Fair Pay to Resolve Economic Woes

September 8, 2011
By Brady & Associates on September 8, 2011 3:27 PM |

The New York Times published an editorial during the Labor Day weekend of 2010, written by former Labor Secretary, Robert Reich. The article addressed the issues this country continues to endure one year later. Specifically, Mr. Reich states that, "this dismal state of affairs is unlikely to improve until we address the deep structural flaws in our economy; flaws that have made it impossible for the American consumer - i.e. the middle class American worker - to sustain the level of spending needed to keep our economy going." The state of affairs includes the low population of organized labor relative to total private work force, high unemployment, and little hope for recovery.

Added to this dismal state of affairs is the fact that the U.S. poverty rate has now risen faster during the last 3 year period than any similar period since the early 1980's, a time when this country was suffering from an energy crisis, unemployment and out of control, spiraling interest rates. According to the census, there are 46 million now living in poverty, which is the largest number since the census started tracking poverty in 1959.

The average American worker's ability to consume continues to erode, as working wages have been on a steady downward trend during the past three decades. During this timeframe, we have seen major U.S. manufacturing firms invest in technology to reduce labor expenses and move manufacturing overseas in order to take advantage of a non-unionized, low wage labor pool. Mr. Reich goes on to predict that full employment, when calculated in conjunction with real income decline, would not be enough to provide the demand necessary for the products that the U.S. is capable of producing. He cites the structure of the economy as the real culprit, not the business cycle. The wealthiest 1% of our population in 1970 earned about 9 percent of the nation's total income, compared with 23.5 percent of the nation's total income by 2007. Reich theorizes that the rich spend much smaller portions of their income than the rest of the population, and so the economy loses much of the demand needed to continue to grow.

As Harry Truman once said, "There is nothing new in the world except the history you do not know." As we watch the U.S. poverty rate rise and as wages continue to stagnate, perhaps we need to stop and look back on our history of success. What structure really worked? What were the very basic building blocks that led to the financial strength of the United States?

The reform that was the New Deal provided the necessary tools for long term economic prosperity for both the American worker and the American economy. The New Deal was not just about relieving the unemployed with WPA projects. It introduced labor legislation in the form of The National Labor Relations Act, passed in 1935, which in turn, put into place the National Labor Relations Board, and along with it, the right to collective bargaining. Additionally, the Fair Labor Standards Act (FLSA) set a minimum wage and mandated the 40 hour work week, along with the right to overtime pay. All of these laws, in conjunction with financial reform and investment in education through the GI bill, led to a much larger and better paid middle class with access to post secondary educational opportunities.

On July 1, 2011, Janice M. Nittoli offered solutions in her op-ed piece in the New York Times. She realistically assumes that our government is unlikely to generate good paying jobs. Instead, Nittoli hones in on the jobs already financed with federal dollars and the fact that nearly one fourth of workers are employed by companies that have contracts with the federal government to supply goods and services. Many of these contractors violate wage and hour laws, so not only do workers not get paid properly, but they are likely to utilize government subsidies such as food stamps and Medicaid in order to survive. Employers should have to certify adherence to wage and hour laws or risk the loss of large, multimillion-dollar contracts.

Instead of arguing against jobs bills and solutions such as that offered by Nitolli, our Washington politicians should consider the ongoing expense of entitlements and low economic demand in the face of high unemployment and low wages. Why not diligently enforce the rules implemented with the FLSA, especially for employers providing jobs with Federal money, and improve the structure of the economy with an environment that entices manufacturing back to the United States, and once again build a strong middle class? The proven lessons of history should not have to be relearned at so great a cost to our society and its members.

Sources:

FDR and Labor: Earning Our Way Out of the Great Recession, Huffington Post, September 1, 2010

How to End the Great Recession, New York Times, September 2, 2010

Pay Workers Fairly and Save Money, NY Times, July 1, 2011

Income Slides to 1996 Levels, Wall Street Journal, September 13, 2011