Over on the Lawyers, Guns, and Money blog, Erik Loomis points readers to this Politico Magazine op-ed by venture capitalist Nick Hanauer (who is probably most famous for his squelched TED Talk on income inequality). Hanauer points to the collapse of paid overtime as an ill plaguing workers’ wages, bedeviling employment, and driving down demand. But he also helpfully deconstructs the idea that the money saved by business in overworking workers is somehow going to employing people.
The arguments that the corporate lobbyists are making—about how badly business will be hurt—just don’t add up. What is adding up instead is the trillions of dollars in corporate profits and stock gains that corporations have made over the same decades that your hours climbed and your wages fell. From 1950 to 1980, during the good old days of U.S. economic might—the era in which the Great American Middle Class was created—corporate profits averaged a healthy 6 percent of GDP. But since then, corporate profits have doubled to more than 12 percent of GDP.
That’s about a trillion dollars more a year in profit. And since then, wages as a percentage of GDP have fallen, you guessed it, by about the same 6 percent or 7 percent of GDP. Coincidence? Probably not. What very few Americans seem to understand is that that extra trillion dollars isn’t profit because it had to be, or needs to be or should be. That extra trillion dollars is profit because powerful people like me prefer it to be. It could have been spent on your wages. Or it could have gone into discounts to you, the consumer. We capitalists will tell you that our increasing profits are the result of some complex economic force with the immutability and righteousness of divine law. But the truth is, it is simply a result of a difference in negotiating power. As in, we have it. And you don’t.
There was once a call in this country for “eight hours for work, eight hours for rest, and eight hours for what we will!” One of the benefits of such a system is that it means that people get employed, because if you have more work than can be done in 40 hours, you either have to pay time-and-a-half or hire someone to make up the missing hours. Which means more employment, more demand, better wages.
But with productivity decoupled from wages, and the rolling back of the eight hour workday, we’re seeing the jobless recovery that’s helped keep Rhode Island in economic distress for all these years; and as Hanauer points out, even as the stock market comes roaring back to life.