That Mythical Rising Tide

Joseph Brusuelas, Tuan Nguyen | Productivity: More Than Profits | A Small Thing? | Factoids

A rising tide: source unknown

Quote of the Moment

The increase in American productivity over the past year, if sustained, is a potential game changer for the economy that represents that mythical rising tide that lifts the living standards of all.

| Joseph Brusuelas, Tuan Nguyen, Productivity continues to rise in potential game changer for economy

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Productivity: More Than Profits

I read the Quote of the Moment above in Talmon Joseph Smith’s Can America Turn a Productivity Boomlet Into a Boom?, and Smith followed the quote with this:

In recent history, the give-and-take between gains in productivity and increases in worker pay has been uneven. Many economic models suggest that if workers begin doubling their daily or hourly production, they are likely to be paid about twice as much as before. From 1979 to 2022, however, productivity grew by more than four times the inflation-adjusted 14.8 percent growth in compensation for average nonsupervisory workers in the private sector, who are roughly eight of 10 people in the labor force.

Said more plainly, front-line workers saw a roughly 15% pay increase during the period from 1979 to 2022, during which productivity grew more than 400%. So, in essence, the implicit social contract of the pre-1980 post-war New Deal era was strip-mined by corporations with major support from the government.

Take just one example, the decline of wages by flight attendants, ably related by Sara Nelson, the President of the Association of Flight Attendants-CWA. She writes, in Let’s Show Bosses They’re Lucky to Have Our Work:

For the last fifty years, all the bosses have been telling workers we should feel lucky to have a job. It’s one of the greatest tricks the corporate class has ever pulled.

The end of the New deal consensus can be tied to the actions of Ronald Reagan and the rise of neoliberal austerity:

In the ’70s, the decline of union density that had begun with implementation of the Taft-Hartley Act in the 1950s picked up steam. Austerity (and the earliest forms of “free trade”) devastated sectors that had formed the backbone of labor: manufacturing, auto, steel, and others. Deregulation of trucking, rail, and air under President Jimmy Carter gave corporations a chance to rob workers and customers.

Labor’s losses in the ’70s were turbocharged by Ronald Reagan. He broke the Professional Air Traffic Controllers Organization (PATCO) strike and gave the green light to corporate America to smash unions. In 1982, Reagan further opened the gates to Wall Street greed by exempting stock buybacks from the Securities and Exchange Commission’s definition of illegal stock manipulation.

She plots the decline of union power in the U.S. using the proxy of strikes, which fell from three million who walked off the job in 1970, almost 3 percent of the working-age population. But in 1984 Reagan was reelected, unemployment was above 10%, and fewer than a million workers went on the picket lines.

Soon every industry downturn or economic blip became an excuse to rob the working class of the benefits of their labor. Even as productivity soared, management kept coming at unions under the banner of “never let a good crisis go to waste.” When the Great Recession crushed Detroit in 2008, bosses convinced workers that massive concessions were the only way to save their jobs and their companies. This has been mirrored in other industries, both before and since.

But whenever demand came roaring back, and profits shot up to new heights, the rewards for the workers’ sacrifices all went to Wall Street.

But we’ve seen a surge in effective, concerted labor action, pushing to not only drive wages higher, but also to counter corporate efforts to destabilize working conditions, such as the SAG-Aftra and Screen Writers Guild actions to minimize the application of AI in entertainment.

This is great background, leading up to the actions of 2023 when ‘more workers went on strike than at any time since 1984’. And the next few years look like a battleground:

More than 1.1 million workers have contracts ending this year: two hundred thousand postal workers; one hundred fifteen thousand railway workers; thirty thousand machinists at Boeing; and fifty-five thousand teachers and staff in LA and New York. And twenty-nine thousand faculty and staff at California State University already walked out on January 22.

The biggest flight attendant contracts in the industry are headed toward a simultaneous showdown.

[…]

Nearly a hundred thousand flight attendants are demanding long-overdue improvements.

Will all these unionized workers win their fight? It appears that they have new leverage, in a strong economy with very low unemployment and high rates of productivity. Again, from Smith:

Looking forward, a range of market analysts are making the case that a crucial variable in broad productivity improvement thus far has been an unemployment rate near record lows.

Peter Williams, an economist and managing director at 22V Research, an investment strategy and quantitative analysis firm, wrote in a recent note that “firms have been forced to innovate and adapt in an environment of tight labor markets.” He added that for many firms, relying on “low-cost labor and low-cost capital is not really an option anymore.”

So, corporations are now unlikely to attempt to drive down wage demands by threatening to fire experienced workers and to replace them with non-unionized, less skilled alternatives. Their profits now rely on productivity, not low costs, so the power dynamic is upended: the workers control the means of productivity.

When a company needs all hands on deck to keep up with sales, using layoffs to improve the bottom line can have the opposite effect. Instead, improving efficiency rather than reducing head count often becomes the better growth engine, or competitive edge.

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For some labor economists — who have seen shareholders and business owners recoup the largest share of productivity gains over the past few decades while wage gains slumped — the primary question in the near future is whether workers will be able to obtain a larger slice of the pie this time.

Sara Nelson — and millions of other unionized workers — are demanding that larger slice of the pie. In a time when corporate economists — and those in the C suite — wake up to the new value of worker productivity, will they also wake up to the obvious conclusion: you can’t afford to pay artificially low wages to the people who make the airlines, the factories, the universities, and transportation work.

The final question is how much they should be paid and how that will be determined. Nelson says it will come from strikes, but it may be just the threat of strikes will be enough, in this time of combined low unemployment, high productivity, and high demand.

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A Small Thing?

As I was researching the preceding section, Productivity: More Than Profits, I came across what seemed at first a small thing, but I realized it was indicative of the way that companies — and entire sectors — collude to take money from the pockets of the less powerful.

Any reasonable theory of work justice should hold with the principle that people should be paid for their work.

However, I learned that the great majority of flight attendants’ paid time does not start until the airplane doors are shut. They are not paid for boarding time, helping people find their seats, doing the headcount, and for serving drinks in First Class.

As Edward Russell reported, Southwest flight attendants ‘overwhelmingly rejected’ a recent contract offer:

One area of disagreement concerns boarding pay. Almost all U.S. flight attendants are paid only when an aircraft door is closed, rather than during the boarding and deplaning process. Delta Air Lines is the sole U.S. carrier that pays cabin crew for boarding, a policy it added last year amid a drive to unionize (the airline’s cabin crew is currently not unionized).

Well, it’s not a small thing for the airlines:

Melius Research analyst Conor Cunningham estimates that a 20% pay increase for flight attendants would cost U.S. airlines roughly $1.9 billion annually, and increase industry unit costs excluding fuel by 1.3%. Add in the boarding pay sought by flight attendants, and expenses would jump another $718 million and unit costs another 0.5%. Southwest would face the largest increases among U.S. airlines.

And it’s not just flight attendants who aren’t paid for all their time. Ride hailing drivers at Lyft and Uber are not paid for time waiting between rides, even with attempts to provide better basic treatment. New York state in late 2023 create the ‘New York Deal’ as part of a settlement:

The rideshare industry is holding up the New York deal as a model for other states and cities, as legislative and ballot proposals get teed up for action in Chicago, Colorado, Massachusetts, and Minnesota. Announced Nov. 2, the settlements let the industry continue classifying drivers as independent contractors by not specifically addressing worker classification, but at the same time extending specific pay, benefits, and protections.

But a coalition of driver groups has criticized the New York settlement’s $26 minimum hourly pay as a raw deal for drivers that doesn’t compensate them for time waiting between passenger pickups or account for their vehicle expenses.

“Given that the New York deal is tied to a big cash settlement, that probably makes it look a little more driver friendly,” said Kerry Harwin, spokesman at the Drivers Union of Washington. But that “creates an inaccurate perception that it’s a win for drivers,” as Uber pushes for a similar settlement or legislative deal in Massachusetts, he said.

Can we accept the foundational principle that no matter what, workers should be paid for all the time they work?

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I find I am spending more time on the Substack app — although mostly on the web version — and much less on Twitter.

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Factoids

A recent survey from remote job search site Jobera of over 3,000 workers found 20% of respondents said having their own bathroom while working from home is a “total game changer” and giving that up is a key reason they don’t want to return to offices. | Hailey Mensik

Apparently, going to the loo at the office is embarassing, so companies are revamping the physical space to create more privacy.

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Americans spend 11.4 billion hours on Federal paperwork per year. | OMB

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Gary Hamel and Michele Zanini conducted an online survey in 2019 of 7,000 Harvard Business Review readers as part of their project on bureaucracy creep. The average respondent worked for an organization with six or more levels. In large organizations (with more than 5,000 employees) there were eight levels above front-line workers. Employees said that they spent an average of 27% of their time on bureaucratic chores such as writing reports or documenting compliance. | Adrian Wooldridge