But history tells us that there was one other element in America’s transformation from a working class society to a middle class society, and it has to do with a statistic reported by the U.S. Bureau of Labor Statistics at the end of January.
According to the Bureau, the percentage of American workers who belonged to trade unions fell to 11.3 percent last year, the lowest level since the 1930s and perhaps as far back as 1918. Last year, of course, was when we saw unions being blasted across the country from Wisconsin to Illinois, and New Jersey.
In some cases, unions have not done themselves or their members proud by ignoring changes in the global economy or the patience that taxpayers have with the pace of public reform. But let us not forget how unions played a critical role in the very creation of the middle class.
Let’s begin with a simple definition of two social classes. We can define a “working class” household as one that has little income and even less economic security. In contrast, a “middle class” household has more income, but even more importantly, a modicum of economic security. In the 1930s, the Roosevelt Administration began the job of transforming America into a middle class society where a majority of Americans enjoyed higher wages and greater economic security. Unemployment insurance helped workers from falling out of the middle class the moment they lost a job. Social Security helped older workers from losing their middle class status once they retired.
Yet it was the passage of the National Labor Relations Act (NLRA) in 1935 that expanded the middle class the most by providing a set of rules that eased the ability of workers to join unions and work collectively to improve their lot. From just nine percent of the workforce in 1936, the proportion of America’s workers who were union members soared to more than 35 percent by the mid-1950s. What is more, given the spread of trade unionism, many non-union employers offered wages and benefits that were close to comparable with organized workplaces – in an attempt to discourage their workers from joining a union. Perhaps two-thirds of workers were thereby helped by the organizing drives of the 1930s, 1940s and 1950s even if half of them never paid a dollar in dues.
The big breakthrough in building America’s middle class came right after World War II when new union contracts were forged in the nation’s major industries. These new contracts had six provisions that would make it possible for workers of modest skill to join the ranks of the middle class along with those who had the benefit of a higher education. The first provision provided blue collar America a middle class wage:
AIF/COLA Clause – The annual improvement factor and cost of living escalator gave workers a wage increase each year consistent with productivity growth and protected their wages from the erosion of inflation.
The next five provided workers with a modicum of job and income security:
Fringe Benefits – Health insurance, life insurance, pensions
Seniority – Layoffs, recalls, and transfers based on years of work on the job
Grievance Procedure – A formal process for adjudicating workers’ rights at work
Work Rules – A formal set of guidelines that protected workers on the job
Union Shop Provision – A guarantee that workers would have union representation
The modern collective bargaining agreement that grew out of these principals and provisions transformed American workplaces into middle class establishments.
Times change and the spread of unionism began to wane. Imports and the introduction of new technologies reduced the need for less-skilled workers and the ranks of organized labor dwindled.
Whether a new form of unionism can replace the old, consistent with the exigencies of a global economy and whether additional worker protections like universal health care insurance can recreate the basis for rebuilding America’s middle class is an open question.
But without making it possible for the majority of American households to once again enjoy the benefits of rising incomes and greater job security, it is hard to see how we can rebuild America’s middle class.
In 1965, according to a national Gallup Poll, 35 percent of Americans considered "big government" to be the biggest threat to the country in the future. Slightly fewer (29%) named "big business" as the biggest threat while just 17 percent put this onus on "big labor." This was the era of Lyndon Johnson and the federal government's massive "War on Poverty."
By 1983, fully 50 percent of those polled listed big government as the biggest threat with only 20 percent naming either business or labor. This was the era of Ronald Reagan and the mantra "Get the Government off my back." By 2001, at the beginning of George W. Bush's presidency and "compassionate conservatism," the Gallup poll revealed that two-thirds (65%) of Americans were most worried about big government. By contrast, less than a quarter (24%) feared big business and only 8 percent now worried about big labor.
Last year, in the third year of the Obama presidency, Gallup asked the same question and the results were largely unchanged from 2001. Two-thirds -- 64 percent – still believed government posed the greatest threat to the future of the country. Despite the Great Recession, brought on in large measure as a result of the financial shenanigans of some of the largest banking businesses ever assembled on earth, only 26 percent of Americans believed business was the greatest threat to the country’s future.
Why the continued distrust and fear of government? It is mainly due to "asymmetrical information" and the lack of a serious education campaign about what government actually does for every last one of us every single day. Essentially, we take for granted what local, state, and federal agencies take care of as a matter of course and rarely consider that the stop light at the next corner was put there and maintained by a local government agency, that our safe drinking water was provided for and guaranteed by a multi-billion dollar state government investment, and that our life expectancy has increased by nearly ten years since the end of World War II mainly due to medical research funded by an array of federal programs.
A good experiment you might try is to keep track of all the things government does for you during a single 24-hour period. Even before you wake up on that day, a government inspector has assured you that your bedroom mattress will not cause you harm. Within the first hour, you will have clean water for your shower, sewers for your waste, and cornflakes for your breakfast that are not only safe but delivered to you along federal interstate highways, state roads, and local streets. And that’s all before 9:00 AM.
During the day, the federal government alone (not counting what state and local governments are doing) is working in the background on an enormous array of programs that benefit us in countless ways. For the sake of brevity, here is a short list of federal programs by function:
Provide for the National Defense
- Army, Navy, Air Force, , Marine Corps, Coast Guard
- National Guard
- Special Forces
- Missile Defense Agency (MDA)
- State Department
- Agency for International Development (USAID)
- Arms Control and International Security
- Defense Advanced Research Projects Agency (DARPA)
- Helsinki Commission (Commission on Security and Cooperation in Europe)
- National Aeronautics and Space Administration (NASA)
- National Security Council
Assist the Private Economy
- Establish Rules for Private Property
- Copyright Office
- Patent Office
- Adjudicate property disputes
- Commerce Department
- Federal Reserve System
- Bureau of the Engraving and Printing (Money)
- Antitrust Division
- Federal Trade Commission (FTC)
- Bankruptcy Courts
- Court of Federal Claims
- Economic Development Administration
- Export-Import Bank of the United States
- Farm Credit Administration
- Federal Deposit Insurance Corporation (FDIC)
- Federal National Mortgage Association (Fannie Mae)
- Federal Home Loan Mortgage Corporation (Freddie Mac)
- Government National Mortgage Association
- Federal Housing Finance Agency
- Federal Mediation and Conciliation Service
Provide for Basic Infrastructure
- Federal Highway Administration
- Federal Aviation Administration (FAA)
- Federal Railroad Administration
- Federal Transit Administration
- Maritime Administration
- Railway Stations
- Local Mass Transit
- Commuter Rail
- U.S. Postal Service
- Federal Communications Commission (FCC)
- Army Corps of Engineers
- Bonneville Power Administration
- Federal Maritime Commission
Enhance Education and Culture
- Office of Elementary and Secondary Education
- Employment and Training Administration
- Vocational Training Programs
- Employment Services
- Commission on Fine Arts
- Holocaust Memorial Museum
- John F. Kennedy Center for the Performing Arts
- Library of Congress
- National Science Foundation
Provide for Health
- National Institutes of Health (NIH)
- Agency for Healthcare Research and Quality (AHRQ)
- Animal and Plant Health Inspection Service
- Center for Food Safety and Applied Nutrition
- Centers for Disease Control and Prevention (CDC)
- Centers for Medicare & Medicaid Services (CMS)
- Food and Drug Administration (FDA)
- Food Safety and Inspection Service
- Healthy Homes and Lead Hazard Control Office
- Indian Health Service
- Nuclear Regulatory Commission
Protect the Natural Environment
- Environmental Protection Agency
- National Parks
- National Forests
- Bureau of Land Management (BLM)
- Bureau of Reclamation
- Fish and Wildlife Service
- Forest Service
- Migratory Bird Conservation Commission
Provide Information to Citizens
- Food and Drug Administration
- Vehicle Safety Information
- Vehicle Efficiency Data
- Agricultural Research Service
- Agriculture Department
- Bureau of Consumer Financial Protection
- Bureau of Economic Analysis (BEA)
- Bureau of Labor Statistics
- Bureau of the Census
- Bureau of Transportation Statistics
- Congressional Budget Office (CBO)
- Consumer Financial Protection Bureau
- Consumer Product Safety Commission (CPSC)
- Government Accountability Office (GAO)
- Government Printing Office (GPO)
- Legal Services Corporation
- National Weather Service (NOAA)
Provide for Domestic Security
- Federal Bureau of Investigation (FBI)
- Federal Bureau of Prisons
- Alcohol, Tobacco, Firearms, and Explosives Bureau
- Bureau of Prisons
- Civilian Radioactive Waste Management
- Federal Emergency Management Agency (FEMA)
- Federal Law Enforcement Training Center
- Federal Mine Safety and Health Review Commission
- Federal Motor Carrier Safety Administration (FMCSA)
- Federal Marshals Service
- Mine Safety and Health Administration
- National Highway Traffic Safety Administration (NHTSA)
On the other hand, one firefighter receiving disability pay while he works out to win a body-building contest gets our dander up … as it should. So does one local public housing agency director who is on the take. But too many of us – if Gallup is right, two-thirds of us -- then take such few idiosyncratic cases of bad behavior as though they were commonplace and blame "big government" for threatening our future. One piece of bad news is more powerful to our thinking about government than thousands of unnoticed, but absolutely critical, services conveyed to us silently and continuously by hundreds of government programs, most of which we couldn’t name if asked to do so.
We need to stop and think about what government actually provides for us before we follow the path to radically downsize government. To be sure, many government programs, like most businesses, can become more effective and efficient – but you would be hard pressed to find enough "waste and abuse" in government to permit major cuts in programs before decimating programs we all take for granted and would have trouble living without. We hate government, but can you imagine how much we will miss it once it's gone? FULL ENTRY
As a general rule, you will do much better taking advice from a used car salesman or, for that matter, a fortune teller than an economist. Economists, on the whole, are much better when it comes to arguing abstract theory about the past or the future than providing even the most mundane concrete advice about the present. My wife, with her training in psychology and survey research, has a much better track record than I when it comes to buying almost anything or investing in the stock market.
Yet at the risk of actually giving out some advice, for whatever it is worth, let me suggest that if you are going to be in the market to buy a home sometime in the near future and can afford to buy one now, there may be no better time to do so than this summer. There are a lot of reasons for listening this one time to a card-carrying economist.
The first is that after nearly six years, home prices in Greater Boston have finally stabilized. While there is still some risk that home prices could fall further, data for the past six months suggest that home prices have hit bottom in most communities and are on the verge of beginning to rise. Buying at the bottom of the market makes sense and this finally looks like a bottom.
The second is that mortgage rates are ridiculously low. If you are creditworthy, you can find a mortgage that carries an interest rate of less than 4 percent. That is lower than anytime this century and may be lower than any time in the past fifty years or more. It is hard to believe that interest rates could get any lower and they are likely to rise later this year or next. When it comes to paying for a home, the mortgage rate can be as important as the price.
The third reason is that, unlike home prices, rents in Greater Boston are at an all-time high and could go higher. This is the consequence of three factors. The first is that many young homeowners are sitting on the sidelines either anxious about home prices or so in debt because of college loans that they cannot afford a mortgage. The second is that an unfortunately large number of families have faced foreclosure and they have moved from homeownership into the rental market. And the third is that over the past decade the graduate student population of our universities has exploded, putting greater pressure on the rental market as students come to Boston to attend school. The upshot is that for some households, the monthly cost of renting might not be much higher than homeownership and perhaps less.
There is one problem, however, that you may encounter if you take my advice. If you want to buy in a community with excellent schools, you may find there is little inventory available. This is just another indication of how strong a “buyers’ market” we have. At any given time, a market can be more favorable to the buyer or more favorable to the seller. A glut of housing (or cars or Red Sox tickets, for that matter) usually favors the buyer. A shortage of housing but in the context of strong demand favors the seller. Right now, sellers who can wait to sell are sitting on the sidelines waiting for property values to increase. Why sell now if you can wait six months and get $60,000 more for your home?
As such, we have a buyer’s market but not a glut of attractive properties. What that means is that you should get into the market now and be prepared to spend some time before that ideal home comes along at a price you can still afford. I’m not sure my wife agrees with me on this, but I am afraid to ask.
The latest news on the employment front is not good. Indeed, it is terrible. Last month, employers nationwide added a total of just 80,000 to their payrolls. Back in January of this year, 275,000 jobs were created, a strong enough performance to reduce the national unemployment rate from 8.5 to 8.3 percent in a single month. If we could have kept that pace up for just five months, we would have shaved the unemployment rate by a full point. By the November election, we might have faced a jobless rate of “just” 6.5 to 7.0 percent. President Obama would have been seen as something of an economic magician, boosting his chances of reelection immensely.Unfortunately, June marked the sixth month in a row that employment growth has been deteriorating. As such the official unemployment rate remains stuck at 8.2 percent. Unless a miracle comes along to create about 200,000 jobs a month to offset labor force and productivity growth, the unemployment rate will not fall much below this level. Essentially, private employers have stopped hiring and the public sector continues to lay workers off. Sluggish consumer demand explains part of this. A weakening European economy explains still another. And while I am not one for conspiracy theories, it just may be true that some employers could justify adding new employees now, but are holding off new hiring until after the election hoping that miserable economic conditions will help jettison Democrats from the White House and the Congress.
The fact is this recession is unlike any one we have experienced over the past century with the possible exception of the Great Depression of the 1930s. A few statistics and a simple chart demonstrates why.
The current “Great Recession” is the eighth official recession since 1960. The job loss during this recession was enormous relative to each of the others as the following table demonstrates. Between January 2008 and February 2010, total non-farm employment plummeted by nearly 8.8 million jobs. This was more than three times the loss in any of the previous recessions in terms of the number of jobs lost and more than twice the rate. Before employment began to recover, the nation had a total of 6.4 percent fewer jobs than before the recession began.
Jobs Lost as % of Total
But what is really frightening about the current state of affairs is that the recovery has stalled in a fashion that makes even these numbers look relatively benign. By May of this year, only 43 percent of the lost jobs had been recovered. In the previous recessions, as the following chart reveals, it took no more than eight months to recover this share of the job loss. This time around it has taken fifty-one (51) months. In this sense, this weak economy is between six and twenty-five times worse than earlier recessions! (The dates in the chart refer to the period in which the total number of jobs was contracting.)
There are several reasons that might explain this. First, of course, is that this recession was so much more severe than all the earlier ones. Snapping back from a recession that claims just 1.3 to 3.1 percent job loss is a lot easier than one where 6.4 percent of the jobs disappeared. A second reason is that all of the previous recessions were “normal” in the sense that they amounted to corrections in a regular business cycle when inventories of unsold goods rose faster than consumption and as a consequence employers slowed down production to bring inventories into line with demand. This time around the proximate cause was not a “normal” inventory build-up, but an irrational speculative boom in housing, a massive credit card spending bubble, and ridiculously risky banking practices that could never be sustained. Instead of a little bubble bursting, a gargantuan one did.
Yet there is still a political dimension to this recession that marks this one apart from all the others. In past recessions, Democrats and Republicans came together to forge a coherent fiscal policy response to bad economic times. The consensus was similar to the near universal support given to the President in times of war or a foreign policy crisis. In the 1960-1961 recession, President Kennedy and Republicans in Congress agreed on short-term tax cuts for working Americans to prop up consumer spending. In subsequent recessions, members of both parties forged a combination of short-term tax cuts and sharp increases in federal spending -- in defense and in social programs -- to shorten the time it took to regain lost jobs.
This time around, Republicans in the Congress have made it clear that they – perhaps like some employers -- do not desire a faster solution to reduce joblessness in the hopes of securing electoral victories in November. By putting partisanship and conservative ideology ahead of a coherent and rational attack on unemployment, millions and millions of American families will suffer for years to come.FULL ENTRY
Nearly three years ago, the Boston Globe published an OpEd I had written about public sector unions. In that piece, I asked whether these unions would suffer the same fate of lost membership and diminished political clout to which my old union, the UAW, had succumbed. What happened in Wisconsin, San Diego, and San Jose last week seems to make that 2009 article more prescient than ever. Yet there is a now chance for organized labor to win back some popular support in Massachusetts if it follows the lead of the Massachusetts Teachers Association (MTA). The Teachers Union has just banded together with Stand for Children to push for groundbreaking state legislation that will help make teacher performance rather than strict seniority the means by which teachers are assigned to schools.
Let me explain what has happened and why this could signal a new era for public unions in the Commonwealth.
When I was a summer replacement worker on a Ford assembly line in the mid-1960s, the UAW had 1.5 million members and was widely respected for its efforts not only on behalf of its own ranks, but workers everywhere. As such, it had widespread political support.
By 2009, however, UAW membership had slipped to fewer than 465,000 as the auto industry collapsed. I noted that most of its demise was due to the “extraordinary blunders made by the auto companies” themselves. But the union was partly to blame. “It failed to press the auto companies to build high quality, innovative cars that could compete with imports. Often it insisted on job classifications and work rules that undermined efficiency and compromised the industry’s competitiveness.”
I asked back then, “Will public sector unions follow the same path?” I equated the UAW and the auto industry’s disregard of their customers’ demands for competitively priced, higher quality, more fuel efficient cars with the apparent disregard of public unions for reforms that could improve the quality of public services. Too often, union leaders seemed to flaunt their political power at the expense of building popular support for their cause.
What I feared back then is coming true. Antagonism toward public unions is exploding. Governor Scott Walker’s victory in Wisconsin provides the exclamation point to the growing movement to weaken or destroy public sector unions in the U.S. Sensing a growing wariness of unions, Mitt Romney’s attacks on organized labor have become ever more intense and shrill. Even before Walker’s victory, the Wisconsin outlawing of the automatic withholding of union dues that led to the recall campaign was taking its toll. According to the Wall Street Journal, one-third of the Wisconsin members of the American Federation of Teachers stopped paying union dues. Membership in Wisconsin’s American Federation of State, County, and Municipal Employees (AFSCME) shrank by more than 34,000.
Wisconsin is hardly alone. Last week, voters in San Diego and San Jose overwhelmingly approved ballot measures to roll back municipal pensions. One suspects that this anti-union movement will spread across the country, especially given the continuing fiscal crises faced by cities and towns nearly everywhere. As communities face the choice of honoring union contracts versus providing basic public services, one can imagine an increasing chorus arguing the case against the unions and fewer and fewer standing up for them.
In the long run, this would be bad for workers everywhere especially in a period of falling wages amidst a rising Plutocracy. Unions have not outlived their usefulness in theory, but their tactics have often undermined their own goals in practice.
Fortunately, there is at least one union in Massachusetts now taking constructive action that should help counter the antiunion animus spreading from state to state. That union is the Massachusetts Teachers Association (MTA). Last week, the union came to an agreement with Stand for Children, an organization whose mission is to improve public schools throughout the state. Stand for Children has been sponsoring a November ballot referendum that would, if passed, require teacher staff reductions or reassignments be based on teacher performance rather than on strict seniority. Working with the MTA, the organization has agreed to withdraw this initiative in light of the union’s agreement to co-sponsor legislation in the State House that would give teacher performance based on honest and fair teacher evaluations precedence over seniority in teacher assignments. This legislation would help provide common standards for teacher assignments while ensuring that teachers continue to have an appropriate collective voice in their schools.
Unfortunately, the other teachers’ union in Massachusetts and the state AFL-CIO have vowed to oppose the legislative alternative. They are urging the leadership of the House and Senate to reject the legislation, and they hint at mounting a “fight” on Beacon Hill to defeat the bill if legislative leaders seek to advance it.
With all due respect to my friends at the American Federation of Teachers Massachusetts and the AFL-CIO, I truly believe they fail to fully recognize that if they are successful with the Legislature, they will have won a Pyrrhic victory. The Stand for Children ballot initiative will almost surely prevail and the cost involved in trying to defeat it will be prodigious. In the end, the bruising battle will turn even more taxpayers and voters against organized labor even as it threatens to undermine the achievements that have made Massachusetts number one in the nation according to many educational measures.
In this age of enormous income equality and the unparalleled power of big business, we desperately need organized labor to preserve its strength to stand up for the 99 percent – not just the unions’ own members. Prevailing against the proposed legislation will undermine the much bigger fight on our hands. Building coalitions with parents, students and other community organizations will help restore the alliance of progressive forces in the Commonwealth and help reconstitute popular support for public unions. Without such coalitions, we all face much darker days ahead.
Beginning July 1, MBTA fares will be going up and service will be cut. To some, the increases may seem modest: a single CharlieCard ride on the Red, Orange, or Blue line will increase by 30 cents to $2.00. Bus rides will increase by 25 cents and student fares by 15. Monthly passes for commuter rail riders will increase between $38 and $64. Some routes will be discontinued; others will experience service cuts on weekends. All of this is to help close a projected MBTA deficit of $160 million in fiscal year 2013.
These fare increases will obviously hurt low and moderate income riders and especially those on fixed incomes. When the T held hearings on the increases earlier this month, scores of riders told of the hardship this will cause them.
The poor will suffer, but in reality the real pain these fare increases and service cuts are likely to inflict are not on the poor but on those who own cars and use them regularly to commute to work or do their daily errands. The irony is the biggest beneficiaries of the T are not its riders, but those who seldom use it.FULL ENTRY
Massachusetts. We are world famous for our health care sector – just think MGH, the Brigham, Beth Israel, Dana Farber, Children’s, and the Joslin to name a few superstars. We are world leaders in biotech and the life sciences – from Abbot Labs and Akermes to Genentech, Genzyme, Shire and Vertex. And we are known for our financial institutions from Fidelity and Putnam to the Prudential, John Hancock, and State Street.
We also have a bevy of world-class universities like Northeastern where I work and a couple other good ones across the Charles. Just within Greater Boston, we have more than 70 universities and colleges, seven of them ranked in the top 100 in the nation. Statewide, there are another nine universities and colleges that U.S. News & World Report puts on their top 100 lists.
So when we normally think about the Massachusetts economy, we think health care, drugs (legal ones), banking and insurance, and higher education. But as a matter of fact, even with the explosive growth of these sectors, the Commonwealth’s economy is much more diverse.FULL ENTRY
About the author
Barry Bluestone is the Stearns Trustee Professor of Political Economy, the founding director of the Dukakis Center for Urban and Regional Policy, and the Founding Dean of the School of Public Policy and Urban Affairs at Northeastern University. More »