From 1979 to 2007, labour’s share of national income in the US private sector decreased by six percentage points, says Tali Kristal, an Assistant Professor of Sociology at the University of Haifa in Israel, in her study “The Capitalist Machine: Computerization, Workers’ Power, and the Decline in Labor’s Share within U.S. Industries.”

This means that, had it stayed the same, workers would have received an additional 600 million US dollars, or about 5000 US dollars per worker.

“However, this huge amount of money did not go to the workers,” Kristal said.

“Instead, it went to corporate profits, mostly benefiting very wealthy individuals.”

She disagrees, however, with other academics who attribute the loss in the share of national income to the growth of computerisation.

Instead, she says, it was due to the declining rate of union membership, and therefore, bargaining power.

If computerisation had been the cause, labour’s share would have declined in all sectors of the economy. Instead, most of the decline took place in organised industries like construction, manufacturing, and transportation. In industries where union density is low, like trade, finance, and services, income share remained relatively constant.

“So,” Kristal concludes, “what we have is a large decrease in labor’s share of income and a significant increase in capitalists’ share in industries where unionization declined, and hardly any change in industries where unions never had much of a presence. This suggests that waning unionization, which led to the erosion of rank-and file workers’ bargaining power, was the main force behind the decline in labor’s share of national income.”

Silicon Valley

Kristal’s conclusions are supported, ironically, by looking at one of the least unionised industries – computer and semiconductor manufacturing – in the citadel of the “union-free environment” – Silicon Valley.

In its report, “Life in the Valley Economy – 2012”, Working Partnerships USA (a labour-sponsored research project) concludes that the low rate of unionisation is responsible for the depressed living standards of high-tech workers, and growing economic polarisation.

“It is an example,” it says, “not of a technology-driven exceptionalism, but of the way a corporate power structure rarely puts the priorities of working families first.”

Lack of unions and of workers’ bargaining power has had very concrete consequences. To begin with, lack of unions produced vast differences in who was able to benefit from economic growth.

“Yes, factories produced goods which were sold, and wealth poured into the pockets of those who owned and controlled them. But they did not flow equally into the pockets of those who labored in the plants.”

Racism and sex discrimination played a part as well in keeping the income of production workers low. “The structure of the workforce in high-tech production has always reflected a high degree of racial and sexual stratification and segregation,” it continues.

Vicious cycle

Finally, lack of unions meant workers were unable to halt the flight of jobs from the Valley.

“Profits and the productivity of industry can produce jobs when our communities provide advantages to large corporations,” the report explains.

“But those jobs can also leave, as they have in the past, when lowering labor costs and gaining tax advantages become a higher priority than the welfare of the working people. We’re in a vicious cycle where corporations cut and outsource in order to raise profits, then use those profits to stack the deck even more.”

Kristal also found that rising unemployment and outsourcing production damaged workers’ livelihood.

“All of these factors placed US workers in a disadvantageous bargaining position versus their employers,” she concluded. “In short, my study shows that capitalists have rarely had it as good as they did from 1979 through 2007.”

In Silicon Valley, from 2000 to 2008, the proportion of households earning less than 50,000 US dollars a year (about 25 US dollars an hour) went up by 76 per cent. The answer, the LIVE report says, is at least in part – unions.

“Trickle down doesn’t work. Wages can go up, if workers organize to push them up, but that’s not a given. If an industry announces that it intends to keep workers from organizing to do this, our community has to consider what is in its long-term best interest ... To make the economy serve the needs of working families, they must be organized. It’s not enough to have a voice or a ‘place at the table.’ Silicon Valley’s 99 per cent need the organized ability to effectively advocate for their needs, even ... in the face of corporate resistance.”