U.S. Workers Need More Power

Covid-19 has brought into sharp relief the contrast between the experiences of the higher-income Americans who receive deliveries and the lower-income Americans who fulfill them, between those who can work safely from home and those who must expose themselves to risk, often with inadequate protection, between those who have the power to safeguard their health and their living standards and those who do not. More broadly, it has highlighted the long-standing trends in the U.S. economy toward a falling labor share of income, rising income inequality and slow wage growth for most workers — even as corporate stock market valuations and profitability rise.

Economic analysis often ascribes these trends to some combination of globalization, technological change and rising monopoly power. But our research suggests that a more compelling explanation is the broad-based decline in worker power. As workers have become less able to share in the profits generated by their firms, income has been redistributed from employees to the owners of capital. That has contributed to higher income inequality along class and race lines.

The evisceration of private-sector unions is the most obvious example of the decline in worker power. At the peak, one-third of the private-sector workforce belonged to a union; that number is now 6 percent. But other factors also affect the degree to which workers can share in firms’ profits. Because of increased shareholder activism, rising levels of debt, increases in private equity and changing corporate norms, businesses are increasingly run for shareholders rather than their stakeholders. Ruthless management tactics involving precisemeasurement of workers’ day-to-day activity have become widespread.

Meanwhile, workers at large firms or in highly paid industries (such as manufacturing, construction or transportation) used to earn large wage advantages, as they shared in the profits generated by their companies, but these benefits have declined by half since the early 1980s. An increasing number of workers are outsourced domestically, employed by staffing or temp agencies or misclassified as independent contractors, reducing their ability to share in the profits of the main firm they work for. And the real value of the minimum wage is lower than it was in the 1970s.