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The Powerful Capitalist Squeeze

The majority of Americans are distressed and angry, and many have protested in the street or have supported politicians who give voice to their alienation. Public trust in the federal government is very low; in 2019, Pew found that “[o]nly 17% of Americans today say they can trust the government in Washington to do what is right ‘just about always’ (3%) or ‘most of the time’ (14%)” (Public Trust in Government, 2019). According to a December 2020 Gallup poll, 83% of Americans were dissatisfied “with the way things are going in the United States at this time” (Satisfaction With the United States, n.d.). There are many reasons for this high level of disaffection including the lack of government responsiveness to public opinion (i.e. climate change and gun regulations); and the lack of representation in government (i.e. the demographic makeup of Congress) to name two examples. One reason that deserves much more attention, is a trend of corporations seeking to maximize profits by shifting costs to the nation, to local communities, and, above all, to their employees and their families, a trend I call the “capitalist squeeze”. As a result, people have to work ever harder and longer in order to sustain themselves and their families, which is a major cause of alienation. One may argue that this trend began when capitalism started. However, I next show that this continued squeezing of workers’ lives for economic gain has advanced considerably since the 1970s, in reaction to some social progress achieved in the 1960s.

Since roughly 1970, the conservative trend, which garnered ideological and political support for the capitalist squeeze — reflected in the privatization of public missions and in deregulation — has been relentless. There are two ways to look at the 1970s baseline. (Historian Jill Lepore dates the turning point between 1968 and 1972 (“How the Pandemic Has Exposed America’s Deep Divide,” 2020).) One is to see it as a turning of the periods. This follows the argument of historian Arthur Schlesinger, Jr., who holds that the US alternates between liberal and conservative ages. According to this theory, after the liberal sixties, the US was “due” for a conservative reaction. However, another way to look at the trend that started in the early 1970s is that the US is a basally conservative country, which — after a liberal interlude — was “due” to return to its basic trendline. In either case, Democratic presidents and Democratically-controlled Congresses have been unable to significantly attenuate this trend. Most telling, President Clinton ended welfare “as we knew it” and froze social programs in order to balance the budget.

In the early 1970s, millions of factory workers — blue-collar workers — had wages that covered the basic needs of their families, earning what is called a “living wage,” enabling their partners, typically their wives, to be homemakers. These workers were also granted benefits, including health insurance and retirement benefits. Labor unions were strong. Income inequality was much lower than it currently is (“How Has Income Inequality Changed over the Years?,” 2016). I am not arguing that it was an ideal society. There was considerable discrimination against LGBTQ people, women, and members of racial and ethnic minority groups. The environment was neglected. However, compared to contemporary conditions, by many measures, most American workers and their families were better off; details follow.

The Wage Squeeze

Since the 1970s, workers’ wages have become increasingly stagnant. Non-management workers employed in the private sector earned an average of $22.65 an hour in July 2018. In January 1973, average earnings amounted to $4.03 an hour, which was equivalent to $23.68 in 2018, meaning that, in terms of purchasing power, average wages actually fell by over a dollar an hour between January 1973 and July 2018 (DeSilver, 2018). For workers putting in 40 hours a week, 52 weeks a year, this amounts to a loss of $2,142.40 in purchasing power over the course of a year. Similarly, according to the Consumer Price Index (CPI) Inflation Calculator maintained by the Bureau of Labor Statistics (BLS), the apparent increase in full-time autoworkers’ wages over this time period, from $10,198 per year in 1970 to $64,613 in 2018, actually represents a decrease in purchasing power. By July 2018, $65,896.34 ($1,283.34 more than autoworkers’ 2018 wages) would be required to secure the same buying power of $10,198 in July 1970 (CPI Inflation Calculator, n.d.; National Income and Product Accounts: Table 6.6B. Wages and Salaries Per Full-Time Equivalent Employee by Industry, 2020; National Income and Product Accounts: Table 6.6D. Wages and Salaries Per Full-Time Equivalent Employee by Industry, 2020). Meanwhile, the real GDP per capita (expressed in 2012 dollars) increased by 135.99% in the same time period, going from $24,288 in the third quarter of 1970 to $57,317 in the third quarter of 2018 (U.S. Bureau of Economic Analysis, 2020b).

In short, as capitalism kept producing more — the real GDP (in 2012 dollars) grew from $4.94 trillion at the end of 1970 to $19.25 trillion at the end of 2019 and real GDP per capita (in 2012 dollars) rose from $23,945 at the end of 1970 to $58,490 at the end of 2019 — and the cost of living rose (as reflected in the CPI), but real wages did not keep pace (U.S. Bureau of Economic Analysis, 2020a, 2020b). Illustrated in other terms, today the income differential between high-level managers and wage workers is, on average, 60 percent greater than it was five decades ago. While these high-level managers have reaped the financial rewards of a steadily growing economy, workers’ wages have remained stagnant (Wodtke, 2016). As a result, households, i.e., families, today have to work longer and harder than they did in 1970, about twice as hard as they did in 1970 to maintain a similar standard of living.

Fewer Benefits

In 1970, large corporations — and many smaller ones, as well — tended to provide employees with health insurance and retirement benefits. The latter often took the form of pensions that extended throughout former employees’ lives and, together with Social Security, enabled them to retire securely. Since then, the trend has been to either greatly dilute these benefits or to stop providing them altogether. Comparative data are often not available for the 1970s; however, developments since 1990 suffice to highlight this trend, which requires workers and their families to increase what they pay for health insurance, as well as their contributions to save for their retirements. In effect, this is one more way that employees now are paid less, and significantly so, as benefits often amount to as much as a third of total compensation.

Between 1970 and 2019, there was a 12.5% decrease in the proportion of people under age 65 who had private health insurance through their employer (with employer coverage falling from 68.6% to 60.0%) (Cohen et al., 2009, p. 9; Table HI05_ACS. Health Insurance Coverage Status and Type of Coverage by State and Age for All Persons: 2019, 2020). In recent years, companies have been ensuring that their employees bear the brunt of the rising cost of health insurance. Frequently, this comes “in the form of health insurance plans that carry high deductibles” (Silverman, 2016). Both deductibles and participation in high-deductible plans have been increasing, and higher deductibles mean that workers face significant costs when they get sick (Silverman, 2016). Employers can contribute to employee health savings affiliated with certain high-deductible plans, but many do not. In fact, 55% of employers that sponsor plans that offer health savings accounts (HSAs) — one of the two most common savings options affiliated with high-deductible plans — do not contribute to their employees’ HSAs. Approximately one quarter of all workers in a high-deductible plan with an associated HSA do not get any employer contributions in their accounts (Claxton et al., 2019).

Overall participation in private industry employee retirement benefits has not changed much in the last 30 years, going from 53% in 1990–1991 to 52% in March 2019. However, there has been a considerable change in the type of retirement plans employees have. Between 1990–1991 and March 2019, participation rates for defined benefit plans dropped 65.7% (from 35% to 12%), while participation rates for defined contribution plans rose 38.2% (from 34% to 47%) (National Compensation Survey, 2019, p. 1; Wiatrowski, 2006, p. 6). Retirement income from defined benefit plans — calculated using benefit formulas — is guaranteed. Meanwhile, retirement income from defined contribution plans fluctuates, depending on contribution amounts and rates of return on investments (National Compensation Survey, 2020). Thus, the shift in participation from defined benefit plans to defined contribution plans indicates that employees have increased uncertainty, responsibility, and risk related to their retirement income (Morrissey, 2016). According to the BLS, employers’ move from defined benefit plans to defined contribution plans started in the 1980s (“Retirement Costs for Defined Benefit Plans Higher than for Defined Contribution Plans,” 2012, p. 3). In a 2016 post on the National Public Pension Coalition website, Tyler Bond provides a summary of the shift:

It is one of the most well-known stories about American retirement: the decline of defined benefit pensions in the private sector. At one time, 88 percent of private sector workers who had a workplace retirement plan had a pension. That number is now 33 percent. So what happened? Where did all the private sector pensions go? While the advent of the 401(k) certainly played a role, the true cause may have more to do with a series of laws passed from the mid-1980s to the mid-2000s. These laws had the inadvertent effect of causing the decline of defined benefit pensions (Bond, 2016).

Workers once could retire when they reached a set age, say 65, drawing on secure retirement benefits, Social Security, and some savings to finance their golden years. Now, seniors often have only meager or no retirement benefits, and millions find that they must work in order to sustain themselves or contribute to their challenged extended family.

Between 1970 and 2019, the civilian labor force participation rate for people ages 65 and older increased by 18.8% (from 17.0% to 20.2%) (Bureau of Labor Statistics, 2020, p. 1; Fullerton Jr., 1999, p. 4). This figure does not include those who work in the informal economy in order to avoid having to pay taxes and as a way to keep all of their Social Security benefits (Epstein, 2019). Moreover, it does not include the many seniors who provide free child care to their children’s children. In 2013, “[o]ne-fifth of children aged below five with employed mothers benefited from grandparent provided child care as their main source of daycare in the US” (Ho, 2015, p. 359). Between 1998 and 2008, over 60% of grandparents cared for their grandchildren at some point, and, of those who engaged in such care, over 70% did so for at least two years (Luo et al., 2012, p. 1143).

Job Insecurity: The Growing Gig Economy

It is difficult to accurately estimate the gig economy’s size due to variations in the standards of what qualifies as gig work. However, drawing on data from three national studies, published in 2016, 2017, and 2018, the Gig Economy Data Hub concludes that “[m]ore than a quarter of workers participate in the gig economy in some capacity” (How Many Gig Workers Are There?, 2020). Based on 2017 data from the BLS, “[m]ore than one in ten workers rely on gig work for their primary income” (How Many Gig Workers Are There?, 2020). A 2014 General Social Survey found that 20.4% of workers depend on gig work to meet their needs. Ultimately, the Data Hub holds that, “[s]ynthesizing existing studies, we estimate that those who rely entirely on gig work in order to make a living comprise less than half of all gig workers. The rest of those who take on gigs do so on a supplemental basis, in addition to part- or full-time work or another income source” (How Many Gig Workers Are There?, 2020).

Gig workers typically have zero work security, receive little or no benefits, and must absorb some of the costs of doing business that employers previously covered. Thus, Uber and Lyft drivers use and maintain their own cars, while many taxi drivers who work for a company use its cars. Furthermore, companies expose gig workers to legal risks. For example, Uber and Lyft “frequently encouraged breaking local regulations to give rides even when providing the service wasn’t yet legal, offloading the risk to drivers while sometimes offering to cover resulting fines” (Siddiqui, 2020). In terms of earnings, as University of California Hastings College of the Law Professor of Law Veena Dubal puts it, “[w]ith changing fares and limitless competition, take-home pay remains an everyday gamble” (2020). In sum, as author Emily Guendelsberger explains, “gig economy workers generally shoulder most of the risks and costs of running a business, while the company retains most of the control and most of the rewards” (2020). Corporations find that gig workers are much preferable to regular employees for many jobs, ranging from nurses to commercial plane pilots. A growing proportion of workers are treated as if they are independent contractors rather than employees, even though the workers are doing jobs that, in the past, were carried out by employees. This trend to increase the proportion of the gig labor force compared to that of regular employees enhances corporate profits and impoverishes workers.

Child Care, a Particularly Hard Squeeze

In many scores of millions of two-adult households, income has increased since the 1970s, because now both adults are gainfully employed. Previously only one person worked outside of the home, whereas the other could devote all of their (usually her) attention to homemaking and child care. However, one often reads that, because the cost of living has increased since the 1970s at a rate unmatched by real wage growth, it now takes the earnings of 1.7 persons to maintain the same standard of living as one person’s earnings could maintain in the past. Thus, for two-adult households, the second adult’s entrance into the formal workforce has not resulted in a doubling of household income and higher standards of living; rather, the gained household income is necessary for survival.

True, between 1970 and 2019, median household income rose from $56,366 to $68,703 (with both incomes expressed in 2019 dollars) (Coder & Cleveland, 1971; CPI Inflation Calculator, n.d.; Semega et al., 2020). The difference between the wage freeze of individual workers and the growth in household income can be attributed to the fact that, while one member of the household could earn a wage that could provide for the family in 1970, it takes the wages of almost two persons to provide the same standard of living. In 1970, 43.3% of all non-institutional civilian women in the US who were at least 16 years old were in the civilian labor force (U.S. Bureau of Labor Statistics, 2019, p. 12). By 2018, that proportion had climbed to 57.1%, an increase of 31.9% (U.S. Bureau of Labor Statistics, 2019, p. 13). As Elizabeth Warren and Amelia Warren Tyagi put it in their book, The Two-Income Trap: Why Middle-Class Parents Are (Still) Going Broke:

The average two-income family earns far more today than did the single-breadwinner family of a generation ago. And yet, once they have paid the mortgage, the car payments, the taxes, the health insurance, and the day-care bills, today’s dual-income families have less discretionary income — and less money to put away for a rainy day — than the single-income family of a generation ago (Warren & Tyagi, 2003).

In addition to the financial strain of the “two-income trap,” the average two-income family today spends more hours each week working, and subsequently has fewer leisure hours, than single-income families with one stay-at-home parent. When defining work as time spent doing “market work, home production, child care, and adult care” combined, “fulltime dual-earners spend a combined 139 hours per week in total work … compared to 125 hours per week among couples with a fulltime employed father and stay-at-home mother” (Sawhill, 2020, 22). Since the percentage of full-time dual-income families has dramatically increased over the past 50 years, so too has the percentage of families required to work (again, defined as total work hours) longer and harder to remain afloat. The consequences of this upward trend towards overwork — economic, social, and psychological — must not be overlooked. With the decline of the stay-at home parent model, dual-income families today struggle to strike a healthy and sustainable work-life balance as “40% of fulltime-employed mothers say they ‘always feel rushed’ and 39% feel that they spend too little time with their children” (Sawhill, 2020, 22).

The trend of having both adults in a household gainfully employed started before 1970, but it has accelerated since then. It reduces the number of parents who are available to care for their young children during the work day, requiring parents to find — and, as a rule, to pay for (except in the case of free grandparent care) — child care, which eats up a good part of the additional income earned by the second gainfully employed household adult.

In 1970, 53% of mothers with a child or children under 18 worked outside the home; by 2019, 69.7% of those mothers were working outside their homes, an increase of 31.5% (Economic News Release: Table 5. Employment Status of the Population by Sex, Marital Status, and Presence and Age of Own Children under 18, 2018–2019 Annual Averages, 2020; Stay-at-Home and Working Mothers, 1970 and 2012, 2014). For those who had young children and who either did not have a partner or whose partner also worked, this entailed either turning child care over to their parents (who were often elderly), or paying for child care, typically out of their pocket. Child care was often hard to find, of low quality, and poorly regulated. Moreover, employers rarely paid for or contributed to child care costs, and parents paying for it found that it sucked up large proportions of the wages earned by women who joined the formal labor force. As Ashley Fetters put it, this creates an “ouroboros-like dilemma of having a job that only barely covers the expenses of child care, which you need only because you have a job” (Fetters, 2020). Nevertheless, for many parents, the portion — however small — of their income that remains after deducting child care expenses is crucial for their family’s survival (Fetters, 2020).

In the same period, the costs of raising a child rose. In 1960, “the average total expenditures on a child from birth through age 17 in a middle-income husband-wife family” totaled $25,230, which was equivalent to approximately $200,250 in 2015 (CPI Inflation Calculator, n.d.; Lino, 1996, p. 9). By 2015, the total was $233,610, an increase of $33,360 over the inflation-adjusted 1960 total (Lino et al., 2017, p. iii).

Millions of workers who have regular jobs not only are paid less in real terms and gain fewer benefits than their peers of an earlier era, but they also suffer from erratic work schedules. A 2015 report found that approximately 17% of employed people in the US have “unstable work shift schedules,” with at least 10% “assigned to irregular and on-call work shift times” and approximately 7% “work[ing] split or rotating shifts” (Golden, 2015). Citing data collected in 2017 and 2018, Brookings reports that 40% of people in the US who work for a wage or salary “know their schedules less than one month in advance” and almost 20% have less than a week’s notice about their schedules (Guyot & Reeves, 2020).

People who have irregular work schedules are more likely to report that they “often” have work-family conflicts than those with regular work schedules (Golden, 2015). Furthermore, the “variability of work hours contributes to income instability and thus, adversely affects not only household consumption but general macroeconomic performance” (Golden, 2015). Also, people who work in irregular shift jobs find that “[t]heir hours are so frequently cut or extended that they cannot plan to live off one job but find it almost impossible to hold down two” (McCallum, 2020, p. 4).

Work After Work

Since the advent of the internet, workers — especially white-collar workers and other professionals — are expected to be available during evenings, weekends, holidays, and vacations. Although there is significant variation in working hours across different sectors and sociodemographic groups, there is a clear, overarching trend toward longer work hours. As Middlebury College professor of sociology Jamie K. McCallum put it in his book, Worked Over: How Round-the-Clock Work Is Killing the American Dream:

From 1975 to 2016, the hours of all wage and salary workers increased by 13 percent, equivalent to about five extra weeks of work per year. … This happened even as worker productivity increased dramatically during the same period, and as all our peer countries decreased their average work hours. Combine these trends with decades of flat or declining wages, and it becomes clear that workers are giving far more to the economy than they’re getting in return (McCallum, 2020, p. 7).

Millions of people are working much more than the standard 40-hour week. About four in ten full-time workers report that they spend at least 50 hours per week working and nearly two in ten report spending at least 60 hours a week working (McCallum, 2020, p. 9). Furthermore, “Americans worked more than 700 million of their earned vacation days in 2017 because they feared they’d be labeled lazy, grounds for replacement in the no-rest culture, earning us the moniker ‘no-vacation nation’” (McCallum, 2020, p. 35).

With new technology and growing connectivity, employees are increasingly feeling tethered to their work for 24 hours a day, 7 days a week. Many feel — and many are indeed — expected to answer work-related emails after their work day is over. This has spillover effects into employees’ home lives. In fact, “[t]he mere expectation of being in contact 24/7 is enough to increase strain for employees and their families” (Haridy, 2018). As William Beck, a Pamplin College of Business at Virginia Tech associate professor of management, put it, “‘flexible work boundaries’ often turn into ‘work without boundaries,’ compromising an employee’s and their family’s health and well-being” (Haridy, 2018).

Some other countries are seeking to impose limits on connectivity. France has been leading the way; French Supreme Court rulings in the early 2000s laid the groundwork, and a 2017 law codified the need for companies to negotiate expectations regarding after-hours connectivity as part of each employee’s contract. Italy has passed a similar law. Some German companies have instituted their own policies. For example, in 2012, Volkswagen altered its email servers so that messages do not get delivered from 6:15pm until 7:00am. Another German car company has an optional program that an employee can activate to delete every incoming email when they are on vacation (with an automated note back to the sender to inform them of this fact). “The idea is that not only will a holiday be left undisrupted, but the worker can confidently return to work without the looming stress of a packed inbox” (Haridy, 2018).

Cost-Shifting to Society

This article focuses on cost-shifting from corporations to individuals and families, whereby corporations are paying less for the same work compared to earlier ages; making people work longer and harder for the same pay; making wages so low that people need two incomes to support their families, which also forces parents who might wish to stay home with their children to pay for child care; and forcing seniors to work to contribute to the upkeep of their grown children’s families or merely to survive on their own. I note that there is a whole other major area of cost-shifting, where the costs of doing business are “externalized,” i.e., shifted from corporations to society (and thus to the people as citizens and taxpayers). Reductions in regulations, which started during the Carter Administration, with the deregulation of airlines, and which have expanded ever since, especially during the Trump era, have the same cost-shifting effect as reductions in benefits and other direct forms of cost-shifting.

One of the most common examples of cost-shifting results in harm to the environment and to public health; when factories pollute the environment, the corporations that own them force society to pay to clean up the mess and to deal with the public health consequences.

Straws in the Wind

The Democratic Party, especially its left wing, has long stated its concern for many of the particulars of what I call the capitalist squeeze, and occasionally it has been able to attenuate this trend, albeit to a limit. Liberals, in general, favored a greater role for the government and increased role for it to protect better workers and the families. Recently, especially since the beginning of the pandemic, there has been an increase accepted of the role of government, albeit not necessarily to elevate the capitalized squeeze.

Often liberal policies have been blocked by the GOP, conservative Democrats, and special interest groups. However, recently, it seems that some conservative ideologues and Republican leaders have begun recognizing that economics ought to be about more than efficiency. In “The Case for Common-Good Capitalism,” published in November 2019, Senator Marco Rubio asserts that we must stop “priz[ing] economic efficiency over resiliency, financial gains over Main Street investment, and individual enrichment over the common good” (Rubio, 2019b). He seems to endorse stakeholder capitalism (rather than shareholder capitalism), holding that businesses should consider the interests of workers and the community, not only investors. (The Business Roundtable recently came out in favor of this approach, with 229 CEOs agreeing to a “Statement on the Purpose of a Corporation,” pledging to “deliver value to all” stakeholders, to promote “the future success of our companies, our communities, and our country” (Our Commitment, n.d.).) In another article, Rubio writes, “On the political right, we have become defenders of the right of businesses to make a profit, the right of shareholders to receive a return on their investment … But … we have neglected … the obligation of businesses to act in the best interest of the workers and the country that have made their success possible” (Rubio, 2019a). Conservative Oren Cass founded a new organization, American Compass, and, in an essay on the organization’s website, he states that environmental and employment regulations are required to “address externalities where the market outcome is not the efficient one and also intervene where economically efficient activities may have consequences that frustrate equally valid but non-economic goals” (Cass, 2020). Another recent example comes in the form of a memo written by a JPMorgan Chase advisory committee that includes business and political leaders, such as the chief executive of Johnson & Johnson, the executive vice chairman of Alibaba, former Secretaries of State Henry Kissinger and Condoleezza Rice, and former Secretary of Defense Robert Gates. The memo states, “Business leaders must realize that they not only have a moral obligation but also a commercial stake in advocating for a fairer, more equitable system” (Sorkin, 2021). Meanwhile the capitalist squeeze continues in full force; in effect it has grown tighter during the pandemic.

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Amitai Etzioni is a University Professor and professor of international relations at the George Washington University.

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