It’s 2021, and Black Americans still struggle harder to climb the socioeconomic ladder compared to whites. For many, the trip is now downward, a situation worsened during a pandemic that has impacted them disproportionately.
Economists William Lazonick, Philip Moss, and Joshua Weitz have been researching the key economic forces that have disadvantaged Black men for decades. In a new study focusing on those with only high school diplomas or less, they find that corporate greed – abetted by government policies designed by the wealthy – turned the dreams of once-upwardly mobile citizens into ashes.
From good times to hard times
To understand what happened, let’s time travel back fifty years to 1970.
Nixon was in office, the Temptations were topping the charts, and the first jumbo jet had just taken flight. Black people were moving up, their success fueled by the civil rights movement and opportunities in newly integrated workplaces. There was a mild recession, but Mike, a young Black man from Detroit, wasn’t lying awake at night. He had a good job at General Motors, and the union boss told him that any layoffs would be temporary — and cushioned with the union’s extra unemployment benefits.
Mike was the son of sharecroppers who left the South in the Great Migration. He had graduated high school in 1964, the same year the Civil Rights Act was passed to guarantee everybody equal access to employment, Black or white. Mike had soon landed a unionized position as a machine operator for GM. He liked his job and performed well. As the year 1970 closed, he got a raise that would help fund the purchase of his dream car, the sleek Chevvy made in his division.
Mike saw GM as his home. The recession had passed and Mike kept his job. He planned to stay with the company long enough to buy a house, put his kids through school, and retire to enjoy his golden years in comfort. The American dream was fully within his grasp.
In 1970, young Black men like Mike were looking forward to joining the blue-collar middle class once closed to them. Up until then, only white men could expect to score the kind of post-World War II jobs that promised growing paychecks, decent conditions, solid benefits, and a career-long tenure at a single company. But now, with firms having expanded production in the ’60s, plus support under the newly-created Equal Employment Opportunity Commission (EEOC) and federal subsidies for education, Blacks were leaving behind the dead-end jobs of Jim Crow.
For guys like Mike, determination and a high school diploma could translate into a life of security, and even better prospects for the kids. With parents able to save and plenty of good public schools, the children of the new Black blue-collar middle class could set their sights on the white-collar employment awaiting those with a college degree. They could do it because state higher education was inexpensive and sometimes even tuition-free.
By 1983, Blacks were only 9.2 percent of the U.S. labor force, but they made up 14.2 percent of all autoworkers and 13.7 percent of all union members. Well over a third of all Black men and one-quarter of all Black women in the country’s labor force were union members. They had every reason to assume that the future was bright.
But in the early ’80s, a shadow began to fall over companies where Blacks held blue-collar jobs. Again there was a recession, but this time, a bunch of Mike’s co-workers got laid off. Mike was now a supervisor in his division, but he took a pay cut to help the company weather the storm. Still, he wasn’t too depressed. There had been hard times before at GM. Everybody had always come through it together, from the executive suite to the assembly line.
Soon, he, too, was let go. Mike’s boss said he would be rehired as soon as the economy improved. But somehow that never happened. The union that had always fought for GM’s employees, the United Auto Workers, suddenly seemed powerless. Mike had to take a non-union position as a forklift operator at a warehouse that paid half what he used to make.
Mike had always planned to send his daughter Janice to college. She liked computers and aspired to become a graphic designer. But that required a college education, and Mike just couldn’t swing it now. His income was unpredictable and tuition fees at the state university had gone way up. On top of that, the government had started charging extortionate interest rates on student loans.
Janice gave up the idea of a bachelor’s degree and enrolled at the community college a few years later. The boom in computer-related jobs of the 1980s and ’90s happened without her. Instead, she became a receptionist at the city health department but lost her job in the Great Recession of 2007. Janice never found a similar position. Her husband, a laid-off transit worker, was serving time in prison on a marijuana charge. Their kids’ school was so neglected that she worried about their physical safety. Instead of growing up in safety and security, Mike’s grandchildren were learning survival skills on the street.
What social scientists call “intergenerational socioeconomic mobility” was not in the cards for Mike’s family and millions like it. Or at least not in the upward direction. Economic forces that clobbered one generation quickly toppled the next. And the next.
But what were those forces?
A meaner, leaner vision
Over the next two decades, the overall economy would prosper, but not for Black people like Mike. The Black blue-collar middle class shrank and shrank until it was all but obliterated. By the end of the century, white Americans without college degrees would find themselves on the same downward trajectory as Mike.
Some said what happened was the result of foreign competition. Others thought it was nervous consumers. Whatever it was, auto plants were closing and workers were cut loose, especially the Black ones with less seniority. Lazonick points out that if it had been whites getting kicked to the curb, companies and the government might have tried harder to intervene and see to retraining for workers displaced by international competition. But Blacks were on their own.
What Lazonick and his colleagues describe as “the most important socioeconomic progress for African Americans in the decade after the Civil Rights Act of 1964” was thrown into reverse.
The researchers also identify a culprit that nobody told Mike about: Wall Street.
They detail how in the late ’70s, a new model of the economy was emerging that led corporate executives to look at workers differently. Instead of investing in them for the long run, many decided it was better to have a “flexible” workforce that could be hired and dispensed with at any time. Blacks were especially disadvantaged in the new model, explain the researchers, because of the “last hired, first fired” mentality dominating the unions.
The new model really took off when business schools, starting with Harvard, started preaching the new “shareholder value” vision in the mid-’80s. Proponents claimed that corporations should focus on making as much money as possible for their shareholders — the people who hold the company’s stock— and never mind anything else. Profits shouldn’t be used to pay workers more, to invest in research, or to build plants. They should be used for Wall Street games that would ensure the money flowed into the pockets of shareholders and the executives who increasingly began to be paid in stock.
Those who hold the opposite view, including Lazonick and his colleagues, favor “stakeholder capitalism.” This model says that companies should consider all their stakeholders—not just the shareholders, but also employees, customers, and taxpayers. Companies that don’t do this may end up wreaking havoc, from environmental damage to driving inequality. If you’re only worried about enriching shareholders and executives, then why spend money curbing emissions? Or bother to pay workers decently?
Shareholder value thinking could even hurt the company itself in the long run. After all, how do you keep making good products and services without experienced, dedicated workers and investments in innovation? But increasingly, America’s executives weren’t thinking about the long run. They were focused on Wall Street and the value of their own stock options. As the researchers observe, “leading corporations lost interest in the fate of the American working class” — and so did the politicians who depended on their donations.
As the ’80s progressed, the anti-government Reagan Revolution swept the country, making things even worse for the blue-collar middle class in general. Federal and state governments stopped investing in public education. Unlike many white kids, those of Black people like Mike had no intergenerational wealth to fall back on. They would have a much harder attaining an ever-costlier college degree. Even attending a good public high school was increasingly out of reach.
Over the decade, government jobs that provided another source of security for upwardly mobile Black people were getting cut. Meanwhile, Republican administrations did little but toss big favors to corporate executives, from gutting regulation to lowering their taxes. Everyone was singing the praises of the “free market” as the answer to all economic and societal questions. As Lazonick and his colleagues note, it’s not surprising that in the decades since shareholder value capitalism took hold, America has experienced a concentration of income and wealth not seen since the Gilded Age. The researchers describe shareholder value capitalism as “the not-so-invisible hand” that chokes opportunity for the working class, especially for Black people.
It has helped to create a new Jim Crow that exacerbates the centuries of harm already endured by Black Americans.
Restoring American values
Hard work. Education. Better opportunities for your children. A fair shot for everybody. These core American values have receded in the 21st century, largely due to economic ideas that seem to value nothing but the rich getting richer. And Black people, the researchers show, have borne the brunt of the damage the longest.
Jobs like Mike’s probably aren’t coming back on a mass scale, but America can support other directions for Black upward mobility. Lazonick and his colleagues recommend that for starters, corporations and the rich should be made to pay their fair share in taxes so that the government can invest in things that support the middle class, like education. If Americans are serious about racial equality, then they have to support affordable public education, a cornerstone of the Black middle class, and the advancement of its children into the white-collar economy.
The researchers also point out that America needs the secure business sector jobs it once had — the kind that allowed people like Mike to gain knowledge, skills, and experience for the long run and to contribute their talents over the course of a steady career. Government support for labor unions, they note, has been historically key to ensuring the benefits and conditions that translate into stability and security for middle-class families. It would help companies thrive and be more innovative, too, to retain and benefit from the talents of all the Mikes.
Lazonick and his colleagues believe it’s time to dump the shareholder value mentality into the dustbin of history. For them, that means taking steps to encourage companies to shift profits back to workers and into investments in capabilities and innovation. They are particularly down on stock buybacks, a form of Wall Street manipulation in which firms use their profits to buy shares of their own stock instead of using them to invest in more productive activities. Stock buybacks, says Lazonick, should be altogether banned. The Biden administration appears to be receptive to this argument.
The researchers also raise concerns about the types of relatively secure jobs that are today held disproportionately by Blacks — especially in policing and the mass-incarceration industries. They emphasize that prison reform movements have to take this into account when calling for the closure of facilities and defunding the police. People who become unemployed because of these closures need somewhere to go, and hopefully somewhere better. As Lazonick explains: “We don’t want to keep jobs in the mass-incarceration industries just because they are jobs. We advocate creating useful social services that could employ people who are now in the mass-incarceration industries—which is consistent with progressive demands for police reform.”
Bottom line: A thriving Black middle class is essential not only to racial and social justice in America but to the country’s future economic prospects. Nobody wins in the long run when the Mikes of America and their families end up living an American nightmare.
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The Article Was Written/Published By: Lynn Parramore, Institute for New Economic Thinking