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A Publication
on The Status of
Adivasi Populations
of India




American Workers And The Welfare State

By Jon Kofas

10 August, 2015

Are American workers “inefficient” (producing more at a lower cost to their counterparts around the world) or are they the cause for the lack of “competitiveness”? Are US wages too high and productivity too low, and is efficiency measured only in terms of maximum profits to the exclusion of all other factors? Are workers the reason that US companies relocating to Mexico, Vietnam, China, Brazil and other countries as part of the de-industrialization process in the last forty years?

The argument that workers are fault for the ills of the US economy started during the first Industrial Revolution in England more than two centuries ago. During the Gilded Age of the late 19th century, the argument of worker inefficiency was used to prevent labor organizers and keep wages low and government away from regulating hours, safety and child labor. Clearly, a child, a woman and a minority male was worked more efficiently because they received considerably less than their white male counterpart during the period when trusts and cartels enjoyed unquestioned influence over all levels of government and the courts.

The New Deal changed labor-management relations, rationalizing the process within the capitalist system. However, as the US became more hawkish during the Cold War, domestic policy reflected a rightwing turn as well. The anti-union political momentum has its origins in the Truman administration that reversed the pro-labor policies of FDR and used the Cold War as a pretext to impose labor conformity to domestic policies. Because the economy was in an expansionary mode during the early Cold War and there were opportunities for the children of workers to secure an education and move into the middle class, conformity was inevitable as the American Dream was the reward.


De-radicalized pro-business trade unions went along with the government on foreign affairs and renounced the class struggle, focused only on “bread and butter” issues as part of the Democrat Party. Anti-trade union policies of the Republican Party that identified unions as appendages of the Democratic Party are part of the reason for the question of inefficiency. Another issue is related to the justification of globalization that transfers high-paying jobs to low-cost labor markets, thus driving wages lower in the US. Finally, there is the issue of preventing unionization where it does not exist, minimizing the influence of the already weak and ineffective unions, and simply busting unions as was the case during the Reagan administration. No matter what the argument, the assumption always revolves around the theme of maintaining capital’s monopoly influence in policy and maximizing corporate profits no matter the cost to society. This is no different than what took place during the Gilded Age.

According to the pro-business Organization for Economic Co-operation and Development (OECD), Germany has the world’s most productive labor force, while the US ranks third. Neither Germany nor the US have low wages compared with China and Vietnam, but they enjoy top world rankings from a pro-business international organization. Why then do politicians, the media, and well-paid pro-business consultants and academics-for-hire to businesses insist the US labor force is the problem to productivity?

On 31 July 2015, the US Federal Reserve released the second quarter labor report costs revealing that these were the lowest in 33 years. Despite massive rises in executive compensation and record corporate profits, politicians and media insist that wages are the problem in the economy. Where exactly is the empirical evidence to suggest that the American labor force on the whole, whether in the public or private sector, whether in the office or in the factory, whether in the commercial farm or the construction site is the cause for productivity inefficiency? If the business model is flawed, if management compensation exorbitant, if the child labor factory in Bangladesh makes the exact same garment five times cheaper under unhealthy and hazardous conditions, why is it the fault of the American worker and not the factory owner trying to squeeze out higher profits by exploiting children in the Third World?

The only reason that the US government, businesses, media and the IMF even raise the issue of worker inefficiency is to demand lower wages throughout the world, to crush labor unions, and to prevent new ones from emerging. If a 12-year girl in Bangladesh is making a few dollars a week, but her adult American counterpart is making $12 dollars an hour, is the conclusion that the American worker is “inefficient” or that the corporate employer is exploiting child labor in countries desperate for capital investment and no laws for children, safety, health and the environment?

It is ironic that politicians, journalist and economists against raising the minimum wage are either millionaires or very wealthy who would never concede giving one dollar more of their parasitically-earned income to reduce the public debt. If they honestly believe workers are not the people creating wealth, but instead they are the obstacles to efficiency, then why not abolish all labor laws, all labor-management regulations, outlaw trade unions and end workers’ rights, and let the employer decide what the worker is “worth”. If these measured are followed to concentrate capital even more than it is today in the hands of the wealthiest one percent, the question arises about what kind of social structure and political system would evolve in America where the middle class is presumably its backbone.

Some sectors of the US economy including construction, agriculture, and manufacturing, employ foreign laborers, some of which are undocumented. This is also the case with domestic workers in the hotel and restaurant business where wages are low. Employers prefer to employ such workers because they are diligent, but also because they earn much lower wages than documented workers. For many decades employers have made the argument that employing Hispanic and other non-US-born workers is more efficient for them and they pass on the savings to the consumer. This is regardless of whether it is a commercial farm or a construction company. The trade unionists then turn against the undocumented workers, arguing the government is not cracking down on these people taking jobs away from American citizens. This is an old story of old immigrant workers making higher wages turning against the new ones earning much less. The media, government and businesses then argue that high paid workers losing their jobs simply do not have the “right skills” for the evolving job market, so it is their fault. If they just secure more education/training, they too could experience upward social mobility.

The downward social mobility in America has been taking place in the last three decades and it is continuing. This has been a subject of many books and articles as well as political debates, with some liberal suggesting adjustments to the fiscal system and wage scales and conservatives arguing in favor of allowing the market to decide and individuals going back for more education to secure a good job. One area where the young have historically looked for upward mobility is the college degree, although studies indicate the political economy and social stratification is such that the average person will change several careers in a lifetime. Moreover, the demands of the market are such that whereas in the 1950s a high school diploma was sufficient to secure a job, in 2015 a Ph.D. is no guarantee the candidate will work in her/his field and make more money than a truck driver.

America’s educational system designed to provide opportunities for self-enlightenment and marketable skills in the workforce achieved its goal from the end of WWII until the end of the Vietnam War. When social welfare began to dwindle as resources shifted to defense and corporate welfare during the 1980s, radio personality Garrison Keillor made famous jokes about the unemployable English major. This was an indication that a college degree in the humanities was hardly sufficient to guarantee a job in the field of academic training. The reality in the 1980s was that any field outside of the hard sciences and business was difficult to secure a job, even with a Ph.D. A decade later, it became difficult to secure a job in fields once thought as safe, including areas in the hard sciences and law. Individuals with college degrees had to secure more and different training for employment. By the time the recession of 2008 hit, it was difficult to find a job in any field even for graduates of prominent universities.

Besides inability to find employment in the field of their educational training, college graduates had a massive debt from loans because costs had skyrocketed as the business model of education meant shifting the burden from the public sector to the student. High college costs excluded children of workers and lower middle class that could only afford local colleges, if at all, or going into the armed forces. Universities responded by introducing distance learning and e-colleges, as well as eliminating standardized exams ACT-SAT, both schemes to secure tuition income as competition increased. In the last three decades, universities have been evolving toward a business model where the administration behaves like corporate management and the faculty like workers, and students are consumers. This is reflected in salaries where there are huge gaps between the millionaire college presidents and professors, with exceptions in business schools.

It is not only that the corporate model of college has become very expensive and leaves out those who cannot afford it, it is also the case that an undergraduate degree is now like a high school diploma in the 1960s in terms of securing employment in a very competitive service-oriented economy geared increasingly to business and high tech positions amid an evolving proletarianization social process that provides people with titles such as “assistant manager” at a fast-food restaurant or an insurance office. College students know that they are no different than consumers because this is how universities treat them, their degree is no guarantee of upward socioeconomic mobility, and society does not value education but wealth that can be acquired by any means necessary, including unscrupulous or illegal methods. In short, the merit-based ideal of the 18th century Age of Reason no longer applies in the new Gilded Age of the 21st century.

The apologists of the corporate model of higher education argue that the problem rests with students who are not interested in math and science but opt for the humanities and social sciences where there is no gainful employment. They point to foreign students who gravitate toward those fields and become successful. This is indeed the case with foreign students, at least looking at this issue on its surface. Beneath this appearance are the following hard facts.
First, High School students in Europe, Russia and Asia have a much better training in math and science than their US counterparts because American secondary education has been deteriorating for decades. Therefore, when foreign students come to the US it is easy for them to take courses in math and science because of their educational training. Second, foreign students do not have language expertise of their American-born counterparts, so they find it easier to focus on math and science. Third, a foreign student could have easily stayed in her/his own country to study humanities and social sciences, as they do, instead of coming here. The reason foreign students come to the US is primarily for the hard sciences. If they wanted to study poetry, they could have done so in their own country.

One would be surprised to discover that not just the US, but the rest of the advanced capitalist countries have a problem with unemployable college graduates, especially Europe and in fields of social sciences and humanities just like the US. Therefore, the problem is not that the US college student is so much different than her/his counterpart in the much of rest of the world, but that capitalism has a crisis of overproduction in college graduates as much as it does in every other commodity. The college student here and world-wide is nothing but a commodity subject to the market laws of supply and demand. Education is a reflection of the crisis of capitalism that cannot absorb the commodities it is producing under the existing system. Because of the “brain drain”, the best and most talented continuing to leave their countries and come to the US, the long-term impact will be surplus graduates. The benefits from a surplus college-educated labor force will mean that employers will demand more for less from their employees. At the macro-economic level, this means downward pressure on all professions and living standards owing to excess capacity of college graduates in every field, including medical sciences. Conclusion: downward socioeconomic mobility as many studies indicate will continue as much in the US as in the European Union.

According to a study in 2012, 35% of Americans were receiving some kind of “means-tested program” assistance amid the tail-end of the recession that started in 2008. The US federal budget in 2014 was $3.5 trillion, of which 34% went for national security and home security while Social Security, Veterans benefits, Medicare and health amounted to 52%. It is important to note that if we add research and development, NASA, and other defense-related spending not budgeted as such, the percentage rises. In 2011 for example the total costs for defense and related programs was $1.3 trillion, while “human security” programs that critics dismiss it as wasteful entitlements cost $2 trillion. Investment in human security vs. national security is an ideological debate among politicians, media, academics and others. Republicans and many Democrats believe that in an open society government priorities ought to be with defense not human security.

While very few people would question defense/national security spending, many since the election of Reagan constantly question “human security” as a “waste of tax dollars”. Critics argue that such programs only encourage the poor and minorities to be lazy and parasitic, an argument that was actually floated in England during the era of Adam Smith at the end of the 18th century. Republicans and many Democrats find nothing wrong spending hundreds of billions on the parasitic defense industry because this sector is associated with patriotism, regardless of whether it adds more security along with a rising public debt. However, these same critics vehemently object to school lunches to feed the poor, assistance for the mentally ill, subsidized housing for people that would otherwise be living in parks, and subsidized health care for the lowest income groups unable to afford immense hospital and prescription costs. It is important to note that the entitlement program money goes right back to corporate America – health insurance and corporate-owned hospitals, supermarket and drug store chains, pharmaceutical companies, and other businesses.

The objection is that the taxpayer is stuck with the bill for human security. However, there is silence when it comes to corporate subsidies and tax breaks for millionaires and billionaires. When was the last time that the media raised the issue of General Electric and Boeing receiving US export subsidies, despite the fact that these are extremely profitable companies? When was the last time that politicians and media objected to local governments subsidizing sports stadium for football, basketball and baseball, using taxpayer dollars, instead of building schools, parks and facilities for the homeless and mentally ill? Why is it acceptable to dish out one billion dollars for sports facilities in any given city but highly objectionable to feed, house and provide health care for the poor?
Considering the price of the ticket for a professional sports event, the government has no problem subsidizing the upper middle class fans and the investors in sports clubs, but it finds it abhorrent to provide a school lunch to the poor and medication for the elderly. Democrats and Republicans alike have no problem providing subsidies, lowering the tax rates and never closing tax loopholes for the corporate sector, any more than they have a problem bailing them out when in crisis as in 2008 to the tune of hundreds of billions in taxpayer money. Who is really parasitic in the fiscal structure that redistributes wealth from the bottom up, corporations and the top ten percent of income earners or the bottom one-third of the population receiving entitlement benefits?

Part of the objection about entitlements is rooted in racism and xenophobia because of sterotypes that politicians and media have inculcated into the public. The assumption that the media and rightwing politicians reinforce is that recipients are black, illegal Hispanics, and lazy white single mothers in a trailer park. The stereotypes are deeply ingrained in the public mind for decades because the mainstream institutions project such an image to justify transferring resources to defense and corporations. The reality is that the capitalist system is based on structural unemployment because of the process of appropriation and overproduction on a global scale. Politicians, business people, the media and many academics from universities to consulting firms and think tanks agree that “full employment is between 4% and 5%” -this is the official rate not the unofficial that is much higher, and it does not take into account part-time work. There is general agreement that a segment of the “potential workforce” must be outside the “active labor force” on a chronic basis for the “health” – profitability - of the market economy to keep wages low.

Of course, one way to deal with the chronically unemployed is to put them in work house or prison and force them to work for a room and board inside these institutions, something that many rightwing elements would love as they romanticize about treatment of workers during the early Industrial Revolution in Europe. In 1834, the British Parliament passed the New Poor Law that prohibited relief to any person refusing to enter into a workhouse that were essentially for profit operations based on slave labor conditions. This is one way to deal with the issue today amid globalization and neoliberal policies that dominate not just in the US but globally.

Savings can be realized from putting the chronically unemployed in institutions, and proceeds could be put to use for more defense spending so the US could better prepare itself to win wars such as those in Iraq and Afghanistan, as well as score major victories in covert operations such as Syria and Libya where US intervention produced even more jihadist guerrilla movements. Some of the savings could also go to subsidize the largest banks and corporations in a show of gratitude for taking their profits estimated at $2 trillion out of the country so they would avoid paying taxes.

Republican politicians and the media are constantly reminding people that poverty is a cultural problem caused by the individual’s character flaws rather than the capitalist system that assumes structural unemployment at 5% is “full employment”. When we eliminate the people unable to work because they are old, or unable because of disabilities, or they have children to raise this leaves a percentage of able-bodied people who could work at minimum wage of around $15,000 annually or roughly $4,000 lower than the poverty line which varies from New York to rural Mississippi. Ironically, critics of entitlements are also the advocates of not raising or even eliminating the minimum wage so that more people would live below poverty in unhealthy and hazardous conditions.

It is true that some people on welfare object to accepting work that pays lower than entitlement benefits including health care coverage. By contrast, Illegal immigrants have no choice and they take such jobs because they will live in groups and share expenses for everything. The 11 million undocumented workers in America are doing just about anything they can from hard construction work in all kinds of weather conditions to farm field work not because they enjoy it and they can make a decent living at it, but because the alternative is to return home or die here.

There are studies indicating that undocumented workers add about 10% of the GDP over the course of a decade. This is in sharp contrast to the rightwing populist rhetoric that undocumented workers are “taking” instead of making more wealth. The clear beneficiaries of this are businesses whose profits remain high because illegal workers are taking jobs that pay at or below legal minimum wage. Instead of striving to raise their wages to legal levels, rightwing politicians and the media use the example of the undocumented workers to lower wages for the rest of the labor force.

The fact that undocumented workers accept very low pay as a reflection of how employers exploit them can become a model for labor-management relations as many neoliberal advocates of both political parties and the right media would like. However, it is important to remember that when the 2008 recession exploded, many were saying how great it was that the US has a social safety net – unlike the 1930s – and the impact would not be as badly felt by society. The most ironic aspect about the debate on minimum wage is that wealthy politicians voting for tax breaks to businesses and the upper income groups are advocating maintaining the existing low-wages that have one-third of the population qualified for an entitlement program. These same critics would never argue in favor of capping executive salaries and compensation amounting to 400 times higher than the average wage.

In the last analysis this is an issue of what kind of society people want as measured by a social contract based on a modicum of social justice. Looking at the growing income gap in the US in the last four decades, there is no doubt that social justice is virtually eliminated from any political debate. Human security issue that politicians, media, business, and academics rarely raise, while they have no problem emphasizing criminal justice and national security with the “war on terror” at the monumental distraction from issues that matter in peoples’ daily lives.

Jon Kofas is a retired university Professor from Indiana University.



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