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Think Again: Labor for a Day, Capital for the Rest of the Year

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In the mainstream media, we focus on the business world every day and on labor one day a year. This obscures the awful treatment that so many U.S. workers endure--particularly their meager vacation time.

Last week, I made a short and somewhat jocular reference to how little vacation time most American workers enjoy. But this Labor Day, I read a great deal more on the subject and learned just how shameful the situation really is.

As Lynn Parramore of Reuters notes, medieval peasants enjoyed more vacation time than today's American worker. The church, she explains, was "mindful of how to keep a population from rebelling, [and] enforced frequent mandatory holidays, which included weeks off for weddings, wakes and births." She quotes the economist Juliet Shor, who found that in moments of relative prosperity--such as 14th century England--your average peasant might work for a mere 150 days per year.

But forget medieval peasants. As Dean Baker explains, the United States stands apart from other countries on this issue, and it's not anything to be proud of. We are the only major industrialized nation where workers are not legally entitled to paid leave of any kind. The norm in Europe is five weeks of paid vacation per year. In Germany, the most economically successful of Europe's large countries, workers are entitled to nearly seven weeks.

As I noted last week, workers in the United States are lucky to get two weeks, and as Baker notes, nearly a quarter get no time at all. Lest you think that this is an argument for economic stagnation, consider this: Germany's unemployment rate, which is decreasing, is only 5.4 percent, and their average hourly wage has risen by more than 4 percent in the past three years, accounting for inflation. But in the United States, wages have hardly risen over the past 10 years, and while unemployment has slightly decreased since it rose above 10 percent in 2009, it is still decidedly unhealthy at 7.4 percent, not including workers who have given up on finding jobs.

One way to reduce unemployment would be for the United States to follow Germany's example. As Baker notes, statistics compiled by the Organisation for Economic Co-operation and Development show that workers in Germany work an average of fewer than 1,400 hours a year. In the United States, that same worker is expected to put in nearly 1,800 hours a year. Baker explains that "If German workers suddenly had to work the same number of hours as workers in the United States, and their pay did not change, then employment would fall by 22 percent."

Now let's look at productivity. According to Thomas Schaller of The Baltimore Sun, a cross-national study recently released by the International Labor Organization found that American workers remain the world's most productive, creating an average annual wealth of $63,885. Measured hourly, they are second only to Norwegian workers, who enjoy many more social benefits than U.S. workers. Even so, U.S. workers not only work 400 more hours than Norwegians and Germans each year, they also work 330 more than the French. Many U.S. workers are either too insecure--or perhaps obsessive--to take even the meager number of vacation days to which they are entitled. According to Schaller:

Although we have 10 official federal holidays, none are guaranteed paid vacation days--a commonplace legal right in most other industrialized nations. ... Almost 3 in 5 American workers in 2011 ended the year with unused vacation time. In a typical year, the estimated number of unused vacation days nationwide is 175 million. Divide that by a standard, 250-day work year, and that equates to 700,000 worker 'years' of unused vacation annually.

Sadly, all this extra toil does not yield many rewards. While productivity rose 80 percent from 1973 to 2011, average compensation increased by barely one-eighth of that amount and has not increased at all since 2000, despite a 23 percent productivity increase. Take a moment to consider that.

If your child ends up being the CEO of a major bank, they can expect massive compensation no matter how they perform. As a recent report from the Institute for Policy Studies notes:

Nearly a quarter of the companies either shut down or received government bailouts following the 2008-2009 financial crash. Eight percent of these CEOs were fired but still received final bonuses averaging 48 million dollars, while an additional eight percent headed companies that had to pay fraud-related settlements of more than 100 million dollars per firm.

According to the AFL-CIO, average compensation for heads of the country's 500 largest companies was around $12.3 million last year, or approximately 195 times that of the average worker for those companies. CEO pay has risen an average of 40 percent in just the past four years, while worker pay has, as we noted, remained stuck for roughly three decades.

Then there are the severance packages.

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