This Labor Day, America's working families did not have a great deal to cheer. According to the new Census report on economic trends in 2006, median earnings for fulltime year-round workers last year fell by about 1 percent, even with a booming economy.
Only the most affluent one-fifth of U.S. households had net income gains between 2000 and 2006. The rest had declines, despite productivity growth averaging about 3 percent per year. The share of people with health insurance provided by employers declined, as did those with guaranteed pensions. And all of this discouraging news happened before the current financial turbulence.
Housing values have now gone into their worse tailspin since the Great Depression. Even if the Federal Reserve manages to contain the effects on the broader economy, America remains on a course where the biggest gains go to a narrow elite, and ordinary people face increasing insecurity.
How did this happen?
Although education gaps are sometimes cited as the cause of widening inequality, America had much more broadly distributed prosperity in the 1940s, 1950s, and 1960s, a period when more people failed to complete high school than earned college degrees.
But what America did have in that era was a set of opportunity institutions. A much larger fraction of workers were members of trade unions. The minimum wage was much higher in its real purchasing power. More sectors of the economy were regulated, and one benefit for workers was that industries such as airlines and public utilities competed on the basis of quality and innovation, not by cheapening wages or relying on outsourcing.
Insider enrichment, of the sort that has sent executive pay into the stratosphere, was discouraged both by custom and by public policy that limited conflicts of interest. Corporations tended to offer steady, long-term employment rather than using temps, contract workers, and shifting work overseas. A higher rate of public investment in public infrastructure and research and development also generated lots of decent jobs.
So there is nothing inherent about the "new economy" that prevents us from having the more broadly shared prosperity that Americans once enjoyed. We just need a dramatically different set of national policies.
A good place to start would be with a higher minimum wage - more like $10 an hour than the gradual increase to $7.25 by 2009 recently legislated by Congress. A second step would be enactment of the Employee Free Choice Act, restoring the right of Americans to organize or join unions without being fired.
As the economy digs out of the hole created by the meltdown in subprime mortgages, a sluggish economy will also need the tonic of increased federal investment in deferred public infrastructure. These investments produce mostly good jobs. A national commitment to replace imported oil and dirty coal with new, clean energy technologies would also generate lots of good domestic employment.
More broadly, we need a national commitment to America as a high wage society. I recently returned from a reporting trip to northern Europe. In small countries such as Denmark and the Netherlands, unemployment rates are lower than ours, and prosperity is distributed far more equally, despite a higher reliance on trade and growing competition from low wage offshore employment.
How do these countries do it? They manage to combine extensive investment in the skills of workers with a national policy that all jobs are good jobs. If a worker loses a job in manufacturing and shifts to services, there is not the deep cut in wages that a similar shift entails in the United States.
Northern Europe not only provides comprehensive, socially financed services to the elderly, to children, and to working families. The jobs in these fields are professional or para-professional positions requiring adequate training and offering good pay, rather than the minimum wage, low-quality jobs typical of hands-on work in child care, home care, and care of the elderly in the United States. Both worker and client benefit.
America needs not only a better program of pre-kindergarten, child care, and elder care for its own sake, but a national commitment to make human service jobs good jobs - as well as a stronger public sector and better enforcement of workers' rights. All this makes the economy not only fairer but more productive.
Such a shift will require a new administration, with a different philosophy of rewarding work, and the boldness and public purpose that has characterized America at its best. Maybe by Labor Day 2009, we will have more to celebrate.
This article originally appeared in The Boston Globe.
