Unions and Pensions
Workers are profit creators.
Conservatives like to speak of wealthy company owners and investors as “job creators,” that they “give” people jobs, as if they just create jobs as gifts for people who are out of work. That is nonsense. The truth is that workers are profit creators, and that no one gets hired unless they contribute to the profit of owners and investors.
It is basic truth. Workers are profit creators. But who says it? How many times, if any, have you heard that truth? It is an important truth; it reframes the issue of jobs from the perspective of the contributions of those who work.
As we discussed earlier, a pension is a delayed payment for work already done.
This is the most fundamental truth about pensions, and it is almost never said. It is an unframed truth.
When you take a job and a pension comes with it, that pension is part of your pay, part of your conditions of employment. It is common for workers to forego higher current pay if there is a significant pension, since the pension is money to live on when you can no longer work. It is part of the employment contract.
The idea behind pensions is that a company can pay less in salary, take the remaining money and invest it, assuming it can invest it at a higher return than the worker could, then make a profit on the investment return when the pension is later paid.
An additional idea behind pensions is that they keep employees loyal to the employer, and so employers save money on having to train new workers, and in addition they can retain workers who know the business and so can be more efficient than new workers.
In short, a pension is anything but a gift to an employee. It is earned. And it is set up to profit the employer as well as the employee.
Unfortunately, money for pensions is often misappropriated or mishandled by the institutions. It may be badly invested or used for some other purpose, like paying dividends to stockholders or salaries to management. So when a company (say, General Motors) or a city or state says to its employees that it cannot “afford” to pay pensions, they are engaging in theft and the thieves should be prosecuted.
The money has been earned. If it has been used for some other purpose, it has been stolen. If it has been badly invested, then the investment loss is the company’s, and the pensioners should have a claim on the company’s assets.
Unfortunately, framing enters in here. Pensions and health care are called “benefits,” as if they are generous gifts to employees. They are not gifts. They are earned as deferred payments for work done. When a company tells its employees that they can no longer afford such “generous benefits” and will have to cut them, it is a framing lie. Either there has been theft or misinvestment or mismanagement. “Benefits” are earnings, period.
Pensions and benefits are freedom issues. In a free society, there is a justice system that punishes thefts, adjudicates contracts, and in the case of misappropriation of funds, permits lawsuits to make a claim on assets to make up for losses and the costs of the lawsuit—emotional and monetary. To the extent that there is no such justice system, people with pensions and benefits that have been taken from them are not free.
Large companies—and some small ones—have two kinds of employees: the assets and the resources.
The “assets” include major management and especially creative or skilled people whose special creativity and skills are necessary to the company’s success. They are part of the stock value of the company. They are hired by “headhunters” and command high salaries and golden parachutes—high pensions and compensation packages.
The “resources” are interchangeable workers that can be hired from an employment pool. They are hired and managed by the Human Resources Department. Just as resources like gas or oil or steel are purchased as cheaply as possible, so, too, are human resources purchased as cheaply as possible. Since pay scales often match skill level, they tend to be hired at the lowest possible skill level and at the lowest cost. When unemployment is high and the employment pool is large, companies can offer less in salary and “benefits” and still get appropriate human resources, while maximizing profits and payments to “assets.”
Unionization is a freedom issue.
Companies that are hiring human resources, in general, have much more power than individuals seeking such a job. When the company is large and there is a big human resource pool, workers seeking jobs have to take what is offered—or the job will go to the next person in the pool. This includes not just salary and benefits, but also working conditions—job safety, working hours, overtime, and so on. The employee is serving on the company’s terms, and often at the company’s whims.
In capitalist economic theory, employment is a transaction in which the employer buys the labor of the employees and the employees sell their labor to the employer. Hence the term labor market. It is assumed in economic transactions that both will seek the best deal. Unions create the best deal for the resource-employees.
Unions function to equalize the power of the company over the employee. Short of outsourcing, companies cannot function without any resource-workers at all. If the company is unionized, then all the workers as a group have bargaining power that a solitary worker does not have.
The alternative—taking whatever the company offers to the individual—might well be called corporate servitude or wage slavery. As the power of unions has declined, the wages of resource-workers have not gone up in thirty years. Over the same time, the wealth of wealthy investors and corporations has skyrocketed without more being produced.
The decline of unions has meant a decline for most citizens in their share of their nation’s wealth, and with it a decline in all the freedoms that wealth brings.
Unionization is a freedom issue, and needs to be understood as such. But the failure to say it out loud and repeat it as often as possible allows conservatives to form organizations like the Center for Worker Freedom, as if unions were taking away freedom, and to speak of “Right to Work” laws, as if unions were taking rights away instead of granting you freedom from corporate servitude and wage slavery.
Immigration
America is a country of immigrants. Many of them have been refugees, either refugees fleeing from brutal oppression or economic refugees fleeing from equally brutalizing poverty. They have come here for freedom.
My own grandparents were such refugees—and if you are not Native American, your ancestors most likely were too. Upon arriving in America, my grandparents became Americans in the best sense of the word: hard-working, raising their families, highly ethical, and loving and appreciating this country. I suspect that your ancestors were like that as well.
The issue of “immigration” is about a new generation of such refugees. President Obama, in a speech on June 22, 2012, at the National Association of Latino Elected and Appointed Officials conference in Florida clearly and beautifully stated his moral understanding of the issue. His words showed that the current wave of refugees, referred to as “undocumented immigrants,” are in many ways already citizens—they contribute enormously to American society and the American economy through hard work, they love the country they live in, they are patriots, they share their lives with other Americans every day, they take on individual and social responsibility. The president offered more than just freedom; he offered appreciation. They have earned not just recognition as Americans, but our gratitude as well for all that they have contributed through hard work, often at low pay.
They are fine Americans already and, through the lives they have been living as Americans, have earned the documentation that other Americans have gotten just by being born, without earning it. This is a moral narrative that tells a truth and needs to be repeated. But it rarely is.
There are two metaphors, one liberal and one conservative, that do not do the refugees justice. The liberal metaphor is the Path to Citizenship, as if citizenship should be the end of a long, hard journey, with little granted along the way, with long years in limbo, and legal residency o
nly to those who act as ideal citizens and either go to college or serve in the military. The DREAM Act, which would allow such access to the American Dream, doesn’t have the right name. It makes these de facto citizens into those who can only dream, as if they are not acting every day just as citizens—the “best” of our citizens—act. At the very least they are earning, and deserve, a minimum along the way: health care, decent housing, decent working conditions, a living wage, and access to education for themselves and their children—and the right to a driver’s license. They deserve not just freedom, but gratitude.
The conservative metaphor shows anything but gratitude. It is the Criminal metaphor. In fleeing to America, often risking their lives to come, these refugees trespassed; they did not have documents, which is not within the law. Conservatives have therefore branded them as “criminals”—“illegals”—as if they are committing crimes every day when they are actually mowing lawns, cleaning houses, taking care of children, picking vegetables and fruits, cooking your meals, working on construction sites, and, whenever possible, using all the skills they have to their advantage and to ours. Their children are studying in schools and helping out at home.
But because they often have brown skins, are impoverished, and speak Spanish, they are discriminated against. Conservatives want to jail them and deport them. Being brown-skinned, Spanish-speaking, and poor, and not being born American, they fall low on the conservative moral hierarchy: They are seen as less moral. They are discriminated against for their color and language and blamed for their poverty.
The issue for Americans is empathy: Do we care for those fellow human beings who are functioning as our fellow citizens? Or do we treat them as lesser beings, not worthy of the freedom they are earning day by day? The issue for those who have come here to escape the brutality of oppression and poverty is freedom.
This is especially true for the tens of thousands of children who have crossed the border, sent by parents or fleeing on their own from human traffickers, gangs, and death squads in Guatemala, Honduras, and parts of Mexico who are murdering, harming, or kidnapping children. Under an executive order signed by George W. Bush before he left office, these children have to be taken care of reasonably well by the US government, processed, given a court hearing, and then either sent to live with family in the United States or deported to another country—Mexico if they are from Mexico.
It was never expected that there would be so many. Conservatives are blaming the situation on Obama, for not just immediately deporting them—though it would be illegal, as well as inhuman, for him to do so. They are not called “Bush’s refugee children,” though they could be if the issue were just pinning the problem on a conservative rather than treating them humanely—and according to law.
Meanwhile, southern conservatives living near the border are rebelling against treating these refugees humanely and not just deporting them. There are massive conservative-organized protests—people lining the roads waving American flags—shouting racist slogans. Those interviewed in the media say things like Send them back. They’re dirty. They carry diseases. They’re criminals. Why is Obama spending our taxpayer dollars to give them clean rooms and clothes and food and medical care? Soon they’ll be in our schools. Where are their parents? How could their parents have been so irresponsible to have sent their children here alone? Don’t they love their children?
This is a major humanitarian issue, and it calls for empathy. Parents who love their children don’t want to see them maimed or murdered or kidnapped by human traffickers. Many of these children are heroic, somehow traveling over 1,000 miles to get to safety and freedom.
The issue is empathy and respect for these refugees as human beings.
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The Piketty Insight on the Accelerating Wealth Gap
Systemic causation applies to the economy as well as to global warming, and it has effects every bit as dramatic and crucial. There is an accelerating gap—not just widening but accelerating—between the ultra rich and everyone else. Why? What are the systemic causes and the systemic effects? And is there anything wrong with some people getting that rich and progressively richer over time?
The answers to these questions were sharpened in 2014 by an insight of economist Thomas Piketty and his colleagues—an insight that has not yet become framed in public discourse.
The Piketty insight showed us that our current concept of Rich is not adequate to understand the wealth-gap phenomenon. One needs to also comprehend the notions of Wealth and Proportion of Wealth. Wealth correlates with certain forms of freedom, like the freedom to acquire goods, or to travel, or freedom of access to certain cultural events, and so on. Wealth also correlates with certain forms of power. For example, paying people to do things is a form of power. Contributing significantly to an election campaign can be a form of power, too.
Workers are profit creators, that is, they create wealth for others. They may acquire wealth for their work, but their value to their employers typically lies in the wealth they create for those employers. A natural question is: Of the wealth created by productive work, how much goes to those who do the work and how much goes to others? And by what means? What is the structure of the system that results in the distribution of wealth and the way that distribution changes?
Piketty’s Capital in the Twenty-First Century is a work of scholarship of the highest order: It changes, or ought to change, not just our understanding of economics, but our understanding of many things. And he has published it just as we need it most.
Here is his basic insight. He studied the history, not just of income, but of wealth. And he observed that there are two fundamentally different kinds of wealth:
•Productive wealth. This is wealth generated by work, by producing and selling things or services. The kind of wealth Adam Smith talked about. The prototypical case concerns individuals, for example a baker and a furniture maker. Each makes and sells things, and each needs and buys what the other sells. The baker’s income pays the furniture maker, and the furniture maker’s income pays the baker. Each works for himself, produces things, gets paid for it, and in a much oversimplified market, each produces wealth for himself and for the other. This is the kind of wealth, productive wealth, measured by the GDP. Piketty calls it “G.”
•Reinvestment wealth. This is wealth generated by receiving returns on investments and then reinvesting those returns over and over. This kind of wealth grows exponentially, like compound interest. The more have, the more you invest, and the more you invest, the more you have. He calls it “R.”
Here’s where the concept of proportion comes in. Piketty looks at the proportion of the kinds of wealth, that is, the ratio between R and G over a population. Then he asks, how does it change and why?
His research was done by studying tax records in many countries, dating back to the eighteenth century. What he discovered was that, up until 1913, most wealth was reinvestment wealth. Even during the period of the industrial revolution, which is usually thought of in terms of productive wealth, R was much greater than G. In other words, Piketty showed that the common wisdom is false. Even in capitalist democracies, where individual liberty and the market were supposed to allow for productive wealth through work, it turns out that reinvestment wealth was overwhelming. For instance, in France, a capitalist democracy concerned with égalité, in 1910, 70 percent of the wealth was reinvestment wealth, held by the very wealthy—not productive wealth, distributed over most of the population.
Starting in 1913, there was a major shift. Because of World War I, the Great Depression, and World War II, a significant portion of reinvestment wealth was destroyed. Productive wealth became greater, more G than R. Between 1913 and 1980, most of modern economic theory was developed, whether liberal or conservative. It was primarily based on productive wealth, on GDP—on G, not R.
Then in 1980, something changed—during the Reagan era in America. Reagan greatly cut taxes on the wealthy, started a major attack on un
ions and thereby on the wages of ordinary workers, cut regulations on business, and so on. Margaret Thatcher did the same in England. And those economic ideas spread. Around 1980, there was a historic shift. R became greater than G again. Reinvestment wealth took over the reins of the modern economies. Being exponential, reinvestment wealth grew exponentially—like compound interest.
In the United States, in 1976 the top 1 percent had 19.9 percent of the wealth. In 2010, the top 1 percent had 35.4 percent of the wealth. In 2010, the top 5 percent had 63 percent of the wealth; and the top 20 percent had 88.9 percent of the wealth. That left the bottom 80 percent with 11.1 percent of the wealth.
That is what the exponential growth of reinvestment wealth leads to. And it gets worse as one goes down the wealth scale, so that six individual members of the Walton family together have more net worth than 41 percent of the families in America (counting families with negative net worth, who are families too).
As the share of the nation’s wealth going to the wealthy rises, the share going to everyone else falls. What else falls? The freedom that wealth can buy, the quality of life that wealth can buy, the power that wealth can buy, and the electoral influence that wealth can buy. Technically, we may still have one person, one vote. But the effect of one person on elections has gone way down.
Is this trend reversible? Piketty says yes, but it takes political change.
The Systemic Effects for Politics
Piketty himself is not pessimistic about the fact that R is above G. He points out that political change can bring the runaway accumulation under control, say, via a wealth tax. He also suggests that traditional liberal measures—like raising lower- and middle-class wages, lowering corporate management wages, closing tax loopholes, increasing access to education, and so on—can help bring about such a reversal.
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