Labor Day Should Really Be Called 'Inequality Day'

We stand at levels of income and wealth disparity not seen since the 1920s.
09/01/2017 09:09 am ET Updated Sep 01, 2017

By David Weil

Labor Day was once a moment to commemorate the accomplishments of the American labor movement. With the continuing decline of organized labor, the attack on worker protection agencies by the Trump administration, and even the announcement by Secretary of Labor Alex Acosta that Ronald Reagan—the president that famously broke the air traffic controllers union—will be the next inductee in the department’s hall of fame, it seems more appropriate to focus on the challenges facing millions of workers rather than the eroding successes of the past.

Sadly, we might aptly call today’s commemoration “Inequality Day.”

We stand at levels of income and wealth disparity not seen since the 1920s. The prospects of children doing better than their parents, once an aspiration that squared with reality, has been steadily declining for several decades. Today, a child born to a typical household in the U.S. has about a 50 percent chance to earn more than his or her parents (compared to 90 percent of children born to parents in the 1940s). Workers can no longer be assured access to health care, pensions, or sometimes even the most basic labor protections in their workplace. The above does not begin to capture the inequalities that have grown stark in access to education, housing, or transportation.

Although many factors contribute to Inequality Day, one of the most important is the reorganization of basic employment relationships across the economy. Over the past decades, the notion of a simple employer/employee relationship has been transformed. Subcontractors, franchisors, third party managers, digital platforms, and every sort of intermediary have arisen in industries and occupations that span the gamut from low-wage janitors and hotel room cleaners to lawyers, journalists, and professors. Those profound changes, which I have called the fissured workplace, have spread and deepened across our economy. Larry Katz of Harvard and Alan Krueger of Princeton estimate that 94 percent of net employment growth between 2005 and 2015 occurred in such alternative work arrangements. At a fundamental level, that change means wages paid to workers are replaced by prices paid to contractors, and with that, we see downward pressure on earnings and the shifting of basic risks onto workers and their households.

Serving as the head of the Department of Labor agency in charge of enforcing basic labor standards during the Obama administration, the Wage and Hour Division, I saw daily evidence of the negative consequences of these changes, such as pervasive minimum wage and overtime noncompliance and the recurring failure to assure that workers receive the basic right of being paid fairly for their hours of work. My Labor Department colleagues at the Occupational Safety and Health Administration saw similar repercussions: murky responsibility for protecting health and safety often results in increased risks of injuries and fatalities for people working as subcontractors or for staffing agencies.

This business reorganization, motivated by a variety of factors, is here to stay. Nonetheless, there are ways for government, employers, unions, and worker advocates to address the modern workplace.

Businesses have chosen to shift work to other entities in part to be more flexible and dynamic. However they also seek to carefully control the actions of the subcontractors and other organizations they use. It is both reasonable and tractable to allow businesses to be flexible and still recognize their role and responsibility in assuring basic labor standards. Clarifying, standardizing, and then enforcing responsibility for labor standards can assure that businesses face the benefits and costs of fissuring.

Public policies can also better recognize that workplace changes have systematically lowered the bargaining power of workers relative to employers (or quasi-employers) in the labor market. A variety of interventions could help rebalance the effects of fissuring and its impacts on bargaining power and inequality. Creating greater transparency on wages and working conditions, particularly for low wage workers, would improve information about other labor market options. Drastically reducing the use of non-compete and mandatory arbitration clauses by employers would restore the crucial ability of workers to exit. Assuring greater access to skill enhancement would expand outside employment options inside and outside a worker’s current job. Finally, providing more varied methods of third-party worker representation, including but not limited to unions, could enhance the crucial role of “voice” in the workplace.

Although the Trump administration purports to be fighting for workers who have been left behind, the absence of any coherent policies to address inequality reveals the administration’s lack of appetite to do so (as well as the deep hooks business associations have in its policies). This is a good moment to think about the consequences of that inaction and to aspire to once again make Labor Day a time to commemorate progress in the workplace.

David Weil is Dean of The Heller School for Social Policy and Management at Brandeis University. He served as President Barack Obama’s Wage and Hour Administrator in the U.S. Department of Labor from 2014 to January 2017.

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