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Missing in the Equation: the American Middle Class

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It’s hard to find someone among the working poor who doesn’t want to have at least a middle-class lifestyle. Even those who don’t necessarily yearn to be wealthy would prefer to make enough that they can live comfortably and support their families. Yet what is billed to the ticket to the middle-class life — building marketable skills through education — may not be what it’s cracked up to be. In this country, we’re moving to embrace an economic model that omits the middle class as part of the equation. Where does that leave all the people who want to have a decent life, but find out they’ve been misled about their eventual ability to do so?

Even the new chair of the Federal Reserve Board, Ben Bernanke, can tell you what’s happening: “rising inequality is a concern in the American economy.” (See Cox News article.) Rep. Barney Frank, in questioning Bernanke before Congress recently, noted that “The economy is doing very well. But average Americans correctly assert that they are getting little or any of the benefit.” Bernanke and Frank might agree about the problem, but what’s Bernanke’s solution? It’s more education: The way to fix the problem is not protectionism against global trading partners, but rather to “continue to strengthen job training and skills acquisition — lifelong learning.”

It’s an opt-repeated mantra, to be certain. Paul Krugman of the New York Times calls it the 80-20 fallacy. “It’s the notion that the winners in our increasingly unequal society are a fairly large group — that the 20 percent or so of American workers who have the skills to take advantage of new technology and globalization are pulling away from the 80 percent who don’t have these skills.” (See New York Times column (available only to Times Select subscribers)). You can probably suspect, since Krugman refers to it a fallacy, what he thinks about this idea:

The truth is quite different. Highly educated workers have done better than those with less education, but a college degree has hardly been a ticket to big income gains….So who are the winners from rising inequality? It’s not the top 20 percent, or even the top 10 percent. The big gains have gone to a much smaller, much richer group than that.

Krugman quotes statistics showing the wealth is not being concentrated in the 20 % at the top with the most education and the highest skills, but in a much more rarefied stratosphere (during the time period from 1972-2001): “Income at the 99th percentile rose 87 percent; income at the 99.9th percentile rose 181 percent; and income at the 99.99th percentile rose 497 percent.” (I wish he had used the statistics from 2001 to present: it’s a problem that’s only getting worse, as if the nearly three decade stretch analyzed wasn’t extreme enough.) At the same time, income at the 90th percentile level rose only 34 percent, or about 1 percent per year.

Why did Bernanke, obviously a very smart man about economic trends, get it wrong? Krugman says,

Because the fallacy he fell into tends to dominate polite discussion about income trends, not because it’s true, but because it’s comforting. The notion that it’s all about returns to education suggests that nobody is to blame for rising inequality, that it’s just a case of supply and demand at work. And it also suggests that the way to mitigate inequality is to improve our educational system — and better education is a value to which just about every politician in America pays at least lip service.

(See New York Times column (available only to Times Select subscribers)).

Even having the Federal Reserve Chairman misunderstand a key economic trend wouldn’t be so troubling if that fallacy wasn’t starting to play itself out in wage models that rely so heavily on this unattainable goal as the primary tool for achieving middle-class status. Take, for example, Caterpillar, the manufacturer who takes care of our big tractor and earth-moving equipment needs.

I’ve written about Caterpillar’s two-tiered wage model before (see blog entry of 1/24/06). It’s clear that the newest workers at Caterpillar’s plant are suffering and having difficulty making ends meet, no matter how “lucky” they may be to have a job at all. When a diabetic worker (Robert Johnson) can’t afford to eat in the company cafeteria, even though he needs to have regular meals, and can’t afford both the medication he needs to live and a weekly bus ride to visit his kids, it’s not what too many people would consider a decent job.

But Caterpillar workers are hearing from plant management that “The ones who are most aggressive, they go back to school and they can rise.” (See New York Times article.) They’re being told they must “work their way up toward middle-class jobs, “and “shed the ‘union mind-set’ of annual raises for doing the same minimally skilled task year after year.” But someone who’s done that begs to differ.

Shane Hillard in Peoria closed down his small landscaping business to take a job at Caterpillar, and by the end of last year, had moved up from welder to machinist — and to a wage of $18 an hour for one of the plant’s more skilled positions for those hired in the lower-wage tier. Caterpillar was forced to raise its wages beyond what was negotiated in the union contract for some of the more skilled positions in the plant in order to retain good employees, it acknowledges: good old supply and demand at work.

But even the $18 an hour is not enough, Hillard says, to support the four people in his household. He lives with his fiancĂ©e, who is going to college and not working, and two children — one each from their previous marriages. Hillard talks about his situation: “We don’t ever have any extra money to do things. I’d like to do normal things that I remember doing as a kid. The family going on vacation, that kind of thing.” You know, that middle-class life that many workers Hillard’s age had when they were growing up.

Caterpillar is being held out as a model of competitiveness: It reported revenue of $36.34 billion last year, up 20 percent from 2004. That was on top of a 33 percent increase in 2004 from 2003. Net income was up 40 percent last year, to $2.85 billion; it has nearly tripled since 2003. Unlike businesses in other sectors such as steel or the airline industry who slashed wages to survive, Caterpillar is thriving.

But according to Caterpillar, that doesn’t mean its success should be shared with its workers. “You could say that in good times you could afford a different kind of package and in bad times you couldn’t,” said Christopher E. Glynn, the director of corporate labor relations. “The real question is: What’s competitive? And our target is competitiveness.” Douglas R. Oberhelman, a group president, concludes, “There is a balance that must be struck between being competitive and being middle class.”

Perhaps Bernanke or any other smart economist can explain where the middle class is going to come from when everyone adopts a Caterpillar-like model. It’s not like the kids of any of Caterpillar’s lower tier of workers is going to have a college fund, so either they forego getting any of the skills that are supposedly their ticket upward (even though we know that may not be true) or they go heavily into debt to pay for their education (leaving nothing left to buy the consumer goods and housing that keep the economy sound.) We don’t even have to wait a generation: even those currently working for lower wages have no time or money left to pursue schooling when they’re working two or three jobs just to make enough to support their families.

Whether it’s futile or not to pursue more schooling or develop one’s skills in order to build a better life, we have to have a wage model that makes that possible. And if the rest of corporate America follows Caterpillar’s lead or listens to Bernanke, soon we won’t.

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How NOT to Use Your Computer At Work

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Are you a “cyberslacker?” — one of the new breed of employees who spends time at work going online “to shop, play games, pay bills, view pornography, download music, communicate with friends, maybe even look for another job?” If so, it might be a good time to knock it off, given how many employers these days are monitoring your every move online. Oh, and if you work for Wal-Mart, don’t use the internal manager’s website to advocate for better workplace conditions, or maybe they’ll decide you should be working someplace else — someplace with decent benefits.

For the last decade or so, worker productivity has skyrocked. (See Economic Policy Institute’s Economic Snapshot.) Between 1995 and 2000, hourly output grew by 2.5% per year, about one percentage point faster than in the prior 20 years, and in the early 2000s, productivity growth has accelerated further, growing at an annual pace of 4.1%. Although, in theory, if workers are more productive, they will see some of the benefits come back to them in the form of increased wages, the theory isn’t matching workplace reality. “Economists assume that faster productivity growth generates higher living standards through higher average wages. The problem is that only a small proportion of the increase in productivity growth since early 2001 has flowed to wages and compensation, implying that working families are not benefiting much from this improved output per hour. ” (See Economic Policy Institute’s Economic Snapshot.)

Instead, the increased productivity has caused corporate profits to soar. “Over prior business cycles, profits (including interest income) have accounted for 23% of the growth in corporate-sector income, on average, with total compensation accounting for the remaining 77%. In the current business cycle, the distribution is almost reversed: profits have claimed nearly 70% of total growth in the corporate sector, while increases in compensation (from increased employment and higher hourly compensation) have received just over 30% of total income growth.” (See Economic Policy Institute’s Economic Snapshot.) Simply put, workers are working harder and harder, not to significantly improve their own economic state, but mostly to put more money in their employer’s pocket — money which the employers are not choosing to share with their workers, who created it to begin with.

Now that we’ve looked a little closer at the real productivity picture, let’s talk about this newly-identified major scourge of productivity: the cyberslacker. You might be one, if you use your work computer to shop, pay bills, surf the net, e-mail your friends, or anything to avoid the work in front of you that you should be doing. (See Monterey County Herald article.) If you’ve ever done this, you probably won’t be surprised to hear that you’re not alone: up to 85 percent of employees use work computers for personal tasks or fun, for an average of 3.7 hours per week, according to a University of Maryland study. (See National Technology Readiness Survey.) Why do you do it? One survey lists the following reasons:

  • Don’t have enough work to do: 33.2%
  • Underpaid for amount of work: 23.4%
  • Distracting co-workers: 14.7%
  • Not enough evening or weekend time: 12.0%

(See USA Today article.)

Sounds like a pretty widespread and egregious problem for employers, doesn’t it, when those millions of employees spend nearly ten percent of an average workweek using the Internet for non-job-related work? What the recent article about the cyberslacker phenomenon failed to point out, however, is that the very same University of Maryland study concluded that:

Employees do in fact use the Internet at work for personal business, but
they report spending more time at home on the Internet for work-related
purposes. Those with online access at both home and at work spend an average of
3.7 hours per week engaged in personal online activities while at the job.
But they spend an average of 5.9 hours per week online at home for work-related
purposes. Thus, the Internet seems to have a net effect of shifting work
to home more than personal activities to work.

(See National Technology Readiness Survey.) So perhaps this concern about worker productivity is a little misplaced, given that employers who allow their workers to use the Internet for both personal and work purposes from both home and work come out quite a bit ahead.

But since we apparently can’t have reality standing in the way of corporate profits, many companies are now using all available tools at their disposal to monitor their employees’ computer usage, both at work and when they are off duty. According to a 2005 American Management Association survey, 76% of employers monitor workers’ website connections, while 36% of employers track content, keystrokes and time spent at the keyboard. Another 50% store and review employees’ computer files. Companies also keep an eye on e-mail, with 55% retaining and reviewing messages. So whether or not your work is getting done, whether corporate profits are up, or whether there’s any significant problem with excessive cyberslacking, chances are good that your activities are being monitored.

And if that’s true, there may not be much that you, as an employee, can do about it. As Nancy Flynn, executive director of the ePolicy Institute in Columbus, Ohio, characterizes the state of the law: “The computer system is the property of the employer and as such the employer has the right to monitor Internet activity and e-mail. Employees should have no reasonable expectation to privacy.” (See Newsday article.) While smart employers might choose to focus on overall productivity and only intervening when there are problems, rather than monitoring each keystroke, the technology and law are mostly on their side. (See Monterey County Herald article.)

As an employee, it’s best to be aware of your company’s monitoring policy — only in Connecticut and Delaware are employers required to tell you that they’re monitoring your activity. You may even be able to ask your boss to exempt certain e-mail addresses or websites from monitoring, or have those doing the monitoring under orders not to snoop or disclose confidential information to other employees. (See Newsday article.) And if you do engage in work-related computer usage from home, it’s not a bad idea to personally track that as well, so that your employer gets the big picture rather than focusing only what you do at work.

This should go without saying, of course, but if you feel the need to visit pornographic websites or use the Internet for illicit purposes, don’t do so at work. It’s more than a little disturbing to learn that in one jurisdiction in Colorado, about 50 percent of last year’s arrests of Internet predators who targeted children used computers at work. (See Boston Globe article.) Such activity only drives more employers to enact increasingly restrictive and intrusive policies, penalizing those whose Internet usage should not be considered illicit.

With all this Internet monitoring going on, however, you have to admire the courage of some Wal-Mart managers who took on Wal-Mart’s CEO H. Lee Scott, Jr. on the company’s internal website for managers. At “Lee’s Garage,” a website established for the company’s managers to communicate with Scott, one manager asked Scott why “the largest company on the planet cannot offer some type of medical retirement benefits?” Good question. Scott’s annoyed answer, after the usual blah, blah, blah about competitiveness, was:

Quite honestly, this environment isn’t for everyone. There are people who would
say, ‘I’m sorry, but you should take the risk and take billions of dollars out of
earnings and put this in retiree health benefits and let’s see what happens to
the company.’ If you feel that way, then you as a manager should look for a company where you can do those kinds of things.

(See New York Times article.)

Given the employee surveillance in which Wal-Mart has historically engaged, especially when it comes to preventing its employees’ efforts to form unions, is it only a matter of time until Scott and his minions help this manager out in his search for a better company? Obviously, according to a Wal-Mart spokesperson, the manager failed to understand how competitive retailing is and would not be able to convey that to his subordinates. (See New York Times article.)

Heaven forbid Wal-Mart’s managers should try to work from within to make the company better, but we applaud this manager for trying. However, all employees should be aware that whether they’re using the Internet to make the world or their work environment a better place, or just trying to get their bills paid on time, there’s a decent chance that your employer knows all about it already.

More Information:

Workplace Fairness: Short-Changed: No More Secrets/Privacy

National Workrights Institute

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Making the Old "Right to Work" New Again

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There was a time in this country when “right to work” meant a right to a job — that if you couldn’t find a job in the private sector, the government would provide you one, as an employer of last resort. Now, to the extent that we recognize a “right to work,” it’s a concept that has been distorted to mean the “right not to join a union,” and governmental policy actively fights the concept of full employment. What would the employment picture look like in this country if government policy encouraged both full employment and union membership? Quite a bit different than it does right now, I’d dare say.

A recent column in the New York Times discussed the concept of “full employment,” which means that every adult who wanted to work could have a decent job. Those who couldn’t find positions in the private sector would be able to turn to the government as an employer of last resort. (See New York Times article.) As crazy as that might sound to those of us under 50, it was once a “hotly pursued goal” for the United States to achieve full employment. President Franklin Roosevelt declared in 1944 that having a job was a basic human right, and during World War II, the nation actually achieved full employment.

Now, governmental policy actively works against the concept of full employment, under the guise of protecting against inflation. The conventional wisdom is that:

If unemployment became too low, the labor shortage would give workers the bargaining leverage to push up wages. Employers would respond by raising prices to cover the labor costs, starting an inflationary spiral deemed to be more damaging than a rising unemployment rate.

(See New York Times article.) It’s considered less damaging for a large group of people who want to work to be sitting at home collecting unemployment than it is for corporations to make less money, so any time the Fed gets the least bit nervous about inflation, workers take the hit.

Of course, some economists think this is bunk. James Glassman, senior domestic economist at J. P. Morgan Chase & Company, says “This idea that wages are a signal of coming inflation is a bad habit. Business has control over labor costs more than ever in this global economy, as so many workers unfortunately are finding out.” Some economists agree with him, and the Times article reports that there is some talk about bringing back full employment, or at least what we had in the late 90s, “when the economy boomed, the unemployment rate plummeted, wages rose faster than inflation across the work force and, lo and behold, inflation remained low, although the Fed still held down interest rates.”

The White House is now saying that we’re close to full employment. (See Reuters article.) The White House has also just appointed two new nominees to the Federal Reserve Board who say their top priority is “controlling inflation.” (See New York Times article.) The timing seems rather suspicious, don’t you think? Does anyone really think it’s true that every American who wants to work has a job? (I guess it doesn’t count if workers now have two or three jobs which have replaced the one job they had before.)

Meanwhile, the “right to work” has come to mean something quite different than what it did in President Roosevelt’s era. It has become the shorthand reference for laws in over 20 states which prevent unions from requiring that all eligible employees in a particular workplace join the union. Supporters of such laws decry “compulsory unionism,” and cloaks their activities in language about freedom and individualism.

One of the leading organizations active in the right-to-work movement, the National Right to Work Committee, says it is “dedicated to the principle that all Americans must have the right to join a union if they choose to, but none should ever be forced to affiliate with a union in order to get or keep a job.” (If you look at the work NRWC is doing, however, you’ll see it’s much more active in the fight on behalf of the second half of that equation than the first.)

We can probably expect more of the same from a new group to recently emerge, the Center for Union Facts, a business-backed group which plans to spend five million dollars this year telling America such viewpoints as, “Union leaders have abused the trust of their members. They’ve misspent member dues and harmed the very same people they promise to protect,” while asserting that many unions are corrupt and have hurt airlines, steel makers and automakers. (See New York Times article.) The Center isn’t disclosing who its backers are, but Randel Johnson, vice president for labor, immigration and employee benefits at the United States Chamber of Commerce, admits to being one of their advisors, saying that “We think the Center on Union Facts is useful for workers to have access to more information on unions.”

Even if you believe those affiliated with the Administration who claim we’re close to full employment, it’s not because of the principles that guided the Roosevelt Administration, that full employment is important “not as a desirable market phenomenon — the spinoff of a robust economy — but as a civil right, on a par with the right to vote.” (See New York Times article.) Instead, the only “right to work” we have is what anti-union interests have staked out for themselves — not what any right-thinking progressive should be supporting. A real right to work would look much different, encompassing both support for vigorous union organizing efforts and government employment for those who cannot find work elsewhere.

It’s obvious there is much work to be done — just look at Katrina’s aftermath and the enormous amount of clean-up work still ongoing, if you’re wondering what kind of work the government should be employing people to do. It seems like it’s easier to let the private sector exploit immigrant workers, temporarily eliminate union prevailing wage protections, and gouge the government for profits than it is for the government to consider employing its own workers. But that experience should tell us that it may be time to resurrect the old “right to work” that President Roosevelt recognized and actively supported through government initiatives such as the Works Progress Administration (WPA).

As Nobel Prize-winning economist Amartya Sen recognizes, “[T]he real costs of unemployment are very high. Having a job confers not only income, but social recognition and self-respect, which comes with having the sense of being wanted by society.” It’s time to start tackling some of those costs by pushing for a real “right to work” — an old-fashioned idea that needs some new blood.

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Super Bowl Advertisers’ Treatment of Workers Lags Behind Public Image

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This Sunday, 90 million Americans, and another 40 million people around the world, will watch Super Bowl XL. The Super Bowl is not only American football’s biggest game—it is a showcase for television’s most expensive, and often most innovative, commercials, which are now as integral to the broadcast as the competing teams.

Some of the world’s largest companies will cough up $2.4 million for a single 30-second commercial. Unfortunately, too many of these industry-leading companies have already coughed up the ball when it comes to treating their workers—the very source of their success—with fairness.

In a new report, Third and Long: Will Super Bowl Advertisers Make the Big Play for Workplace Fairness? Workplace Fairness looks at Super Bowl advertisers such as Ford, Burger King, and Sprint, as well as the NFL itself, to expose how their treatment of their employees lags far behind the image they hope their commercials cultivate.

Workplace Fairness thinks that:

Working people watching the game around the world deserve to know what’s behind the ad campaigns before they rush out to support the companies with the best commercials.

Some of the report’s examples of how Super Bowl advertisers need better coaching:

  • With Ford Motor Company’s announcement that 30,000 workers will be laid off and 14 plants will close, Ford’s workers will ultimately take the hit for Ford’s moment of glory during the game to be played at Ford Field.
  • While the Super Bowl MVP will drive away in a 2007 Cadillac Escalade, General Motors has become the industry MVP in the race to eliminate jobs and benefits.
  • Workers at FedEx Corporation who are “absolutely, positively” misclassified as independent contractors—or subjected to racial discrimination—cannot “Relax.”

In contrast, Coca-Cola, after a big-league lawsuit several years ago, is now moving ahead “full throttle” when it comes to treating its employees more fairly. “Coke’s innovative human resources practices, brought about by a $192.5 million settlement, are the real thing,” says the report.

Teams in the National Football League have made real forward progress in hiring more minority coaches, thanks to the “Rooney Rule,” named after Pittsburgh Steelers owner Dan Rooney, requiring teams to interview at least one minority candidate. But the hiring process at the end of the 2005 season was tackled at the line of scrimmage:

  • Of the record number of six African-American head coaches, three (Tony Dungy, Lovie Smith, and Marvin Lewis) were among the NFL’s most successful, with Lovie Smith named as “Coach of the Year.
  • Eight head coach openings were filled with eight white coaches.
  • Only one black coach was hired, in a lateral move accompanied by a trade (Herman Edwards from the Jets to the Chiefs).

The report concludes about the NFL,

Even with forward progress, the league still falls short. If just a fraction of the 90 million football fans watching the Super Bowl were to let their favorite team’s owner know that increased diversity in the coaching and leadership ranks was an important consideration for them, we could expect real forward progress.

Third and Long: Will Super Bowl Advertisers Make the Big Play for Workplace Fairness? is available online at www.workplacefairness.org/superbowl, in online interactive and PDF formats. Make it part of your Super Bowl party!

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