With the welfare reform act of 1996, President Clinton fulfilled his campaign promise to "end welfare as we know it," sharply cutting social programs such as Food Stamps and Aid to Families with Dependent Children. Some have been emboldened now to suggest cuts in Social Security benefits and various privatization schemes. The combination of falling wages and cutbacks in social programs has caused a serious decline in working class living standards. At the same time, the nation's economic output has experienced sustained growth.
PROFITS vs WAGES at business cycle peaks (corporate sector)
1959 1973 1979 1989 1997 Profit Rates Pre-tax 8.7% 7.4% 6.4% 7.1% 10.4% After-tax 4.6 3.9 3.2 4.0 6.7 Income Shares Profit share 21.7% 18.0% 17.4% 18.4% 21.6% Labor share 78.3 82.0 82.6 81.6 78.4
Profit = return to capital per dollar of assets. Profit share = capital income divided by all corporate income. From: State of Working America 98-99, Mishel et al, EPI The grave consequences of this paradox affect the entire country, and must be addressed by comprehensive federal legislation. The campaign for a comprehensive federal living wage law is a campaign for equality, security and prosperity for all. Three decades ago, Martin Luther King, Jr. called for raising the minimum wage to a level that would keep working families out of poverty. King's call resonates today, as the tens of millions who bear the brunt of economic inequality struggle to choose between buying food and paying the light bill. Workfare participants, labor unions and religious organizations stood together at the forefront of Baltimore's seminal and successful 1994 campaign for a municipal living wage law. The campaign for a living wage is a campaign for justice and equality. And it is more. The recent series of major financial crises has brought the issue of economic security before the country, and its economy, as a whole. This lays open the opportunity for further qualitative development of the living wage movement. At the heart of the capitalist economy is the buying and selling of manufactured goods, raw materials and labor power. And in its loins is an innate drive for profit, which depresses wages and causes, on a cyclical basis, financial crashes and disruptions in the process of commercial trade. When commercial trade undergoes severe displacement, as it has in recent years, our economy is at risk. Indeed, a wave of goods is loosed around the globe with each financial shock, from the 1995 collapse of the Mexican Peso, to the 1997 debasement of several Asian currencies, to the radical decline of the Russian Ruble in 1998. These goods are sent to markets that, because of declining wages, are losing the buying-power to absorb them. Many of these goods are sent to the US, the market of last resort. For example, a recent Economic Policy Institute study projected a $100 to $200 billion increase in the US trade deficit with Asia in the aftermath of the 1997 Asian currencies debacle. Their conclusion: "700,000 to 1.5 million jobs will be eliminated in manufacturing and other tradable goods industries, and these job losses will occur in every state." They predict a significant drain on US Gross Domestic Product, in part due to declining wages as workers are pushed out of manufacturing into the service sector. The campaign for a living wage is a campaign for economic security. With each crisis, big investors and their spokespersons in Washington have demanded, and received, hundreds of billions of dollars in federal bailouts, from the savings and loan giveaway of the early 1990s to the recent bailout of the major "hedge fund," Long Term Capital. That is the Wall Street response to the current economic situation. It has not worked. The living wage campaign is the working people's response to the economic crisis. The living wage movement will characterize the present times. A Comprehensive Federal Living Wage Law. In the Great Depression of the 1930s, working class living standards were under severe attack, and significant sectors of capital in the developed industrial countries had turned to fascism. In the US, the progressive movement launched a campaign against the fascist threat and for broad democratic rights. We organized mass labor unions. We fought hard for what many working people thought at the time was a pipe dream. And we won passage of the laws that gave us, among other things, the minimum wage, Social Security and welfare. Sixty years ago, when Congress passed the 1938 Fair Labor Standards Act (the minimum wage law), they wrote their purpose into that law: "The Congress finds that the existence ... of labor conditions detrimental to the maintenance of the minimum standard of living necessary for health, efficiency, and general well-being of workers, is, in a word, bad for the economy." By including provisions in the law that guarantee a minimum hourly wage, that set the standard 40 hour work week, and that prohibit child labor and sex discrimination in wages, they demonstrated that the detrimental labor conditions they found must be addressed by federal law in a comprehensive manner. That was a correct judgment then as now. But both the nature of "labor conditions detrimental to ... health, efficiency, and general well-being of workers," as well as our society's capacity to remedy the problems have changed in the last 60 years. In particular, the need to make ends meet has caused a tremendous growth in the proportion of two-parent and single-parent families where all parents are wage-earners. This means that access to quality child care from early infancy must be regarded as a fundamental labor condition. Furthermore, in the wake of the civil rights movement and the War on Poverty, we won our first national health care system, Medicare. This led to a dramatic growth in America's health care delivery network. Thus, we are now more able than ever to provide for the health of workers, one of the original goals proclaimed in the 1938 Fair Labor Standards Act. The legislative proposal we make is to amend that law. To bring it up to date requires that:
· The minimum hourly wage be determined by a formula that allows every full-time worker to provide for the most basic personal consumption needs of a family of four: food, housing, utilities, clothing, transportation, household supplies, personal care, taxes and co-payments for health care and child care as provided for below; · Congress be directed to extend the Medicare program so that every working family can be fully covered from the first day of employment to the end of the period covered by unemployment insurance, as well as at any other time these benefits are available; · Congress be directed to expand the Head Start program to make child care from early infancy available to every working family in an easily accessible facility that provides a safe and developmentally appropriate environment. The formula we propose to determine the minimum wage is similar to that proposed by a panel of the National Research Council in 1995 to measure the poverty threshold. It is expected to yield a minimum wage of at least $10 per hour at present prices. This would be a guarantor of security for the entire economy. It would spread economic prosperity. By raising payrolls and, consequently, payroll tax revenues, our legislative proposal would strengthen the Social Security system, and talk of privatizing it would be laid to rest. The development of the health care and child care industries as proposed in our legislative draft would create further economic benefits. The growth of these industries, promoted under the public sector, would create secure jobs and would insulate a large part of our economy from the turbulence of world financial crises and the ups and downs of the business cycle. It Can Be Won. The recent story of the Kennedy Bill (S. 1805), which would have raised the minimum wage to $6.15 per hour, hardly a living wage, has some important lessons. That bill made it to the senate floor, where senators, fearful in an election year, tabled the measure rather than directly voting it down. Had there been a broad-based movement, organized to throw street heat behind that bill, the outcome would have been otherwise. To galvanize such a movement, however, requires a comprehensive law, one that addresses directly and in full measure the widely felt need for federal living wage legislation. The movements that established the social safety net in the 1930s, and that brought civil rights legislation and Medicare in the 1960s, were monumental. The legacy to us, beyond the concrete social gains, is the idea that great changes can be won, under certain historical conditions, by ordinary people and their organizations. Let's make the minimum wage law a living wage law.