Labor in America

American attitudes toward labor, both here and throughout the world, are misguided, counterproductive, and dangerous to the welfare of mankind.

The attitudes are consequences of the view that labor is merely one commodity among others. This view means that labor is to be bought as cheaply as possible and treated disdain to the point of making it dispensable whenever possible.  This view results in our antagonism to labor unions, workplace safety, worker health and welfare, and a disorganized and ineffective provision of retirement income. The view results in our judicial system’s treatment of employee claims in bankruptcy as though they were mere creditor claims and allows for the abrogation of duly negotiated and agreed upon contract provisions in ways that conflict with the ways in which contract provisions between companies are treated.

But all of these attitudes display a misunderstanding of how an economy works.

For a nation to prosper, its economy must prosper. No nation can be great if the masses of its people are impoverished, no matter how wealthy some minority class of elites is.

For an economy to flourish, the money in it must circulate. Products cannot be sold if people lack the means to purchase them. If products cannot be sold, businesses cannot prosper. So if an economy is to prosper, money must flow from business to labor which then flows back to business when products are bought. By denying labor remuneration that allows for considerably than a subsistence wage, business merely constrains the purchasing power the people which, in turn, constrains the sale of products, which then constrains business profits.

It is well known that the American economy’s engine of prosperity is consumption. More than two-thirds of the American economy is dependent on consumption. Reduce the power of the people to purchase, and the American economy declines.

Many American business practices tend to reduce purchasing power. Low wages, low benefits, high prices are but a few. Offshoring is another that really is a two-edge cutlass. American businesses move production to foreign countries to exploit the low wages possible in those countries. When this results in the reduction of jobs in America, the result is a lowering of purchasing power, unless some other industry comes along that picks the displaced workers, as has often happened in the past. Unfortunately, there is not guarantee that it will happen in the future.

And although American business likes to tout the slightly higher wages than is customary it pays to workers in foreign countries, the higher income that goes to those employees is seldom high enough to propel the economies in those countries to higher standards of living.

The result, ultimately, must be a situation in which although business costs are reduced, the reduction in purchasing power is greater and the economy, including the profits of business, must ultimately decline, because the loss in domestic purchasing power is not made up by an associated increase in purchasing power in the foreign lands to which American companies have offshored their productive capacities.

So it really is not difficult to see that given the current American attitudes toward labor, decline is inevitable. And likewise, it is not too difficult to see how dispensing with these attitudes would not only promote prosperity in America and in foreign countries. Business merely needs to adopt practices that increase consumption, not only domestically, but in all of the countries they do business in.

Americans have been taught to believe that high wages increase inflationary pressures. But this belief cannot possible be true.

The argument is not much different for either zero-sum or non-zero-sum situations:

Prices “P” are made up of employee costs “E” plus overhead “O” plus profit “R.”  So P = E + O + R. So the equation can be preserved in either of two ways or a combination of them.

Say “E” in increased to “E + n.” The equation is preserved in either of the following two ways:

P = (E + n) + (O – n) + R  or  P = (E + n) + O + (R – n).

So higher wages are no more responsible for inflationary pressure than are higher overhead or higher profits.

A funny thing happens when businesses know that employees in their areas are about to receive higher wages. Prices on products that are in no way affected by the increased costs of labor that are about to provide the higher wages go up.

A number of decades ago, when I was employed as a staff person by a United States Senator, government employees were granted a substantial raise. But about two weeks before the raise went into effect, stores in the Washington, D.C. area all began to raise prices. The result was that the federal workers who received the raise gained little of anything is disposable income.

So, you see, the problem is merely greed. Every businessman seeks to feather his own nest and to do so, whenever possible, as everyone else’s expense. But why should a laborer be different? He, too, has the same human inclinations as the businessman. The laborer also wants to feather his own nest. What is really needed is a spirit of sharing, which would result in the feathering of everyone’s nest.

Increased wages, when they are not nullified by increased prices, lead to increased consumption and more business. So it can easily be argued that by giving labor more and taking less in profits, not only do employees gain, business do too, and that gain includes profits.

So instead of treating labor as a commodity, laborers should be treated as human beings. Their desires to improve their economic positions should not only be honored, they should be encouraged. And if this were done not only domestically but abroad too, all the world would benefit.

The L-word (labor) is not the evil; the G-word (greed) is. All of us should deride it and dishonor those who espouse it.