Before I started writing this column on why paychecks are likely to keep shrinking even if unemployment starts to inch down, I consulted Google to see if the term Marxism was trending upward. It was and has been ever since the end of December, the conclusion of a year in which workers’ share of the U.S. economic pie shrank to the smallest piece ever: 54.4% of GDP, down from about 60% in the 1970s. No wonder Marx is back in fashion. It’s been more than 100 years since the German philosopher predicted that capitalism’s voraciousness would be its undoing — as bosses invest more in new technologies to make things more cheaply and efficiently and less in workers themselves, who, deprived of fair wages, would eventually rise up and revolt. That hasn’t happened, of course, though depressed wages certainly contributed to the revolution in Egypt, not to mention lots of other instances of public unrest over the past few years. But the fact that wages in the U.S. and most other rich countries have been falling since the 1970s and went off a cliff after the recent financial crisis is going to become a more pressing economic and political concern. Just think how hard it will be for Obama to sell himself in 2012 if salaries are still falling. And fall they have, to an extent not seen since the 1930s. Labor Department figures show that from 2007 to 2009, more than half the full-time workers who lost jobs and then found new work took pay cuts. A depressing 36% had to take positions paying 20% less than the ones they lost. The drop in wages occurs in part because unemployment rose so sharply and widely after the crisis and has remained higher for longer than in past recessions. Both factors have led to a disconnect between labor supply and demand that makes it tough for workers to negotiate better deals. Forget about driving a hard bargain with a new boss. Most of us feel lucky just to have bosses, and we work as hard as we can to keep them happy — as the productivity figures emphatically show. Yet even if unemployment starts to ease, it’s unclear whether labor’s portion of the pie will stop shrinking. The global headwinds may be too strong. Just as Marx predicted, technology-driven productivity is increasing not just in manufacturing but also in services. Even the financial wizards that caused the crisis aren’t immune. While trading volumes and the size of global markets have increased dramatically in the past 20 years, Wall Street still employs roughly the same number of people. If you’ve ever watched a trader working a three-screen Bloomberg terminal flashing hundreds of prices in dozens of countries, you’ll understand why.
