Economic Crisis and the Crisis of U.S. Labor

By Yates, Michael D. | Monthly Review, April 2002 | Go to article overview

Economic Crisis and the Crisis of U.S. Labor


Yates, Michael D., Monthly Review


Capitalist economies have always moved in cycles of expansion and contraction. They are crisis prone by their nature. The U.S. economy expanded for ten years, from 1991 until the spring of 2001, and, as is normally the case during such a long expansion, the pundits began to argue that the economy had overcome any tendency to contract and that prosperity could go on forever. Even Alan Greenspan seemed to think that uninterrupted growth was possible, provided, of course, that he remained at the helm of the Federal Reserve. In the end, however, the good times came to an end, as they always do. An economic crisis, like any kind of crisis, always has class dimensions. Workers are inherently more vulnerable than employers, so they will suffer more when the economy falters. As the current crisis has begun to unfold and deepen, what has happened to working men and women in the United States? What might happen as the crisis continues? What has been and is likely to be the effect of the September 11 attacks and the ens uing "war on terrorism" on the economic conditions of workers?

What a crisis means for workers depends in part on what they managed to achieve during the expansion. A period of economic expansion is ordinarily good for workers. Sustained growth creates an empowering climate for workers by depressing the rate of unemployment, which, in turn, puts upward pressure on wages and increases the security of working people. This growing sense of stability then increases the likelihood that workers will behave more aggressively toward their employers. A falling unemployment rate also narrows the unemployment differential between minority and white workers, and this can facilitate cooperation between them. Rising incomes generate higher revenues for the government without higher tax rates, and this makes it easier to argue in favor of progressive social spending.

Given the long duration of the expansion, one would expect that workers would have made considerable gains in their life circumstances. The improvements, however, were rather modest and con- centrated in the last few years of the expansion. The data show that working people did not benefit much during the first half of the expansion. In fact, real wages (the purchasing power of the workers' actual money wages) for all production and nonsupervisory employees were lower in 1996 than they were in 1991. The unemployment rate actually rose in 1992, the second year of the expansion and remained relatively high until 1999. Even the low levels achieved in 1999 and 2000 (4.2 and 4.0 percent respectively) were not especially eye-catching when compared to those managed during the post-Second World War prosperity.

Still, the workers did make some gains at the end of the expansion. For example, real hourly wages, adjusted for inflation, for all production and nonsupervisory workers grew by 1.5 percent per year between 1995 and 1999 (and rose even more sharply in 2000), while they had fallen by .6 percent per year between 1989 and 1995. (By comparison, real hourly wages rose by 2.3 percent per year during the long post Second World War expansion from 1947 to 1967.) The large drop in unemployment from 1996 to 2000 broke a decade-by-decade trend of rising unemployment rates from the 1950s through the 1980s. Sharply lower official poverty rates (from 15.1 percent in 1993 to 11.3 percent in 2000) and a slightly more equal distribution of income also marked the last few years of expansion, developments especially helpful to minorities and women.

While the long cyclical upswing of the U.S. economy was a boon to workers in general, it was not accompanied by much growth for organized labor. This is important because economic growth in the past has been correlated positively with union membership. Rising union membership in an expansion allows workers to secure more permanent increases in wages and benefits and boosts the power of the working class as a whole. …

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