On April 5, 2019, Thomas A. Kochan writes on the MIT Institute for Work and Employment Research:
Like Rip Van Winkle, America’s workers appear to be waking up after a 30-year nap. To their surprise and dismay, many of them find they’re being offered wages that are not much different than when they went to sleep. Pensions have disappeared, and their children are often earning less, in real dollars, than they did when they started their own careers.
And now workers are being told that robots, artificial intelligence, and other technological innovations will either require new skills or put them out of work.
These wake-up calls are leading to a new era of worker activism. The signs are everywhere. At Google, workers are demanding a fair way of resolving workplace discrimination claims, calling for transparency and equity in pay between genders, and asking for employee representation on the company’s board.
Elsewhere, InstaCart contractors petitioned the delivery company’s CEO to stop stealing their tips, and Marriott workers went on strike to improve their wages and access to training for new technologies under the slogan “One job should be enough.”
MIT Sloan research indicates these actions might be omens of more to come. In a 2017 survey of 3,915 American workers, my colleagues and I found that workers report experiencing a sizable “voice gap” at work — that is, a gap between how much say or influence they feel they ought to have and how much they actually have — on topics such as wages, working conditions, fair treatment, and input into how they do their work.
And now a second study I have just completed with a new team finds that today’s workers want forms of voice and representation that go well beyond traditional unions. In addition to collective bargaining, workers want more individual benefits and services that carry across jobs — including health care, retirement, training, and job search assistance. They also expressed interest in new options for participating in decision-making to improve operations at their organizations, from enterprise-wide councils or committees to seats on company boards of directors.
In short, today’s workforce wants what we and others are calling a New Social Contract at work. To no one’s surprise, at the heart of this new social contract is the belief that workers should be fairly compensated for the contributions they make to the success of their enterprise and to meeting their customers’ expectations.
Real wages stagnate
To understand what this prospect implies for the future of compensation, we first need to understand how we got here. America did have a social contract for work in the decades following World War II up through most of the 1970s. During that time period, compensation adjusted for changes in cost of living rose in tandem with national productivity. This was the period during which President John F. Kennedy popularized the phrase, “A rising tide can lift all boats.” As the economy grew and became more productive, workers gained their fair share of the gains they helped produce.
However, that social contract began to fray in the late 1970s and broke down completely in the 1980s. Since then productivity continued to grow, but real compensation for the average worker stagnated. The share of national income going to the workforce declined from 64% to 58%, and the ratio of CEO to average worker pay rose from about 30 to 1 in 1978 to more than 300 to 1 in 2017. Meanwhile, union membership declined from 20.1 percent of the U.S. workforce in 1983 to 10.5% in 2018 (and just 6.4% of the private sector workforce), so worker bargaining power evaporated.
Workers waking up
All this happened while the workforce seemed to be asleep. But if recent activism and the message from our surveys — and the tightening labor market for talent — are indications, the era of passive acceptance of these trends may be coming to an end.
Yet we can’t go back to the old social contract given today’s global economy, advancing technologies, and much more diverse workforce.
The challenge facing business leaders is to work with key stakeholders in education, labor, and government to forge a new social contract that supports what MIT Sloan calls “Good Companies, Good Jobs” — that is, enterprises that can both compete effectively and earn a good rate of return for their investors while supporting high-quality jobs and careers for their workforce.
While the specific practices needed to achieve those outcomes need to be tailored to fit different industry and occupational settings, common features include:
- Careful selection of employees with strong technical and behavioral skills (e.g., communications, leadership, problem-solving, and teamwork).
- Continuous investment in staff training and development.
- Respect for worker rights.
- Opportunities for workers to adapt to changing technologies and work requirements.
- Fair and transparent compensation systems that ensure employee incomes rise with enterprise and overall economic performance.
- A voice for workers in the critical business decisions that will shape their futures.
If our research results and the recent workforce actions are indications, turning these practices into the new norms governing work may be the defining business leadership challenge of our time.
Kelso created the ESOP as a credit mechanism, which, with the support of Senator Russell Long (Democrat, Louisiana), was included in the employee benefits sections of the Internal Revenue Code (Employee Retirement Income Security Act of 1974 [ERISA], also known as the Pension Reform Act) as legislation not to look like something new and different.
The ESOP can give employees access to capital credit so that they can purchase the employer’s stock, pay for it in pre-tax dollars out of the earnings generated by the new assets that under lie that stock, and after this stock is paid for earn and collect the capital earnings income from it, and accumulate it in a tax haven until they retire, whereby they continue to be productive capital earners receiving income from their capital asset ownership stakes. This is a viable route to individual self-sufficiency needing significantly less or no government redistributive assistance.
Professor Kochan leaves out a discussion of anther reason American workers are suffering with wage stagnation. Presently, as a result of decades of allowing free instead of “fair trade,” American corporations are widely outsourcing their supply chain parts and finished products manufacturing, as well as increasingly off-shoring their manufacturing to low-wage, non-worker and non-environmentally regulated, and often non-democratic, authoritarian if not as well embracing elements of communist State ownership of the means of production, countries. These same American corporations have not had to pay tariffs on what they produce in foreign countries and import back into the United States. Or if corporations were subject to tariffs, the tax was far too low to effectively deincentivize their leaving in the first place to produce in such foreign countries and import back into the United States. As a result, our manufactory capabilities have and are being gutted. These outsourcing/off-shoring corporations have and are destroying the employment of Americans in jobs at home, as well as significantly lessening the opportunity to create employee-owners.
While Professor Kochan seeks to increase the real compensation for the average worker through specific recommended practices, he fails to address concentrated capital asset ownership and thus, control, and the means, such as stock buy-backs, by which people with the greatest stock ownership and control of a corporation are able to further concentrate their ownership stakes and effectively achieve monopoly control of a corporation.
For-profit public corporations are a legal entity created and sanctioned by state and federal government and judicial law. We need to reform the statutes regarding the operation of a for-profit public corporation. We need a corporate tax policy that will incentivize corporations to create new owners as they have needs to grow — both their employees and other citizens. Not only should the corporate tax rate be substantially raised but at the same time allow the full payout of corporate earnings to the people who own the corporation, to be tax deductible to the corporation — thus effectively eliminating the earnings tax on corporations, with their owners paying taxes subject to their personal tax rate. Right now, 98 percent of all corporate growth is financed either through retain earnings (reinvesting the corporate earnings already earned) or debt financing, neither of which creates any new owners.
Own The Future
What Professor Kochan and any coalition of key stakeholders in education, labor, and government should be forging and demanding is the effective right of EVERY citizen to acquire productive capital with the self-financing earnings of capital.
We need to reform the monetary and financial system to free economic growth from artificial barriers that are restricting us from breaking free of anemic growth to create responsible, environmentally protective and enhanced growth and empower our building a future economy that can support general affluence for EVERY citizen, not limited by the 1 percent who own today’s America.
The solution is to empower EVERY citizen to be productive and earn to consume. So, if everybody who consumes, produces, and everybody who produces, consumes, things would work a lot better in the world. When people cannot produce, something must be done to meet their consumption needs, or what was a simple economic problem (how people can consume) turns into a major political problem (how to keep order in society when people are deprived and starving). Thus, what should be the major, if not sole focus of government — how to assist people in becoming and remaining productive is ignored. Instead, government implements policies seeking to guarantee that most if not all people have sufficient effective demand to enable them to consume when they do not or cannot produce. This in turn requires ever-increasing levels of government interference not only in the economy, but in every aspect of life.
Thus, logically, if productive capital is increasingly the source of economic growth, it should become the source of added property ownership incomes for all Americans. If both labor and non-human capital are independent factors of production, and if capital’s proportionate contributions are increasing relative to that of labor, then equality of opportunity and economic justice demands that the right to property (and access to the means of acquiring and possessing property) must in justice be extended to EVERY American citizen — all children, women, and men. Yet, sadly, the American people and its leaders still pretend to believe that labor is becoming more productive and couch all policy directions in the name of job creation, job retention, and minimum wage increases. Americans ignore the necessity to broaden personal ownership of wealth-creating, income-producing capital assets simultaneously with the growth of the economy.
Tectonic shifts in the technologies of production have, are and will continue to eliminate the necessity for masses of labor workers as workers are replaced by “machines” of all description. Significantly though, no matter how much labor is necessary or unnecessary, it is imperative that the issue of concentrated capital ownership is addressed, and policies are enacted to simultaneously create new capital owners of the corporations growing the economy, both established and viable start-ups.
How to accomplish this goal and create a plan should be our national focus. The solution entails monetary reform of the Federal Reserve and banking system, and the creation of financial mechanisms that do not require past savings to finance future growth. That means empowering EVERY child, woman, and man to acquire productive capital with the self-financing earnings of capital, and without the requirement of past savings (or reductions in consumption).
Given financially feasible investments, i.e., investments that pay for themselves out of future profits and thereafter provide consumption income for the investor, there should never be a question of whether there’s enough savings accumulated in the economy to finance all the necessary new growth of building a future economy that can support general affluence for EVERY citizen. Using “future savings,” there can always be enough money in the economy — and past savings can effectively be spent on consumption, which is their purpose, as they represent unconsumed production from the past.
Thus, the most important economic right Americans need and should demand is the effective right to acquire capital with the self-financing earnings of capital. “Capital Homesteading” provides such a means.
Support the enactment of the proposed Capital Homestead Act (aka Economic Democracy Act and Economic Empowerment Act) at http://www.cesj.org/learn/capital-homesteading/, http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-a-plan-for-getting-ownership-income-and-power-to-every-citizen/, http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-summary/ and http://www.cesj.org/learn/capital-homesteading/ch-vehicles/. And The Capital Homestead Act brochure, pdf print version at http://www.cesj.org/wp-content/uploads/2014/11/C-CHAflyer_1018101.pdf and Capital Homestead Accounts (CHAs) at http://www.cesj.org/learn/capital-homesteading/ch-vehicles/capital-homestead-accounts-chas/.
Support Monetary Justice at http://capitalhomestead.org/page/monetary-justice.
Support the Agenda of The JUST Third WAY Movement (also known as “Economic Personalism”) at http://foreconomicjustice.org/?p=5797, http://www.cesj.org/resources/articles-index/the-just-third-way-basic-principles-of-economic-and-social-justice-by-norman-g-kurland/ and http://www.cesj.org/resources/articles-index/the-just-third-way-a-new-vision-for-providing-hope-justice-and-economic-empowerment/.
For an overview of this new paradigm, see “Economic Democracy And Binary Economics: Solutions For A Troubled Nation and Economy” at http://www.foreconomicjustice.org/?p=11
