The Year of the American Worker

The Pitch: Economic Update for December 16th, 2021

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Civic Skunk Works

10 min readDec 16, 2021

(The Pitch is a weekly economics newsletter written by Zach Silk. Sign up for free on Substack to receive a new issue in your inbox every Thursday.)

Friends,

Yesterday, the final Child Tax Credit checks provided by the American Rescue Plan went out to millions of parents around the country. The Child Tax Credit has been a roaring success, with its monthly checks lifting some three million American children out of poverty this summer. At a time of uncertainty, the checks also provided billions of dollars in direct economic support to communities everywhere in the United States, saving and creating jobs through increased consumer demand and providing some stability for families that were struggling with affordable childcare and the chaotic process of restarting in-person public education.

The Build Back Better Act has an extension of the Child Tax Credit program written into it, but it appears that the Senate has chosen to prioritize voting rights legislation over the Build Back Better Act for their final action of the year. This means American families won’t receive Child Tax Credit checks next month. According to NBC News’s Teaganne Finn, polling shows that without Child Tax Credit checks, “50 percent of respondents said it will be more difficult for them to meet their family’s basic needs and 36 percent said they will no longer be able to meet their family’s basic needs.” As we’ve learned during the pandemic, economies are delicate ecosystems in which everything is deeply connected. Congress’s inaction will result in a slowdown of consumer spending and more uncertainty for American families. The Senate should prioritize the passage of the Build Back Better Act as soon as they return to session in 2022, because when American families struggle to get by, the entire economy is in peril.

The Latest Economic News and Updates

The real Person of the Year

Twitter had a lot to say this week about the fact that TIME Magazine selected the richest man in the world to be their Person of the Year. That’s certainly not who came to my mind. Off the top of my head, better options include the scientists who created the COVID vaccines, the courageous Capitol Police officer Eugene Goodman who confronted the insurrectionist mob on January 6th, the striking workers bravely taking a stand against exploitative employers, and the frontline care providers closing the second year of this pandemic.

The biggest trend of the year in the economic space was American workers finally advocating for better pay and working conditions — both individually, as we’ve seen in the Great Resignation, and collectively. Just this week, 3000 striking workers at Columbia University spotlighted the atrociously poor treatment of graduate student workers including teaching assistants, and workers at the New York Times’s consumer products website won a significant victory in their ongoing labor dispute including a salary floor, guaranteed annual raises, and the end of NDAs used to silence workers who have been harassed on the job.

I expect this story to continue into the next year as more and more American workers realize that they can demand the real raises that they’ve been denied for the past four decades. In fact that raise is long overdue: a new study from EPI found that the top one percent of earners in the US have seen their wages climb nearly 180 percent since 1979, while the share of wages for workers in the bottom 90 percent hit an all-time low last year.

State of the unions

We’ve been talking a lot about unions lately in this newsletter — an excessive amount, some may argue, given that only a little over 10 percent of the American workforce is unionized. But a new report from the Economic Policy Institute examined worker conditions and found that nonunion workers in states with high union density earn a lot more than their nonunion peers in states with low union density — more than $12,000 per year, on average — and the minimum wage is a remarkable 40 percent higher in states with high union density.

2021 was a record year for corporate profits

When workers complain about low wages, corporations always respond in bland, polite market-tested tones that their salaries are already competitive and rising costs mean that everyone has to sacrifice in these unprecedented times. If that’s so, why have corporate profits skyrocketed this year, blowing past the previous record by the better part of a trillion dollars?

The Center for American Progress is using this shocking statistic to make a very convincing case that American corporations — many of which often pay nothing in taxes — should be subject to a Corporate Profits Minimum Tax proposed in the Build Back Better Act. CAP examined publicly accessible data and found that “in 2020, 7 of the 8 most profitable large corporations — Microsoft, Apple, Google, Facebook, Intel, Amazon, and Verizon Communications — paid less than 15 percent of their income in corporate income taxes. Under the Build Back Better Act, these corporations would have owed an estimated $6.4 billion in corporate profits minimum tax.”

Of course, this kind of corporate tax evasion should already be illegal, but the truth is that our tax code simply doesn’t reflect the modern reality of how the richest people and corporations in the world make and grow their wealth. Reforms like this one are needed to simply patch the massive leaks that have sprung up in our ancient tax code and if this reform passes, a complete overhaul will still be necessary if we want a functioning system of taxation.

Immiserating the working class won’t cure inflation

The ongoing conversation about the Build Back Better Act seems to have merged with the national conversation about inflation and rising prices. Critics of the BBB make the argument that any investment in the American people will cause prices to rise even higher than they already are. (Funny that trickle-downers are identifying Child Tax Credit checks and rising wages as the cause of inflation and not, say, this year’s all-time-record corporate profits that I mentioned in the item above.) As JW Mason points out, this single-minded obsession with solving inflation could be dangerous. If the Federal Reserve were to basically slow our economic recovery into a recession, for example, the lost jobs and stunted economic growth that might result from the recession would likely result in more misery than the high prices they meant to resolve by starting the recession in the first place.

For The Hill, Rose Khattar makes a compelling case that the best way to fight inflation is to pass the Build Back Better Act. “Anyone who truly cares about the cost of living pressures families are facing should work to pass the Build Back Better Act as quickly as possible because the act is expected to do more to cut costs for families than any piece of legislation in more than a generation,” Khattar writes. Trickle-downers love to make economic matters sound like a complex Rube Goldberg device in order to intimidate everyday Americans — pull a lever here by creating a national affordable childcare program, they warn, and the inflation hammer drops onto the vase on the other side of the room — but the truth is that by raising wages and lowering costs like medical care, childcare, and energy bills, you’re improving outcomes for Americans in a very real way.

Abortion is an economic issue

We haven’t yet written in this email about one of the most pressing political topics of the year, which volleyed from the state legislature in Texas directly into the Supreme Court: the fight over abortion rights. Access to safe and legal abortions is something that touches every aspect of American life, from religion to privacy to employment to healthcare. As the fight has escalated over the past year, reporters and economic policy advocates have put together a number of excellent deep dives into what the restriction of abortion access would mean for American women, families, and children. Here are a few of the best:

Many abortion rights advocates argue that restrictive abortion laws are a way for politicians to control women, to refuse their rights to full personhood. The economic data backs up those claims: Without access to safe and legal abortions, women lose a significant amount of economic control over their lives, creating worse economic outcomes for themselves and their children.

Latinos are underpaid by a quarter of a trillion dollars a year

McKinsey & Company have done a deep dive into the economic state of Latinos in America, and they find that due to discriminatory economic barriers, Latino workers and families are not fully realizing their economic potential. “Our research finds Latinos are collectively underpaid by $288 billion a year,” the authors write. “In a situation of full parity, they could spend an extra $660 billion annually. Latino businesses could generate an additional $2.3 trillion in total revenue each year, and 735,000 new businesses could be created supporting 6.6 million new jobs. And Latinos’ annual flow of net wealth from one generation to the next could be $380 billion higher.”

Axios wrote up the report, and there are plenty of interesting findings to explore, including the fact that Latinos born in the United States earn significantly more than foreign-born Latino workers. Among Latino immigrants, it’s also interesting that second-generation families see a huge jump in intergenerational wealth — significantly more than either the first or third generation.

WFH Forever?

As we prepare to enter 2022, Axios’s Erica Pandey reports that in the cloud of the Omicron variant, many companies are giving up on return-to-work plans for white-collar workers who have been working from home for the duration of the pandemic. For DocuSign, she notes, this latest cancellation of return-to-office plans marks the fourth such cancellation since the pandemic began. (And shortly after Pandey published the story, Apple became the latest in a long string of tech companies to announce that they were indefinitely delaying a planned return to its corporate offices — significant because Apple has been one of the strictest Big Tech companies to insist all along that it will one day return to a full work-in-office culture.)

Unless these companies change their plans drastically, March 2022 will likely mark two full years of many offices working from home. That’s a significant chunk of time. Elected leaders’ hopes for the revival of downtown businesses in cities like Seattle and San Francisco that previously relied on office workers to survive must be dwindling. How much time can pass before the culture around office work changes forever?

Real-Time Economic Analysis

Civic Ventures provides regular commentary on our content channels, including analysis of the trickle-down policies that have dramatically expanded inequality over the last 40 years, and explanations of policies that will build a stronger and more inclusive economy. Every week I provide a roundup of some of our work here, but you can also subscribe to our podcast, Pitchfork Economics; sign up for the email list of our political action allies at Civic Action; subscribe to our Medium publication, Civic Skunk Works; and follow us on Twitter and Facebook.

On Civic Action Live this week, we’ll discuss some of the major economic stories of the year and look at what might be in store for the year ahead. We’ll also talk about McKinsey’s new study on Latino entrepreneurship and intergenerational wealth, and we’ll take your questions in real time. Join us on Friday at 10:30 am, PST.
On the Pitchfork Economics podcast this week, the Roosevelt Institute’s Kyle Strickland joins Goldy to discuss the concept of “racial liberalism,” which was the dominant political idea in the 1990s and 2000s arguing that we could end racism in America simply by disavowing personal bigotry and overt discrimination. Strickland argues that to improve economic outcomes for people of color, our leaders have to instead target systemic injustices built into our political and economic systems.
And in his Business Insider column, Paul discusses the pernicious practice of overdraft fees. Even though the average overdraft fee is just $34, large financial institutions have rigged their practices to wring billions of dollars out of their poorest customers every year. But now the government is cracking down on the practice, and hopefully putting an end to other high costs of banking while poor.

Closing Thoughts

We’ve made some impressive gains in 2021 — the economic recovery from the pandemic has been faster than anyone could have predicted, and absolutely nobody expected a Great Resignation on the scale of what we’ve seen this year — but the year has also marked some notorious records as well. Case in point: Corporations bought back some $235 billion in stock this year, breaking a record that was previously shattered in 2018, reports Monique Beals at The Hill.

Stock buybacks like this were illegal until the Reagan Administration, and they have proven to be one of the most meaningful mechanisms to transfer wealth from everyday American workers to the wealthiest one percent. Rather than sharing profits with their workforce, investing in improvements that might benefit customers, or sinking money into R&D innovations, CEOs and corporate executives instead simply pass hundreds of billions of dollars on to shareholders with no strings attached every year — and remember, too, that CEOs are often largely compensated with stock, meaning they’re rewarding themselves when they vote for buybacks. Our leaders could make a significant dent in America’s runaway income inequality by making a resolution to curb stock buybacks in 2022. Here’s hoping for a better, more equitable year ahead.

Be kind. Be brave. Mask up. Get vaccinated — and don’t forget to get your booster shot.

Zach