Why worker power is in such deep decline : The Indicator from Planet Money The three main drivers behind the decline in worker power.

The Power Of Workers

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Hey, everyone. It's Cardiff. This is THE INDICATOR FROM PLANET MONEY. Today's episode is about the power of workers; the power of workers to negotiate with their bosses, their employers for better pay, better benefits, better working conditions. And our guest on the show to discuss this topic is Anna Stansbury. Anna is the co-author, along with economist Larry Summers, of this fascinating recent study about worker power. And what they find is that it has actually been in decline for about four decades, going all the way back to the early 1980s. Now, this trend seems especially meaningful to understand now in the current moment, when so many workers have just lost their jobs because of the coronavirus pandemic. And so many other workers - especially people categorized as essential workers, like nurses, and grocery stockers and sanitation workers - have had to keep doing their jobs even when it has meant taking personal risks to their health and without extra pay to compensate for that risk in many cases. So after a quick break - our chat with Anna Stansbury, who tells us the three main causes of declining worker power. And she tells us how this trend has intensified the effects of the pandemic for workers.


GARCIA: Anna Stansbury, welcome to the podcast.

ANNA STANSBURY: Thank you. I'm pleased to be here.

GARCIA: So, Anna, in your paper with Larry Summers, you found that for the last four decades, workers have been getting a smaller and smaller share of the money that is made by the companies they work for and that this is how we know that workers have been losing power. So, of course, companies will sell goods and services to make money. And so if, over time, workers are getting a smaller and smaller share of that money, then correspondingly that would mean that the companies are keeping a bigger and bigger share. Is that basically right?

STANSBURY: Exactly; and specifically, it's the shareholders, so we're talking about a redistribution of income and power from workers to shareholders. What we see is that, basically, there's been this rise in the valuations of companies and in companies' profitability. So that's what you see in terms of shareholders getting a bigger return on their investment than they used to in the past.

GARCIA: And, Anna, you found that there appear to be three big causes of this decline in worker power. And I just kind of want to go through each of them and ask you to explain what's going on for our listeners. So the first cause that you find is the decline of unions, so what's going on there?

STANSBURY: So in the '50s, 1 in 3 private sector workers was a member of a union. Now that's about 6%, so unions have all but disappeared from the American private sector. And unions, of course, bargain for higher wages and better work conditions for the workers that they represent. But unions also have an important role in improving pay and work conditions even for non-unionized workers through what we call the union threat effect, where if I'm a worker in a non-union firm, the threat of me unionizing with my colleagues might be enough to incentivize my manager to pay me more, to give me better work conditions.

GARCIA: All right. And the second cause of declining worker power that you find is a rise in the ruthlessness of companies. It's an interesting word there. The ruthless economy is what you call it, so what is that exactly?

STANSBURY: That's a set of management practices and capital markets practices that lead to pressures on companies to really cut workers' pay and compensation down to the bare minimum that they can afford to pay, where the pressures on firms to increase their efficiency can be good but can also lead to massive cost cutting in terms of workers' wages.

GARCIA: Yeah. Anna, it sounds like we should maybe be kind of ambivalent about this trend of two minds. I mean, making a company more efficient, more innovative that can be a good thing - right? - especially if it means things like getting rid of wasteful spending, like, you know, executives, the CEO, getting their own fleet of private jets or whatever. But on the other hand, it can lead to companies also doing disturbing things; I mean, like surveilling their employees or monitoring them really closely, only paying them as little as they can get away with paying them. It could mean a private equity firm buying a company and immediately firing a lot of people, so, yeah, this trend seems kind of complicated.

STANSBURY: I think it's important to note that these are not necessarily bad things in and of themselves. The implementation of, you know, shareholder value maximization and private equity and things can massively increase efficiency. And if we increase efficiency, we grow the size of the pie. We increase the goods and services that we produce in this economy for everyone to benefit from. But they can also have an effect of redistributing the pie rather than growing it; just taking wages that would formerly have gone to workers and redistributing those to shareholders. And so what we see is that this set of ruthless economy practices may have been growing the pie. But at the same time, it's been having a big redistributive effect from workers to shareholders.

GARCIA: Yeah. And you say that another part of this ruthlessness story, this push for efficiency and cost cutting could be that companies have also increasingly contracted out a lot of jobs and that that has also led to lower pay.

STANSBURY: If I am an investment bank and I hire janitors in-house, I might feel obliged to pay them more because we're a very profitable investment bank. But if I hire a janitorial services company, then I can keep the costs of my janitors low and, in some sense, reduce their power relative to what would have happened in the past.

GARCIA: And doing this also means that there's less scope for advancement for those workers who now work for these contracted-out companies rather than being part of the organization that they're actually doing the work for, right?

STANSBURY: It absolutely does. And one thing to bear in mind with our research is we're conceiving of worker power only in the sense of pay, really; compensation, pay and benefits. And actually, these trends have had a much more pervasive effect at reshaping work. We've seen a decline of what you might think of as good jobs. And factoring into that is the possibility for advancement, the degree of autonomy that you might have in the workplace, the degree of voice you have over your workplace conditions. All these have declined in tandem, and that's not something we're measuring or studying in our paper but is also really important, obviously, to people's welfare.

GARCIA: And, Anna, you find that the third primary cause of declining worker power is that the federal minimum wage, when you take into account inflation, has fallen throughout the last few decades. And so especially for low-income workers, that also leads to lower pay, obviously, and less power.

STANSBURY: Now, what is important to note is that the minimum wage is super-important for workers on low pay. But a big part of the loss of worker power and the loss of workers being able to share in the profits of firms has not been at the very bottom end of the wage distribution. But it's been throughout the bottom and middle end of the wage distribution. And so increasing the minimum wage would restore worker power to some extent for very low-paid workers. But it's not going to do anything really for workers in the lower-middle or middle part of the distribution who's also lost power in the last few decades.

GARCIA: And finally, Anna, it seems like we are now in this moment where the power of workers is an especially important topic because, of course, the pandemic has now thrown a lot of people out of work. There's less economic activity overall, and so companies just may not feel the pressure to raise wages or otherwise agree to whatever workers are asking for. So what is the overlap between this trend that you describe that's been happening over the last few decades and what's happening now?

STANSBURY: I think there's a lot of overlap. I think it's the issue you've mentioned that workers have lost power, but also that this crisis has really illustrated very starkly the lack of power that many workers have in their workplace and the need for that power. I think there can be no starker illustration of this than the essential workers in, for example, distribution, groceries and retail, transportation, who've had to continue to work through a pandemic, often with insufficient protective equipment, often with really serious worries for themselves or their families of contracting this deadly disease and who haven't had the power to say no or to advocate for better health and safety in the workplace; in many cases, who have tried to strike or to unionize during this pandemic at a moment when one might think they have the most power because they are essential and irreplaceable and yet still have not been able to do so.

GARCIA: All right. Anna Stansbury, thanks so much.

STANSBURY: Thank you so much.

GARCIA: This episode of THE INDICATOR was produced by Brittany Cronin. THE INDICATOR's editor is Paddy Hirsch, and THE INDICATOR is a production of NPR.


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