This is a section of the book:

US

Everything is Done By US

We Can Make it For US

by Tom Cantlon

The list of links to chapters can be found at:

http://tomcantlon.com/us_on_rsn

This time, looking at how the slicing of the pie of national income has been steadily shrinking what the people doing the work get. How correcting that would do more good than any other program. And how that approach defeats common counter-arguments because this has nothing to do with increasing taxes, or redistribution, or hand-outs, or limiting the rich, or harming the national economy, or Socialism, or entitlement programs that are hard to maintain.

Working Peoples' Share Is Declining

Here's a perfect example of the problem, and a piece of the solution. It gets into a few numbers but you don't need to follow the details, just the general idea that this problem is costing you a lot of money. And know that the underlying reason that our share has been declining is all about a loss of power on our part. Likewise, the fix has nothing to do with taxing or social programs or limiting the rich or any of the usual controversial ideas. That's because what went wrong, and how to undo it, is strictly about leverage. About having enough leverage to get our full value.

It boils down to a few points:

• The share of the total national income that goes to working people has been steadily declining. That is, of the total wealth that we all create—"we all" in this case being everyone, the owners, the investors, and the workers—out of that total, the slice of the pie going to investors keeps getting bigger while the slice of the pie going to workers gets smaller. Never mind how much the pie grows or doesn't grow overall, this is about where the lines are drawn to slice it. This slipping of the workers' share is something that's been going on since World War II, is commonly accepted by both conservative and liberal economists, has been continuously documented and updated over the years, and has been officially tracked with verifiable records collected by both government and business. Details are at the end of this book.

• The loss of worker's share fell even faster after about 2001. So just to pick one point in time to focus on, we're going to consider how much difference it would make just to roll the clock back to then, to 2001 when workers were getting a little more of the pie than now.

• In 2019 the economically conservative Wall Street Journal calculated approximately what the money lost for workers comes to and stated, "If workers were commanding as much of domestic income as they did in 2001, they'd have...$5,100 per employed American". That is, on average, each working American should have $5,100 more per year.

• This, of course, accumulates over time. If you had $5,100 more per year on average over, say, a 35-year working career, that would be almost $180,000 total more. People who started their adult working life in 2001 are now less than 20 years into their 35-year career. They've already lost a lot, and they're going to keep on getting less than they would have, and the loss is going to keep on getting bigger, right on through to retirement. And since the slice of the pie is still shrinking, by the time they reach their later years of working, the loss is going to be even worse than $5,100 per year. The average worker earns around $45,000 per year, so a $5,100 difference would be more than a 10 percent difference. Imagine getting a 10 percent raise at the start of your working life and continuing to have that much of a difference across your 35 years. How much difference does $180,000 across those years make? Is it the college fund for the kids? Or the difference in owning your home outright when you retire versus still having a mortgage? Or, when you retire, the difference between having to stay in the same home close to where you worked versus being able to move to a nicer area where you'd like to spend retirement? Or the difference between having a stay-at-home retirement versus getting the big travel trailer and traveling all over with it? It's a big difference in your life. Oh, and note that that is per worker. So if you are a two-earner couple, double it, to about $360,000 lost.

• That is the problem. Here's a solution to consider, and let's look at what that possibility tells us. The solution would be to simply regain the negotiating power, the leverage in the employee-employer negotiations about pay, to return the way the pie is sliced back to the way it was in 2001. Never mind trying to get the pie sliced even more in working peoples' favor, like the way it was way back in 1947, or the way it was in 1970. Let's just consider the idea of rolling the clock back, the pie slicing back, just to the way it was in 2001.

A few things to note about these points:

• It's clear that this loss of a portion of the pie is primarily about our loss of leverage, loss of power to insist on our proper share. Working people are less organized and less demanding than they used to be. Back when, if they didn't feel they were getting proper pay, they could shut an operation down to make their point. Plus we had a big recession, a big downturn in the economy in 2001, when a lot of people lost their jobs and had a hard time finding any others. That meant employers could offer less starting pay and still get people desperate for work to take it. And even after the economy recovered, employers managed to hang onto at least some of that lower rate of pay to workers. Then we had a much bigger downturn in 2008, and this time it took many years for jobs to come back. Through all that time workers were desperate and would accept lower pay. Again, as the economy recovered, pay rose some, but it's just not back to where it would have been had there never been a downturn. That is to say, companies managed to hang onto more of the business income. This smaller slice is just a matter of US having become weaker in the grand and constant negotiation between working people and powerful players. It's not like there was some necessary change in government policy or that economics just has to work this way. We just lost ground in a process of negotiation. There is no other reason for it.

• It's nothing inherent in the free market system. The market can give either result, that is, the way it is now or the way it was then, and the powerful players simply prefer the current result, that is with them getting more of the pie. And they have managed to arrange things so they get more. It's not like the way the pie was sliced in 2001, or the way it's sliced now, is more truly the free market. And it's not like changing the slicing back to the way it was would be any less of a free market. It's just that powerful players managed to find ways to finagle getting more of the pie, and they did.

• If we managed to regain our share, this has nothing to do with many of the often controversial issues that come up, like the following.

• This has nothing to do with taxing the rich more. How much the rich are taxed wouldn't need to be any different than it is now, or than it was in 2001. Maybe we do want higher taxes on the top, or maybe we don't, but it has nothing to do with this. This is just about the fact that we've been losing at negotiating, losing leverage to use in negotiating.

• This has nothing to do with redistribution. That's the term that usually goes with the idea of taxing the rich more. The idea is that the rich end up with too much of the nation's wealth and therefore we should tax some of it and use it to help middle and lower income people. In other words redistribute it. But "redistribute" has built into it its own problem. It is to "re" distribute. That must mean it was not distributed right in the first place. It's a weak position. It accepts that income is allowed to be distributed wrong in the first place, then requires taxing some of it after the fact so it can be "re" distributed correctly. A better solution is to have the leverage to get the distribution right in the first place. That is, the distribution of company income between the top and the working people. It's also better because otherwise we have to use our government programs to decide how to redistribute. Better to have proper negotiations between equals, which lets the free market sort it out. Some changes in taxes and services may or may not be needed but as an overall solution redistribution is a mistake. The more powerful and correct solution is to distribute right in the first place.

• This has nothing to do with limiting the rich. They weren't limited in 2001, and we don't need to do that now to get the pie back the way it was.

• This has nothing to do with making it so the rich just can't be all that rich. The richest in 2001 could live like royalty if they wanted to. They could do it then, and they could do that now even with the pie cut the way it was in 2001.

• This has nothing to do with harming the economy. When people talk about taxing the rich more or other similar ways to help everyone else, one argument is always that if you tax the rich more they won't be as motivated to invest, to build companies, to use their capital to create more wealth. (Actually, that's all mistaken thinking, as is covered elsewhere, but leaving that point aside for the moment.) This has nothing to do with taxing the rich more or in any way dampening what the rich do in the economy. They were doing extremely well in 2001. The economy was doing extremely well. Making the pie slices the way they were then still means that the rich and the overall economy can do great.

• This has nothing to do with anyone simply being given something. People worry that if we help people financially—by free education, or a supplement to their health care or flat-out sending checks to everyone or just boosting what we do for the poor, like more food stamps—people worry that that has bad consequences. They worry that people just being given stuff creates problems. This has nothing to do with that. Maybe food stamps do need to be more or maybe less, but this has nothing to do with that. This is just about whether working people are able to get something closer to the full value of what their work is worth.

• This has nothing to do with our country being any more or less socialist or social-democratic. It has nothing to do with how much influence government has on business. It has nothing to do with social programs being more or less. We weren't a socialist country in 2001, and we don't need to be one now to achieve this goal. It's just about our having more leverage.

• This has nothing to do with right and left politics.

• This has nothing to do with the usual ups and downs of the overall economy. The typical scenario is that it's only when the economy is near the peak of one of its up and down cycles that working people finally get some benefit out of it, some easiness of finding jobs, some increase in wages. Then it's over as soon as the next downturn starts. So people who want to help working people often focus on ways to get the economy into one of those high phases. That's always going to be important, but if the pie was being sliced the way it was in 2001, it would help both in good times and bad. Good times would be even better because we'd have more of the pie, and bad times wouldn't be as bad. Of course, we want as much of the good times as possible, but this goal cuts through the up and down cycles and helps all the time.

• This has nothing to do with the overall wealth of the nation. There's a notion that there isn't enough money in the country for some of the things we'd like. That we can't have everyone who earns a low wage getting a big raise to a considerably higher minimum wage because businesses won't be able to afford it. There's a notion that we can't make sure everyone has healthcare because there just isn't enough money, that the nation can't afford it. This has nothing to do with those debates. It has no position on any of that. It's not about whether such ideas are right or whether they're just wishful thinking for what doesn't exist. It's not about wanting anything new. It's just about wanting to get back what we had. This is income that we know exists because we used to have it. This is just wanting the same division of slices as before, regardless how big or small the total pie really is. It's something we know exists, and it used to be in "our" pocket, and it somehow slipped into someone else's pocket, unnoticed. It's just wanting it back.

What all of this says is, it's about power. We may need higher taxes or more social programs, or not. Turning the pie slices back to what they were in 2001 may be enough or not enough. It may be a good enough goal in itself, or only part of what needs to change. But it would make a difference, a $5,100 a year per worker difference. And it has nothing to do with taxes, socialism, harming the economy, limiting the rich, or giving anything away. And that tells us something. It tells us that the single most important change is, power. That we have to have this change of regaining our power, or any other changes will just be tweaking around the edges.

Not harsh power. Not one group clubbing another group over the head kind of power. Not violent power. Leverage power. Economic power. The power to slice the pie so that we have the full value of our work, leaving the rich and powerful to have the full value of their profits on our work, but not more. The pie sliced the way it ought to be. It is the power to slice it correctly that matters. No other change, without that one, will really change anything. And if we do change that and regain our proper power, then any other changes that are properly needed will follow from that. We can sort out the exact details of taxation and social programs and other questions separately. The only thing that must be done, the only thing that matters, is regaining that leverage.

Next

Next time, the two ways pay can be calculated. The way it is now that works against people, and the right way that gives them their full value. Plus, the free market only works when equal negotiators are involved.