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Frayed-Collar Workers in Gold-Plated Times

U.S. Secretary of Labor Robert B. Reich

Center for National Policy in Washington, D.C.

August 31, l995

What's happened to the American economy since last Labor Day?

A year ago the unemployment rate was 6.1 percent. We won't have August's unemployment rate until tomorrow, but July marked the eleventh consecutive month below 6 percent. A year ago, the American economy hummed with 114 million jobs. Today, it brims with well more than 116 million. A year ago, the stock market was strong. Today, it's reached dizzying heights. Corporate profits are surging. Figures released yesterday show that profits in the past year rose 5.2 percent. On Labor Day l995, by almost every traditional measure, the economy has had a solid year.

But as I travel the country listening to American workers and their families, I hear voices that respectfully dissent from that conclusion. The business page economy might be doing fine, these voices say, but from the perspective of my home, the economy isn't doing so great. At my home, we're still living from paycheck to paycheck. We still can't save for retirement. If I want to earn enough to pay the bills, I can't spend enough time with my kids to raise them right. My job -- and our health insurance -- is none too secure. And how are we going to pay for college? Whose economy, they ask me, are you talking about?

The economy has caught fire. But the gains to most workers have gone up in smoke. Last year at this time, the median worker in this country--the person who'd be smack in the middle if we lined up Americans by their earnings--was taking home $479 a week. This year, factoring in inflation, the median wage is $475 a week--four dollars less in every weekly paycheck. And both this year's and last year's figures are lower (again adjusted for inflation) than the $498 median weekly wage in l979.

On Labor Day, l995, the earnings of most American workers are either stuck in the mud or sinking. Millions of white-collar supervisors and mid-level managers are joining blue-collar production workers in a common category, frayed-collar workers--frayed collar workers in gold-plated times.

In macroeconomic terms, the nation is prospering. But Americans do not live by macroeconomics. They live by home economics. They don't live by official statistics. They live by the number that matters most: the figure on their family paycheck.

The state of the American workforce this Labor Day is not bad -- but not nearly as good, paradoxically, as the state of the economy. Profits are up. Paychecks are not.

We should celebrate the good fortunes of Americans who are becoming wealthier -- the highly-skilled and well-educated portion of the workforce. But there is something terribly wrong, terribly unAmerican, about the fact that the economy's prosperity is bypassing so many working people. I am not referring to some unfortunate sliver of the population. I am talking about most full-time workers.

Closing the gap between paychecks and profits is our great remaining challenge. The steady decline in the median wage and the widening gulf between the rich and the rest, threatens the stability and prosperity of our nation. There are many indicators of this trend, and I direct your attention to the appendix of facts that economists in my office have compiled and that accompanies this speech.

Instead of reciting numbers, I'd like to tell a story -- only the most recent tale of frayed-collar workers in gold-plated times. This week, we learned about 12,000 more American jobs that will disappear. For most of us, 12,000 jobs going away -- 12,000 families being affected -- is bad news. But this news was greeted quite happily.

When two giant banks -- Chemical and Chase Manhattan -- decided to merge this week, white-gloved Wall Street high-fived the market's invisible hand. The announcement sent the stock prices of each bank climbing, and shareholders stand to reap a total of $2.5 billion in gains. The corporate CEOs who hammered out the deal were praised for their vision and their toughness. So was the fund manager who helped force the deal. The lawyers and the investment bankers who hashed out the details also made out well. Almost lost in the celebration were the people who would lose these 12,000 jobs.

There are understandable reasons why banks decide to merge -- economies of scale, more efficient use of new technologies. After all, none of us will prosper if we attempt to hold back technological progress or withdraw from the global economy. Chase and Chemical are not the villains of this story.

But this episode is yet another symptom of the disconnect between the paycheck economy and the paper economy. Jobs disappear and the markets cheer. There's something wrong with this picture.

Now, the men and women who lose those 12,000 jobs will likely find new ones -- though perhaps not right away, perhaps not as good. But their experience, witnessed nationwide, intensifies the pervasive sense among average workers today that they're lucky to hold on to the jobs they have. American workers have been silenced by this, and by a thousand other such demonstrations of their easily replaceability. They won't complain if they don't get a raise, even if their company is making bundles of money. Many will even accept cuts in pay or benefits. When you feel your choices boil down to take it or leave it, there's not much to say.

So let this weekend celebrate this silent majority of American workers. And let us not forget that this coming Tuesday, when Labor Day weekend ends, tens of millions of these hard-working Americans will rise at dawn, dress the kids, make the breakfast, drive to child care or school, put in a long day's work, pick up the kids, scrape together dinner, put the kids to bed, clean the house, and yet still find the energy to listen to their children, talk to them about their problems and their fears, and read them a story before tucking them into bed.

These are the real heroes of the American economy. These Americans need the wind at their back if they are ever to cross the gulf of prosperity.

What does this mean specifically?

It means, first, a higher minimum wage. The current minimum wage of $4.25 an hour is heading toward a 40-year low. Someone who works full-time at that wage brings home $8,500 for a year's work--not enough to support a family. And some 40 percent of these people are their family's sole breadwinner.

Giving American workers a fair break also means an expanded Earned Income Tax Credit that makes work pay by putting money back in the pockets of 15 million tax-paying working families with modest incomes.

It means good schools--schools that give our kids a good start in life. We can't expect children to learn in classes of 30 or more, managed by teachers who must spend their time and energies maintaining simple order, during a school day lasting barely five hours.

It means low-interest direct college loans for any student who seeks higher education--and a family tax break for college tuition, the most important investment a family can make.

It means youth apprenticeships for kids who may not go directly on to college, so they can learn on the job. And skill vouchers for people who lose their jobs and need to get new skills at a local community college.

It means affordable and safe child care. And time off from work to take care of a sick child or parent.

It means enforcing the nation's labor laws, coming down hard on employers who cheat and abuse their workers, and shutting down sweatshops that have no place in a civilized country.

It means a robust labor union movement, so workers can boost their bargaining power in order to earn a family wage.

And it means companies that treat their workers as assets to be developed rather than as costs to be cut. Companies that don't pass out pink slips while piling up profits. Companies that give workers a share of the wealth their hard work has created. Companies that invest in their workers' skills--not just in machines to replace them.

That's what it means. And that is the agenda we are pursuing. It is an agenda centered on home economics--an agenda for the blue-collar and pink-collar and white-collar workers who are struggling to build a decent life for their families. Some of this agenda is already accomplished. But there is far, far more to do. The long-term decline in the median wage, and the widening gap between the well-off and ordinary working families, can not be reversed easily or quickly. We are on our way, but it will be a long road.

And yet, there are some who want to reverse this direction. Often, they stride under the banner of "family values," but they lead a parade that's marching backwards.

They refuse to raise the minimum wage. They want to cut child care, Head Start, and the Earned Income Tax Credit for the working poor. They want to cut college loans, reduce opportunities for young people to make the transition from school to work, and slash other funds for education and job training.

They claim budget-balancing as their goal. But the details of their plan betray the values they claim to cherish.

For the fiscal year beginning October 1, they aim to spend an extra $7 billion on national defense--$7 billion more than even the Pentagon says it needs or can use--$7 billion that they want to cut from education, job training, Head Start, and other investments in the economic security of our families.

Meanwhile, they refuse to touch tens of billions of dollars of special tax loopholes and subsidies for particular industries and companies--benefits that well-heeled corporate lobbyists have written into the law--handouts which keep corporations in a perpetual state of welfare dependence. When the chairman of the House Budget Committee presented his Republican colleagues with a loophole-closing plan earlier this year, they blinked. Despite their call for austerity for working people, this Congress is open for business.

They want billions of dollars in additional tax breaks for companies that buy new machines, but not one penny of new tax breaks for investments in the skills of working men and women.

They want to chop the Earned Income Tax Credit for working families, and plan to award the proceeds to well-off Americans on the other side of the gulf of prosperity, in the form of a capital gains tax break.

There's an Alice-in-Wonderland quality to their logic. Liberate the economy with deregulation and tax breaks for companies and the rich, they say, and all Americans will prosper. But the economy is already liberated enough to sprint merrily away from a majority of Americans. The problem is that wages are stagnant while profits surge -- so how can higher profits be the whole solution?

Many of these politicians speak fervently of family values, but they leave out home economics. They talk passionately about the breakdown of American homes, but they neglect to mention the breakdown of family incomes.

They do recognize the frustrations of working families. But they direct these frustrations against fake targets: against immigrants, against welfare mothers, against affirmative action policies, against our own government.

The politics of resentment--of blame and intolerance--presents a distorted mirror image of the values most families try to transmit to their children. This technique pits working families against working families, or against the very poor, in a fight over a smaller and smaller slice of national income.

The true test of a society is its willingness to face up to its core problems--not to deny them, not to project them on to scapegoats, not to be diverted by issues of the moment nor become easily discouraged when the problems are not quickly solved--but to work at them with steadfast commitment and a fair sharing of whatever sacrifice is entailed.

For example, next week the Senate will debate welfare reform. There will be much pounding of fists and pious pronouncements about the decline of family values. But does anyone really doubt that the best anti-poverty, pro-family policy ever invented is a good job? That poor teenagers with the prospect of jobs and careers when they finish school are more likely to finish, and far less likely to get into trouble? Welfare must be reformed, but the claim that most welfare recipients prefer a welfare check to a job is a cynical lie.

Self-righteous talk is easy and it's cheap. Securing people good jobs is neither easy nor cheap.

Or take the issue that will likely dominate Washington's conversation in the coming months -- the impending "train wreck" on the federal budget. To the pundits, this is high drama -- a trillion-dollar game of "chicken," in which one side must blink or government must shut down. But to many people outside Washington, this is drama could have far more personal consequences. Because out in America, where workers do the jobs that make the country go, a train wreck is already occurring -- a terrifying collision between the job they need and the families they love.

The Congress can avert a budgetary disaster by addressing the real economic problem in this country -- home economics. But if it refuses, if it ignores the country's core problem, the President has vowed to give modern meaning to the ancient adage that the pen is mightier than the sword. If Congress wields its family-slashing sword, the President will respond with his family-saving pen. If the Senate cuts pro-family initiatives as the House already has, he will veto their plan and send them back to try again.

Not too long ago, another President said, "Today, the economic issues are the primary social issue. The economic disaster confronting the United States hurts family values, destroys family savings, and eats away the very heart of family hopes and dreams."

What better moment than the Labor Day weekend to heed these words of a man named Ronald Reagan? What better moment than Labor Day weekend to reaffirm our national commitment to families who are working desperately hard and trying to do right by their children? What better moment to sanctify family values by doing everything in our power to value families? What better moment to pledge to lift the lives of the silent majority of the American workforce?

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