A $22,000 Question

The Big Squeeze: Tough Times for the American Worker
by Steven Greenhouse
Knopf, 2008, 345 pp., $25.95

Love the Work, Hate the Job: Why America’s Best Workers Are Unhappier Than Ever
by David Kusnet
Wiley & Sons, 2008, 270 pp., $25.95

Many labor scholars find the concept of a “postwar social contract” a little light in the socks, too intangible to be useful and too optimistic about the potential of capitalism to be desirable. Not Steve Greenhouse. In The Big Squeeze, the postwar social contract between workers and capitalists was simply about sharing the gains of productivity growth. Workers’ standard of living should go up, in “real” terms adjusted for inflation, exactly to the extent that productivity increases.

That’s the social contract. For Greenhouse it’s simply the cost-of-living adjustment (COLA) plus the annual improvement factor (AIF) first inscribed in the so-called Treaty of Detroit in the 1948 and 1950 negotiations between General Motors and the United Auto Workers and subsequently spread to most union workers and, as a more intangible principle, to all workers in the aggregate. Though socialists like me were often contemptuous of the treaty back in the day, it sure looks good now that it’s gone. For more than a quarter-century, from 1947 into the 1970s, wages, incomes, working conditions, and living standards improved steadily and dramatically.

There was a significant and mysterious decline in the rate of growth of productivity in the 1970s and 1980s, and in Greenhouse’s sense of the social contract, that should have led to a slowing of the improvement in wages and standards. Instead, what we have gotten is a reversal—a 15 percent decline in real weekly wages for production and nonsupervisory workers and a shredding of health insurance, pensions, workplace health and safety, work-family balance, and lots of basic dignity.

The results of this reversal are thoroughly documented in The Big Squeeze and, to a lesser extent, in David Kusnet’s Love the Work, Hate the Job. Together they detail the miserable conditions for most workers in most workplaces today, from the “working poor” to a large subset of “knowledge workers.” Some of the worst stories have nothing (directly) to do with wages, but let’s keep our eyes on wages and productivity for the moment.

Most public discourse about wages assumes that increased wages automatically lead to price increases (and thus to inflation), as if we still had a series of oligopolies and regulated industries that allowed employers to pass on wage increases to consumers without consequence. Another way to pay for wage increases, of course, is by reducing profits, but this is routinely assumed to be bad, supposedly because it could eventually lead to job loss. But there is a neglected third option, which, even though it is a ...