Labor Day Reflections

September 2, 2018

Labor Day, the first Monday in September, is an outcome of the U.S. Labor Movement and is dedicated to the social and economic achievements of American workers. It is an annual national tribute to the contributions workers have made to the strength, prosperity, and well-being of our country.

The first Labor Day holiday was celebrated on Tuesday, September 5, 1882, in New York City, in accordance with the plans of the Central Labor Union.  It didn’t take long for the federal government to recognize it (1885), and it became a national holiday in 1894.

The inspiration of Labor Day is closely tied to both the roots of Capitalism and the emergence of Labor Unions in the U.S.

In 1983, the first year for which union data are available, the union membership rate was 20.1 percent and there were 17.7 million union workers.

By 2017, the union membership rate had declined to 10.7 percent, and – most alarmingly – union representation of public-sector workers (34.4 percent) had become more than five times higher than that of private-sector workers (6.5 percent).

The origin of Capitalism as economic system assumed that private individuals or families who directly invested in (and directly took on the risks of loss) would own the means of production, distribution, and thus ensure a free and fair market for goods and services: They had real skin in the game.

Relying on the theories that: (1) people (consumers) are rational and will seek maximum utility from their economic actions; (2) information is transparently available to all who participate in the economy; and (3) markets are self-correcting; the concepts of Capitalism are compelling to most people when contrasted to cooperatively or state-owned means of wealth.

Worker exploitation was one of the early criticisms of the Capitalism model. The Labor Movement in the U.S. was instrumental in creating a buffer (safeguard) to help ensure a safer workplace, fair wages and reasonable hours and benefits.  The Labor Movement was enabled by Labor Unions.

Today’s version of Capitalism has morphed into ownership of corporations by passive investors (mutual funds, pension funds, venture funds, etc.) which seek maximum current ROI with little or no regard to sustainability or externalities.

The executives who are charged with achieving the expectation of the passive investors are “hired guns” who begin with no skin in the game, yet who often are rewarded with stock options when short-term outcomes are positive.

In 1978, the average CEO earned about 30 times as much as the average worker.  U.S. Census data tells us that the average income for U.S. households was $17,730, pegging average CEO income at $531,900.

In just 40 years, statistics from 2017 indicate that CEOs in the 350 largest companies in the U.S. are earning over 300 times as much as the average worker (actually, 312:1).

A recent survey by Glassdoor found that the median salary for U.S. employees is $51,272, implying median CEO compensation at nearly $16 Million.

There is no rational explanation for the explosion of the CEO to Worker compensation ratio.  It seems to reflect a total lack of oversight by those individuals who have been elected to represent the interests of the American people.

Current economic conditions ought to raise a red flag to our elected officials that our nation has navigated very close to a Feudalistic System which is on track to implode and to destroy the very notion of what is described in the Declaration of Independence.

Labor Day seems like an appropriate time to pause and reflect on what seems to be an egregious obstacle to the healthy future of our American society.

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