How the Disappearance of Union Jobs Obliterated an Emergent Black Middle Class

Yves here. The point of unions was to provide workers with better pay and workplace protections and thus also reduce the power imbalance between labor and capital. Needless to say, the side effects included lowering the status gap between managers and professionals versus union members. That facilitated social mobility, since in manufacturing towns, the children of both groups would go to the same schools and play together, which made it normal for blue collar kids to think about going to college, just like their friends from better-off families.

This leveling process particularly aided blacks, since union rules impeded them being fired, when blacks would normally be more exposed to dismissal. Having steady employment in well-paid jobs enabled them to buy homes and cars, accumulate savings, and help their kids move up socially and economically if the children were so inclined.

As we have written, the prospect of reduced inequality and social mobility has gone out the window. If you are born in the bottom 40%, you are almost guaranteed to stay there. This hits blacks and other people of color hard.

By William Lazonick, Professor of Economics, University of Massachusetts Lowell and President, The Academic-Industry Research Network; Philip Moss, Professor of Economics, University of Massachusetts Lowell; and Joshua Weitz, Research Associate, Academic-Industry Research Network​. Originally published at the Institute for New Economic Thinking website

Since the 1980s, the enemy of equal employment opportunity through upward socioeconomic mobility has been the pervasive and entrenched corporate-governance ideology and practice of maximizing shareholder value

The Covid-19 pandemic has laid bare the deep-rooted racial divide that infects American society. According to APM Research Lab, the Covid-19 mortality rate for blacks has been 61.6 per 100,000 compared with 28.2 per 100,000 for Latinos, and 26.2 per 100,000 for whites. It’s another abhorrent statistic to add to the highly disproportionate number of African Americans who are poor, unemployed, and incarcerated.

The longer life-expectancy of white men compared with black men in the United States has narrowed in recent years, but that is because of a significant drop in longevity of white working-class males, who, even before the pandemic, were succumbing to “deaths of despair.” The fact is that blacks are doing terribly in a nation wracked by extreme economic inequality, which is dragging down the whole working class, irrespective of race or ethnicity. In a nation that once advertised itself as the land of upward socioeconomic mobility through equal employment opportunity, intergenerational downward mobility has become the norm.

As a new generation has taken to the streets with demands for social transformation, we need to look back a half century to a time when the quest for equal employment opportunity gave rise to an African American blue-collar middle class. During the 1960s and 1970s, blacks with no more than high-school educations gained significant access to well-paid unionized employment opportunities, epitomized by semi-skilled operative jobs in the automobile industry, to which they previously had limited access. Anti-discrimination laws under Title VII of the 1964 Civil Rights Act with oversight by the Equal Employment Opportunity Commission (EEOC) supported this upward mobility for blacks in the context of a growing demand for blue-collar labor in the United States.

From the late 1970s, however, the impact of global competition and the offshoring of manufacturing combined with the financialization of the corporation to decimate these stable and well-paid blue-collar jobs. Under the seniority provisions of the increasingly beleaguered industrial unions, blacks tended to be last hired and first fired. As U.S.-based blue-collar jobs were permanently lost, U.S. business corporations and government agencies failed to make sufficient investments in the education and skills of the U.S. labor force to usher in a new era of upward socioeconomic mobility. This organizational failure left blacks most vulnerable to downward mobility.

Central to this corporate failure was a transformation of corporate resource allocation from “retain-and-reinvest” to “downsize-and-distribute.” Instead of retaining corporate profits and reinvesting in the productive capabilities of employees, major business corporations became increasingly focused on downsizing their labor forces and distributing profits to shareholders in the form of cash dividends and stock buybacks. Legitimizing massive distributions to shareholders was the flawed and pernicious ideology that a company should be run to “maximize shareholder value.” Eventually, the downward socioeconomic mobility experienced by blacks would also extend to devastating loss of well-paid and stable employment for whites who lacked the higher education now needed to enter the American middle class. By the twenty-first century, general downward mobility had become a defining characteristic of American society, irrespective of race, ethnicity, or gender.

In our project, “Fifty Years After: Black Employment in the United States Under the Equal Employment Opportunity Commission,” supported by the Institute for New Economic Thinking, we analyze the socioeconomic forces behind the promising rise in the 1960s and 1970s but, subsequently, the disastrous fall of the black blue-collar middle class. We do so by taking a deep dive into little appreciated but publicly available employment data collected for more than fifty years by the EEOC, notwithstanding the fact that a treasure trove of company-level “EEO-1” submissions remains hidden from public view. Our new working paper begins the analysis.

We show that the institutional foundation for upward socioeconomic mobility was the employment norm of a career with one company (CWOC) that prevailed at major U.S. business corporations in the decades after World War II. For both blue-collar and white-collar employees, CWOC meant stable employment, rising real wages or salaries, healthcare coverage, and company-funded defined-benefit pensions in retirement. But CWOC was a white man’s world, to which minorities as well as women were given unprecedented access from the last half of the 1960s by virtue of the Civil Rights Act of 1964. Government employment at local, state, and federal levels helped blacks gain access to the employment stability and rising pay that, along with health and retirement benefits, are foundational to the status of middle class. Blacks made their greatest progress, however, by entering unionized semi-skilled and skilled occupations in mass-production industries, most of which were dominated by a relatively small number of very large companies.

From the late 1970s, challenges from more productive foreign companies, particularly the Japanese, led to widespread plant closings and permanent layoffs in these industries, with a disproportionately adverse impact on black employment. Increasingly, automation and globalization also undermined stable and well-paid blue-collar employment in the United States. Automation and globalization, however, generated large profits for U.S. corporations that could have been reinvested in employees and new competitive products.

The more fundamental cause of the fall of the black, and eventually white, blue-collar middle class was the demise of the CWOC norm that had defined the “Old Economy business model.” A concomitant of this dramatic change in corporate employment relations was the failure of federal and state governments to invest in the education of the American working class, whites as well as blacks, so that, intergenerationally, they could transition from high-school-educated blue-collar employment to college-educated white-collar employment.

As the U.S. industrial economy transitioned from an “Old Economy business model,” characterized by a career with one company, to a “New Economy business model,” characterized by interfirm labor mobility, advanced education and social networks became increasingly important for building careers in well-paid white-collar occupations. In our Fifty Years After project, we analyze how, along with non-white Hispanics, blacks found themselves at a distinct disadvantage relative to whites and Asians in accessing these New Economy middle-class employment opportunities.

The fundamental explanation for these changes in socioeconomic mobility, however, is found, not in employment relations per se, but rather in a profound transformation of corporate governance. Since the 1980s, the enemy of equal employment opportunity through upward socioeconomic mobility has been the pervasive and entrenched corporate-governance ideology and practice of maximizing shareholder value. Our Fifty Years After study—which will be available in a series of INET working papers over the next two months—shows that for most Americans, of whatever race, ethnicity, and gender, maximizing shareholder value is the not-so-invisible hand that has a chokehold on the emergence of the stable and well-paid employment opportunities that are essential for sustainable prosperity.

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23 comments

  1. Altandmain

    As I live only a short drive from Michigan, this strikes near and dear to me, not just because I work in the automotive industry (and I used to work in a plant that sent 1/3 of its jobs to Mexico to “save” money, presumably on labour costs).

    Thomas Frank has a great point on this.

    https://www.politico.com/magazine/story/2016/09/2016-election-working-class-trade-tpp-trade-democrats-214219

    We’re discovering that the consensus on trade was always something of a Washington illusion, propped up by the support of business elites plus the appearance of professional unanimity among mainstream economists. Those who doubted were dismissed as throwback isolationists, or as deluded radicals like the protesters who tried to disrupt the World Trade Organization meetings in Seattle in 1999, or as union types who simply “didn’t get it” (to use the favorite expression of the New Economy 1990s), anxious to protect their obsolete Rust Belt jobs.

    But part of the answer lies in something Americans have a hard time talking about: class. Trade is a class issue. The trade agreements we have entered into over the past few decades have consistently harmed some Americans (manufacturing workers) while just as consistently benefiting others (owners and professionals). As a result, and more than almost any other issue, trade brings together the wealthy elements of both parties: the free-market business types in the GOP and the successful professionals among the Democrats.

    African Americans were the ones who were hurt the most by the decline in manufacturing and the so called “Free trade” agreements because they often lacked the financial resources to do anything else, such as relocate to cities with more prosperous economic futures.

    It’s also why in places like Flint, the lead poisoning hurt African Americans so much – they lacked the resources to move easily. Those with the money to do so had fled a long time ago.

    It’s also why I get so angry at the Clinton – Biden – Obama neoliberal types and their upper middle class supporters. They make trade sound like it is just a White working class issue. Far from it. At work, I knew people from many nationalities that are worried about losing manufacturing jobs. Unless they feel the economic pain, nothing is changing.

    Oh and one other thing – the things that Bernie and the left advocate for, such as universal healthcare, a higher minimum wage, free public education, etc, would benefit the African American community disproportionately. Not to mention, it would benefit females disproportionately too. It’s another example of the “big lie” of identity politics.

    Other people, such as Michael Moore, get it. Bernie and Warren, whatever their other flaws, have at least taken a hostile view on free trade. There are other awful parts of these free trade agreements, such as ISDS and the excessively strong intellectual property protections that seem more for corporate rent seeking than anything else.

    These free trade agreements need to go. So too do the “right to work” laws and “at will” employment laws that appear throughout the “red” states.

    If you look around a lot of these places, the jobs that remain (and there are not that many), are often minimum wage, or not much more than that, temporarily, and lack benefits. It’s also not just manufacturing. When I went to the dentist a few months ago, the hygienist said she once lost her job because of an auto plant closing because nobody could afford to see the dentists afterwards. The US and Canada ought to have universal dental care, but that’s a different conversation.

    —–

    The other, much more difficult challenge I think will have to be to instill a strong sense of “noblesse oblige” in the upper middle class. How that is going to happen I don’t know.

    These trade deals and the decline of these jobs happened because the well off no longer care about the less well off. At least in the aftermath of WWII, there were social norms on aspects like executive pay and investing back into society. That is no longer the case today. This “downside and buy back stock” mentality happened because the rich don’t care about the rest of us. They are fighting to save the system because they benefited at our expense over the past few decades.

    Reply
    1. Carla

      H.R. 1384, Medicare for All Act of 2019, includes dental and vision care and long term care. From the summary:

      “This bill establishes a national health insurance program that is administered by the Department of Health and Human Services (HHS).
      Among other requirements, the program must (1) cover all U.S. residents; (2) provide for automatic enrollment of individuals upon birth or residency in the United States; and (3) cover items and services that are medically necessary or appropriate to maintain health or to diagnose, treat, or rehabilitate a health condition, including hospital services, prescription drugs, mental health and substance abuse treatment, dental and vision services, and long-term care.”

      It was introduced by Pramila Jayapal (D-WA) on 2/27/2019 and has 118 co-sponsors, all Democrats.

      H.R. 1384 is far superior to the Sanders bill in the Senate.

      Reply
    2. DJG

      altandmain: Thanks for this. I agree.

      Within the last ten / fifteen years, I have driven from Chicago to Philadelphia several times (for a visit on a certain holiday weekend). The economic and social devastation in eastern Ohio and western Pennsylvania is there for all to see, except, of course, the elites of the Monoparty, who can’t be bothered. Even though the economies of Illinois and Wisconsin are troubled, I wasn’t prepared for the devastated factory towns that I drove through or stayed in. Cambridge, Ohio, with two day-labor offices. Beaver Falls, Penna., where the downtown is so wrecked that even the Salvation Army store had closed.

      Reply
      1. LawnDart

        Having lived in both places, Chicagoland and SWPA, I can attest to the fact that the differences for the worker are vast: SWPA is an economic wasteland for the blue collar, but even in troubled times Chicagoland offers opportunity and far higher wages (much thanks to union presence).
        In SWPA I was offered a job as an Industrial Electrician at $15hr. I nearly doubled that in Chicagoland, and the true cost-of-living is less as well.
        One thing that really made an impression on me in SWPA was the sharp and obvious class distinctions between the upper, lower, middle, and the elite “good families.” It is a region that really caters to the wealthy, and offers little more than a few scraps off the table to the working class.
        I loved the outdoors opportunities in SWPA, as those helped me keep my sanity while I was struggling to keep food on the table and a roof over my head.

        Reply
      2. JBird4049

        The Salvation Army was closed? Any tumble weeds drifting by? Jokes aside, you can say similar things about areas of California especially its red periphery. It’s been ongoing for forty years as has the disappearing jazz, clubs, and Black populations in the Bay Area. I have never been particularly social, but it has been increasingly hard and expensive to find and go anywhere.

        Reply
  2. ObjectiveFunction

    Seniority (last hired, first fired) also plays a part when times get tough. Matt Stoller’s recent piece:

    Offshoring steel and automobile production had a special role in fueling racial tensions. White workers usually had a longer tenure of work, and according to union rules would be the last laid off because of this tenure. So offshoring would cause black layoffs first, and then white layoffs. Civil rights groups rightfully understood that as racist, but few recognized the largest context that racial tension was a result of white and black workers feuding over a smaller and smaller pie.

    It was in [the 1980s] that black people were finally able to buy homes, and so they never were able to build wealth as white people had. And most people were falling behind.

    Reply
  3. Sound of the Suburbs

    You’re at the top and you want to stay there.
    Social stratification is the name of the game.

    The US and UK are pretty good at it according to OECD stats.

    The UK’s hereditary aristocracy gives us a nice fixed top layer.
    Social mobility won’t be a problem there.

    The more inherited wealth you can pass on, the more socially stratified things should become.
    Trump has just removed estate taxes to keep wealthy families at the top.

    Biasing the education system is a firm favourite in the US and UK.
    The UK has private schools, while the US takes no chances with private schools and universities.
    The wealthy can afford a better education for their children and this is what you want for social stratification.
    The US has come up with another cunning idea.
    Schools are funded from the local area so schools in wealthy areas get more funding and schools in poorer areas get less funding.
    In the UK, we use house prices in the catchment areas of schools to help wealthier families get a better education for their children in the good schools.

    Everything is nicely set up to socially stratify society.

    Doesn’t this keep poor, black people, poor?
    Oh yeah, I’d never even thought about that before.

    The Americans are a bit smarter, and don’t make it so obvious.
    In the UK, the different layers make it obvious by the way they speak.
    Upper – Plummy tones
    Middle – BBC English
    Bottom – regional accents
    With the US, you need the OECD stats. to see what is going on.

    Reply
    1. Off The Street

      At the rate so much of the US has changed, one indicator is likely increasingly visible. Look at the appearance of the individual to see if healthy, age-appropriate size and weight, decent dental hygiene, then move to presence of personal grooming.
      Those faces captured by Dorothea Lange and others almost a century ago continue to haunt, if one is allowed awareness of them.

      Reply
    2. TimH

      Also the US public school system relies on volunteers amongst parents… so schools in poorer areas where both parents work 24/7 lose out.

      Reply
    3. neo-realist

      From my vantage point growing up in NYC, due to racism in the housing market, many middle income black people were relegated to living in the ghetto areas with the black poor because they were steered that way, or in some cases intimidated from living in better neighborhoods (predominantly white with better schools) – Mother told me a story about how my father and she were on the verge of closing on a house out in Queens and they discovered racial epithets on the door. They bought a place in Bed Sty Brooklyn instead. Unless black parents opt for private schools, which mine did, and or finagle their kid into a school in a different district, which my mine also did, the middle class blacks, in many cases, are stuck with the same lousy schools as the black poors (don’t mean to knock poor people), leading to decreased educational outcomes, and, I suspect, lesser social networks for the kids of the black middle class compared to those of the white middle class.

      Also you want to factor in the preponderance of union jobs for blacks due to far greater public sector employment, which my parents had, and the rampant racism of the private sector forcing blacks, educated and not so educated, to seek employment in the public sector, where many did obtain good wages, benefits, and pensions.

      Reply
  4. skippy

    National unions without capital controls and boardroom chairs is a non starter.

    BTW for the ideologically challenged how many Unions are in China.

    Reply
  5. casino implosion

    Let’s start a cold race war and make 1619 Project the basis of the public school American History curriculum. That’ll definitely strengthen the working class solidarity we need to rebuild the unions

    Reply
  6. TomDority

    “From the late 1970s, challenges from more productive foreign companies, particularly the Japanese, led to widespread plant closings and permanent layoffs in these industries”
    I think, with further research re more productive foreign companies; you will find this to be a myth without any statistical underpinning, I think a Harvard business review in the 70s delved into this and found no advantage in foreign productivity or real differences in what was mythical employee dedication.

    In regard to “Increasingly, automation” and “Automation and globalization, however, generated large profits for U.S. corporations” and “new competitive products.”
    Automation was an American invention including robotics and the lot – it was American management and CEO’s that failed to implement these new techniques, who had no vision and, were busy trying to dress up their stats in order to juice their pay thru financialization and other non-productive tricks of the trade (that trade being graft and puffery) These same said managers and CEO’s together with their corrupted congress critters and local reps are what labeled Unions as bad, Japanese as wonder workers and undercutting our markets ( particularly the auto manufacturing segment) when in fact, the Japanese, through our automation, were producing many versions of auto off a single line while Dim-witted and greed inspired auto execs created the Pinto and Cordoba and some of the crappiest autos ever made.
    Automation did not kill american jobs – CEO’s and their minions did and on purpose.
    See Walkmans and Harvard Business Review for an issue addressing this.
    Also, these same said Managers and CEO’s are resposible for the slandering of many nationalities around the world and also of Mexico and it’s inhabitants. – Talking about a bunch of PHDs in bigotry

    Reply
    1. Yves Smith Post author

      Sorry, tons of studies disagree with that. I went to HBS in 1979 to 1981 and everyone acknowledged that Japanese and German manufacturers were more efficient than Americans.

      You can find later studies that flatly contradict that early HBR piece (which sounds like apologia). There were also tons of business press stories at the time about sclerotic management of US manufacturers, particular Big Auto and steel. Try spending five minutes on Google. For instance:

      https://sloanreview.mit.edu/article/manufacturing-innovation-lessons-from-the-japanese-auto-industry/

      https://www.theglobeandmail.com/globe-drive/adventure/red-line/the-rise-of-japan-how-the-car-industry-was-won/article27100187/

      The Japanese have slipped in the last decade plus but that does not change the fact of their earlier accomplishments.

      https://www.bloomberg.com/news/articles/2017-10-19/some-famously-efficient-japanese-manufacturers-are-now-lying-to-compete

      https://www.wsj.com/articles/companies-everywhere-copied-japanese-manufacturing-now-the-model-is-cracking-1517771142

      Reply
      1. Andreas

        Having lived through the period, I remember (maybe accurately maybe not) that the press focused far more of unproductive workers (especially union workers) has responsible for falling productivity and the accompanying quality of U.S. goods (especially automobiles) rather than

        “…sclerotic management of US manufacturers, particular Big Auto and steel.”

        Whenever I heard this kind of running down of workers I would give the example of Caterpillar, which as a union shop produced the best large equipment in the world and dominated the industry. If memory serves the UAW had unionized Caterpillar’s workforce.

        Reply
        1. Yves Smith Post author

          Huh? There were TONS of articles decrying sclerotic American management, in Business Week, Forbes, Fortune, the Wall Street Journal, and the Detroit papers. It was widely discussed at HBS when I was there. It was conventional wisdom that the US was losing out to the Japanese and Germans due to: 1. Bad American management and 2. The Japanese and Germans having newer plant. #1 was generally seen as much more important than #2. I never heard anyone at HBS, profs or students (about 40% came out of manufacturing) blame or even criticize unions, and HBS had extremely free-wheeling debates in its classrooms. Japan and Germany both have unions, further undercutting the idea that unions could be depicted as the problem.

          And that thesis was proven when Toyota took over the management of one of GM’s worst plants, in a joint venture called NUMMI. in 1984. The fact that GM would turn to Toyota was a sign of desperation. GM had said all sorts of terrible things about its workers in that factory. Toyota took that plant, with those supposed dirtbag employees, and brought it up to Toyota levels of efficiency and low defects (as in way way better than the Big Three).

          Perhaps the management of these American companies had some success in blame-shifting in the MSM in the late 1970s, but the financial media was not buying it.

          Having said that, I was at HBS from 1979 to 1981, which was before the concerted effort of the ultra right wing conservatives (as codified in the Powell Memo of 1971) had gotten much traction. The Reagan era and the breaking of Patco, the air traffic controller union, legitimated union breaking. Paul Volcker was also out to weaken unions by forcing high levels of unemployment to make them reduce their wage demands. So I was at HBS at the very tail end of the widespread acceptance of New Deal values.

          Reply
    2. eg

      Another part of this story is told in Judith Stein’s “Pivotal Decade”

      https://yalebooks.yale.edu/book/9780300171501/pivotal-decade

      The State Department knowingly promoted unequal trade agreements at the expense of US labor as far back as the 50s as part of their “containment” effort against Communism. In this way there was a policy bias towards offshoring that advantaged US capital against US labor, with predictable results. It also gave ideological cover for what otherwise ought to have been readily exposed increasingly as another form of financialized looting.

      Reply
  7. Andreas

    Union membership peaked in 1955 at 35% and remained strong until the late 1960s. In 1970, the membership rate stood at 29% of the U.S. workforce and since then has continued to fall. Recent data from the Bureau of Labor Statistics shows a nationwide membership rate of 11% (including public sector unions).

    Then came ERISA.

    While ostensibly passed to protect pensioners from corruption, any objective analysis of the effects of the Employee Retirement Income Security Act of 1974 (ERISA) shows that it has had the largest (and likely most insidious) affect on the decline of Union membership and economic power in the United States of all Union busting strategies.

    ERISA prohibitions against Union Pension Funds making direct investments that support Union owned businesses or business interests have created an uneven playing field in the U.S. economy.

    Private Capital does not face such restrictions. Corporate Capital does not face such restrictions.

    Private & Corporate Capital in conjunction with their (wholly owned?) political allies created ERISA to block, diminish, and undermine Union economic power on the pretext of rooting out corruption.

    Even now, after all of the assaults on labor, Union pension funds control trillions of dollars in their investment portfolios, but they can not make direct investments to employ or directly benefit Union workers.

    Consider all of the U.S. companies that got into trouble, that Union pension could have owned.

    Where else in the entire U.S. legal system does a crime like corruption (which no one defends) receive a permanent and systemic remedy that shifts the balance of the control of capital on such a scale?

    Reply
    1. Off The Street

      The Senators wanted access to better clubs and parties, so they voted accordingly. Better to have a few masters and donors than too many, with those pesky questions, and better offshore plans to boot. ERISA was yet another piece of legislation sold one way to get votes and administered another way to channel hidden benefits.

      Reply
      1. Andreas

        I find it astonishing that no one on the left ever mentions ERISA and its hidden agenda to undermine unions and their workers.

        Do Bernie Sanders and Elizabeth Warren know (or remember) this history?

        Reply
        1. JBird4049

          Just like much of American history, it is deliberately(?) left out of history and the news, which means only the dedicated student or the lucky reader finds out. If I was not a lifelong reader of American history, I could so, so easily fall for the propaganda of both the modern American “liberal” and “conservative” establishments.

          ERISA nasty anti union provision is only really known to union and economic historians. Not because anyone lied, but because few reported or wrote on it.

          Just look at how the 1921 Tulsa, Oklahoma massacre was covered up for more than eighty years or how the Battle of Blair Mountain has just faded away. If facts are inconvenient for those with the money, then those facts goes missing. History is made holey with enough smoke and mirrors and the occasional lies like in the 1619 Project to appear both solid and true.

          Reply
  8. jackiebass

    The destruction of unions didn’t only hurt black workers. It also hurt white workers. When I grew up most children did better than their parents. Good paying union jobs facilitated this. You could get out of high school and immediately go to work in a factory. The pay actually was better than the pay for a starting teacher. Then came neoliberalism , promoted by republicans favorite president, Ronald Reagan. One of the bedrocks of neoliberalism was the destruction of unions. There was a constant propaganda campaign to make unions look evil. Over time it worked and fewer private sector workers belonged to a union. With that came the outsourcing of jobs to low wage countries. Now a person graduating from high school doesn’t have the same opportunities as in the past. Unless they are trained in a skill or have an education, their chance for a good paying job is slim to none. In effect what used to be called The American Dream died. Instead of creating a system like Germany, we threw many young people under the bus. Until government policy changes and a new New Deal emerges, we will continue our downward slide to a second rate country.

    Reply
  9. Bill Wald

    The big problem IS national unions. State-wide or county-wide unions would cut the corruption problems.

    Reply

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