It’s Working

Amidst violent and distressing headlines at home and abroad, the past few weeks have seen a surprising amount of good news about the economy. The economy is growing at rates that far exceed most experts’ predictions, with rising real wages and increasing labor power. Workers with the United Auto Workers (UAW) won historic raises and secured record-setting contracts with the Big Three automakers. Even as the President and his administration face a series of international crises, there is increasing evidence that their new approach to economic governance is working for working people.

The Rebalancing​

Peak Bidenomics?

The news that the economy grew at a 4.9 percent clip in Q3 caused a bit of shock last week among the pundit class.

The impressive figure prompted Politico to refer to the unexpectedly high growth as “peak ‘Bidenomics,’” suggesting the strong growth was the result of the President’s policies, but that the good times were not likely to continue. “[E]conomists predict this may be as good as it gets for the near future—and some fear it may spur the Federal Reserve to do more to slow growth and fight inflation,” wrote Politico reporter Zachary Warmbrodt.

But maybe those who are shocked—shocked!—need to take another look at how they analyze the numbers, and who the economy should be working for most. While it is clear that Bidenomics’ public investments contributed to the strong growth figures, it would be a mistake to consider overall GDP growth to be the best indicator of its economic and political impact.

Bidenomics didn’t just promise economic growth; it promised a transition from the era of trickle-down, neoliberal economics to a new paradigm that focused on improving the wages and livelihoods of working- and middle-class people. The transition to a “bottom-up, middle-out” paradigm requires a renewed focus on metrics that look at economic outcomes for working- and middle-class people, and, crucially, their power to form unions and collectively bargain for better contracts. Paul Volcker, who ushered in the era of neoliberalism during his time as Fed Chairman in the Reagan administration, famously carried an index card schedule of upcoming union contract negotiations in his pocket—because breaking the power of organized labor was among his highest priorities. Bidenomics’ aim of rebalancing the economy for a post-neoliberal era requires a similar focus on the power of workers, but with the opposite, pro-labor intentions.

A look under the hood of these topline figures reveals that this new approach to economics is meaningfully delivering on the goal of improving wages for working- and middle-class people. A widely cited NBER paper from May found that, “Real wages of workers at the 10th percentile of the hourly earnings distribution rose by 6.4 percent between January 2020 and September 2022.” As we’ve previously covered in the Bidenomics Brief, unions won more elections in 2022 than they have in 20 years, and more workers went on strike than any year since at least 2000. And the compression between the wages of college and non-college educated workers is an indication the rebalancing efforts of Bidenomics are having an impact.

Perhaps one of the reasons many economic pundits and prognosticators are committed to the idea of a coming recession—as they have been for years—is an increasingly outdated belief that rising wages for workers is bad for the economy. While we can’t predict what will happen in the coming months, it’s noticeable how many CEOs and conservative commentators cited regarding the new jobs figures expressed concern that workers are doing too well, and are becoming too empowered. Maybe those most committed to suggesting the bottom is about to fall out of the economy still believe the most important place to look is what’s happening on top.

Some Like It Hot

When we fight, we win

When UAW launched its strike against the Big Three automakers, it was hailed by friends and foes of organized labor alike as a potential inflection point in labor history in the US. As new UAW leader Shawn Fain ratcheted up the rhetoric against the management of the Big Three automakers and the billionaire class, he also raised the expectations—and the stakes—for the union to succeed in delivering on behalf of its workers. As Fain said, “Record profits mean record contracts.” The union began with demands of 40 percent raises, which were calculated to match the raises the Big Three executives had given themselves over the past three years.

And while there are still important steps remaining, tentative deals struck with the Big Three are indeed remarkable achievements. According to Alex N. Press at Jacobin, the agreement with Ford, for example, “amounts to more than a 30 percent raise for workers earning the top rate, which will increase to above $40 an hour, and 68 percent for those earning the lowest, which rises to over $28 an hour.” As Press explains, “For perspective, the combined wage increases for UAW members at Ford from 2001–2022 only amount to a 23 percent raise.” In addition to the impressive wage gains, the union also won significant concessions on its top two non-wage demands: restoring a cost of living adjustment removed during the Great Recession and undoing the tiered wage system that led to different classes of workers. According to the union, the contract also includes a historic right to strike over plant closures, a first for the union.

In addition to these wage and non-wage demands, the UAW has secured a commitment from GM to include electric vehicle battery production work in the UAW’s national master agreement with the company. The transition to electric vehicles has loomed over the talks between the union and the Big Three. But, the agreements reached bode well for advocates of a just transition to clean energy that maintains the role of organized labor in auto manufacturing. Analysts agree that these contracts not only put the Big Three in a solid position to focus on the transition to EVs—they could even pressure non-union EV automakers like Tesla and others to raise wages in an effort to persuade workers not to form a union.

UAW’s success in achieving these record contracts is the result of a united and committed approach to negotiations from members, and a more aggressive and confrontational leadership. UAW Vice President Chuck Browning said, “Thanks to the power of our members on the picket line and the threat of more strikes to come, we have won the most lucrative agreement per member since Walter Reuther was president.” And, the favorable conditions set by the hot labor market and supportive National Labor Relations Board show how the President’s support for unions and for the collective power of workers is bearing serious fruit. In the wake of successful strikes at Kaiser Permanente and by the Writers Guild of America, the mere threat of a strike by the Teamsters at UPS, and now the historic achievements by the UAW, the verdict is in: This new approach to economic governance is making a difference.

What to Read

The new rules are taking hold

Brian Callaci, chief economist at the Open Markets Institute, has a piece in the Atlantic on the Biden administration’s reversal of Chicago School economics and the era of deregulation.

In the Nation, Roosevelt’s Mike Konzcal writes about how hot labor markets can increase labor force participation to heights most economists didn’t think was possible.

Roosevelt’s Isabel Estevez has a new brief that provides a framework for how industrial policy can use holistic thinking to achieve multiple goals, without getting sidetracked from its original purpose. Think of it as a recipe for a delicious everything bagel.

Roosevelt Institute Fellow Lenore Palladino writes about the potential of leveraging pension funds as a form of “solar capital” in Phenomenal World.

Who Said It: JRB or FDR?

As you know by now, we close every week with a quote from either President Biden or FDR.

This week’s quote:

“The first truth is that the liberty of a democracy is not safe if the people tolerate the growth of private power to a point where it becomes stronger than their democratic state itself. That, in its essence, is Fascism—ownership of Government by an individual, by a group, or by any other controlling private power.

The second truth is that the liberty of a democracy is not safe if its business system does not provide employment and produce and distribute goods in such a way as to sustain an acceptable standard of living.”

If you guessed last week’s quote, “Federal investments attract private sector investments” was JRB, not FDR, then you were correct! It was from a speech he gave on union jobs in the clean energy economy.