Why Do 80% of Americans Say They Are Living Paycheck to Paycheck?
By Robert Reich/ RobertReich.org/ July 30, 2018
The official rate of unemployment in America has plunged to a remarkably low 3.8%. The Federal Reserve forecasts that the unemployment rate will reach 3.5% by the end of the year.
But the official rate hides more troubling realities: legions of college grads overqualified for their jobs, a growing number of contract workers with no job security, and an army of part-time workers desperate for full-time jobs. Almost 80% of Americans say they live from paycheck to paycheck, many not knowing how big their next one will be.
Blanketing all of this are stagnant wages and vanishing job benefits. The typical American worker now earns around $44,500 a year, not much more than what the typical worker earned in 40 years ago, adjusted for inflation. Although the US economy continues to grow, most of the gains have been going to a relatively few top executives of large companies, financiers, and inventors and owners of digital devices.
America doesn’t have a jobs crisis. It has a good jobs crisis.
When Republicans delivered their $1.5tn tax cut last December they predicted a big wage boost for American workers. Forget it. Wages actually dropped in the second quarter of this year.
Not even the current low rate of unemployment is forcing employers to raise wages. Contrast this with the late 1990s, the last time unemployment dipped close to where it is today, when the portion of national income going into wages was 3% points higher than it is today.
What’s going on? Simply put, the vast majority of American workers have lost just about all their bargaining power. The erosion of that bargaining power is one of the biggest economic stories of the past four decades, yet it’s less about supply and demand than about institutions and politics.
Two fundamental forces have changed the structure of the US economy, directly altering the balance of power between business and labor. The first is the increasing difficulty for workers of joining together in trade unions. The second is the growing ease by which corporations can join together in oligopolies or to form monopolies.
What happened to unions
By the mid-1950s more than a third of all private-sector workers in the United States were unionized. In subsequent decades public employees became organized, too. Employers were required by law not just to permit unions but to negotiate in good faith with them. This gave workers significant power to demand better wages, hours, benefits, and working conditions. (Agreements in unionized industries set the benchmarks for the non-unionized).
Yet starting in the 1980s and with increasing ferocity since then, private-sector employers have fought against unions. Ronald Reagan’s decision to fire the nation’s air-traffic controllers, who went on an illegal strike, signaled to private-sector employers that fighting unions was legitimate. A wave of hostile takeovers pushed employers to do whatever was necessary to maximize shareholder returns. Together, they ushered in an era of union-busting.
Employers have been firing workers who attempt to organize, threatening to relocate to more “business friendly” states if companies unionize, mounting campaigns against union votes, and summoning replacement workers when unionized workers strike. Employer groups have lobbied states to enact more so-called “right-to-work” laws that bar unions from requiring dues from workers they represent. A recent Supreme Court opinion delivered by the court’s five Republican appointees has extended the principle of “right-to-work” to public employees.
Today, fewer than 7% of private-sector workers are unionized, and public-employee unions are in grave jeopardy, not least because of the Supreme Court ruling. The declining share of total US income going to the middle since the late 1960s – defined as 50% above and 50% below the median – correlates directly with that decline in unionization. (See chart below).
Perhaps even more significantly, the share of total income going to the richest 10 percent of Americans over the last century is almost exactly inversely related to the share of the nation’s workers who are unionized. (See chart below). When it comes to dividing up the pie, most American workers today have little or no say. The pie is growing but they’re getting only the crumbs.
What happened to antitrust
Over the same period time, antitrust enforcement has gone into remission. The US government has essentially given a green light to companies seeking to gain monopoly power over digital platforms and networks (Google, Apple, Amazon, Facebook); wanting to merge into giant oligopolies (pharmaceuticals, health insurers, airlines, seed producers, food processors, military contractors, Wall Street banks, internet service providers); or intent on creating local monopolies (food distributors, waste disposal companies, hospitals).
This means workers are spending more on such goods and services than they would were these markets more competitive. It’s exactly as if their paychecks were cut. Concentrated economic power has also given corporations more ability to hold down wages, because workers have less choice of whom to work for. And it has let companies impose on workers provisions that further weaken their bargaining power, such as anti-poaching and mandatory arbitration agreements.
This great shift in bargaining power, from workers to corporations, has pushed a larger portion of national income into profits and a lower portion into wages than at any time since the second world war. In recent years, most of those profits have gone into higher executive pay and higher share prices rather than into new investment or worker pay. Add to this the fact that the richest 10% of Americans own about 80% of all shares of stock (the top 1% owns about 40%), and you get a broader picture of how and why inequality has widened so dramatically.
What happened to politics
Another consequence: corporations and wealthy individuals have had more money to pour into political campaigns and lobbying, while labor unions have had far less. In 1978, for example, congressional campaign contributions by labor Political Action Committees were on par with corporate PAC contributions. But since 1980, corporate PAC giving has grown at a much faster clip, and today the gulf is huge.
It is no coincidence that all three branches of the federal government, as well as most state governments, have become more “business-friendly” and less “worker-friendly” than at any time since the 1920s. As I’ve noted, Congress recently slashed the corporate tax rate from 35% to 21%.
Meanwhile, John Roberts’ supreme court has more often sided with business interests in cases involving labor, the environment, or consumers than has any Supreme Court since the mid-1930s. Over the past year it not only ruled against public employee unions but also decided that workers cannot join together in class action suits when their employment contract calls for mandatory arbitration.
The federal minimum wage has not been increased since 2009, and is now about where it was in 1950 when adjusted for inflation. Trump’s labor department is busily repealing many rules and regulations designed to protect workers.
The combination of high corporate profits and growing corporate political power has created a vicious cycle: higher profits have generated more political influence, which has altered the rules of the game through legislative, congressional, and judicial action – enabling corporations to extract even more profit. The biggest losers, from whom most profits have been extracted, have been average workers.
America’s shift from farm to factory was accompanied by decades of bloody labor conflict.The shift from factory to office and other sedentary jobs created other social upheaval.
The more recent shift in bargaining power from workers to large corporations – and consequentially, the dramatic widening of inequalities of income, wealth, and political power – has had a more unfortunate and, I fear, more lasting consequence: an angry working class vulnerable to demagogues peddling authoritarianism, racism, and xenophobia.









‘Trump is subjecting American democracy to a brutal test. Our survival requires that the press halt its unwitting complicity in his power grab.’ Photograph: Michael Candelori/Rex/Shutterstock
Donald Trump has been a salesman for nearly half a century. He is now selling himself, his worldview and his self-serving views of the law and the truth. His principal tools are language and the media. By faithfully transmitting Trump’s words and ideas, the press helps him to attack, and thereby control, the press itself.
Trump knows the press has a strong instinct to repeat his most outrageous claims, and this allows him put the press to work as a marketing agency for his ideas. His lies reach millions of people through constant repetition in the press and social media. This poses an existential threat to democracy.
Language works by activating brain structures called “frame-circuits” used to understand experience. They get stronger when we hear the activating language. Enough repetition can make them permanent, changing how we view the world.
Even negating a frame-circuit activates and strengthens it, as when Nixon said “I am not a crook” and people thought of him as a crook.
Scientists, marketers, advertisers and salespeople understand these principles. So do Russian and Islamic State hackers. But most reporters and editors clearly don’t. So the press is at a disadvantage when dealing with a super salesman with an instinctive ability to manipulate thought by 1) framing first 2) repeating often, and 3) leading others to repeat his words by getting people to attack him within his own frame.
Language can shape the way we think. Trump knows this. Here are some of his favorite manipulation techniques.
First, he weaponizes words. The modifier “crooked” convicted Hillary Clinton without a trial. The media’s constant repetition sealed the verdict. “Fake news” proclaims that the news is fake. The use of “fake” is designed to delegitimize the press itself. Trump also uses strategic name-calling to undermine the Russia investigation, tagging it as a “witch-hunt” by the “deep state” in an attempt to shift blame. It’s false, but when the press repeats it, his narrative wins.
A possible immediate correction might have been to use “RussianSpyGate,” repeatedly focusing on the Russian contacts of Trump’s campaign aides Carter Page and George Papadopoulos, with the FBI informant checking on Russian spying in the Trump campaign. This would have had to be done over and over, with reporters bring it up whenever “spygate” was used. Not an easy fix.
Then there are what cognitive scientists call “salient exemplars” – well-publicized individual cases, where wide publicity leads the public to take them as having a high probability and typifying a whole class. Trump turns them into weaponized stereotypes. He is a master at defaming entire groups of people as liars, rapists, terrorists – or in the case of US law enforcement and intelligence agencies – agents of corruption.
He knows how to avoid taking responsibility for a claim. “Maybe.” “I don’t know.” “We’ll see.” Yet the claim has been made and stands, with no responsibility for it.
In The Art of the Deal, Trump discusses using “truthful hyperbole” – exaggerated claims suggesting a significant truth. His hyperbole can be either positive (“great”, “terrific”, “the best”) for what he likes or negative (“a disaster,” “the worst ever”) for what he dislikes. “The worst trade deal ever” frames trade agreements as “deals”, where “deals” are seen as zero-sum games that you either win or lose – and winning is the only good outcome. “Doesn’t it feel good to win!” “You’ll win so much, you’ll feel tired of winning!”
“Deal” and “winning” are not just words. They are central to his worldview. Those who win deserve to win; those who lose deserve to lose. Those who don’t win are “losers”. This is a version of individual responsibility, a cornerstone of conservative thought. There is a moral hierarchy. Those who win are better than those who lose.
“America first” means that America is better than other countries, as shown by its wealth and power. And that wealth and power should be used to win – to acquire more wealth and power in all its “deals” – even with our allies. Power includes the power to bully or punish – for example, to impose tariffs or pull out of treaty – or at least threaten if others don’t go along with him.
Trump’s tweets are not random, they are strategic. There are four types: 1) Pre-emptive framing, to get a framing advantage. 2) Diversion, to divert attention when news could embarrass him. 3) Deflection: Shift the blame to others. And 4) trial balloon – test how much you can get away with. Reporting, and therefore repeating, Trump’s tweets just gives him more power. There is an alternative. Report the true frames that he is trying to pre-empt. Report the truth that he is trying to divert attention from. Put the blame where it belongs. Bust the trial balloon. Report what the strategies are trying to hide.
Cornered by the Russia investigation, Trump is working overtime to twist the facts, the law, and reality in general, to benefit himself. As the indictments and the evidence pile up in favor of a case for Trump-Russia collusion in the 2016 election, he’s made it clear that he considers himself above both the law and the truth. As president of the United States, anything he says – true or false – is faithfully parroted by the press. This needs to change.
Trump is subjecting American democracy to a brutal test. Our survival requires that the press halt its unwitting complicity in his power grab. The press has become complicit with Trump by allowing itself to be used as an amplifier for his falsehoods and frames. When the press gives Trump absolute power to dictate coverage, it abdicates its role as a pillar of democracy.
How can the press do a better job? Here are some basic suggestions:
First, journalists must understand how propaganda works on the brain and grasp the cognitive science that marketers of propaganda have implicitly mastered: frames, metaphors, narratives and brain basics.
Second, keep a steely focus on the fact that American democracy is under attack by a foreign power, possibly with collusion from the sitting president’s campaign. This is a crisis. Certain rules don’t apply in a crisis, especially the rule that the press must amplify the president’s words, whatever they are.
Third, stop letting Trump control the news cycle. Newsgathering should be a serious affair controlled by editors whose power rivals any politician’s. Stop chasing his tweets and elevating every sideshow. Start every story with truth and the context of what’s really important to citizens in a democracy. More BBC, less TMZ.
Fourth, don’t spread lies. Don’t privilege Trump’s lies by putting their specific language in the headlines, the leads or the hashtags. Don’t repeat the lies assuming people will automatically know they’re lies. People need to know the president is lying, but be careful about repeating the lies because “a lie repeated often enough becomes the truth”. Repetition of lies spreads them.