Midwest Today, March 1998

N E W S F R O N T 

Labor Under Siege:
Worker Pay Declines, CEOs Prosper

As inequity widens, employers violate labor laws with impunity, while
unions face uphill battle to reclaim their vital role.


If you listen to the so-called government experts and private-sector financial analysts, the nation's economy is booming. The stock market is soaring, executive compensation is at an all-time high. Productivity is up, corporate profits are skyrocketing, and inflation is in decline.

The unemployment rate is down to 4.6%. During the past six years, our exports have grown and our economy has rebounded, with the creation of 10 million new jobs.

While this rosy economic news was the chief impetus behind Bill Clinton's re-election as President, there's a darker side to the story that's not being told.

The stark reality is that, although more jobs have been created, they pay less. While unemployment is being cut, so are wages and benefits.

Average hourly wages paid to American workers are down by 10%. Many of the new jobs are part time and short-term. Few have company retirement plans.

Working-class Americans are finding themselves spending more hours on the job and working harder for less. They're loaded with debt and nervous about job security. They have little time, money or energy left over from work to take their kids to a movie or a ball game or to go to church.

The impact on society of absentee parents is felt in many ways.

Why has this occurred? John Sweeney, president of the AFL-CIO, says it's because "American business, abetted by American government, decided to compete in our new global economy -- not by know-how and technology, or through fair trade and fair market policies -- but by squeezing more out of workers while paying them less, by taking the low road to a low-wage economy."

He blames union-busting consultants and anti-union employers, who were emboldened by the anti-worker, anti-union policies of the Reagan and Bush Administrations, as bringing about this change. But the Clinton White House is also seen as a big source of the problem, as the President has turned his back on union supporters and embraced the decidedly anti-labor NAFTA and GATT agreements.

Some experts say that it is no coincidence that what economist Lester Thurow has called the "greatest redistribution of wealth in history without a revolution" has coincided with the largest decline in membership in the U.S. labor movement.

During the last two decades, the number of people belonging to unions has declined from 27% of the work force to about 15%. Large numbers of members were lost in the private sector even as public sector union affiliation increased.

While all this has been going on, Sweeney says, "the American labor movement has been asleep. Frankly, when we woke up, the bell was tolling," he reflects. "We had lost power at the bargaining table and at the ballot box and the voice of America's working families, once one of the strongest such voices in the world, had been reduced to a whisper."

There is also renewed concern about who is going to be looking out for American workers now that Robert Reich, whom many regard as the best Secretary of Labor in decades, has left the Clinton Administration. His successor, the ethically tainted Sec. Alexis Herman, came into office with a reputation as the "queen of schmooze."

The mainstream press have certainly not been reporting with any regularity or emphasis on the plight of U.S. workers. For the vertically integrated corporations that own America's largest print media and broadcast networks, quarterly profits are the journalistic beacon, not truth-telling.

As evidence of this fact, last Fall, when Heartland-based Archer Daniels Midland (ADM) agreed to pay a staggering $100 million fine for criminally conspiring to fix prices, its chairman Duane Andreas (a Bob Dole crony) was inexplicably re-elected. The story was little more than a blip on the media radar screen.

Labor supporters complain that the press shows no interest in asking the questions that are really relevant to most wage-earners. They wonder, for instance, why is it that the top 1% of the population in America own 39% of the nation's wealth, compared with 18% in Britain and 16% in Sweden? How does it happen that while wages for non-supervisory employees have fallen by 11%, individual hourly productivity in the American work force has increased by 17% and corporate profits have soared by 205%? Why do stock prices rise when layoffs are announced? Why do we promote U.S. corporations cutting domestic jobs, and outpouring $612 billion in goods and major components to low-wage factories in countries like Mexico, Honduras or China so they can avoid payroll taxes and benefits? Why is an American worker killed, injured or poisoned on the job every five seconds? Why do U.S. workers put in longer hours, with less vacation time, than their European counterparts?

Important issues, like pension security, worker training and retraining, computer literacy, workplace safety, labor-management cooperation and profit-sharing are topics that surely deserve to be addressed, labor activists argue. But that has not been happening.

The Rich Get Richer

Former Sec. Reich criticized the growing gap between executive compensation and worker pay. He worried that the payoffs from efficiency gains were going into corporate profits and CEO bonuses, instead of workers' pockets.

"Share in the gain as well as the pain," Reich frequently said.

But it's not even news when Disney gives a compensation package of $771 million to CEO Michael Seiner (with a potential $15 million bonus annually) over the next ten years, or a severance package worth $130 million to former president Michael Moritz for 14 months of service. (The State of Wisconsin Investment Board, which owns Disney stock, protested the move, but their objections were not widely reported.)

There are now, according to the Internal Revenue Service, three times as many millionaires as there were in 1990.

This has occurred because the rich have gained disproportionately from the economy's growth. The Department of Labor's analysis shows that 98% of the growth in income between 1979 and 1993 went to the wealthiest 20% of American families. That leaves only 10% for the other 80% of Americans to divide up. It's not really surprising that typical working families got nothing under these circumstances.

According to BusinessWeek magazine, the average salary and bonus of America's chief executives hit $50S million last year, a 39% raise from the year before. Thanks to the long bull market in stocks, incentive plans, retirement benefits, and stock options pushed the average up to $50S million, a whopping 54% raise from 1995.

CEOs are being paid as much as rock stars and super athletes, and sometimes more.

Too many boards of directors and compensation committees function more like a clubhouse, with CEOs serving on each others' boards and approving each others' pay packages. In addition, some directors are often relatives of the CEO, receive lavish perks themselves (like lifetime pensions), or have lucrative business relationships with the company.

The highest paid executive last year was Milliard Dexter of retailer Gap In., whose compensation totaled $1940S million.

By 1991, the creator of Metro media, John Kludge, who grew up in a Detroit tenement, was worth $70S billion -- more money than the combined wealth of all the descendants of John D. Rockefeller.

Pay inequality is clearly on the rise. Even before last year's huge increase, the average chief executive in the United States earned 212 times what the average factory worker did, according to compensation firm Pearl Eyer & Partners In. That same ratio 30 years ago was 44 to 1.

Lawrence Cross, chief executive officer (CEO) and chairman of Green Tree Financial Cop. in St. Paul, Inn., is one of last year's big winners in executive pay. His company sells mobile homes, but his pay is definitely more up market.

He earned $1920S million plus another $1960 million in stock-option grants.

How long would it take the average worker to earn that kind of money? At $24,700 a year, the typical American worker would have to work 5,720 years.

"It's clearly pay that is beyond what is required to attract people to run corporations," complains Chris Boner, research analyst for the AFL-CIO's office of investment.

"Executive pay has become the leading proxy issue," says Kathy Bane, a compensation analyst for the nonprofit Investor Responsibility Research Center (RR), which tracks 1,500 publicly traded companies. This year shareholders filed 112 proxy resolutions on executive pay, up from 63 last year

Workers Not Seen As Assets

Robert Reich also had a point when he said "People should be treated as assets to develop, not costs to be cut."

A two-income family that earns a combined $30,000 annually and is only a down sizing away from losing both its middle-class status and its health insurance, may live very well by historical standards but is still closer to the edge than members of the professional elite can easily imagine.

For millions of Americans, most of them children, things really are changing radically -- for the worse. Workers with average and below-average pay have lost bargaining power, both inside and outside of the unionized sector. Company owners and highly skilled workers have gained profits and wages at the expense of workers further down the totem pole.

In this everybody=s-a-free-agent society, the labor market's 18 million temporaries and 30 million part-timers employees without pensions, holidays or the money of the average worker, are carrying a larger share of the load.

Some are predicting a near-future dyspepsia in which high-tech luxury exists side by side with Third World-style poverty in this country.

It surely is true that the U.S. is becoming a society whose elite live like expatriates in their own country -- sending their children to private schools, living in gated communities protected by private security forces, enjoying luxuries beyond imagining -- while education, public order, and infrastructure for the population at large deteriorate even further.

Jesse Jackson and Pat Bacchanal speak to these issues from opposite ends of the politician spectrum. But "organized labor" is an oxymoron, especially since it has to recruit at least 300,000 new members a year in order to maintain its current share of the work force -- no easy task in a culture where unions are denigrated or ignored.

By international standards, union membership in the United States is low, and it continues to shrink. In the mid-1950s about one worker in three on non-farm payrolls was a member of a union, and membership rates were even higher in the private sector. But by the mid-1990s fewer than one worker in six had a union card. In the private sector, just one worker in ten is a union member today.

Industries that were once union strongholds, like coal mining, auto assembly, and trucking, have shrunk or been challenged by powerful nonunion competitors.

Even worse, unions have failed to establish a toehold in most of the nation's fastest-growing industries, such as financial and business services.

Yet a strong case can be made for union membership. Last year, union members earned an average of $1960 more per hour in wages and benefits than did those without union membership. Of this, $1960 was in wages and $1960 was in benefits. Union members got over twice as much in health care benefits as did non-union workers. This advantage exists across industries, occupations and racial groups. Interestingly, female union members earned 38% more than nonunion women.

Labor Laws Ignored

Meanwhile, across the nation, there is evidence of a great laxity in enforcement of existing labor laws. In the 1950s, employers were involved in about 4,000 unfair labor practices per year. Today that figure has risen to about 23,500.

Weeny complains that "Union-busting has become the sport of choice in our country and employers large and small routinely violate our labor laws because the laws have no teeth." The sad truth, he contends, is that "in this most advanced of industrial nations, you lose all your rights when you try to join or form a union. No freedom of assembly; if you assemble, you get fired. No freedom of speech; if you speak up or out, you get fired."

He cites as examples what happens to strawberry workers who start talking about unionizing. "The growers' goons single you out for a little 'education,'" he explains. "If you are an immigrant running a sewing machine in a sweatshop or caring for patients in a nursing home and you try to organize, the employer calls in the Immigration and Naturalization Service for a friendly visit."

Weeny says "If you're a janitor, your supervisor loads you up with work like a donkey, or whacks you around with a golf club, just like one did a couple of years ago in Washington, D.C."

He says that among those who work higher up on the job chain, "the retaliation for organizing is more subtle. You get yanked off the job repeatedly and taken into a closed room for one-on-one 'sweat sessions' with your supervisor, who tells you the plant will be closed if you vote union," he notes. "If you persist in supporting the union," he says, "you are harassed, threatened and intimidated. If you become really effective, you get fired, just like 10,000 union activists do every year."

Global Exploitation

As bad as the situation is here, it's even worse in other countries. Enticed by the seductive lure of unrestricted cheap labor, countless employers have abandoned American workers and their families to move their primary manufacturing operations to places like Mexico, Latin America, China or Vietnam.

Recently a group of Congressmen visited adulator plants along our southern border in Mexico. They wanted to see if wages and working conditions had improved since they toured those same plants four years ago, before NAFTA.

What they discovered dismayed them. While the number of plants and jobs clustered in the border area has virtually doubled, wages have gone down by 70 cents to a dollar an hour in some cases.

House Minority Leader Richard Depart (D-Mo.), who went on the inspection, stresses that these are highly skilled Mexican workers. They operate sophisticated machinery in some of the world's highest-technology, highest-productivity plants. Large U.S. corporations benefiting from their labor have enjoyed a highly profitable escalation in stock values.

But the adulator workers whose skills contribute to these profits have few of the benefits routinely accorded employees in our country.

Many are so poorly paid, Depart reveals, that they live in what he describes as "cardboard huts" crowded into squalid nearby colonials, without sewer or running water. Depart argues that the United States should not extend the NAFTA treaty to other countries without some important changes affecting standards of work and pay. But that's what Clinton wants to do.

As Charles Kenosha wrote recently in the San Francisco Examiner, "The multinationals want this to remain an open playing field where they roam the world in search of poverty to exploit -- because naturally, they explain, you will find the lowest wages where there is the greatest unemployment and misery.

"Nike goes to Vietnam, where it can pay 20 cents an hour, Disney to China, where wages are 13 cents, Warn to Burma, where the average wage is six cents.

"Nor is there any end in sight to how low wages can sink given that there are over 1960 billion people in the world living at the edge of starvation, eking out an existence on less than $1 a day."

Nike spokesman Jim Small defends his company's record, saying Nike pays at least the minimum wage in all its factories, and an average of 50% more.

That explanation -- widely parroted by those politicians and celebs associated with Nike -- is misleading because, writes Kenosha, "Third World countries, locked in a desperate competition to attract jobs, have entered a downward spiral, fighting each other, slashing tariffs, taxes, regulations and often setting the legal minimum wage below subsistence levels."

Katie Qu an, Northwest regional manager of the garment workers union, said Nike's contractors in Indonesia have consistently fought against efforts to organize their factories.

"The labor leaders there have been fired and imprisoned," Qu an said.

Media Benjamin of Global Exchange says "Nike sweatshop workers in Indonesia make $1960 a day -- well below the livable wage -- yet Nike continues to pour money into bloated megaspore, into CEO [Phil Knight's] $50S billion hoard, and on multimillion-dollar promotional contracts with rich sports stars (like Michael Jordan)."

What's So Bad About NAFTA and GATT?

"Trade agreements are very much tools for deregulation and the result is unsafe food, dangerous trucks on the highway and a lack of border inspections," said Lori Wallah, director of Ralph Fader's Citizens Trade Campaign.

It certainly is significant when 80% of the Democrats -- members of the President's own party -- abandon him and consistently oppose giving him so-called "fast track" authority to negotiate trade agreements.

The New York Times recently reported that "Some of Mr. Clinton's aides are beginning to say that the White House...erred by not acknowledging more explicitly that many Americans are losers from freer trade. They were willing to acknowledge publicly, however, what many say privately: that the Administration wildly oversold the benefits of free trade to ordinary workers in 1993 during the NAFTA debate."

That was the debate, of course, when critics like Pat Bacchanal were severely ridiculed for their opposition to the proposed trade agreement, and the mainstream press treated opponents as flakes.

But Bacchanal still says taxpayers and workers are the ultimate losers as as result of some trade pacts. He says that "what NAFTA and GATT are all about is the steady transfer of wealth from industrial America and its workers to a new financial elite.

"NAFTA expansion is the payoff to the Business Roundtable for the millions poured into both parties in 1996," Bacchanal claims. "To a transnational corporation, how a politician stands on quotas, abortion or school prayer is irrelevant, so long as he or she supports the right of big business to shut down plants in the United States, where the minimum wage is near $40 a day, and open plants in Mexico, where the minimum wage is about $3 a day," he notes.

Bacchanal sketches the following scenario to explain the deleterious effects of NAFTA and GATT: "Capital once invested in U.S. industry is now poured into hot Third World economies. When those regimes, like Mexico, squander the money and need a bailout to pay off their wealthy Yankee investors, Washington lends the bankrupt regime the money, puts U.S. taxpayers on the hook and makes the investors whole. To keep up interest payments, the bankrupt regime then devalues its currency to cut its prices, exports more to the United States and runs a trade surplus. Thus, America's industrial base and the best jobs of our manufacturing workers are sacrificed on the altar of finance..."

He notes that "Within a year of passage, the U.S. trade surplus with Mexico disappeared, a huge trade deficit opened up, the Mexican economy tanked, the peso collapsed, illegal immigration soared, and Mexico was on its way to becoming the source of 70% to 80% of the cocaine and marijuana pouring into the United States." Bacchanal says NAFTA's big winner was "the Mexican drug cartels. Then, taxpayers were put on the hook for tens of billions of dollars in loans to Mexico, to prevent a total financial collapse."

He concludes, "If that is a success, what would a NAFTA failure have looked like?"

Pat Bacchanal also worries about the fact that since Summer, stocks have crashed and burned in Thailand, Malaysia, Indonesia, the Philippines, South Korea, Taiwan and even Hong Kong. In all cases except Hong Kong (at this writing), the currencies have been cut free of the dollar and plummeted.

He says consumers may enjoy short-term benefits by a lowering of prices. But ultimately the big losers will be America's manufacturing workers.

"The flood tide of imports will increase the annual 'kill' of U.S. manufacturing jobs, and wage cuts across Asia, from devaluations, will convince transnational companies to site new plants in the Pacific Rim,: he predicts. "Downward pressure on U.S. wages will increase, as companies can tell workers: 'Either accept a wage freeze, or we shut this place down and build a new factory in the Far East'"

As Bacchanal sardonically observes, "In the global economy, America's manufacturing workers are the snail darters, threatened with extinction, yet largely unwanted."

Yet columnists like David Broader have been saying a defeat of fast track legislation would "signal retreat by the United States from its leadership role for a more open international marketplace." Referring to labor's opposition to the measure, Broader quoted an anonymous White House source as saying "This is the most blatant example of the corrupting effect of campaign finances on Washington policy-making I know," though he failed to explain why labor money should be considered any more corrupt in a democracy than the money spent by big business.

This time, the struggle is over giving Clinton the negotiating authority he needs to expand free trade beyond Mexico to other Latin American countries.

Broader is typical in how the press has been treating fast-track opponents. He quotes "thoughtful Democrats" such as Rep. Ron Kind, a moderate freshman from Wisconsin, whom Broader reports concedes he is adopting the "parochial concern" of dairy farmers frustrated by their post-NAFTA dealings with Canada.

Parochial concern?

What the Future Holds

While U.S. political and business leaders are in love with an economy that regularly dumps millions of Americans over the side, and obsessed with economic growth that is globally unsustainable, many workers are learning the tough lesson that made unions so attractive in the first place: An employee's well-being and job security are a priority to no one but the employee.

The 1960 Teamsters Union strike against United Parcel Service in August is being hailed as a turning point for the labor movement. A Gallup survey found 55% of Americans on the side of striking UPS drivers and only 27% on management's side.

Labor's expenditure of $35 million last year to hold members of Congress accountable for their votes on the minimum wage, education and Medicare may also signal a rebirth of the movement. These efforts were hugely successful.

Indeed, only when Americans put pressure on politicians to reinforce labor laws and oppose lopsided trade agreements will they be able to assure that those more irresponsible and greedy among American business are brought into check. There are, of course, many employers who do treat their workers fairly. Unfortunately, they too are losing out to unscrupulous competitors who gorge at the trough.

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