Monday, November 7, 2011

The 99%, the 1%, and Class Struggle

The 99%, the 1%, and Class Struggle


Dollars and Sense

November 2011


[Use the link above to view the accompanying graph.]


Between 1979 and 2007, the income share of the top 1% of

U.S. households (by income rank) more than doubled, to

over 17% of total U.S. income. Meanwhile, the income

share of the bottom 80% dropped from 57% to 48% of total

income. "We are the 99%," the rallying cry of the

#OccupyWallStreet movement, does a good job at calling

attention to the dramatic increase of incomes for those

at the very top-and the stagnation of incomes for the majority.


This way of looking at income distribution, however,

does not explicitly focus on the different sources of

people's incomes. Most people get nearly all of their

incomes-wages and salaries, as well as employment

benefits-by working for someone else. A few people, on

the other hand, get much of their income not from work

but from ownership of property-profits from a business,

dividends from stock, interest income from bonds, rents

on land or structures, and so on. People with large

property incomes may also draw large salaries or

bonuses, especially from managerial jobs. Executive pay,

though treated in official government statistics as

labor income, derives from control over business firms

and really should be counted as property income.


Over the last forty years, the distribution of income in

the United States has tilted in favor of capitalists

(including business owners, stock- and bondholders, and

corporate executives) and against workers. Between the

1940s and 1960s, U.S. workers' hourly output ("average

labor productivity") and workers' real hourly

compensation both grew at about 3% per year, so the

distribution of income between workers and capitalists

changed relatively little. (If the size of a pie

doubles, and the size of your slice also doubles, your

share of the pie does not change.) Since the 1970s,

productivity has kept growing at over 2% per year.

Average hourly compensation, however, has stagnated-

growing only about 1% per year (see figure below). As

the gap between what workers produce and what they get

paid has increased, workers' share of total income has

fallen, and capitalists' share has increased. Since

income from property is overwhelmingly concentrated at

the top of the income scale, this has helped fuel the

rising income share of "the 1%."


The spectacular rise in some types of income-like bank

profits or executive compensation-has provoked

widespread outrage. Lower financial profits or CEO pay,

however, will not reverse the trend toward greater

inequality if the result is only to swell, say, profits

for nonfinancial corporations or dividends for wealthy

shareholders. Focusing too much on one or another kind

of property income distracts from the fact that the

overall property-income share has been growing at

workers' expense.


Workers and employers-whether they like it or not,

recognize it or not, prepare for it or not-are locked in

a class struggle. Employers in the United States and

other countries, over the last few decades, have

recognized that they were in a war and prepared for it.

They have been fighting and winning. Workers will only

regain what they have lost if they can rebuild their

collective fighting strength. In the era of globalized

capitalism, this means not only building up labor

movements in individual countries, but also creating

practical solidarity between workers around the world.


A labor resurgence could end workers' decades-long

losing streak at the hands of employers and help reverse

the tide of rising inequality. Ultimately, though, this

struggle should be about more than just getting a better

deal. It should be-and can be-about the possibility of

building a new kind of society. The monstrous

inequalities of capitalism are plain to see. The need

for an appealing alternative-a vision of a cooperative,

democratic, and egalitarian way of life-is equally stark.



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