Last year, Representative Tim Walberg of Wisconsin spoke on the House floor against a provision concerning the funding of the Temporary Assistance for Needy Families program. His edifying proved short and sweet. Certain Americans, in his mind, have lost touch with the “dignity of work,” causing the undeniable swelling of the ranks of those receiving welfare benefits.
Eloise Anderson, Secretary of the Wisconsin Department of Children and Families and Scott Walker protégé, testified before Paul Ryan’s House Budget Committee hearing on poverty this past July. In her prepared statement she asked, “why has the poverty level in the United States returned to levels almost as high as when the War on Poverty began?” Her answer might surprise you: a loss of traditional culture, including hard work and family values, is to blame.
Dr. Bill Path, public higher education apparatchik and current President of the Oklahoma State University Institute of Technology, wrote recently in the Huffington Post “we have become a society that no longer respects or celebrates hard work. We have become a nation of consumers rather than producers.” Path advises students to pursue a more practical vocational education in order to meet the stated needs of the business world. He holds a degree in Bible from Harding University.
Yet no one has made a bigger name for himself discussing the importance of work than Steve Southerland, the Florida congressman whose eloquent preaching on the topic earned him a recent profile in the Washington Post. In June, Southerland introduced a last-second amendment to the farm bill that would put new requirements on the Supplemental Nutrition Assistance Program (SNAP), colloquially known as food stamps. Much like Anderson, he highlighted the high poverty rates in America and the fact that “food stamp benefits have tripled in the past decade.” He calls this “the defining moral issue of our time,” and has given virtual sermons on the House floor about the need to “incentivize” hard work instead of “reinforcing the same government dependency” which has, evidently, been the primary cause of continued poverty for decades. It is his “Gospel of Work,” one partially rooted in religious doctrine (he kindly reminds us that God put Adam in the garden of Eden primarily to work). “What we are fighting for is a cultural shift,” he claims.
These are but a few voices in a choir that sings a catchy tune about a vast swath of people who have lost touch with the ethical and cultural importance of hard work. They are the New Puritans, reliant not upon any long-term economic analysis or examination of structural problems, but on a simplistic mythology about American values and a quasi-religious sanctification of the providence of work.
Such views aren’t merely divorced from reality – they’ve taken the house, the kids, and the family dog in a messy separation that has impoverished rational public discussion about work and pay.
Because many of us pass our time sitting in front of glowing screens where people boast about the best aspects of their lives, it’s hard to see or even accept that there is a swelling underclass, scraping by for basics like food in what is by some distant and increasingly irrelevant measure the richest country in the world. It’s a country where the poles of social mobility have drastically reversed. Where it was once possible for penniless immigrants to build comfortable lives and own real property, the United States has now become a place where anyone can sink to base levels of destitution. Efforts to stymie the growth of the social safety net are merely symptoms of an ideological rot that has engendered a fuck you attitude towards anyone who doesn’t somehow find a way to make gobs of money, regardless of how hard or long they work.
The New Puritans are snake oil salesmen hawking an all-in-one moral solution to a make-believe cultural problem. The crux of the matter is that Americans work some of the longest hours in the developed world and have seen dramatic increases in labor productivity over the past half century – two facts in direct contradiction to the claims of Dr. Path and others like him. That companies spent decades failing to properly compensate workers for these achievements flies over the heads of the New Puritans, and, oddly enough, the issue of low pay goes unmentioned in their arguments about morality and work.
“History has proven that work is the surest way to empower able bodied Americans to advance from welfare to self sufficiency,” said Southerland in one of his Congressional sermons. If true, history must have ended sometime in the 1970s, when gains in productivity failed to translate into wage growth for most Americans, social mobility made a drastic reversal, and the seeds of inequality began sprouting to their current Third World highs.
Two Graphs, Two Viewpoints
Several years before the Recession hit full swing, the Chairman of the Council of Economic Advisors under George W. Bush, Edward Lazear, wrote a paper touting the remarkable growth of the American economy over the previous four decades. High levels of productivity were “the common thread that ties all positive economic news together.” And, as one would expect, overall compensation grew almost exactly with those productivity gains. To emphasize this point, he included the following graph:
Lazear credits greater “labor flexibility” for most of the increase in productivity, an academic term made to sound friendlier than what it actually describes. Labor is more “flexible” from the point of view of business instead of the needs of employees. An OECD report on employment outlook put it this way: “It encompasses overtime working, some part-time working, shift-working, and other forms of ‘unsocial hours’ working, such as weekend, evening, and night working,” which, as we will see, have increased since the Recession. Moreover, while the rest of the OECD saw a decline in the number of hours worked by full-time employees, the United States bucked the trend, witnessing “sizeable increases” in working hours. In other words, Americans work longer, stranger hours and do so more productively than the rest of the developed world.
This is the monolithic view of the American economy, one that regards overall GDP growth and similar national-level measures as indicators of prosperity. Implicit in this view is the assumption that if the country as a single unit is performing well, then the lives of all Americans will improve, hence the Thatcherism of “a rising tide lifts all boats.” No wonder the New Puritans believe in a critical mass of uninitiated welfare-dependent sloths. Under the monolithic view, that’s the only way, despite a recession here and there, that an American family could have lost buoyancy in the rising water table of wealth.
But a nuanced view of productivity and compensation presents a more sobering picture. According to the Bureau of Labor Statistics and the Economic Policy Institute, among others, wage increases for the median worker nearly flatlined beginning in the mid 1970s while productivity continued to soar.
When considering wage and compensation growth for the median worker, which eliminates the distortions of the remarkable growth seen by the top earners, the numbers are startling. According to an EPI study, from 1973 to 2011 the hourly wage of real median workers increased by 4%, from $15.45 an hour to $16.07 an hour in 2011 dollars – an increase of 0.1% per year or, in more visceral terms, a paltry two cents per year. This proves all the more distressing, considering that productivity increased more than 80% over that same time period. But even taking into account compensation instead of wages, those in non-supervisory roles have also seen their growth stagnate over the same period, as shown here:
This development – which some call the Great Decoupling – presents a conundrum for the New Puritans and their ilk, as it seems that Americans have not been paid adequately for decades. “The dignity of work,” it turns out, doesn’t include the “dignity of pay.”
Proponents of the monolithic view cannot account for the Great Decoupling. But to those who examine such issues, the causes are unequivocal: “the most important factor” accounting for the divergence is “growing wage inequality.” It may very well be that inequality, and not the loss of some iconic work ethic, is the great moral issue of our time.
The Unequal State of America
Partly because of the Recession and the Occupy movement it spawned, a popular discourse on inequality in America has ballooned. Several recent books have highlighted the topic, as have works by Nobel laureate Joseph Stiglitz and writer Timothy Noah. Clintonian Secretary of Labor Robert Reich recently established himself as the lead public intellectual on the issue with his latest documentary Inequality for All, though he’s lectured and written about inequality for over a decade.
These economists and authors all tell the same story: beginning in the 1970s, the difference in wages between the top 10% and bottom 90% of earners dramatically increased. The Congressional Budget Office reports that from 1979 to 2011, the top 19% of households saw their income grow by 65%, while those in the bottom quintile experienced a mere 20% increase. Remarkably, the top 1% increased their wages 275% over the same period. That same group seized most of the after-tax income growth of the period, while the bottom four quintiles of households saw their share decline. From 2002 to 2008, median households saw their wages decline 3.6% after inflation, with the 90th percentile as the only group experiencing an increase of any kind.
One useful measurement of inequality, the GINI coefficient, provides an illuminating picture of this trend. The OECD reports that the GINI coefficient has increased substantially from 0.476 in 1979 to 0.579 in 2011 (the number ranges from 0 at complete equality to 1 at complete inequality). According to the CIA, the United States is one of the most unequal countries in the OECD. Globally it ranks somewhere between Uruguay and the Philippines.
All of which is to say that an ever smaller percentage of extremely wealthy people have managed to capture a greater share of the increases in wealth and compensation in the past four decades, especially those at the very top. Aside from issues of fairness, high levels of inequality go hand in hand with other trends that anyone should find troubling. The OECD warns: “excessive concentration of wealth on a small group could lead to their having disproportionate political influence.” Other side effects include declining public health, decaying infrastructure, and increased political dysfunction, among others.
Much of that should sound familiar. Most importantly – and in direct opposition to the bootstrap-yanking idealism of the New Puritans – parental wealth is the single best predictor of a child’s economic future, supporting the well-established link between high inequality and declining social mobility.
How did this happen?
Reich and other economists provide a diverse range of explanations. Globalization and the outsourcing of low skill jobs depressed wages, simultaneously causing a domestic increase in the need for highly trained workers – the so-called technical skills gap. The latter point remains hotly disputed, and current high levels of unemployment for the well educated seem to suggest that a lack of technical skills isn’t the whole story. Decline in union membership might account for some of the increase, as collective bargaining powers waned and workers lacked potent methods for demanding increased pay. Deregulation of business and financial markets beginning in the 1970s also provides a plausible reasoning, as that is precisely when the Great Decoupling begins.
Each of these explanations has merit and certainly contributed to the problem. But an important cultural shift in the business world occurred in the 1970s that would reshape corporate attitudes towards work and pay.
Friedmanites at the Gates
The 1970s witnessed the ongoing conflict of the Cold War, in which the ideologies of Communism, with its centrally planned economies, and the American model, whose history contained a mixed bag of economic management, went head to head. So overbearing on cultural and political discourse was this conflict that some believed an equal but opposite capitalist extreme, which called for an unimpeded free market economy, would provide the only path to ideological victory.
The economist Milton Friedman became the figurehead for that movement. He championed the Chicago School of neoclassical economics, which espoused an absolute faith in the efficiencies and rationality of free markets and promoted the idea that the aggregate actions of individuals acting in self-interest would, through the magic of the market, create the best of all possible worlds. In 1970, Friedman wrote an op-ed in the New York Times arguing against the concept of corporate “social responsibility” and instead for the idea of profit as the sole responsibility of anyone in business.
“In a free enterprise, private-property system, a corporate executive is an employee of the owners of the business,” he wrote. “That responsibility is to conduct business in accordance with their desires, which generally will be to make as much money as possible”. In other words, generating short-term profits, which provide value to shareholders (the owners), is the true ethical duty of any firm.
A recent article in Forbes – not exactly the paragon of socialist thought – called Friedman’s conception of business ethics “the dumbest idea in the world” while pointing out that the economist’s high stature ensured that this idea became “the new gospel of business.” It contributed to an entire cultural shift that transformed avarice from vice to virtue, with the consequence of greater returns for shareholders and a bullish financial market. With a myopic focus on profits, wages became simply another cost on par with any other. It’s not a stretch to see how the Great Decoupling emerged by way of a business culture that valued profits over everything else, including workers’ pay.
This mentality still pervades, and seems distinctly at odds with the public interest. CNBC provides a window into this worldview. During a baffling appearance on the network’s Closing Bell, writer Alex Pareene faced an incredulous lot of hosts who simply couldn’t believe that he would call for the resignation of JP Morgan CEO Jaime Dimon in the wake of the largest financial corruption settlement in history. Fortune writer Duff McDonald called it “preposterous” pointing out that “the stock’s touching a ten year high. It’s a cash generating machine.” Long time financial news personality Maria Bartriomo asked “the company continues to churn out tens of billions of dollars in earnings and hundreds of billions of dollars in revenue. How do you criticize that?” Clearly, any legal, ethical, or moral failure on JP Morgan’s part takes a backseat to profitability – a theme that CNBC has taken to even new heights in the aftermath of the Great Recession.
The monolithic view of overall American growth in the past four decades reeks of this cultural shift. It also may have promoted attitudes within business and finance that led to the recklessness and borderline illegal activity of investment bankers, which, according to Roger Martin, culminated in the most recent economic collapse and recession.
In Capitalism and Freedom, Friedman wrote, “History offers ample evidence that what determines the average level of prices and wages is the amount of money in the economy.” History since the 1970s dictates otherwise, and the economy since the recession has demonstrated that the long-term trends of low pay and skyrocketing inequality haven’t reversed. In fact, the people lucky enough to have jobs work longer and harder than ever before.
A Recovery for Whom?
The Great Recession officially ended in June 2009. A monolithic view defines that end and the start of recovery as a turnaround in overall economic growth, with particular attention to increasing GDP. Depending on the time period considered, GDP has increased somewhere between 2.3% and 5% during the recovery. This means that the country as a whole has generated a decent amount of income. But such growth has come without a significant recovery in employment. Worse still, the kinds of jobs and the nature of work indicate accelerated longer-term trends in depressed pay.
A 2011 Northeastern University study examined how the overall growth of the economy had not translated into increased employment during the recovery. At this point, their conclusion shouldn’t be surprising: the growth came primarily from an impressive 6% increase in productivity by those who are working coupled with a slight increase in the amount of hours they worked per week. Those productive workers, however, failed to see any meaningful increase in their incomes. This begs the question – where did all of that wealth go? The authors put it bluntly:
Substantial improvements in labor productivity over the past few years have not yielded any increase in the real hourly or weekly earnings of the average U.S. worker […] The gains in labor productivity have been used to boost aggregate corporate profits to a degree not seen before in the nation since WWII.
Wage increases amounted to around 1% of the growth seen from the end of the recession to 2011, while corporate profits claimed 88% of that growth. In the first six quarters of the recovery, profits increased an astonishing 40%. Wages and salaries, on the other hand, currently comprise the lowest percentage of GDP ever.
In a paper published in September, Emmanuel Saez updated this information for 2012 and discussed the effects on income inequality. From 2009 to 2012, the income of the top 1% grew 31.4%, while the bottom 99% of earners saw a measly 0.4% increase in incomes. Thus “the top 1% captured 95% of the income gains in the first three years of the recovery.”
The New Puritans see the growth of welfare recipients during this time of recovery as a problem of dependency and not, despite all the evidence, as a problem of profitable companies hoarding wealth and refusing to justly compensate workers – companies that sometimes fail to provide even sustenance level pay. McDonald’s has lately made itself an easy target in this regard. An employee of the fast food chain recorded a phone call in which a company representative advised her to go on food stamps. Back in July, the media caught wind of sample materials on McDonald’s employee budgeting website, which helps employees map out a balanced household budget. The default examples assumed that most workers would have a second job even while working at McDonald’s full time. In other words, the iconic company accidentally acknowledged that its restaurants don’t pay basic living wages to their employees.
If it seems unfair to use minimum-wage workers as an example, consider this: most of the jobs added during the recovery have been of the low wage variety, precisely the kind of “flexible” employment Lazear touted as key to monolithic growth. Since long-term trends of rerouting mid-wage positions to low-wage positions accelerated during the recession, America now carries the dubious distinction of having some of the most highly educated low-wage employees in the world: nearly one-fifth of all low wage earners have a four year college degree.
Young people have disproportionately faced the brunt of this calamity. Aside from accruing insane levels of debt through an out of control student loan and University tuition regime, companies in some cases expect recent graduates to work for poverty level wages, or even for free, claiming that “experience” will propel them further in the future. Thus, we’ve seen the growth of unpaid internships and adjunct professors on food stamps. Sarah Kendzior, the Al-Jazeera writer and ardent chronicler of social breakdown, hit the nail on the head in her latest piece, writing “If you are 35 or younger – and quite often, older – the advice of the old economy does not apply to you. You live in the post-employment economy, where corporations have decided not to pay people. Profits are still high. The money is still there. But not for you. You will work without a raise, benefits, or job security. Survival is now a laudable aspiration.”
In a way, one can see the “post-employment” economy as the logical conclusion of a decades-long pattern of increased work and decreased pay for the typical American. And corporate managers have neither an immediate incentive to make such pay increases, nor will they in general feel some tremendous moral obligation to do so. Because of the overall growth of GDP and the high profits of the corporate sector, the financial markets have likewise witnessed a spectacular performance during the recovery. Meanwhile, regular people suffer and get nowhere. But to the monolithic view and to Friedmanites alike, such contradictions don’t matter. And why should they? Growth and profits have returned. The country is rich. If individuals aren’t benefitting from that, the fault must be their own.
New Puritan Delusions
After a parade of New Puritan proselytizers like Eloise Andersen finished recounting the moral failings of the poor during the Paul Ryan’s House Budget Committee hearing on poverty, it took a Catholic nun, Sister Simone Campbell, to bring everyone back to reality:
More than one in four jobs pays wages below the poverty level. Thus, it isn’t surprising that about seven in ten children living in poverty live in working families […] This growth in SNAP is not a scandal or evidence that the program has run amok, but the consequence of a weak economy and a national commitment to care for those at the margins of society.
Instead of a misplaced appreciation of the value of hard work, low pay and lackluster opportunities have contributed to poverty, and thus an increase in the need for programs like food stamps.
For all but the New Puritans it’s easy to see how Friedmanism, the Great Decoupling, and mounting inequality play together to create a circumstance where more Americans survive on the government dole. Once profitability became a single-minded goal, businesses saw labor as just another cost. Despite decades of soaring productivity and corporate profits, workers did not benefit from booming national-level economic gains. That productivity and those profits, of course, had to go somewhere – to the top earners in society who have seized an ever-greater share of American wealth.
Our political discourse is poisoned with simple ideas, and our politicians peddle the notion that the economy is limping along because too many people are on welfare or outright refuse to work. But anyone with an iota of analytical ability can see that cause and effect have been deviously switched in this mythology. Taxpayers have picked up the slack of profitable companies who refuse to pay their employees sustenance level wages – is that not a morally reprehensible situation? Why is the “dignity of work” an all-important, era defining concept, but decent compensation isn’t? Why has a decades-long fleecing of people who willfully submitted to the daily grind gone largely undiscussed in public?
New Puritans can’t explain any of this without pointing to a skills gap, government dependency, a lost work ethic, or some other failure of individuals. Their piety blinds them from seeing that an every-man-for-himself ideology hasn’t worked out for the everyman. Instead they call for a hunkering-down, a rediscovery of the inherent virtue of hard work. Given the present economic reality, this seems akin to pissing on the heads of regular people and then blaming them for not carrying umbrellas, all while complaining about the ghastly weather. And as long as struggling Americans keep their heads down they’ll never see the source of their inundation.
If it seems radical to say that someone working full time has a right to living wages, then that goes to show the true extent of our deranged national discourse on work. New Puritans like Steve Southerland are, in a way, correct: we need a cultural change. But instead of telling the most productive workers in the history of the world to work harder and take what they can get, we should compel companies to pay justly through shame or legislation. Any moralizing about work or the economy will prove hypocritical until that comes to pass.