The political media is in a tizzy over comments 2016 presidential candidate Jeb Bush (R) made to a New Hampshire paper about what needs to happen to fix the American economy for working people. But the gaffe frenzy fixates on the wrong thing from Bush’s remarks.
To hit his desired economic growth rate, Bush told the Manchester Union Leader, “we have to be a lot more productive, workforce participation has to rise from its all-time modern lows. It means that people need to work longer hours and, through their productivity, gain more income for their families. That’s the only way we’re going to get out of this rut that we’re in.”
Election watchers have latched onto the “people need to work longer hours” part of that quote. Politicians and pundits have suggested that Jeb Bush was blaming workers for the slack in the economy, and suggesting that his impossible dream of 4 percent yearly GDP growth would become feasible if only Americans were willing to work longer hours. Bush has called those criticisms unfair, saying that he meant that more hours should be made available to workers rather than that workers are somehow lazy.
But that back-and-forth over the “work longer hours” line misses the bigger, subtler error in Bush’s diagnosis of the economy’s present underachiever status.
Bush claimed that if workers were able to get scheduled for more hours, they would “through their productivity gain more income for their families.” Obviously more hours would equal a larger paycheck. But Bush’s suggestion that being more productive will produce individual prosperity for American workers in the 21st century is flat wrong.
The relationship between American workers’ industriousness and their economic security has eroded so severely in recent decades that the two concepts aren’t even on speaking terms these days.
Workers were a staggering 25 percent more productive in 2012 than they were in 2000. But over the same period that bosses started getting a full quarter more work out of their employees, the median wage grew exactly zero percent. Even those with college degrees saw their pay stagnate over the past decade. Over the five-year stretch encompassing the Great Recession and the first few years of the slow recovery Bush is criticizing, workers gave their bosses an 8 percent jump in productivity – and got back an outright decline in earnings.
Wages and work ethic were already decoupled long before the enormous economic sinkhole that Bush’s brother handed down to President Obama. After charting nearly identical growth trajectories for decades after World War II, productivity growth and wage growth unlinked in the mid-1970s. Productivity has more than doubled in those past 35 years, while wages have grown by roughly 13 percent:
CREDIT: Economic Policy Institute
The de-linkage of how well people work and how well they’re compensated is unsettling to contemplate in a culture that’s already so much more work-oriented than its happier-but-smaller counterparts in the developed world. But it isn’t hard to identify the causes – and they’re all adjacent to the ideological battle Bush will help to wage over the country’s future economic policies in the coming election.
The most obvious link between Bush’s conceptual error and hot-button issues of the 2016 cycle is the minimum wage. Adjusting for inflation, the minimum wage has fallen dramatically in value since the late 1960s – just before productivity and earnings had their messy divorce. If the pay floor had risen at the same rate as worker productivity throughout that window, the minimum wage would be about $22 an hour by now. Many states have begun trying to catch back up to inflation by pushing their minimum wage up to about $10, and a handful of cities have actually tried to get ahead by setting their sights higher.
More subtly, Bush’s comments paper over an extreme shift in corporate priorities that has enriched a relative handful of people – mostly investors, Wall Street advisers, and CEOs – at the expense of frontline workers. Working people now take home the lowest share of total corporate income that’s been recorded since 1950. After hovering between 78 and 84 percent for decades, labor’s share of overall income in the corporate sector dropped to 74 percent last year. It’s a small difference in percentage terms, but that slide reflects billions of dollars that once went to workers and now go to profits.
CEOs have been shifting income from their workers to themselves and their shareholders in increasingly aggressive ways over the past few decades. The government has helped by subsidizing executive pay through the tax code.
Corporate America’s increased desire to appease shareholders and squeeze workers is one of the primary drivers of the explosion in income inequality that began in the Reagan years. That inequality has gotten so severe that it threatens the fabric of American democracy, according to a commission of experts convened by the Center for American Progress last year that recommended a slate of policies to change the incentives that corporations respond to in making these kinds of decisions.
A third key driver of the productivity-wage disconnect is the right’s assault on union power. Workers who have access to collective bargaining have a better chance of staving off the kinds of profits-over-people decisions that employers are often inclined to make. Wage growth averaged about 23 percent in the 10 states where collective bargaining rights remained widespread from 1979 to 2012, according to an EPI analysis. They grew just 5.2 percent in that time in the 10 states with the largest dropoff in the share of the workforce covered by collective bargaining agreements.
Productivity and wages have been estranged for years. The progressive plan for getting them back together is straightforward: restore a meaningful pay floor through the minimum wage, change the incentives that allow corporate America to exacerbate inequality, and enhance workers’ bargaining power through unions and union-like alternative structures. Bush’s, by contrast, involves throwing even longer hours into the same broken-down system and hoping for an explosion of economic growth that economists say is deeply implausible.