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Honest Abe said it best: profits a product of labor

My suggestion last month that workers deserve to share in the current bounty of corporate profits appears to have touched a sensitive nerve, judging by the sheer volume of Stuart Marsh’s Aug. 25 response.
Good. Debate on such a fundamental issue is healthy and contributes to advancing the general discussion. Let’s clear up a few points as we continue the debate.
Mr. Marsh posits as irrefutable fact the idea that corporate profits belong to the owners of the company because the owners take all the risk and therefore are entitled to all the reward.
First of all, this is economic theory, not fact. Unlike, say, the laws of physics, economic theory is a hotly disputed and ever-changing field, more closely resembling the weather in terms of unpredictability. And there are even those who would argue that the weather is more predictable than economic theories.
Secondly, as Mr. Marsh himself demonstrates, it simply is untrue that owners take all the risk: “The last 10 years could be labeled the “Downsizing Decade,” where a pay cut often was the only alternative to losing one’s job.”
In fact, it could be argued that while owners risk losing their investment (which is not necessarily their livelihood), workers actually put much more on the line by risking the loss of their very livelihood.
In fairness, I have to say that in my business, I work with many small contractors who do indeed invest their life savings–and sometimes even their homes–in their businesses. But they recognize that their workers are sharing the risk–by investing time, energy and money in training–and they share the profits of their mutual effort through good union wages and benefits.
On the issue of “substituting capital for labor,” let me cite no less an authority than President Abraham Lincoln (a Republican, incidentally), who said, “Labor is prior to and independent of capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and man deserves much the higher consideration.”
There are two salient points to be made regarding Mr. Marsh’s tale of the $250,000 computerized phone operator who replaced the “pesky human.”
First, where are the economic benefits of this supposed cost-saving computer/operator? I don’t know about you, but the only direction my phone bill has gone is up. Somebody may be making money on the deal, but it sure isn’t the consumer.
And second, how is that laid-off phone operator going to pay her phone bill? Or her rent? Or buy groceries, appliances and the rest of the consumer goods that drive the American economy? Or, as United Auto Workers founder Walter Ruether said to Henry Ford after a tour of a newly mechanized auto plant: “Very nice, Henry, but who’s going to buy your cars?”
Mr. Marsh’s definition of “wage-containment” as “take a pay cut or forgo a raise” is right on target, but the discussion of the effects of driving wages down completely misses the point.
Our whole argument on this issue can be boiled down to this: You get what you pay for. And Mr. Marsh proves the point himself by reminding us that “Made in Japan” used to guarantee cheap and inferior quality.
“Now,” Mr. Marsh writes, “Japanese products are considered by many to be the finest in the world, and Japan’s labor costs have risen so much they have shifted production to Malaysia, China, Vietnam and other low-wage nations.”
Exactly. Which is why these countries are now known for inferior products. Quality and high wages are as inextricably intertwined as are low wages and shoddy products.
The crux of the whole worker-boss relationship is candidly recognized in Mr. Marsh’s assertion that increased manufacturing wages are the direct result of the bargaining power held by workers. This is of course true for all workers, non-union as well as union, because wage increases won by union members steadily raise the wage floor for everyone.
Undermining this bargaining power has been a stated goal of major business lobbies like the U.S. Chamber of Commerce and the Business Roundtable since the late 1960s, when they unilaterally disrupted the business-labor peace that had ruled following the bloody battles of the 1930s.
Frankly, organized labor has been hard-pressed in this battle, and we have considered ourselves fortunate to hold on to our gains in the face of devastating and vicious attacks by both business and government. The result is that real wages for working Americans have stagnated for the last 25 years, changing the whole face of this country’s work force. Both parents have been forced to work, children go off to day care, and the whole spiral of low wages, long hours and frustrated workers cycles ever downward.
Which brings us to Mr. Marsh’s final point, one with which I fully agree: Low morale means low productivity.
It is one of the central flaws of current economic theory that, as Mr. Marsh puts it so well, “A company’s single most important asset does not appear on its balance sheet: its employees.”
A company that failed to report its bank accounts as assets could reasonably expect a visit from Securities and Exchange Commission inspectors. Why, then, does “human capital” fail to appear on corporate ledgers?
Perhaps because it is far easier to “downsize” that which is invisible to the pitiless balance sheet. Perhaps because we workers are indeed “pesky humans” who revel in a humanity that includes coffee breaks and gossip around the water cooler, who do get sick and take time off and stick pictures of our kids next to our machines.
The employer who would replace such humans with tireless humming computers may indeed reap increased profits. But at what cost?
This is an important and urgent debate with much at stake. I invite readers–whether you agree or disagree–to contribute your thoughts.
(Ronald Pettengill is president of the Rochester and Vicinity Labor Council, AFL-CIO.)


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