There’s a belief among business managers that labor is a “necessary evil” and needs to be treated accordingly. This is great if you’re a boss but not if you’re an employee.
Since Ronald Reagan broke the air controllers’ strike in 1981, labor unions and the clout they traditionally gave workers have been on the decline. But it hasn’t just been union busting that has helped management reduce the need for the “necessary evil” of labor; starting in the 1970s businesses began shipping jobs overseas where wages are lower and regulations nonexistent. Most recently businesses laid off workers during the Great Recession, shifting the workload onto fewer and fewer overworked employees who were afraid to object for fear of losing even a bad job.
But sometimes minimal staff can’t do everything that has to be done. So businesses have increasingly turned to temporary workers who can easily be let go when no longer needed.
Temporary workers, and now even some full-time staff, are classified as “independent contractors” allowing businesses to save the cost of workers comp and payroll taxes. This type of “off-the-books” employment has always been with us, but in recent years has grown dramatically, giving rise to what some experts refer to as the “underground” or “gray economy.” In a recent article in The New Yorker author James Surowiecki says tens of millions of people are now working off-the books – and paying no taxes as a result.
It is believed that working off-the-books is keeping unemployment numbers artificially high. Economist Edgar Feige has been following the underground economy for 35 years and observed to Surowiecki that while the number of Americans working traditional jobs with benefits and taxes has dropped a great deal since the Great Recession, “personal consumption is higher than it was before the recession, and retail sales have grown briskly.” In other words, many people not traditionally “employed” are still earning money some way. Economist Bernard Baumohl says in the Surowiecki article that current retail sales suggest an actual unemployment rate of 5 or 6 percent instead of the “official” 7.6%.
Surowiecki says that in 2006 — before the recession — the I.R.S. estimated that $385 billion dollars in tax revenue was lost to the “gray economy.” It’s thought to be much higher now. If off-the-book workers were paying taxes, Surowiecki says “the deficit would be trivial.”
The deficit is one of the most contentious issues facing America today. Conservatives and liberals are locked in a bitter struggle to either disenfranchise the poor or raise taxes on the rich.
But if a way could be found to collect the legitimate taxes tens of millions of Americans owe, neither of these steps would be necessary. The question is, how? Waitresses, for example, are required to report and pay taxes on tips. But there’s no way to check how much money anonymous diners leave on lunch counters.
There will always be people who mostly work for cash. But the trend in business away from employees in favor of off-the-books arrangements is starving our Treasury. And since businesses that avoid paying workers comp and payroll taxes can undercut businesses that do, there’s growing incentive to work more and more with off-the-books employees.
In attempting to deal with the “necessary evil” of labor, more and more businesses are engaging in the “necessary evil” of inflating the jobless rate, cutting tax revenues and depriving workers of benefits. What does this say about the foundation of our economic system – that businesses do best when screwing both workers and the government — and what does this portend for the future of our deficit?
In November a fire at the Tazreen Fashions factory in Bangladesh killed at least 112 garment workers and injured over 200 more. Since then there have been 41 more fires in Bangladesh garment factories, killing 9 and injuring 660. In the past decade 600 garment workers have died in Bangladesh, and that was before more than 600 people were killed when the Rana Plaza building collapsed a few weeks ago. Shortly before this happened workers reported hearing a noise like an explosion on the third floor, and an engineer, horrified by cracks he found in the support pillars, told administrators that the building must be evacuated. It wasn’t.
On May 4th Bangladesh’s Finance Minister commented on the Rana Plaza collapse, saying it wasn’t “really serious.” Walmart, which sells clothing manufactured in Third World countries including Bangladesh, has stopped doing business with the most blatantly unsafe factories (though work is often subcontracted to these places anyway). But retailers like the Gap, Old Navy and Banana Republic have refused to take any action to improve working conditions, saying they “did not want to pay factories more money to help with safety upgrades.”
Garment workers in Bangladesh make a whopping $38 per month. Low wages and an abject disregard for worker safety have allowed large corporations to make a lot of money selling clothing manufactured in countries like Bangladesh. Many corporations today tout their social responsibility programs, yet despite claims they are working to prevent more disasters, these tragedies keep happening.
But that’s to be expected in the Third World. America is different; after the infamous Triangle Shirtwaist fire in 1911, where the exits were blocked and 146 young women died, worker safety has been a government concern, and workplace safety – as well as programs that help workers who are injured on the job – have made the American worker one of the safest in the world.
But these programs impose regulations. And in a deeply divided country where many see regulations as yet another sign of a broken government, some states – especially Texas – have done their best to skirt them.
Texas, which has no state occupational safety program, has an occupational fatality rate twice that of California. Worker compensation programs are voluntary, which leaves many workers without insurance in the case of an injury. But Texas isn’t just morally opposed to worker safety; zoning laws are so limited that schools, apartments and nursing homes can be built near dangerous industrial sites.
Texas has experienced some of the worst industrial accidents in history, including the 1947 Texas City fertilizer explosion that killed over 500 people. When a fertilizer plant in West, Texas, exploded on April 17th it killed 14 residents – mostly first responders – injured more than 150 and leveled scores of homes. Yet an assistant Fire Marshall dismissed it as an “act of God” – something that couldn’t have been foreseen or prevented. This despite the fact that the fertilizer plant hadn’t been inspected since 1985, was guilty of numerous safety violations and was improperly storing huge amounts of explosive ammonium nitrate.
“It’s not anything that anybody thought could happen,” said an official of the adjacent – and now demolished — school. But that isn’t true. Texas, like Bangladesh, has profited by lax safety regulations – despite repeated examples of why regulations are necessary. Everybody knew something like this could happen – they just didn’t care.
Though regulations can be a pain, to ignore safety measures for the sake of profit is deplorable. Yet some continue to see it as “good business.” Until humanity evolves beyond valuing profit over lives, the need for strong safety regulations will remain vital.