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The Money Gap

Andy Stern, Alan Greenspan and the Emerging Clash Over Economic Class

Beryl P. Wajsman

1 August 2005

“Castles built to burden poor.”

~ The Anglo-Saxon Chronicle, “On the Death of William the Conqueror”


“I saw thousands who could have overcome the darkness,

For the love of a lousy buck, I’ve watched them die.”

~ Bob Dylan, “When the Night Comes Falling From the Sky”

The past few weeks have seen several troubling reports and testimonies, in Canada as well as in the United States, on the growing money gap between management and labor in North America. Taken alone they would be problematic. Set as they were against what was arguably the most momentous, and fractious, AFL-CIO Convention in a half-century, they are portents of an emerging North American clash over economic class.

"This is not the type of thing which a democratic society - a capitalist democratic society - can accept without addressing." This was not the statement of your typical left-wing bleeding heart. These were the words of none other than Alan Greenspan in testimony before a Congressional committee where, among other matters, he discussed the astonishing 301-1 ratio of average senior management pay to average worker pay in the top 500 U.S. corporations. A Globe and Mail Report on Business around the time of Greenspan’s testimony showed much the same figures held true among Canada’s top 150 corporations.

In 1982, this ratio in North America was 42 to 1. According to figures from the OECD and The Economist, the ratios in Europe today range from 30/40-1 and in Asia today from 15/20-1. The average worker in Canada made about $35,000 last year. The Canadian government poverty line for a single individual is $19,000. The money gaps are becoming canyons.




Ordinarily these reports on economic disparities might only attract academic interest and narrow policy speculation. But Greenspan’s comments were set against the backdrop of events in Chicago taking place the same week.


The AFL-CIO, the giant union federation formed in 1955 by George Meany and Walter Reuther, is breaking apart in a dispute over the future direction, and immediate priorities, of North American labor. Its convention in the Windy City saw the biggest shake-up since its formation.

Six of the largest and most successful unions in the federation - the Service Employees International, the Teamsters, the Carpenters, the Food and Commercial Workers, the United Needle-trade Workers and the Laborers International - are rebelling against the leadership of AFL-CIO President John Sweeney. As international unions, their actions have an immediate impact on Canadian workers who are organized under the same banners within the Canadian Labor Congress and the Quebec Federation of Labor both AFL-CIO affiliates.

Ten years ago in the wake of the Republican takeover of Congress, Mr. Sweeney promised to pour hundreds of millions of dollars into electoral politics to stop the right-ward drift in America. He staffed AFL-CIO headquarters with activists from the political left and made an almost formal marriage with the Democratic Party.



A decade later Democrats remain in the House and Senate minority, and union membership continues to decline across the North American economy.

The leader of the rebels, Service workers President Andy Stern wants to arrest this decline by diverting more labor resources into union organizing, especially at such large employers as Wal-Mart, and attracting more members by aggressively attacking a problem that he views as serious as the credibility gap of the Vietnam War. One of his rebel allies, Terence O'Sullivan of the Laborers International Union, wants to launch on offensive using union pension funds and financial assets to influence corporate decisions and gain seats on corporate boards.

Sweeney doesn't oppose either idea, but he also wants to pour cash into Congressional lobbying and Democratic coffers. Stern believes that this money will largely be wasted until unions increase their member ranks by addressing urgent economic priorities.



It has long been a source of concern that western societies in general, and North America’s in particular, have dysfunctional standards of worth. We seem to know the price of everything and the value of nothing. Those who heal us, teach us and protect us are paid relatively little. While those who entertain us and boss us reap remarkable rewards.

A Washington wag wrote recently that the John Roberts confirmation campaign for the Supreme Court will be the first in history where a political party will have spent $10 million in advertising to place someone in a $200,000 a year job.

Within the past month Philip J. Purcell, fired as CEO of Morgan Stanley, got a severance package of $113 million. Stephen S. Crawford, dismissed as co-president of the same firm after just four months, received a golden parachute of $32 million. According to the U.S. National Compensation Survey doctors average earnings were $118,000 and registered nurses who worked full-time made about $52,000.

The eloquence of these numbers need not be embroidered by further commentary.

Some have argued that if one looked at North America 50 or 100 years ago one could find the same disparities. But that is not so. The rich control and consume much more than they ever did. At the beginning of the Great Depression some 20% of North Americans controlled about 80% of the wealth. Today, 75 years later, after all the breast-beating about the “system’s” distributive dilemmas and saving capitalism by giving it a conscience, some 4% control the same 80%. The greatest concentration of wealth in history.

Aided by fiscal and regulatory disequilibrium the gap between the rich and the middle class, not to mention the working class, has never been wider. After all the policies of the “New Deal”, the “Fair Deal”, the “Great Society” and the “Just Society”, a pitifully small percentage of North Americans have a net worth of even $10,000.




But this is not a one-sided story. There has never been any rhyme or reason between society’s values and society’s rewards. But adding to today’s perplexing paradox of an economy of abundance producing only a thin veneer of affluence is our obsession with, and idolatry of, wealth and consumerism. Most North Americans have done away with any sense of responsibility and spend without any restraint of consequence.

Fuelled by the media, both in its advertising and in its cheerleading, and by the availability of one-time easy credit, most of us end up facing the harsh reality that what Bobby Kennedy once called the “revolution of rising expectations” has become nothing more than the perpetuation of rising debt and shattered hopes. The boulevard of broken dreams. Canadian consumer debt alone is a staggering $30,000 for every working man and woman.

This trauma has been made worse by the accompanying feelings of inadequacy of the many who do good work but not for astronomical pay. There is a continental stirring of resentment in our societies that have historically seen minimal class conflict. That may soon be about to change.  And the changes will be felt north of the 49th Parallel as well.




Andy Stern is setting out to build a new political plurality of hard-headed economic self-interest. He does not believe in the notion that the large economic problems of North America have been solved, and all that is now required are small adjustments and some minor technical tinkering, and he is using the money gap as the object lesson. With men like Greenspan giving it credence, everybody ought to begin to listen.


Stern is backed by the most disaffected groups in the labour movement coalition  including the large ethnic minorities, who see their problems as political and distributive not managerial and technical. His are not the old labor dogmas. He seeks to speak for the assembly line worker who hates his job but has no alternative; for the tax-burdened masses who pay out of all proportion to the services they receive; for the elderly eking out lives on meagre social security cheques; for the newly poor who have lost a lifetime of savings in a corporate catastrophe; for the working poor fed up with the rich getting richer while they work longer; for women and the visible minorities tired of being the last hired and first fired. He is building a coalition of economic class. It may well be the greatest challenge to the North American status quo between business, labor and government since the 1930’s.


In addressing the core social security safety net issues that should concern us all Stern and his allies are focusing attention on two critical areas. In 1960 pensioners in Canada and the United States could count on funds that would pay for roughly 50% of the standards they had while working. Today, government supports equal barely one-third. In 1970 there were roughly six workers contributing into the pension system for every one retiree. The system was set up for an 8 to 1 ratio. Within thirty months Canada’s ratio will be 3 to 1. At 2 to 1 the system will be hard-pressed to maintain even the currently low level of seniors’ pensions.


Stern has articulated the frustration of a new populism. He may be on the verge of constructing more than the usual yoke holding together factions in temporary alliance for short-term political gain. Stern and his friends know full well that winning elections is only half the battle because so many promises have yet to be fulfilled and so much power rests beyond the reach of the electoral process. They mistrust  the technocrats who have failed so spectacularly so often. They believe  change must be generated from below and they do not fear to ask who holds power and by what right – whether in the labor movement or elsewhere.


This labor insurgency is on the road to challenging North America with more than a mere anti-plutocrat vocabulary.



The importance of the Greenspan testimony and the Stern revolt was recently underlined by David Leonhardt in The New York Times. He pointed out that they are warning about the end of two parallel influences that have been primordially responsible for the income gains of the last quarter-century, influences that cannot be repeated and are divorced from any steady increases in hourly pay. Firstly, over the past twenty years, women entered the workforce in historic numbers increasing the total number of hours that families work and helping to make up for decades of stagnating wages. Secondly, the giant financial bubbles we have lived through – and are now suffering for - created so many transitory jobs and so much phantom demand for workers, for a few years, that nearly everyone received more money in their hands.

Today’s reality is that since the bubble burst, the wages of most workers - those in roughly the bottom 60 percent of earners - have done little better than inflation. As Frederick W. Smith, the chief executive of FedEx, said, "It’s going to be hard to have significant improvement in overall wages."

Stern’s view is even more dramatic. "We are in the midst of the most rapid transformative moment in economic history, and workers are suffering," he said. "When you're going down a road and you know where it ends, you have to get off that road and go in a different direction where there is hope." He believes that without increased membership and the power that brings in collective bargaining on the bread and butter economic issues – not political positioning in elections – working men and women are heading for disaster if the money gap can’t be closed.

His position has received some backing from the U.S. Labor Department’s own statistics. They have demonstrated that paychecks are only marginally higher than they were five years ago for rank-and-file workers using inflation-adjusted numbers even though the economy  has grown significantly. The reason for that is that wage increases have become completely divorced from productivity gains over the past ten years according to the U.S. figures.

Unless we seriously address these critical issues soon, it is a good bet that the economic and labor thunderclaps heard from Greenspan and Stern over the past ten days will reverberate far beyond the confines of congressional committees in Washington or labor conventions in Chicago.


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