Economists are required to say “it depends” but I hope not. Yet, many fun and not-so-fun facts say otherwise. Let’s get into it.
The labor market rocks.
Despite the challenges we still face, American workers are experiencing the best labor market of my lifetime. Labor – as an economic concept – is having an incredibly good run:
The national unemployment rate has held below 4.5% for the past 31 months (ending May 2024), the longest period of low unemployment since the late 1960s1.
Real wages took 22 years to return to their Q1 1979 peak after two recessions, then remained near this peak for another 13 years. The post-GFC recovery in the mid-2010s finally began to push growth in real wages with a spike occurring in the pandemic and, as of Q1 2024 real median full-time wages are up 8.3% from that peak when I was 3-years old.
Unionization is increasing, which improves wages, benefits, equity, and working conditions for those in the union and the community at large2. According to the Economic Policy Institute, private-sector unionization rose 6.9% (or 261,000 workers) in 2023, workers are organizing at a pace not seen in decades, and over 60 million workers want to join a union.
![Chart: US Real Median Weekly Earnings for full-time wage and salary workers Chart: US Real Median Weekly Earnings for full-time wage and salary workers](https://substackcdn.com/image/fetch/w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Fd3e79a49-5a8b-409b-927a-07559ca27142_960x480.png)
This is fantastic news, and we should be excited about the potential for sharing more economic gains with labor. The economy performs best when everyone has the means to meet their needs, including enough disposable income to save for future needs. Economists know this and, I assume, by the transitive properties of employing economists for planning and forecasting, corporate leadership does too.
Labor is having a good run. In a presidential election year, this should be a slam-dunk for the incumbent.
Wait, what?
Stephen A. Schwarzman, the chairman, chief executive officer (CEO) and co-founder of Blackstone endorsed he who shall not be named for president. This confuses me.
After Schwarzman’s endorsee was convicted on 34 felony counts related to a scheme to influence the 2016 presidential election, he was invited to a private Business Roundtable event to discuss economic policy via interview format with his former National Economic Council Director, Larry Kudlow. Schwarzman is a member of the group, but it is unclear if he attended.
The Business Roundtable has over 200 CEO members. Bloomberg expected about 100 members to attend this election year event, including the CEOs of JPMorgan Chase, Citigroup, Bank of America, Apple, KKR, Wells Fargo, Nasdaq, Cisco Systems, and American Express. After the meeting, Forbes confirmed attendance of about 80 CEOs, including three not listed before the event from Xerox, Gap, and Truist.
The goal for Kudlow and his interviewee was to deliver their campaign’s “pro-business message” by emphasizing reductions in taxes and regulations to gain additional endorsements from members of this 50-year-old corporate lobbying group. I expect they will succeed in attracting more CEO endorsements from the roundtable because the CEO of Blackstone made it acceptable to endorse this candidate.
To recap the endorsee’s history hidden in several links above:
The chief executive of a $150 billion firm that manages $1 trillion in assets is telling citizens of the $29 trillion US economy to vote for a felon acting to influence the 2016 election who also instigated an insurrection at US Capitol to prevent the transfer of power after the 2020 election and mocks those fallen or injured in defense of democracy as our chief executive.
This is not OK.
How is this even a conversation in the business community?
Both candidates are septuagenarians, but only one will continue our democracy and that one gets my vote. There are some issues where I disagree with our current president. However, given the binary choice between a candidate who is actively trying to subvert American democracy and believes the state has jurisdiction over how individuals use their internal organs versus one who supports a free market democracy, I endorse the latter.
In addition to a past rife with subverting democracy, Schwarzman’s endorsee has some anti-democratic and, frankly, anti-American plans for a second term. Project 25 lays out these plans in a 920-page wall of text that no executive would ever read all the way through.
Here are a few salient points from the plan Schwarzman is happy to endorse:
Place all government agencies under direct presidential control, which includes:
Firing up to 50,000 government employees who serve in merit-based agency jobs and replace them with political appointees.
Combining the BLS, BEA, and Census Bureau into one “more manageable, focused, and efficient statistical agency” under political control.
Returning the Justice Department to pre-Watergate political control.
Deploy the military for domestic law enforcement.
Dismantle the National Oceanic and Atmospheric Association.
Gut the Federal Reserve:
Remove full employment from the Fed’s mandate,
Limit its capacity to serve as the lender of last resort,
Cut its balance sheet back to pre-GFC levels (or 89%) and restrict future borrowing to only US Treasuries, and
End interest payments on excess bank reserves.
PS - pages 799 and 804 of the report use data retrieved from FRED, Federal Reserve Bank of St. Louis which would be cut under their plan.
End carbon-reduction goals in favor of increasing carbon-based energy production.
Eliminate the Department of Education.
Prohibit US pension funds from investing in China’s stock market. The CEO of Blackstone is cool with this? I am so confused.
Enact a transgender military ban and allow employers to discriminate against people based upon their sexual orientation and gender identity.
Dismantle the Department of Homeland Security.
Enact a 10% across-the-board tariff on all imports and a 60% tariff on imports from China.
I am going to stop there for my health. If you need a break, here is a summary that helped me laugh through it:
All the items listed above have negative consequences for the American economy and many are difficult to forecast. One area where economists are weighing in is the inflationary impacts of tariffs:
The “Full-blown Trump presidency” downside economic scenario from Oxford Economics expects planned tariffs and immigration crackdowns to boost inflation and stop the Fed from further easing.
The Peterson Institute for International Economics reports that the planned tariffs alone will cost American consumers an extra $500 billion per year.
Yet, the chief executive of a firm managing $1 trillion in assets – or 3.4% the size of the US economy – is recommending this agenda.
About those gains for labor.
The relatively short period of gains for labor under the current president are a triumph in my opinion, but not everyone sees it this way.
As of June 17, 2024, the US National Labor Relations Board (NLRB) [https://www.nlrb.gov/] has 22,861 open unfair labor practice cases against companies operating in all 50 states plus Washington DC, Puerto Rico, and Guam. Every place in the US has at least one company using illegal tactics to block employee rights. To investigate and rule on these cases and manage nearly 1,000 open representation cases where employees have voted to organize, the NLRB has an annual budget of $2.20 per private sector employee3 that it serves.
Despite its meager budget, the NLRB has been working through cases and labor organizers are winning representation elections at a pace not seen since before the GFC. Bloomberg Law reports that employees petitioning to form a union won organizing elections in 662 out of 824 cases in the first half or 2023, the highest January to June total since 2005.
The recent resurgence in worker organizing has — for some employers — been a cause to fight against.
Employers have fired workers supporting a union, hired third-party “union busters” to persuade employees not to form a union, and held mandatory attendance meetings to prevent employees from going to organizing campaigns4. For example, Amazon spent $14.2 million in 2023 to hire third-party union busters and Starbucks went all the way to the Supreme Court to fight the NLRB injunction requiring them to rehire employees fired for organizing. Starbucks won their case. As the president of the union negotiating with Starbucks commented, “it underscores how the economy is rigged against working people all the way up to the Supreme Court."
I struggle to find any reason to disagree. Workers are the foundation of every company, yet a comfortable living is difficult to achieve in America. I understand why 60 million American workers want to join a union.
Are historic gains for labor a threat to democracy?
In 2024, the sad answer is yes.
We will learn the magnitude of this threat over the next six months. Over this period, there will be debates, political conventions, more endorsements, an election, the fourth anniversary of an insurrection, and then, an inauguration. Political instability, in my opinion, means we may not know the outcome for democracy until the inauguration. I will wait, but I refuse to be quiet about what I see.
I see that, in practice, median chief executive pay in 2023 was 300 times the pay of their median employee. The motive and measurement of a corporation’s success, and thus chief executive compensation, is maximizing shareholder value, which places outsized importance on short-term profits5.
Long-term, sustainable revenue requires a focus on people – employees, customers, and vendors – to maintain healthy, mutually beneficial relationships. However, when cost cutting is prioritized over business relationships, stock prices and executive compensation increase. Prioritizing mutually beneficial relationships reduces revenue volatility, which limits short-term profit growth while maximizing long-term revenue. This is not the best path for stock price growth or executive compensation.
The strength of labor is a threat to earnings for a cohort of people whose job it is to crush threats to earnings growth. Putting profit margins ahead of democracy is a dangerous game, but here we are.
I cannot find another motive for a CEO to make such an endorsement.
I try to remain hopeful that allegiance to democracy will outweigh all other factors when the American executive class fills out their presidential ballots. But even if they change their minds in the voting booth, it cannot undo the damage from money spent to encourage the rest of us to pledge our allegiance to a felon insurrectionist.
The longest post-WWII period of sub-4.5% unemployment in the US was between July 1965 and May 1970, chart.
Economic Policy Institute, “Workers want unions, but the latest data point to obstacles in their path”, January 23, 2004.
The NLRB fiscal year 2023 budget was $299.2 million and, as of December 2023, the US Bureau of Labor Statistics reports total private sector payroll employment of 134.2 million.
Economic Policy Institute testimony prepared for the US House Subcommittee on Health Employment, Labor, and Pensions for a hearing on “Big Labor Lies: Exposing Union Tactics to Undermine Free and Fair Elections”, May 22, 2024.
In 1997, the Business Roundtable Statement on the Purpose of a Corporation was changed to “the principal objective of a business enterprise is to generate economic returns to its owners” and, in 2019, the statement was updated again to “companies should deliver long-term value to all of their stakeholders – customers, employees, suppliers, the communities in which they operate, and shareholders”.