There’s a hole in the economy where the middle class used to be. And the Harper Government is making it bigger by busting unions.
You’ve heard of Reaganomics? That’s where money was supposed to trickle down from the rich to the poor like manna from heaven. Of course it didn’t. It stayed up with the rich.
Let’s call this new economics “doh!conomics” in honour of Homer Simpson, whose middle income is always a doughnut hole away from becoming lower income.
The middle part of the income cake is being hollowed out. So, if your income level has slipped in the last five years, you are not alone. A University of Toronto study found that between 1970 and 2005, the number of Torontonians who made a lot of money (more that 40% more than a middle income earner) increased from 7% to 15%.
That eight percent increase is not a lot of people until you look at their economic impact. In the US, the top 1% of income earners now take home 25% of all pre-tax income – they used to take around 10%. And the 200 best paid hedge fund managers, together, rake in enough money to hire 25 more teachers, 25 more firefighters and 25 more police officers in every county in the country.
In Canada, the trend is the same. The top 20% of income earners take home nearly 40% of national income. The richest 1% of Canadians now take home one-third of all income growth (it used to be 8%)—mostly due to the huge sums they are paid for whatever it is they do.
“But we’re worth it,” is the response. The argument goes that CEOs and money managers get top dollar because they’re the ones with the expertise. Don’t pay them what others are getting and they’ll go elsewhere. The best reply to that argument came from a retired Nortel executive who was asked about Nortel managers—the same ones who drove the tech company into the ground and who were pulling in huge salaries even as employees’ pensions were being razed. “They’re top of their field,” said the interviewer. “Can they really be replaced?” The executive said, “In a heartbeat.”
But the real story is with those who are falling out of the middle class. Back in Toronto, the number of middle income workers declined from 66% in 1970 to 29% in 2005 (a decrease of 37%). Low and even lower income workers now make up 54% of the city, an increase of 35%, or about the same percentage that have fallen out of the middle income bracket.
So much for Reaganomics: the only thing that trickles down is poverty. It was the recession says government. But that’s little consolation if your month is longer than your paycheque. So why on earth would you try to break the thing that helped grow the middle class – the unions?
Back in 2009, in the middle of the recession, and while Chrysler and the Canadian Auto Workers were in at the bargaining table, Tony Clement told workers the government expected them to cut their incomes and benefits by 25% to help bail out Big Auto* – in other words cut to the same rate as non-union auto workers. The thing is, union wages and benefits are only about 7% of the cost of making a car or truck.* Hey, don’t worry, Mr Harper told them on his way to Timmy’s, at least there are plenty of investment opportunities out there. Good grief, who could afford to buy them? It was like saying, let them eat cake or rather, doughnuts.
In 2011 the federal government tabled legislation just 16 hours after the Air Canada strike began and that jinxed negotiations in favour of management. It tabled legislation to end the mail strike and that encouraged Canada Post to lock out CUPW workers, and it set their wages below what the union had already negotiated, and on terms that gives management the upper hand in future talks.
The writing on the wall of the union hall is clear: strike and you risk getting less than you bargained for.
Good for the government you say? Not so fast brother. Unions were born of appalling wages and work-house conditions. Since then they have raised millions out of poverty and into the ranks of the middle class.
And that’s a good thing. The larger the middle class, the more tax revenue there is to pay for government services like health care and education. It’s the middle class that has the numbers and the buying power to keep the economy chugging along. Why do you think China is working so hard to grow theirs?
Meanwhile, ours is shrinking.
If you’re looking for someone to point a finger at, point at conservatives and liberals alike. In the US, several states are passing anti-union legislation. As Hacker and Pierson remind us in their book Winner-Take-All Politics, it was the Democratic governments of Jimmy Carter and Bill Clinton as well as Ronald Reagan’s Republican government that set the stage for doh!conomics by deregulating the financial industry and putting CEOs into lower tax-brackets than their secretaries. That deregulation, along with the globalization of the economy, turned America’s industrial heartland into heartbreak.
In Canada, the Ontario Liberal government still refuses to repeal Mike Harris’s 1995 law that allows companies to hire “replacement workers” – scabs by any another name. Ontario’s Liberal Premier Dalton McGuinty and his Minister of Economic Development, Michael Bryant joined with Harper and Clement in calling for Ontario’s CAW workers to give up 25% of their pay and benefits. If you don’t, McGuinty said, don’t come looking to Ontario to cover your pensions if GM and Chrysler go belly up.
We’re not growing a healthy democratic society with an equitable distribution of income and influence. We’re growing a 21st Century feudal system. The working poor are little better off than indentured servants. Middle income workers are like craftsmen providing specialized professional services to multinational corporations—they are even organized into guilds: engineering consulting firms, management consulting firms, public relations firms, the University of Toronto, Queen’s, McGill, Harvard, MIT. Third world workers, by far the largest portion of the world’s population, are essentially serfs, forced to survive by share-cropping food (or diamonds or minerals) and by gleaning what global business leaves behind.
We even have the aristocratic and clerical trappings of a feudal society. There are Hollywood and Bollywood stars and a smattering of real royals whom we venerate or denigrate nightly, right after the 6 o’clock news. There is a second tier nobility, a kind of knighthood, who are paid outrageous amounts of money and who take their quest for profit all over the globe. Some, such as The Trump and The Lord Black of Crossharbour, are even allowed at court – Buckingham Palace in the case of Conrad and Reality TV in the case of The Donald. The US has a clergy powerful enough to give indulgences to errant politicians and rich enough to bankroll their favourites.
It’s easy to blame the 1% that have it, especially if you’re close to the bottom of the other 99%. But the 1% isn’t going about to start giving away their billions. If we really want a democratic, egalitarian society, then we have to stop busting unions. These days, it’s a bit like biting off your nose to spite your face. Actually it’s not a bit like that – it is exactly like that.
*“CAW & Chrysler ordered to resume negotiations”, Globe and Mail April 21, 2009.
© David McLaren July 2011.
The following 3 maps are from J. David Hulchanski, Three Cities Within Toronto: Income Polarization Among Toronto’s Neighbourhoods, 1970-2005, University Of Toronto.
Source: Globe and Mail, Dec 15, 2010.
For Tim Hudak’s articulation of Doh!conomics visit the Hub Owen Sound.
Tim Hudak was the Progressive Conservative (yes, I know, an oxymoron) leader in Ontario during the 2011 and 2014 provincial elections. He lost both times. The second time cost him his job, thanks in no small measure to his promise to lower corporate taxes (already the lowest in the G7) and cut 100,000 middle class public service jobs.