The Fractured Power
How to Overcome Tribalism
In recent years, academics and policymakers in the United States have struggled with an economic mystery. Why, even as the U.S. economy has grown in the past few decades, have wages remained relatively stagnant? Many scholars have landed on one reason in particular: the decline in the bargaining power of U.S. workers due to shrinking union membership and the rise of subcontracting. Workers have benefited less from economic growth as their ability to bargain for higher wages has withered. Instead, major gains have gone to investors and managers, and inequality in the United States has soared.
Other industrialized countries have also seen rising inequality, but the decline in worker power is particularly acute in the United States. From the 1980s to the late 2010s, the labor share of income in the United States—essentially, the percentage of overall income that ends up going to workers—fell by four percentage points, in effect a decline of hundreds of billions of dollars per year. Over the same period, U.S. workers lost key protections: collective-bargaining agreements cover less than 12 percent of workers (and only seven percent of private-sector workers) in the United States, compared with 98 percent in France, 80 percent in Italy, and 56 percent in Germany.
The diminished place of the worker in the United States helps explain the country’s poor management of the coronavirus pandemic compared with its peers. No other industrialized country has handled the pandemic so disastrously. To be sure, many factors have contributed to the weak U.S. response to the crisis—first and foremost, the ineffective and often counterproductive leadership from the White House, but also missteps at the state level and structural racism. And countries in Europe and elsewhere that boast strong worker protections are still seeing sporadic upticks in novel coronavirus infections that could lead to greater spread. But the path of the coronavirus to date suggests that a country whose workers lack economic and political power cannot respond to the crisis nearly as quickly or completely as its counterparts.
Since its outset, COVID-19 has particularly imperiled workplaces. A Harvard University study of the initial spread in Asian countries estimated that work-related transmission accounted for up to 47.7 percent of early cases. From the beginning, the virus has spread easily in U.S. workplaces, including among health-care workers, bar and restaurant employees, transit operators, meat-processing plant workers, and others. Now, nearly half a year into the pandemic, the United States government has still exercised little oversight over the conditions employers impose on their employees. The Occupational Safety and Health Administration, for instance, declined to issue emergency safety standards after the outbreak began. Influential corporate donors and federal indifference to the demands of unions have ensured that OSHA mounted a passive response to the crisis. Understaffed owing to years of defunding, the agency issued its first coronavirus-related citation only in late May.
A lack of legal protections that are common in other countries has further endangered worker safety. The United States does not have federal legislation guaranteeing paid sick leave—and temporary measures enacted to address the consequences of COVID-19 have major holes—forcing many sick and at-risk workers to choose between coming in sick or losing their paycheck. The 88 percent of U.S. workers who lack union representation are employed “at will,” meaning that employers have wide latitude to fire them without cause. Workers in hospitals and on construction sites have faced retaliation for raising health concerns, and as a result, many workers may fear speaking out when they feel unsafe.
European governments, by contrast, moved more quickly to set new workplace standards after the outbreak. Even before the pandemic, workers in Europe operated in an environment where they had greater say over the conditions of their labor. The European Agency for Safety and Health at Work issued guidance on COVID-19 that states: “The participation of workers and their representatives in [occupational safety and health] management is a key to success and a legal obligation.” Businesses and labor unions have jointly recommended safety protocols in industries such as food and beverage manufacturing. In Germany, for example, councils that represent both employer and employee interests are responsible for maintaining proper workplace standards. The practice is so entrenched that when the pandemic hit, Germans didn’t worry about whether workers had a right to participate in determining workplace conditions so much as whether that right was sufficiently protected if the necessary meetings were held by videoconference.
From the outset, the virus has spread easily in U.S. workplaces.
When employees have little say in determining workplace conditions, the results can be appalling. The U.S. meatpacking industry offers a cautionary tale. COVID-19 tore through slaughterhouses and meat-processing plants, where workers were stuck side by side on assembly lines. Federal and state regulators and the owners of meatpacking plants ignored complaints from workers and unions. Instead, firms allegedly offered employees “responsibility bonuses” for continuing to show up at work and disciplined workers for missing scheduled shifts. According to a July report by the Centers for Disease Control and Prevention, nine percent of all meat-processing workers in states for which data were available had contracted COVID-19, and of those diagnosed, 87 percent came from racial or ethnic minority groups.
The meatpacking industry in Europe has suffered its own outbreaks—thanks in large part to weaker protections for migrant laborers—but through early June, it had documented one-ninth as many cases as its U.S. counterpart, despite employing about two-thirds as many people. And while hot spots remain, the European response to these outbreaks has been significantly more aggressive: the governments of the two countries with the largest meat-processing industries, Germany and Spain, have extended new rights to contract workers who had previously been excluded from labor protections and were most vulnerable to COVID-19.
A similar story has unfolded in other industries, including in retail, construction, cleaning services, and health care: the pandemic exposed a lack of protections for U.S. workers while it encouraged European workers to push for and win better standards and new rights. In both the United States and Europe, for instance, Amazon employees engaged in work stoppages and protested workplace conditions. Amazon fired leaders of protests in the United States (claiming they had violated certain company policies), but a court in France helped Amazon’s French employees force the company to negotiate new safety standards.
Safer workplaces make the whole society safer. Improved standards in industries where workers have contact with the general public reduce the risk of transmission to the broader community. In the United States, the virus spread disproportionately in neighborhoods that were home to many “essential workers,” in the communities where meat-processing plants were located, and in places where opening bars and restaurants created spikes of infections among staff. To fail to ensure the safety of workers is to fail to keep the virus in check.
The relative lack of worker power in the United States also risks hurting the country’s overall economic recovery. The pandemic has dampened economic activity everywhere—GDP fell by 9.5 percent in the United States and 12.1 percent in the euro area during the second quarter of 2020. But the weaker position of U.S. workers means the United States will probably be slower to regain its economic footing than will its European counterparts.
The United States has channeled most relief for workers through unemployment insurance payments to those who lost their jobs. In March, Congress passed a historic expansion of the program, increasing benefit amounts and loosening eligibility requirements. In June, unemployment insurance benefits represented 15.6 percent of total U.S. wage and salary income, more than six times the pre-crisis high of 2.5 percent.
Unemployment insurance has been a crucial lifeline for the U.S. economy and millions of workers. But many Americans struggled for weeks and even months to receive these payments thanks to dilapidated public infrastructure—the computers that process unemployment insurance in many states still rely on programming from the 1960s—and the fact that the system often makes it difficult for people to get benefits in the first place. Since the creation of unemployment insurance during the New Deal—when segregationist legislators intentionally excluded agricultural and domestic workers from the program—various provisions have made it harder for Black and Hispanic workers to obtain benefits. Moreover, the system incentivizes employers to contest workers’ claims for benefits (by linking employer taxes to the number of employees who file for benefits) and otherwise restricts workers from getting assistance where receiving it might increase their bargaining power. For example, the U.S. Department of Labor has affirmed that states can rescind the benefits of people who refuse to return to work during the pandemic—even those who fear that doing so is unsafe.
The expanded unemployment benefits were allowed to expire at the end of July, as conservative lawmakers insisted that they were too generous. Millions of unemployed Americans saw their income suddenly drop by $600 a week right as any momentum toward a recovery slowed. U.S. President Donald Trump has sought to provide a smaller boost to unemployment through a presidential memorandum, but this effort is likely to provide insufficient, short-term relief. It has also stalled the necessary legislative process for extending the payments that were at the heart of the initial U.S. response to the pandemic, even though the unemployment rate is still above ten percent.
Other industrialized countries, by contrast, have established—with greater worker involvement—systems that are more resilient. European countries already have more functional unemployment insurance systems than that of the United States. Many of these nations, including Belgium and Denmark that use the “Ghent system” in which unions are responsible for administering jobless benefits, have built programs based on the imperative of including rather than excluding workers. European countries have also established or boosted programs that sent money to workers while they remained on payrolls, often through so-called work-sharing or short-time compensation arrangements. The German government looks likely to extend from 12 to 24 months its expansion of the Kurzarbeit (“short work”) program, which allows companies to furlough workers—instead of laying them off—by helping make up for their lost earnings from reduced hours. Such measures helped minimize the disruption to the economy during the unprecedented shutdowns, creating a clearer path from crisis back to recovery.
These programs help explain why official unemployment rates rose by less this spring in Europe than in the United States, despite similar declines in GDP. Moreover, these work-sharing approaches—typically negotiated jointly by employers and unions—reflect the joint commitment of the government and the private sector to maintain the incomes of workers during the crisis. What distinguishes these programs from their U.S. counterparts is not that their benefits are necessarily more generous—at least this spring, unemployed U.S. workers were often receiving slightly more in benefits as a share of their prior income than were unemployed Europeans—but how they ensure that, on a firm-by-firm basis, workers both remain better connected to the labor force and actually get the payments they are due.
The lack of worker power in the United States risks hurting the country’s economic recovery.
The role of worker power in making these programs function is evident in a little-appreciated fact: the basic mechanics of European-like schemes are available in the United States, but they haven’t been actually used in a way that benefits workers. Prior to the crisis, 27 states had enacted work-sharing arrangements, in which workers can receive unemployment benefits to compensate for reduced hours; and the Paycheck Protection Program, as the U.S. small-business support program is called, has made $660 billion available to firms in an approach designed to prevent layoffs. But according to the U.S. Department of Labor, only about 450,000 workers out of 28 million workers claiming unemployment benefits in the United States are enrolled in work-sharing schemes, and little evidence supports the notion that PPP and other business assistance programs have actually encouraged employers to retain workers. The airlines were one of very few industries to which government support came with an insistence on firm rules around employee retention. Unsurprisingly, flight attendant unions and other airline worker groups played an important role in negotiations over the aid.
Restarting a weakened economy will require the government both to control the virus and to provide real support to workers, families, and small businesses. A robust program to maintain workers’ incomes is necessary to allow workers to stay home when social distancing is in effect and to restart activity when it is not. Without bringing workers to the table, the United States will struggle to make these programs as effective as they can be.
And failing to provide strong and reliable support to workers will have economic consequences that go far beyond the unemployed themselves. Aid to idled workers not only helps them and their families but also serves an important “countercyclical” function during an economic downturn. These workers are likely to quickly spend the money they receive, helping to boost consumer activity that can in turn drive a wider recovery. But if the unemployed aren’t actually able to access benefits—or if those benefits expire too early in the downturn—then people will be less likely to spend and support the economy. The United States has neither managed to keep workers on payrolls nor provided sufficiently comprehensive and long-lasting financial support to workers. As a result, the country risks greater damage to small businesses and local communities and a deepening economic downturn.
As many economists have repeatedly insisted, protecting public health and supporting the economy in a pandemic are not mutually exclusive goals. The United States’ inability to marshal a comprehensive response encompassing both is a failure of leadership that has been exacerbated by the absence of workers from decision-making. Federal and state efforts to “reopen” the economy have rarely included more than superficial consultations with workers.
The debate over whether and how to reopen schools in the United States offers a useful counterexample. Teachers are unionized at relatively high rates compared with other sectors of the U.S. economy (about 70 percent of public school teachers, for instance, belong to unions). In some districts, teachers have protested rushed plans and won protections for both staff and pupils alike. But teachers have struggled to secure such measures in states where their unions have less power. That teachers have any opportunity at all to participate in such decisions stands in marked contrast to almost every other part of the U.S. economy.
U.S. policies in the wake of the pandemic treat most workers as dispensable.
U.S. policies in the wake of the pandemic treat most workers as dispensable and, in so doing, put the public at risk. State governments were slow to mandate or even encourage mask wearing, leaving retail workers to enforce their use. And Republican legislators have tried to exclude corporations from liability even if workers, consumers, or their families contract the virus in a workplace or a place of business, thereby prioritizing the protection of business owners over tackling the threat of COVID-19.
Many European countries, by contrast, maintain a long-standing “social dialogue” model in decision-making about major social and economic issues, in which labor and employer organizations are involved in negotiations around major policies. This approach is embedded in institutions and political norms. And it reflects how union membership can, in the words of the political scientists John Ahlquist and Margaret Levi, encourage people to take actions that are “in the interest of others” outside their own group by expanding their sense of whose fate is tied to their own. Reforming labor laws to make it easier for workers to organize and join unions is a crucial step to not only increasing wages or reducing inequality but building a society more resilient to crises.
Recent decades have shown that societies become more unequal when workers have less power. The travails of this year suggest that empowering workers will also strengthen a country’s ability to weather the ravages of a pandemic.