Washington, D.C.
The living standards of American workers and the growth and power of their unions are under attack. Workers are finding it is more and more difficult to make a living for their families and to realize the American dream. For the same reasons, it is also becoming more difficult to form unions and bargain for our share of American income and wealth. The economic policy regime that shapes the environment in which unions grow and bargain with their employers is a key factor in our ability to grow and better defend the living standards of our members and all American workers.
Over the past 25 years, an increasingly aggressive corporate lobby has pushed for a new economic policy regime—The Wall Street Agenda—in the U.S. and many other countries. In the U.S. this new regime, championed by business and financial interests and conservative political ideologies, has produced a weak and unbalanced economy and a generation-long stagnation of workers’ wages and living standards.
American workers are the most productive workers in the world, and we work harder and longer than workers in any other developed country, and yet the current generation of American workers may be the first in our history to fail to achieve substantial improvements in our living standards. Today, the U.S. has the most unequal distribution of income and wealth of any developed country, and economic inequality is greater in the U.S. today than it has been at any time since the 1920s. The Wall Street Agenda has also powerfully inhibited labor movement growth and undermined union bargaining strength. Weakening the power of unions is one of the goals of this policy regime that shifts the balance of power to employers and improves profitability at the expense of workers and their families.
We are hampered in our ability to fight the Wall Street Agenda because, besieged on many fronts, we too often miss the forest for the trees. Manufacturing workers know the hazards of free trade, but they are less likely to understand the dangers of a depleted tax base or de-regulation. And, while government workers understand the challenge of privatization and regressive tax cuts, they are less likely to understand the hazards of free trade. Union members may well understand the lack of effective rights to organize, but Federal Reserve policy seems remote from their concerns. And the challenge of de-regulation is felt primarily by workers in the particular sectors immediately affected.
We will enhance our capacity to counter the Wall Street Agenda and set a new economic course for America’s workers if we, as a united movement, respond collectively to the whole economic policy regime instead of its individual parts. Free trade is as much a challenge to public sector workers as privatization. Privatization is as much a challenge to manufacturing workers as free trade.
The AFL-CIO will lead a coordinated labor movement effort to directly challenge the Wall Street Agenda for economic policy and advocate an alternative America’s Economic Agenda to strengthen the economy, defend the living standards of all American workers, help our movement grow and restore the American dream for our children and future generations.
The Wall Street Agenda
The Wall Street Agenda is composed of six inter-related policy themes, and can be represented as a three dimensional box, the sides of which are pressing in on working family living standards and unions’ ability to grow. Each side of the box has a positive sounding name and seems to address an important policy objective. However, each also carries a darker underside with serious implications for employment, wages and economic security. And together, the Wall Street Agenda powerfully inhibits the growth of unions and shifts the bargaining power of workers to employers. Corporations and the wealthy benefit handsomely from the Wall Street Agenda, but working families are left behind.
Ø “Price Stability” The foundation of the Wall Street Agenda features a monetary policy conducted by a “politically independent” Federal Reserve Bank focusing solely on “price stability.” The Congressionally mandated objective of producing full employment is subordinated to fighting inflation. Price stability is a good thing, of course, but the immediate effect of this unbalanced policy is to slow economic growth and produce an unnecessary, and socially undesirable, level of unemployment.
Ø “Tax Cuts and Balanced Budgets” The first side of the box marginalizes fiscal policy as an instrument of macro-economic policy. Some neo-liberals maintain that tax cuts alone will produce economic growth, but aim at balanced budgets as a way to reduce the role of government in the economy. Other neo-liberals maintain that balancing the federal budget, by itself, will stimulate economic growth by pleasing the bond market and lowering interest rates. However, fiscal austerity compounds the effect of a monetary policy focused on price stability in slowing economic growth and aggravating unemployment.
Ø “Globalization” A second side is the opening of the U.S. economy to international competition. Neo-liberals maintain that the elimination of trade barriers will, in the long run at least, raise the level of economic growth and income. However, free trade forces American workers into direct competition with some of the most impoverished and oppressed workers in the world. The result of free trade has been the loss of millions of jobs, many of them union jobs, particularly in manufacturing.
Ø “Privatization and De-Regulation” The third side is privatization of former government economic activity and the relaxation of regulations in many industries including transportation, utilities and telecommunications. Neo-liberals maintain that these policies, by reducing the role of government in the economy and enhancing competition in domestic industries, will increase efficiency and lower prices to consumers. In fact, these promises often do not materialize. But their certain effect is to deprive citizens of needed public services and reduce public sector employment.
Ø “Labor Market Flexibility” A fourth side is labor market flexibility, policies that allow employers to discharge employees at will, undermine workers’ rights to organize and bargain collectively, and erode minimum wage and labor standards. Neo-liberals maintain that such policies allow employers to adapt quickly to changing market conditions and result in faster economic growth and increased employment. However, the effects of this flexibility have been falling wages and labor standards, declining union membership and a loss of democracy in the workplace.
Ø “Personal Responsibility” On the top of the box, in place of a social insurance system to provide health care and retirement security, the Wall Street Agenda attempts to shift all the responsibility for the security and welfare of working families onto the families themselves. Employers are pulling back from their commitment to provide family health care and defined-benefit pensions to their employees and the Bush administration is trying to undermine Social Security. Less than half of unemployed workers receive unemployment benefits and welfare support for impoverished families has been virtually abolished. The result of the policies is enormous unnecessary suffering and chronic insecurity.
The Challenge of The Wall Street Agenda
Each of the policies in the Wall Street Agenda destroys jobs and serves to increase workers’ anxiety about their economic security. Just as important, each of these policies bolsters the power of employers, inhibits union growth and weakens workers and their families.
When economic growth is slow and unemployment high, the bargaining position of labor is weakened by the competition from unemployed workers. The lowering of labor standards and inability of workers to form unions has the same effect. As American corporations internationalize their production, they us the threat of job loss to undermine workers’ bargaining power. Public sector employers use the threat of privatization in the same way.
If the effect of each of these policies is to reduce union membership and bargaining power, their combination in the Wall Street Agenda poses a formidable obstacle to the growth and power of the labor movement. As long as these policies prevail, union organizing efforts must overcome fear of job loss among workers and the loss of existing union member jobs, before they yield net union membership growth. And, as long as these policies prevail, unions will be bargaining in an environment of unbalanced employer power.
The Wall Street Economy
The American middle class was built in the 25 years following the Great Depression and World War II. With Keynesian economic policies forged during the New Deal and giving priority to full-employment and worker rights, the economy grew rapidly and productivity growth was strong. Unions grew throughout this period and their bargaining strength assured that real wages grew along with productivity. Real family incomes saw their most rapid increase in our history. American prosperity was broadly shared as both income inequality and poverty were reduced. And, though union density peaked in 1955, union membership grew steadily throughout this period.
This pattern of broadly shared prosperity began to break down in the 1970s, however. The last quarter of the 20th century exhibited a very different pattern. Economic growth slowed sharply. Productivity growth also slowed, but real wages actually began to fall. Falling real wages forced American workers to work more hours, and hold more jobs, to sustain their families’ living standards. As a result, whereas real family incomes doubled in the earlier period, they increased only 22 percent since 1973. As working families struggled, wealthy families prospered and inequality grew. The wealthiest 10 percent of families saw their incomes double in this period and the incomes of the top 0.1 percent of families tripled their incomes. Unions found it increasingly difficult to grow in this period and their bargaining power weakened.
Economic growth did accelerate in the mid-1990s spurred by a sharp increase in investment, particularly in telecommunications and information services. The unemployment rate fell and real wages rose for five years. The sharp rise in incomes swelled government coffers and the federal budget deficit was transformed into a surplus. There was even speculation that we were experiencing a “New Economy” in America that was powered by the Internet and would provide unending productivity improvements and a steady rise in living standards. These hopes were dashed by the rise in the dollar, falling profit rates and the bursting of the Internet bubble.
The recession we experienced in 2001 was short and shallow, but it was devastating for manufacturing. Since manufacturing employment peaked in 1998, over 3.3 million jobs have been lost. Almost all the jobs lost in the recession and the jobless recovery that followed were in manufacturing and telecommunications. These losses disproportionately fell on unionized workers. The damage to America’s industrial base means that we do not now have the capacity to produce sufficient exports to balance our country’s external account. Manufacturing workers have suffered enormously and America has been seriously weakened in its ability to compete in the global economy.
The Federal Reserve responded to the recession by lowering interest rates to historic lows, which stimulated debt-driven consumer spending. The Bush administration passed a series of massive tax cuts, primarily benefiting the wealthy, and increasing federal spending. These steps have failed to produce a strong and sustained recovery. Not until May did the level of private sector employment reach pre-recession levels, a full 50 months since the recession ended. Moreover the regressive Bush tax cuts have left the nation with massive and irresponsible federal budget deficits that can only be financed by borrowing from foreign central banks.
The Bush Administration’s policies have produced the weakest and most imbalanced recovery since the end of World War II and leave the country vulnerable to the whims of capital markets and the policies of our trading partners. Even in the fourth year of recovery, real wages are still falling. There are not enough jobs for those seeking work and the quality of jobs continues to deteriorate. The trade deficit has continued to grow and will likely set a new record this year at over $780 billion, 17 percent above the record mark set last year. As a nation we must now borrow an unsustainable two billion dollars a day to pay for the things we consume but do not produce, mostly from central banks in China and Japan.
Workers suffered most from the recent recession and have shared not at all in jobless recovery. And the continuing serious imbalances in the U.S. trade and fiscal deficits only aggravate the insecurity that so many American workers continue to feel.
Declining Union Membership
Our unions represented one out of every three American workers in the 1950s, but union density has declined steadily ever since. However, even as union density declined, union membership continued to grow in absolute terms throughout the early post-World War II period. From 1980 to the present, however, union membership has declined along with density. From 1946 to 1980, union membership grew an average of 0.7 percent a year when the economy was expanding and decreased an average of 0.6 percent when the economy was in recession. Our unions grew with the economy throughout this period.
The economy has been growing away from our unions under the Wall Street Agenda. Since 1980, union membership declined an average of 1.7 percent a year when the economy was in recession. And even when the economy expanded, union membership declined by an average of 1.3 percent a year. Since 1980 union membership has declined by over 5 million members. The fundamental change of economic policy regimes and the effects of the Wall Street agenda are also important causes of declining union membership and weakened union bargaining power.
Fighting the Wall Street Agenda: What We Must Do
From their earliest emergence, American workers and their unions have struggled against the policies of the Wall Street Agenda to defend their living standards. However, the struggle has usually been focused on one component of that agenda and not the Wall Street Agenda as a whole.
We must continue to organize new members of course. We must also fight together to elect politicians to change the laws to make it easier for workers to join unions. But we must also directly challenge the Wall Street Agenda as an integrated policy regime of distinct, but integrated and mutually supporting components. In that way, we can better organize around the common interest all workers and unions have in countering the Wall Street Agenda and bring to bear the power of the entire labor movement in fighting for an alternative policy regime under which we can more effectively grow our unions and defend the living standards of all working families.
America’s Economic Agenda
Our movement and the workers we represent believe the economy should work for the American people. The American people do not work for the economy. We need an economy strong enough to provide the goods and services necessary for national security and to meet the needs of the American people. We need an economy that provides economic security for working families. And we need an economy that is democratically accountable to American people and not controlled by corporate and financial interests.
The AFL-CIO will lead a coordinated labor movement effort to meet the challenge of The Wall Street Agenda. We will advocate an alternative America’s Economic Agenda that serves the interests of working families and helps builds the power of workers and their unions. America’s Economic Agenda involves eight inter-related policy themes:
Ø A Strong American Economy and Full Employment. America needs a rapidly growing economy capable of producing the value equivalent of what we consume in an increasingly global economy and providing enough good jobs to employ all that are willing and able to work. We need a macroeconomic policy that balances price stability with full-employment, that uses fiscal as well as monetary policy and that is more accountable to the American people.
Ø A National Investment Strategy. We need to invest in the education and life-long learning of American workers. We need to invest in our national research and development infrastructure to strengthen our technological capabilities. We need to invest in our national transportation and communications infrastructure to make it possible to build successful and innovative businesses in the U.S.
Ø A National Industrial Strategy. We need a national industrial strategy to respond to the crisis in manufacturing and rebuild our country’s industrial base. We need more balanced currency exchange rates. We need effective enforcement of our trade agreements and adequate safeguards to protect against import surges. We need tax policies to encourage, rather than discourage, manufacturing operations in the U.S. We need national health care reform to reduce the competitive disadvantage of U.S.-based manufacturers. We need state and local manufacturing policies and a robust manufacturing extension system to assist small and medium-sized manufactures to modernize.
Ø Fair Globalization. We need coordinated efforts with Europe and Japan to increase growth in the global economy and create exports for the U.S. We need to replace “free trade” agreements with “fair trade” agreements that protect fundamental workers rights. We need immigration laws and policies that also protect the rights of immigrant workers in the U.S. We need increased levels of official assistance to developing and transition countries, including debt relief particularly for the most indebted nations, to help these countries build domestic markets and integrate into the global economy without undermining the standards of workers in the developed countries.
Ø Good Government and Fair Taxes. We need strong governments at all levels to provide the investment and regulation for a strong economy that markets cannot provide themselves and to provide the public goods and services that our nation needs. We need progressive taxes that raise adequate revenue to meet the nation’s needs. We need effective government involvement in particular industries characterized by natural monopolies, public goods and/or externalities. We need effective regulation of the airline, trucking, utilities and telecommunications industries.
Ø Workers Rights and Labor Standards. In place of labor market flexibility, we need effective worker rights to allow workers to freely associate, organize unions and bargain collectively. We need dignity at work and a democratic voice in the workplace. We need a minimum wage indexed to one-half of the median wage for non-supervisory workers in the private sector. We need protection of employer-provided health and pension security.
Ø Social Protection. American workers need unemployment insurance when they cannot find work. We need a national health care system that provides quality care to everyone and reduces the cost of health care. We need retirement security including sound defined-benefit pension plans and strengthened Social Security.
Ø Corporate Accountability. As Enron and other corporate scandals demonstrate, we need fundamental reform in the way that corporations are organized, regulated and governed to assure that corporations serve their core economic purpose of creating the wealth on which our prosperity depends. We need to give workers’ capital a powerful voice in the companies they own. We need to hold CEOs and corporate boards accountable and restore integrity to our capital markets.
Each component of America’s Economic Agenda supports the others. Each component is therefore the concern of all workers and unions. Realizing the goals of America’s Economic Agenda will require the efforts of a united labor movement coordinated by a strong AFL-CIO. It will also require the broadest outreach to all Americans concerned about the strength of the American economy and the well-being of America’s working families.
The AFL-CIO and an American Economic Agenda for Working Families
The AFL-CIO and our unions are already engaged on a number of economic policy fronts to meet the challenge of the Wall Street Agenda. Our Voice@Work program is fighting to change the climate for organizing and ultimately change the law to protect workers’ right to organize. Our global economic program is fighting unfair trade agreements and attempting to establish workers’ rights as an essential component of future trade and investment agreements. Our international solidarity program is helping build strong unions in other countries. Our capital strategies program is fighting for corporate accountability and capital market integrity. We support the efforts of individual unions in their efforts to resist privatization of important government programs, or strip government workers of their effective rights to organize and bargain collectively.
However, to more effectively meet the challenge of the Wall Street Agenda, we need to integrate these various policies into a more comprehensive and compelling alternative economic program of our own: America’s Economic Agenda. Advancing our economic agenda will require a unified labor movement, a strong AFL-CIO and the support of our social allies, both in the U.S. and abroad.
The AFL-CIO is committed to growing and confronting the challenge to the living standards of our members and all workers. We will fight for economic policies that strengthen the American economy and foster rapid growth. We will do all we can to ensure that work is rewarding and fulfilling; that workers are treated with respect, dignity and fairness; and that working families fully share in the benefits of a prosperous economy.