Behind the General Motors Autoworkers Strike: Economic Power Begins to Tilt Toward Labor

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The strike by workers at General Motors plants across the country is the clearest demonstration of a shift in the U.S. economy that began nearly two years ago. Workers are finally gaining some economic leverage over their employers.

The shift can be seen in wage gains. After several years of falling or stagnant wage growth, wages began a sustained rise in late 2017. In October of 2018, average hourly earnings growth surpassed three percent for the first time since the Great Recession.

Wage gains for what the government describes as “production and nonsupervisory employees” hit the three percent marker a month earlier. In the most recent figures for August, annual wages were up by nearly 3.5 percent.

And the gains are going to workers who need them the most. Over the past year or so, low-wage workers have seen the fastest pay hikes, a reversal of the Obama-era when wage growth was concentrated among workers with the highest incomes.

The gains are real. Inflation has been muted, which means the wage gains give workers more spending power.

This is quite a change. For years following the financial crisis, wages surprised economists by staying put even as unemployment fell and businesses continued to grow payrolls by adding hundreds of thousands of jobs each month. The best guess as to why wages stayed so low is that workers were still too shell-shocked by the financial crisis and its aftermath to demand higher wages. Many still just felt lucky to have their jobs.

Some of the low wage growth may also have been the result of companies adding new, less experienced workers or bringing on board those who have been out of the workforce. Those new or returning workers tend to be paid lower wages, which brings down the average. The availability of new workers can also make experienced workers hesitant to demand better pay.

But as the economic expansion has stretched on–it is now the longest on record–companies are finding it harder to find new workers. And an aging workforce means that some of the most experienced are retiring, forcing companies to compete for younger workers to restock the employee ranks.

Politics may be playing a role as well. The election of Donald Trump led to a dramatic rise in consumer optimism as well as small business optimism. Even after recent retreats in some measures of optimism, these remain at historically high levels. And workers may feel a bit of confidence from the fact that President Trump has staked his political fate on their fortunes.
Trump has shown a willingness to take on powerful actors in the economy that many workers see as inimical to their interests, from chief executives to China. When General Motors announced it was closing a plant it Ohio, Trump blasted the move on twitter and brushed off attempts by GM to blame unions.

Which brings us back around to the General Motors strike. Ten years ago, the UAW accepted a tiered system of wages for autoworkers, allowing carmakers to pay new hires lower wages and give them smaller retirement packages. Now, after tens of billions of profits that benefitted GM shareholders, the union is asking for a return to worker parity.

President Donald Trump, far from taking the side of shareholders or corporate management, has maintained a steady neutrality when it comes to the strike. He’s called on both sides to reach a deal and said the conflict makes him sad. But he has said for years now, at campaign rallies and in speeches as president, that American workers have been given a bad deal. No doubt many GM workers suspect the president is on the side of the union urging a better deal for its workers.

The General Motors strike may just be the beginning. If the labor market remains strong, the economy continues to expand, and business optimism remains bouyant, workers around the nation may soon be demanding a much bigger share of the American economic pie.

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