The Real Cost of Cheap Labour

A review of Hell to Pay: How the Suppression of Wages Is Destroying America by Michael Lind, 240 pages, Portfolio/Penguin Random House (May 2023).

Real wages in the United States have been stagnant for five decades. Since 2021, inflation has been outstripping real wage growth, driving down living standards for many American workers. But mainstream economists and political commentators on both the libertarian Right and much of the liberal Left treat low wages as an unfortunate but unassailable facet of the modern globalized economy. Low wages are the price we pay for free trade, efficient markets, and low prices. If liberals and libertarians diverge at all from this point of the neoliberal consensus, it is only in how to best respond to low wages. Liberals may support government welfare to supplement low wages while libertarians contend that redistribution disincentivizes workers from upskilling or moving laterally into industries and occupations in higher demand, but both accept low wages as the natural byproduct of technological progress (i.e., automation) and the global free markets of goods and labor that lower prices for everyone.

In his new book, Hell to Pay: How the Suppression of Wages Is Destroying America, Michael Lind rejects this status quo. Enabling employers to pay low wages, he contends, is a political choice. Far from being natural or inevitable, low wages are the spoils of a successful war being prosecuted by employers against worker bargaining power.

Lind concedes that low wages translate into lower consumer prices—but, as the title of the book suggests, the price Americans pay for low prices is far too high. He places low wages at the root of the biggest problems plaguing Western countries, especially the United States, where the assault on worker bargaining power has been most extreme. His contention is that low wages contribute not only to poverty but also declining marriage and birth rates, toxic identity politics, partisan polarization, moral panics, loneliness and social atomization, “deaths of despair” caused by depression and addiction, and more.

The argument goes like this: employers suppress wages by reducing worker bargaining power through union-busting, offshoring, bringing in low-wage foreign workers, and various employment practices such as “salary bands, no-poach agreements, non-compete clauses, forced arbitration, and the outsourcing of jobs to contractors.” These practices have been so successful at retarding wages that many workers are no longer able to survive without public assistance, which Lind reframes as “employer welfare.” Employers need only pay sub-living wages because the government offers food stamps, subsidized housing, the Earned Income Tax credit, and other means-tested benefits. (Lind excludes both universal benefits, such as public healthcare and childcare benefits, and “social insurance” that workers contribute to, such as Social Security, from his definition of welfare.) The taxpayer is left picking up the bill to keep low-wage workers alive. In Lind’s words, “The business model of 21st century American neoliberal capitalism is privatizing the benefits and socializing the costs of cheap labor.”

Meanwhile, aspirants to the beleaguered middle class find themselves mired in an expensive credential arms race despite diminishing prospects in the face of the slow proletarianization of the liberal professions. Colleges are putting out more graduates than there are good jobs, and the oversupply of graduates exerts downward pressure on wages for those lucky enough to find a professional job at all. Students trained for professorships are now more likely to become low-paid adjuncts in precarious employment or baristas. But despite diminishing prospects, middle-class aspirants have no choice but to attend college and shoot their shot. Credential inflation has employers favoring applicants with bachelor and advanced degrees for roles that don’t even require such education. The lowliest entry-level administrative assistant now usually needs a four-year degree to get their foot in the door of most big companies. (Lind contends, as have others, that this highly competitive environment encourages the promotion of toxic identity politics by professionals who leverage identity as yet another credential and a weapon for elbowing one’s way past the competition and up the career ladder.)

These economic conditions have more and more workers delaying or forgoing marriage and procreation. Much of the working class cannot afford to buy homes or raise kids without further impoverishing themselves. Those aiming for middle-class professions often spend much of their 20s and even 30s in college, internships, postdoctoral study, and the like. Those who don’t come from generational wealth often come out with too much debt to buy homes or start families, thus major life milestones are delayed even longer. Many of those who run the academic gauntlet never secure a good, stable professional career at all. There just aren’t enough professional jobs for all of the college graduates.

The “demographic crisis” is but one social pathology Lind traces back to the assault on worker compensation and bargaining power. He attributes many “deaths of despair” from depression, alcoholism, drug addiction, and suicide to low wages and diminished prospects. However, this isn’t just a byproduct of the economic crisis. People are more atomized than ever in both their professional and personal lives due to, respectively, the collapse of unions and other civic associations, as Robert Putnam famously chronicled in Bowling Alone, and the decline in family formation and family life. Lind writes, “What was once the rich associational life of much of the American working class, centered on unions, churches, clubs, and local political parties and supplemented by friendship with neighbors, in all too many places has become a social desert.”

Political polarization, centered around inane culture wars, is also traced back to the decline of unions and mass politics. With private-sector unions decimated and public-sector unions on a slow decline, most American workers lack institutions to represent their economic interests or counter the political lobbying done by employers in pursuit of business interests. Neither of the national political parties is of much help here, as they each cater primarily to the interests of donors and primary voters who tend to be more educated, affluent, and ideological than the average citizen or even voter. Lind writes, “Affluent Democrats and Republicans alike tend to be motivated by ‘post-material values’ and passionate about polarizing social issues like abortion or gun control, unlike America’s multiracial working-class majority, whose chief concerns according to pollsters are quotidian issues like the economy, health care, and safety from crime.”

This is a notably nonpartisan indictment of the political establishment. Lind faults both of the national parties and wisely warns against partisan politicization of the labor movement so as not to alienate workers, who, of course, hold a range of social views and political affiliations. In this way, Lind departs from other prominent proponents of organized labor and worker power. In her 2021 book A Collective Bargain: Unions, Organizing, and the Fight for Democracy, celebrity union organizer Jane McAlevey makes the case for a revitalized labor movement as a vehicle for the pursuance of a broader progressive agenda. This is partially strategic. Labor can, and does, use its influence in the Democratic Party to push for labor-friendly policies. While McAlevey condemns neoliberal Democrats for their role in dismantling unions, she still sees the Democratic Party as the best path forward for rewriting labor laws hostile to American workers and rebuilding the labor movement.

The problem with this strategy is that the Democratic Party, in particular, its social agenda, alienates many workers. Lind cites polling showing that workers are more likely to reject union representation for political reasons than out of fear of employer retaliation. Whatever political power the labor movement gains through its purchase in the Democratic Party may well be offset by how the association erodes the appeal of the movement to its grassroots base. The tradeoff doesn’t look favorable. The sad state of organized labor in the United States suggests that the Democratic Party hasn’t been an effective champion or defender.

Convincing unions to remain neutral on divisive social issues, as Lind suggests is necessary, would not be easy given how enmeshed they are in the wider complex of progressive nonprofits. Now that private sector unions have all but disappeared, the labor movement is dominated by public sector unions whose memberships consist mostly of schoolteachers, civil servants, and other college-educated professionals whose social views typically lean left. This specific membership has had a marked effect on the goals of the labor movement itself, as seen by the various social justice causes championed by teachers’ unions in recent years. Within the actually existing labor movement, union leadership, professional organizers, and much of the rank-and-file members consider social justice issues non-negotiable. As Lind notes, “Traditional working-class concerns have been yoked to those of college-educated progressive activists in various single-issue movements based in the nonprofit sector and academic leftism: sexual and reproductive rights, environmentalism, racial identity politics.”

Lind’s other key policy prescriptions are unlikely to land well with such membership, either. Lind calls for restrictions on the ability of American corporations to engage in “global labor arbitrage” via offshoring and the importation of low-wage foreign workers, whether unskilled or brought in by corporate employers under the H-1B program. While Lind acknowledges that there is a range of valid interests relevant to immigration policy, such as refugee and family policy, and concedes that reasonable people can disagree on the “right” levels of immigration, contemporary progressives obsessed with “diversity and inclusion” are likely to view any talk of immigration restriction as nativist and xenophobic. Progressives and the radical Left have converged with free-market libertarians on permissive immigration policies, albeit for different reasons, even if they fail to realize how their embrace of open borders fits into the neoliberal consensus.

Other prescriptions to restore worker power may or may not provoke segments of the existing labor movement, which Lind would happily upend by abandoning the failed system of enterprise bargaining established by the Wagner Act in 1935. Enterprise bargaining forces workers to organize “shop by shop,” collecting signatures and winning recognition through workplace elections. This kind of organizing is slow, tedious, prone to failure, and easy to undermine. When workers do win union recognition, employers can simply close up shop and reopen elsewhere, as Starbucks has done to unionized stores in recent years. For these reasons, attempts to strengthen or fix enterprise bargaining, such as the PRO Act championed (unsuccessfully) by the Biden administration, seem futile and misguided. Lind proposes a patchwork of alternatives to enterprise bargaining: a national system of sectoral bargaining, which is common in Europe and has also proven successful for US railroad, transit, and airline employees covered under the Railway Labor Act of 1926; wage boards to represent workers employed by small businesses and in distributed industries; and legislation to protect basic workers’ rights and curtail employment practices designed to undermine worker bargaining power.

If these strategies worked and American wages went up, so too would consumer prices. Likewise, Lind’s calls for expanded universal benefits and social insurance, if funded through payroll or corporate taxes, would also drive prices higher. (If not, the money would have to come from another tax source. Someone has to foot the bill.) To this, Lind says fine and good. Let the employers pay for their own workers. Let consumers pay the true cost of the goods and services they consume.

Lind believes his prescriptions would be popular with, “if not economic elites,” the majority of American voters, who have long favored lower levels of immigration and protectionist trade and industrial policies, according to some polling. I am not so sure, especially if we consider the material interests of the college-educated overclass of professionals and managers Lind took on in his previous book, The New Class War: Saving Democracy from the Managerial Elite. Such workers are an economic elite. The middle class benefits disproportionately from low consumer prices since they generally consume far more than the working poor. While middle-class liberals, including professionals in many public sector unions, may support unrestricted immigration out of sincerely held moral beliefs, such positions have historically been in line with their own material interests. Would middle-class professionals really support sweeping economic changes that drive up their own living costs? Perhaps—if the middle class continues to shrink and proletarianize. But it would be in the interest of the neoliberal political order to keep the middle class and its aspirants happy (or at least grinding away hopefully), just as it is in the establishment’s interest to provide just enough welfare to keep the working poor alive.

Lind closes Hell to Pay with an ominous warning to business interests that a political order producing such harmful social outcomes cannot be sustained and that employers are better off negotiating with their workers than some future demagogue, “more effective and focused than Donald Trump,” who capitalizes on populist discontent. But what if the neoliberal order can be sustained? Socialists, taking their cue from Marx, have long claimed that the “internal contradictions” of capitalism will lead to its inevitable collapse. For almost two centuries now, they have been wrong. Capital, or business interests, or the neoliberal political order, or whatever you want to call it, has shown itself perfectly capable of managing its own crises and “contradictions.” At this point, we should not doubt the system's capacity to manage conflict and even decline.