Corporate Theft From American Workers Killed The American Dream

Corporate Theft From American Workers Killed The American Dream March 28, 2017
American Dream
American Dream

The formula was simple, it was genius, and it built the “American Dream.”

Employers and employees in America had an economic agreement. As employee productivity went up and added value to the company then wages would also increase in proportion. This worked well, this worked astoundingly well, and the middle class in America prospered as did the nation itself.

As Henry Blodget writes:

“Back in the 1940s, 1950s, and 1960s, income gains were more evenly distributed. The top earners did well, but so did everyone else. There was a universal sense — an accurate one — that we were all in this together. And the idea that rich companies should share more of the value they create with the people who created it — their employees — was well-established.”

Our nation became prosperous and capable of great things. We were an example to the world. The phrase “The American Dream” was known in every corner of the world. We were an economic powerhouse. This is the nation conservatives recall wistfully when they talk about American greatness. Nothing could stop the American economic juggernaut!

Nothing except for greed.

The Robbing OF American Workers
The Robbing OF American Workers. Courtesy – Robert Reich

The Killing Of The American Dream.

Corporations, led by conservative economists, discovered that they could chip away at wages and not suffer consequences. They could pocket the value of that productivity, add it straight to the bottom line, and American workers would not only NOT reduce productivity but they would keep INCREASING it. American workers are amazing!

In spite of being screwed American workers kept increasing their productivity, their value to corporations (which was the standard for compensation). Their contribution to the bottom line grew and grew from the 70’s until now even as their wages failed to increase in real dollars. While previous generations would get a part of the money their increased productivity earned a company in their wages this generation got nothing. Wages stagnated. Not just at the bottom but also in the middle. Especially in the middle. And America suffered.

The arbitrary cutting of wages in real dollars by corporations helped lead to the decimation of the American middle class which once made this nation great. The real economic engine of a nation is the middle class. When the middle class does well, as in post WWII America, the nation does well. Period.

Of this system venture capitalist Nick Hanauer said, “Rich businesspeople like me don’t create jobs. Rather, they are a consequence of an ecosystemic feedback loop animated by middle-class consumers.” When the middle class thrives, he said, “businesses grow and hire, and owners profit.”

If, as had happened in the past, wages kept pace with production we would currently have a minimum wage of over $21. We would not hear the cry of “Make America Great Again,” America would still be great. Families, the backbone of society, would be healthier and so would the overall economy. More money to spend means a booming economy and all that goes with that. The diverting of these huge sums of money from workers to the rich and to corporations has done nothing good for America.

Corporations Inherit (Steal) The American Dream.

Because of this arbitrary and short-sighted grasping for money American corporations now have the “highest profit margins as a percent of our economy in history” but “pay the lowest wages in history as a percent of the economy.” And the shocking fact is that “all of the income gains in this country over the past three decades have gone to the top 10% of American earners — the ones who own and control our largest businesses. These top earners — especially the top 0.1% of earners — now take home more of the country’s national income than at any time in the past century, including the “Gilded Age” of the 1920s.”

All of the income gains. Not some, not most, not a fair percentage, but ALL of the income gains have gone to those who were already wealthy. The middle-class and the poor got nothing. And this does great harm to American workers, to their families, to their communities, and to our nation as a whole. America only prospers if all Americans prosper from their labor.

Since the 70’s the American middle class has virtually disappeared. As wages were effectively cut so too were benefits. Corporations learned that they could now pit people who were becoming economically less stable against one another. Or they were able to hold the prospect of sending jobs to foreign countries over workers heads as they demanded more and more cuts to wages and benefits. They didn’t do this because they were not profitable but because they wanted more and more profit. They were not driven by any concern for our nation, its economic health, or the best interest of workers and their families – they wanted money and damn the consequences to American families. The more money they got from robbing workers for increased production, the more they plowed into laws that made what they were doing easier and easier rigging the game even further.

At one time the labor and productivity of one person could earn enough to support a family, by the 1980’s it took double that productivity to barely get by. Corporations were getting increased productivity from workers and were not paying for it as they had when America was an economic powerhouse. They learned how to manipulate people and used legislation they lobbied for with their new wealth to get and keep as much as possible even if it meant harming America. They, the politicians they bought, and the economists they financed told us over and over that things would get better and better as they prospered. Eventually, we were promised, it would all trickle-down. But more money in the pockets of corporations and the rich did not, in spite of the boastful economic theories of conservatives, make American workers prosperous. It greatly harmed them. It killed the American Dream.

Families Deserve The American Dream

American families suffered, and continue to suffer, because the system that they had been equal partners in was rigged against them. It became increasingly common and necessary for both parents to work to maintain a reasonable standard of living. The same people who call themselves champions of “Family Values” are mostly the same people who become indignant when it is suggested that American workers both need and deserve a large increase in the minimum wage. While they point to everything from music, to TV, to clothing styles as contributing to the breakdown of the American family they will not blink and will keep insisting that this massive economic shift had nothing to do with this. But parents who need to work multiple jobs and dedicate less time and money to families, food insecurity, and stress are the real killers of American families.

The great America they remember fondly was built by American workers. And these workers need us to change the rigged system.

As Blodget succinctly puts it: “If we want to get our economy humming again, we need to remember that the economy is an ecosystem and that healthy ecosystems are balanced. We need to encourage our companies to maximize value, not profit. And we need to encourage great companies and managers to serve three important constituencies — customers, owners, and employees — instead of just one.”

This, and only this, will restore economic prosperity and the American Dream.

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  • jekylldoc

    This is so oversimplified as to be silly. Yes, corporations and the one-percenters who buy and sell them have been the big winners from globalization and automation. Yes, less-skilled workers who could be replaced by machinery have been the big losers. But it wasn’t a decision made by corporate devils, or even mainly a change in corporate mentality, which brought about the shift.

    Globalization, a largely inevitable process assisted by reduced barriers to trade, has shifted the economy toward management functions like marketing and shifted labor-intensive jobs like sewing garments to other countries. Automation has continued the process going on for the last 150 years, replacing many dock workers, auto mechanics, printers, auto assemblers, steelworkers, welders, etc., etc., etc. Automation is the biggest source of productivity gains, and up through the mid-90s, it resulted in new jobs opening up in industries where consumers shifted their spending because it was no longer needed in the more efficient automated industries. Remember paying for long-distance phone calls? I remember party lines and telephone operators.

    While corporate greed and government enabling of it may be responsible for some of the decline in job growth, it would be easy to make the case that failure to stimulate Aggregate Demand has been far more important. And that the real increase in inequality has more to do with two-career couples and the concentration of income earning in a few dynamic megalopolises (Bay Area, Boston, New York, Los Angeles, Seattle) than with changes in labor market rules or corporate behavior toward workers.

    By all means lets go after corporate greed and bring back worker rights. A robot tax is also a great idea. But lets not pretend we could fix the problems of the non-college educated simply by leaning on corporations to be nicer to workers.

    • “Yes, less-skilled workers who could be replaced by machinery have been the big losers.”

      Nope. ALL workers. Across the board. Regardless of skill-level or education. It is not about being nice it is about being fair and about killing the goose that is laying the golden egg.

      Globalization does not dictate that companies must curtail and eliminate compensation for productivity gains. In addition better methods, materials, and tools, including varying forms of automation have always been responsible for major productivity gains. Ford’s assembly line required far less training and skill from each worker and yet the auto industry always compensated workers commensurate with productivity gains. Ditto for most other industries which transitioned from labor (and skill) intensive to heavily automated.

      Thanks for the comments.

      • jekylldoc

        John – It seems to be true that companies used to pass on productivity gains (Sloan of GM put “productivity plus two percent” into the UAW contract in the 50s, for example) to workers and no longer do. So I think you have raised an important issue. But people studying the problem have not succeeded yet in examining the various pieces enough to know why or what all has changed.

        Changes in the nature and motivation of automation seem to be part of it. There is a study cited today in the NY Times
        showing that robots have a negative effect on employment and wages, meaning that the forces which caused automation to improve society up through 1990 or so may have run out of gas.

        International competition seems to have played a significant role as well. Yet, the good side of that is that incomes in China and India have moved up quickly as world trade expanded. Between 1995 and 2005, 40 percent of humanity moved out of extreme poverty. There has never before been such a huge transition in such a short time.

        I would be very surprised if you have evidence that the top 40 percent of the income distribution has suffered income losses over any recent time period (except maybe if you cherry pick a transition into recession, like 2005 to 2010). I don’t exactly follow it daily, but as recently as two years ago I was seeing figures showing great gains for workers with at least a college education.

        I am actually very pleased to see someone with knowledge of the field getting into the progressive Christian blogosphere. I understand that you have to portray a clear picture in a given blog, and that nuance can take second place to the main point without doing violence to the truth. But I would like to see the discussion dip into the complexities now and then.

    • BTW, I have seen your comments elsewhere and have found a number of them to be entertaining and thought-provoking. Do you write anywhere?

      • jekylldoc

        I haven’t blogged much since the recession began. It’s too depressing to watch ignorance defeating sensible policy that could make everyone better off. I expect Krugman only maintains his motivation because he knows he is making an impact. Currently I am producing enrichment materials for IB economics, and I am fairly pleased with them but this is not the place to promote the website.

        Thanks for the appreciation.

  • gimpi1

    Absolutely true! I’m 60 this year, and I’ve seen, over my working life, the wages of average working people drop to less than half what they were when I first started working.

    I’ve seen benefits, especially medical benefits, shredded. When I got my first job, my health-insurance covered virtually everything. Over time, more and more exclusions, deductibles and limits were imposed, until (before the A.C.A.) most insurance generally covered around half of all prescriptions and procedures and around 60% of doctor-visits. At the same time, employees were expected to pay more and more of premiums that were originally paid by employers. Post-retirement insurance benefits vanished. Insurance coverage for dependents faded or became insanely expensive.

    Pensions disappeared, to be replaced by retirement accounts that employees had to pay into – sometimes with an employer match, sometimes without, at a great savings to employers. With government complicity, unions were decimated. Without unions to keep wages in many industries stable, wages fell in many trades. At the same time, overtime rules have been largely ignored, what we used to call ‘moonlighting’ has become normalized to the point where a person with only one full-time job is seen as slacking off. Witness the “gig” economy, where teachers and nurses are encouraged to drive for Uber and people rent their homes out on AirB&B. Over my lifetime, we’ve gone from one average full-time job being able to provide for a family, to two average full-time jobs being able to provide for a family, to needing several jobs in a family to have a less secure lifestyle than that one-job family had when I was starting out…

    For decades, I’ve been watching the working people around me being expected to do more and more (provide for more of their own retirement and medical costs,) with less and less (lower wages) while working harder and harder. I’ve been wondering, “where the money went.” Finally, a few years ago, we began discussing income-inequality, and the light dawned. The money had not disappeared, it had been siphoned off by the people at the top.

    We can fix this. We did it before. We ended the huge disparity of the gilded age. We can do it again.

    • I also believe we can fix it. Thanks for the thoughtful comments.

  • Timothy Weston

    Greed or because the American Dream is a lie?

    • The economic dream is obtainable (or at least it was). The whole package is another discussion and beyond the scope of one article.

  • Chuck Johnson

    The best way to understand this problem is to refer to modernization.
    Robots now do much of the work that human hands and human minds used to do.

    This is the foundation of the problem, and solutions need to be invented which understand this foundation.

    One of the characters in a Kurt Vonnegut novel asked:
    “What are people for ?”