When President Franklin Delano Roosevelt said, “No business which depends for existence on paying less than living wages to its workers has any right to continue in this country,” he expressed a view shared by many business leaders. In today’s business climate it seems incredible, but through much of the 20th century business leaders supported workers’ rights. Why did leading businessmen advocate laws like the National Labor Relations Act (NLRA), which created the right to collective bargaining, and the Fair Labor Standards Act, which created the minimum wage?
You don’t have to look far to find the answer. The preamble to the NLRA says the law’s purpose was, “to maintain a full flow of purchasing power and to prevent recurrent depression.” The law’s author Senator Robert Wagner pointed out:
When wages sink to low levels, the decline in purchasing power is felt upon the marts of trade. And since collective bargaining is the most powerful single force in maintaining and advancing wage rates, its repudiation is likely to intensify the maldistribution of buying power, thus reducing standards of living, unbalancing the economic structure and inducing depression with its devastating effect upon the flow of commerce
In other words, unionization and higher wages were good for business.
Similarly, decreased collective bargaining and lower wages are bad for business; they reduce consumer demand. We’ve seen the proof of that over the last few decades, as the decline of unions led to a decline in wages and the decline of the middle class, which has been a constant drag on businesses.
Why aren’t today’s business leaders pushing for policies that would expand the middle class by raising wages? Has an era of shareholder lawsuits compelled them to focus on increasing stock prices instead of building consumer demand? Have hugely generous executive compensation packages that are tied to stock prices made them want to focus on stocks? Have top executives become so insulated that they simply don’t care about the rest of us? The answer is: all of the above.
Today’s big businesses could learn from their predecessors who helped build a thriving middle class in the 20th century. And if they don’t, we’ll all be worse off.
Ben Field is the Executive Officer of the South Bay Labor Council.
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