Labour Policies and the Wage Gap
A fine editorial from Marjorie Cohen in today’s Vancouver SunÂ on the close link between labour policies and wage inequality.
I think we’re leading with our chin on this one. I took a look at the database Armine Yalnizyan’s paper last year was based on (which said largely the same thing as the Statscan study). What it showed was a sharp drop in the average income in BC from about 1980-1982. It has been mostly flat ever since, except for a few minor improvements since 2000. So it would look like the collapse of forest industry jobs during the recession in the early 1980’s, and the advent of the buncher-feller technology, had a much bigger impact of the long-term changes in wages than any changes in labour policy since that time. Most notable is that things didn’t improve during the 1990s when the NDP was in power and brought in several progressive labour policies. This is something Jim Stanford talks about with his EFRU index, that basically a strong industrial jobs base has more impact than government policy, which is why Ontario comes out on top in his index regardless of what political party is in government.
Last time I ran the national statistics on inflation adjusted hourly compensation going back to the 1970s wages peaked +/- 1978 and then went basically flat until 2000. This was a nation wide trend. So focusing on the particularities of BC seems a little odd to my mind. No doubt changes in the forest industry exaggerated this trend in BC but what needs to be accounted for is the more generalized trend.
When we turn to labour legislation, labour market and welfare policy, and industrial restructuring and rationalization we get a much more robust i.e., nation wide explanation.
Note that similar factors also help explain the relative stagnation in inflation adjusted wages in the US and other advanced capitalist countries.
It is what some of us us call neoliberalism and others euphemistically refer to as globalization.
If you click here you can see a graph of corporate profits as a percent of total labour income going back to 61. http://rppe.files.wordpress.com/2008/05/corporate_profit_ratios_canada.jpg
When I have time I will scale out executive and managerial pay. I am quite certain the graph will be even more drastic.
The deliberate action to undermine wage growth and to remove social policy protection of income has been successful as the census date confirms once again. The policy operates at various levels. At the federal level, UI/EI, monetary policy, fiscal policy, trade policy, the absence of pro-active industrial policy were all aimed at reducing so-called labour market rigidities and introduce flexibility. Under our Liberal-Conservative governments, for 25 years Canada has been a poster child for neo-liberalism, which is about making labour a commodity, and creating spot markets for labour. Workers were supposed to move to find work, and accept lower wages.
In BC the government has gone further making explicit commitments to weaken income and social policy as Marjorie Cohen points out. Without these measures, the gap in BC would have been closer to the national average. How much? There is no way to measure it exactly in a satisfying manner. But government policies do matter. Why else are they introduced?
The BC measures were so draconian they eventually contributed to a Supreme Court of Canada decision to recognize collective bargaining rights, over-turning decades of jurisprudence under the charter.
In fact, BC and Manitoba lead the non-oil having provinces (NOHPs) in corporate profits as a percent of total labour income. Which is itself at a record high for the last 27 years. See the graphs presented here.
This whole debate is starting to remind me of the argument where someone complains about the degree of manipulation in advertising and the other side responds with “advertising does not work.” And they spend all that money on advertising why?
Armine said it well, and I mentioned it in my minimum wage paper, that workers are better educated, working harder, and are more productive than ever before, but their wages have stayed flat. There has been some long-term growth in GNP, which all else being equal would have resulted in some increases in profit, some increases in wages. But this was all happening while a wide range of neoliberal policies were being implemented from 1978 onward, which meant wages were flat and profits and executive pay surged. This reflected in the ramping-up of the 90th percentile incomes that is covered in Armine’s paper, and is also the topic of much discussion by Saez and Veal.
However, we get into difficulty when we argue that the problems from 1980-2005 were attributable to the BC liberal government from 2001 onward. That is because the changes were happening continuously over that 25-year period, including both federal and provincial policy. Then there were major structural changes that were independent of public policy, which in BC related to the long-term collapse of forest sector employement, most pronounced at the beginning of the 25-year period.
Remember we are talking about aggregate figures. Marjorie is right to note several classes of employees who have been hurt badly. However, there is a whole swath of oil and gas workers and construction workers who have done well (no thanks to public policy), and those increases average everything out.