We Need to Invest in American Workers Again

One of my most vivid childhood memories is accompanying my father, a casino bartender in Las Vegas, as he and his fellow Culinary Workers Union members walked the picket line on strike. Americans can hardly escape the image of a random politician shaking hands with men and women adorned in hardhats and safety glasses. Conveying solidarity is easy. But it is no substitute for really grappling with what my father knew on the picket line: that our economy often does a poor job of recognizing and rewarding the contribution that working Americans make to the economy.

I recently released a report that seeks to attack this problem. It finds that American business investment has been in decline for decades. Investment in research and innovation — in actual capital goods like equipment, and in workers — is in decline even as corporate profits and GDP rise. The report makes the case that this decline is driven by American businesses and policymakers prioritizing high returns in the short-term, rather than investment in long-term productive capabilities.

If this idea sounds unrelated to the well-being of working Americans, let me assure you it isn’t.

The theory of “shareholder primacy” holds that since shareholders undertake the financial risk of investment without any guarantee of a return, they have a rightful claim on any profits. Employees, who receive guaranteed wages, supposedly don’t take the same level of risk. Supposedly, a wage should be sufficient to satisfy a business’s obligations to workers — even if business decisions ignore their long-term interests.

This idea profoundly disrespects the real level of risk workers take in contributing to the creation of economic value, especially the risk of job loss. Shareholders can sell their stake and depart their investment in a given company easily. Employees cannot. Losing a job is one of the most challenging moments in a person’s life. Yet in times of economic downturn, workers tend to serve as a risk shield for shareholders via offshoring or downsizing, because they are viewed as line items on a ledger rather than essential contributors to value creation.

Workers rely on the firms that employ them to make the kinds of long-term investments that will boost the firm’s future productivity, and thus workers’ own future economic well-being. Workers, despite their essential role in the value-creation process, have little ability to drive those decisions, even though their futures depend on them. When America abandons investment in the productive industries of the 21st century, the working people who depend on American industrial success are the first ones on the chopping block.

Over the last 40 years, corporate profits increased from about 10 percent to nearly 30 percent last year. During this same period, business investment decreased by 20 percent despite corporations tripling the amount of capital returned to shareholders. This is deeply problematic. An American economy that favors quick financial profits for shareholders, instead of the challenging work of making real things and inventing new products, is not in the best interests of working Americans.

To be fair, some of my Democratic colleagues recognize there is a problem. But their default solution is to force companies to pay more without worrying about helping workers or their employers become more productive. This so-called solution stands in the way of the long-term prosperity of workers and the firms that employ them. We need to focus on actually creating the conditions for American companies and workers alike to become more productive, which will provide well-paying, decent jobs and lift wages in a sustainable way.

Some of that work is already underway because the Trump administration rightly rejected the notion that America’s best days were behind her. The president’s pursuit of tighter labor markets and rebalanced trade agreements was long overdue.

Now we must pursue policies that deliberately and strategically prioritize long-term investment in ourselves again — especially in the critical 21st century industries that can employ working Americans at decent wages, and drive a national prosperity in which we all can share. Those investments will not happen simply because Washington mandates them. Washington must create the conditions that allow for an America where dignified work, through which working people can build healthy families, thriving communities, and a strong country, is available to all. If we do not, the well-being of working Americans and their families, and our strength and prosperity as a nation, are at risk.

Originally published at www.orlandosentinel.com on May 21, 2019.