The New Reserve Army of Labor?
In October of 1999, Karl Marx topped a BBC News Online poll to be named the millennium’s “greatest thinker” by voters around the world. Marx has survived one hundred years of scrutiny because his theories are relevant to the workings of capitalism today. Capitalism may be changing by “revolutionizing” into variations of itself—but it always remains unchanged. Take capitalism’s inherent need for what Marx calls a “relative surplus population” or “reserve army of labor,” which includes the official unemployed and all those parts of the population, whether part of the workforce at a given time or not, who might become part of the workforce if the demand for them grew. Marx explains the business cycle “depends on the constant formation, the greater or less absorption, and the reformation of the industrial reserve army or surplus population,” because the economic system dictates that larger numbers of workers must be seeking work than employers will ever recruit.
Traditionally, disabled people have been considered irrelevant to the modern political/economic system, and placed in the category of people Marx designated the “stagnant” surplus population—those unable to work and the least likely to be employed. But now that more disabled persons can work with a reasonable accommodation as called for by the ADA, there is the potential that this stagnant group may join the “active” reserve army of labor.
Upon passage of the ADA in 1990, Business Week suggested that “one of the hidden keys to profitability may be a large and growing bloc of Americans—people with disabilities.” It projected “… in a decade in which willing and able workers will be increasingly hard to find, the nearly nine million working age Americans with disabilities now outside the job market may be one of the best sources of new employees—period.”1 Disabled persons represent a possible influx of hundreds of thousands of job seekers to newly compete with, and join the ranks of, labor. Seven out of ten working-age disabled persons who are not employed, for example, say that they would prefer to be working.2 […]
Recently, President Clinton has used his bully pulpit to place employment of disabled persons on the national radar screen. He has, for instance, ordered federal agencies and departments to hire these potential workers, which in turn, he says, will set an example and provide a model for private industry to follow. Business, however, so far has resisted hiring and retaining workers with disabilities by vigorously fighting ADA discrimination cases in the courts. […] Unlike non-disabled employees, disabled workers may need reasonable accommodations, and the cost of providing their health care may exceed the norm (insurers charge exorbitant rates for those who have a history of a disabling condition). Americans with disabilities face a distinct form of economic discrimination, inherent in capitalism, in which the costs of nonstandard (disabled) labor are weighed against standard (non-disabled) labor, and employers discriminate accordingly.
The president’s call to private industry is accompanied by support for legislation that would remove one such economic barrier. Rather than tackling the powerful and fragmented health care industry, where private health insurance companies are in the business to make money as opposed to guaranteeing health care, government is enacting legislation (Work Incentives Improvements Act) that would publicly subsidize the health care of employed disabled persons by allowing them to buy into Medicare or Medicaid. Instead of the employer paying for a disabled worker’s health care, government will offer paid health care as an incentive to potential employers.
Why, after some twenty years of activists’ efforts to get government to reform such systemic problems which restrict disabled persons’ freedom to work, and twenty-five years of government noncompliance with affirmative requirements under the previously enacted Rehabilitation Act [of 1973—Ed.], has the government chosen 1999 to become active? The recent emphasis suggests there is more to the president’s actions than advancement of the civil rights of disabled persons. There is, in fact, another dimension to the president’s call. His administration has a macroeconomic agenda (as opposed to a singularly microeconomic matter of labor discrimination). Labor Secretary Alexis Herman told a joint meeting of national disability organizations, “The last big group of people in this country who could keep the economy going strong with low inflation are Americans with disabilities … who are not in the workforce.” President Clinton clarified how the new reserve army fit into macroeconomic planning on his poverty tour: “[T]here are a couple of options [for ways to keep America’s economy growing without inflation]. You can bring more people from welfare or from the ranks of the disabled into the workforce….”
Clinton’s comment came upon the heels of discussion in economic circles as to whether the Federal Reserve Bank would raise interest rates or not. Their concern: how much growth and how low the unemployment rate could go before the combination set off an explosion of inflation due to rising labor costs, which Clinton and mainstream economists fear would kill the recovery. Although the Humphrey-Hawkins Act directs the Federal Reserve to adhere to goals of full employment, Federal Reserve monetary policy is based on the theory that a certain level of unemployment is healthy for the economy; it caters to investors’ interests by manipulating interest rates to quash growth, which, in turn, cools down hiring. This, they rationalize, controls inflation but, more importantly, it protects profits and investments on Wall Street.
Disabled persons are the last identity group to enter the workforce, seeking the right to share in the wealth of the nation at a time when unemployment levels are as low as they have been in nearly forty years, and may be below what the investor class traditionally will tolerate. The employment expectations of disabled persons are likely to outstrip material gains due to the limits economic policy makers place on growth. The administration’s primary intent is to use the new army of labor to put downward pressure on the now rising wages in a tight labor market. After nine years of lax enforcement of disabled persons’ civil rights, and relative inattention to the unemployment predicament of disabled persons, those representing the investor-capitalist class now have an incentive at this stage in the business cycle to utilize them to meet Wall Street ends. Ironically, the unemployment predicament of disabled persons may improve, not because of civil rights laws, but because the macro economy demands enlarging the active reserve army.
Macroeconomic Matters: Reserve Armies, Compulsory Unemployment, and Wall Street
Under Marx’s General Law of Capitalist Accumulation, unemployment is not an aberration of capitalism; rather, it is a built-in component of the market economy that requires many people be unemployed against their will. There are many sources of the reserve army of labor. Some of them, like the destruction of precapitalist societies, the detailed division of labor, and mechanization, are internal to the process of capital accumulation; and others, such as the manipulation of credit availability by the US Federal Reserve System, are international mechanisms of state policy. I want to focus my attention on the role of the state in augmenting the reserve army.
US monetary policy as carried out by the Federal Reserve—a system of quasi-independent banks overseen by a board of governors appointed by the president, which sets interest rates, and for many years now has essentially been running the economy of the nation—illustrates how US capitalism preserves the reserve army of labor. Before we continue, it is important to remember that the reserve army is much larger than the officially unemployed. For example, the Bureau of Labor Statistics put official unemployment at 5.5 million in April of 2000, but another 3.1 million people work part time when they would rather have a full-time job, and 4.4 million who need jobs are off the recording charts because they gave up looking and are not counted. The real jobless rate is closer to 13.0 million or 8.9 percent of the population—more than twice the official rate.
Large numbers of people are left jobless because mainstream economists believe that a threshold of unemployment is necessary to avoid inflation and maintain the health of the American economy. The theory of a “natural rate of unemployment,” or nonaccelerating inflation rate of unemployment (NAIRU) has dominated macroeconomics for about twenty-five years. The Full Employment and Balanced Growth Act of 1978 (the Humphrey-Hawkins Act) mandates that the Federal Reserve Bank promote full employment, but the Federal Reserve connects low unemployment with inflation in disregard of the Humphrey-Hawkins Act. Since the 1970s, the Fed has instead assumed the task of fighting inflation by raising interest rates, slowing economic growth, and keeping unemployment in check. When the unemployment rate drops, the Fed adjusts interest rates upward to discourage more growth (employment) with the intent of preventing inflation.
There are central bankers who reject the NAIRU theory, and these have adopted the “Taylor Rule,” making their anchor of economic policy the “sustainable rate of growth.” Under this theory, growth becomes unsustainable when unemployment gets below 3 percent. Under either theory, mainstream economic policy makers assume the need for a reserve army of labor, holding that at least 3 to 6 percent of the population must be unemployed at all times.
Underlying the Fed’s maintaining a ratio between employment and unemployment or enlarging the active reserve army of labor, is its desire to regulate wages. Marx explains:
[Wages are not] determined by the variations of the absolute numbers of the working population but by the varying proportions in which the working class is divided into an active army and a reserve army, by the increase or diminution in the relative amount of surplus population, by the extent to which it is alternatively absorbed and set free.3
Tight labor markets—a “labor shortage” or smaller active reserve army— mean pressure for wage increases from labor; as unemployment goes down, labor costs go up because there is more pressure for wage increases.
Before Marx, Adam Smith, observing such a mechanism, originated the truism that the power relationship between workers and capitalists changes with the employment rate. Smith wrote that “the scarcity of hands occasions a competition among masters, who bid against one another in order to get workmen, and thus voluntarily break through the natural combination of masters to not raise wages.”4 A shortage of labor forces capitalists to raise wages.
There is solid empirical evidence for the negative correlation between wage levels and unemployment. Two mainstream economists, David Blanchflower and Andrew Oswald, have produced evidence that, all things being equal, unemployment depresses wages.5 Economist James Galbraith has also shown that power, and particularly market or monopoly power, changes with the general level of demand, the rate of growth, and the rate of unemployment. He explains that “in periods of high employment, the weak gain ground on the strong; in periods of high unemployment, the strong gain ground on the weak.”6 Even Alan Greenspan, the chairman of the Federal Reserve Bank, the mouthpiece for Wall Street investors, admits a class relationship: a primary purpose of US monetary policy is to keep wages down.7
When the unemployment rate gets too low, wages will rise. So, in terms of the political economy, enlarging the active reserve army of labor is “good” for business because it disciplines labor. Having more people desperate for work keeps competition for jobs high and workers’ wages down, thereby protecting the corporate profit margins which are sacred to the interests of capital.
How many disabled persons are there to potentially join the active reserve army? The Economic and Social Research Institute finds 2.3 million disabled who are not working could now be working with workplace accommodations.8 But this is surely an underestimation of the disabled in the reserve army. There are 17 million working-age disabled persons, 5.2 million of whom are working.9 This leaves 11.8 million either officially unemployed or not in the labor force. According to the 1998 National Organization on Disability/Harris Survey, seven out of ten among those with disabilities age 16 to 64 who are not employed say that they would prefer to be working.10 Thus, as many as 8.3 million workers could be enlisted in the active reserve army. But further, there are indications that disabled persons may be significantly underemployed, preferring to work full time when they are only employed part time. Between 1981 and 93, the proportion of disabled persons working full time declined by 8 percent, while the number of disabled working part time for both economic and noneconomic reasons increased disproportionately.11 All in all, there is a large pool of disabled persons to utilize as buffers against higher wages and lower profits.
Of course, the administration’s objective is not to assimilate the millions of disabled persons wanting a job into the workforce. The omission of a jobs creation program that might achieve such an end is a clear signal that government’s intent is to use the disabled (along with those transiting from welfare to work) to protect the interests of investors by keeping inflation and wages in check. Both inflation and higher wages decrease the value of financial assets and weaken the fortress of class privilege—Wall Street.
The administration’s ultimate aim is to prevent the collapse of the “new economy,” which has delivered primarily to the investor class while working-class people have slid further behind. Over the past twenty years, for instance, real wages have fallen for 60 percent of the workforce. Seven years into the recovery, the inflation-adjusted earnings of the median worker in 1997 were 3.1 percent lower than in 1989,12 the worst performance since the Great Depression. By contrast, the “new” economy has delivered for capital; it is consolidating money into the hands of the few. The stock market, for example, rose by a staggering 60 percent in 1995 and 1996 alone, but according to economist Edward Wolff of New York University, an estimated 42 percent of the benefits of the increase in the stock market (between 1989 and 1997) went to the richest 1 percent.13 The richest 1 percent of households now controls 40 percent of the nation’s assets, twice what they had twenty years ago. Since 1983, the value of the stock market has increased thirteen-fold, but less than half of the population owns any form of stocks, and the vast majority of those who do—three quarters of the stockholders—have less than $5,000 invested in the market. The administration and the Federal Reserve are not about to upset this economic juggernaut, this capitalist golden egg, by allowing wages to rise too much.
Microeconomic Obstacles: Business Resistance to Employing Disabled Persons
Can the government employ a strategy to successfully use disabled persons to fight inflation? Here, the microeconomic interests of business may be in conflict with investors’ macroeconomic interests. […]
As Marx outlined, and as any businessperson knows, business exists to make profits. The basis of capitalist accumulation is the business use of surplus labor from the workforce in a way which makes it money. Typical business accounting practices weigh the costs of employment against profits to be made. Productive labor, or exploitation of labor, means simply that labor is used to generate a surplus value which is based on what business can gain from the productivity of workers against what it pays in wages, health care, and benefits (in other words, the standard costs of having an employee). The surplus value created in production is appropriated by the capitalist. The worker receives wages, which cover the worker’s subsistence, (theoretically) making it possible to reproduce labor-power every working day.
To business, the hiring or retaining of an employee with a disability represents nonstandard extra costs when calculated against a company’s bottom line. Whether real or perceived in any given instance, employers anticipate increased costs in the form of providing reasonable accommodations, speculate that disabled workers will increase their workers’ compensation costs, and project extra administration costs to hire an unknown quantity, the nonstandard worker. Employers, if they provide health care insurance at all, expect extra premium costs for health insurance for workers with disabilities. Insurance companies and managed care health networks often exempt “pre-existing” conditions from coverage for periods of time, or make other coverage exclusions based on chronic conditions, charging extremely high premiums for the person with such a medical history. Employers, in turn, look for ways to avoid providing coverage to cut costs. In addition, employers characteristically assume that they will encounter increased liability and lowered productivity from disabled workers, either from decreased capacity or absences from work.14 […]
How could a government now interested in bringing more workers with disabilities into the active army of labor to fight inflation make the pendulum swing in the other direction, so that business, in fact, could profit from and be compelled to hire disabled people? One way is through public subsidies to employers. Government has already moved to subsidize disabled workers’ health care by allowing them to retain their public health care while on the job by buying into Medicare and Medicaid. This may reverse one disadvantage: it means business will not have to pay for these laborers’ health care, and non-disabled people’s health care will seem the more expensive prospect. It could subsidize the cost of reasonable accommodations or provide other subsidies to make it more palatable to business. The Labor Department could include disabled persons as a part of its mandatory affirmative action program (currently it only urges employers to hire them).
Other incentives might include officially lowering the price of disabled persons’ labor. Economist Richard Epstein, for instance, says that “[disabled persons] have been subject to unfair treatment in the marketplace,” but holds that this is due to government interference with the control of their labor in the competitive process. Epstein argues that “the disabled should be allowed to sell their labor at whatever price, and on whatever terms, they see fit.” Pointing to the free market as the appropriate mechanism, he states that “the minimum wage laws and various kinds of ostensible safety and health regulations can impose a greater burden on them [disabled persons] than on others. Repeal those laws as well.”15 Epstein believes that in a deregulated competitive market, disabled persons’ labor would fall below minimum wage because it is worth less.
Despite the fact that the ADA prohibits wage discrimination, wage gaps are readily found in the “regulated” market for the 5.2 million workers with disabilities who have a job. […] Further, there is a precedent for justifying below-minimum wages for disabled persons. Section 504 of the Rehabilitation Act of 1973 provides that federally financed institutions are required to pay a “fair” wage to disabled workers, but they are not required to meet even minimum wage standards. The traditional sheltered workshop is the prototype, based on the theory that disabled persons are not able to keep up with the average widget sorter. Any employer is allowed to pay below minimum wage to disabled employees under federal law, if the employer can show that the disabled person has “reduced productive capacity.”
Six years after passage of the ADA, Republican legislator Scott Baugh (CA) latched onto the subminimum wage concept for disabled workers by introducing legislation in 1996 that would allow employers to hire disabled workers at a “special minimum wage,” without the minimal and very subjective “protection” of having to show that the prospective employee is “less productive” than a non-disabled one. Any disabled person could be considered “less productive,” and theoretically a subminimum wage or wage below non-disabled in any pay category could be used to not only hold down the wage floor, but lower it.16
When Clinton signed the Personal Responsibility and Work Opportunity Reconciliation Act of 1996, government ended federal welfare entitlements and made moving people from welfare to work a primary goal of federal welfare policy. By ensuring that between two and twelve million new workers would be forced onto the job market, the government has used the welfare population to control inflation and depress wages. By July of 1999 seven million women had transited from welfare into low-wage, in many cases below poverty rate, jobs. Many disabled persons fall into a similar work grouping because they generally have low high school graduation rates, and many students with disabilities do not continue their education at postsecondary institutions.17 Theoretically, welfare reform and disability Return-to-Work programs could result in an overall lowering of the cost of labor. The Economic Policy Institute, for instance, warned that the low-wage labor market is already suffering greatly, and proposals to put welfare recipients to work will drive the wages of the working poor down further. It estimates that to absorb all the welfare workers, the wages of the bottom third of the labor force would have to fall by 11 percent nationally.18
The tight labor market, alone, may reverse businesses’ reluctance to hire disabled persons. In labor shortages, employers are more likely to hire workers they would ordinarily discriminate against simply because they need them. The National Urban League, for instance, finds African American employment and income have been raised to “unprecedented levels” in the current labor market.19
Microsoft Corp., for one, has recently taken note of the employment potential of disabled persons. It is leading a group of twenty-one major North American corporations in establishing a program dubbed “Able to Work,” in an effort to share strategies aimed at finding jobs for disabled persons. Microsoft knows how to use the marginalization of certain groups of workers to its advantage. It has, for example, utilized prison labor at the Twin Rivers Correctional Center in Monroe, Washington, to pack Windows and Microsoft Office software, as well as thousands of Microsoft mice, through a subcontractor, Exmark. Prisoners are paid low wages, and Microsoft has no overhead, no medical costs, no retirement benefits, no local taxes, no workers’ compensation, because the taxpayers absorb the costs of doing business. Disabled persons, formerly excluded from having a steady paycheck and eager to have jobs, similarly offer employers a reliable, partially subsidized workforce.
A tight labor market may temporarily produce more jobs for those previously excluded from the workforce, but in the long run there is little security. A Wisconsin study of the welfare-to-work transition period conducted by John Pawasarat of the University of Wisconsin at Milwaukee, found 75 percent of those hired lost their jobs within nine months.20 Only 28 percent sustained projected annual earnings of $10,000 for two consecutive quarters, and such work was often part-time, low-paying, and quick to end. When the Children’s Defense Fund and the National Coalition for the Homeless reevaluated the status of former welfare recipients in 1998, they found that only about 50 percent to 60 percent of those who leave welfare are working, and those who work typically earn just $5.50 to $7 an hour—too little to lift a family out of poverty.21 During World War II, American industry recruited women and physically limited persons in large numbers to keep production going while the able-bodied male population was fighting overseas. As the war ended, many of these workers, particularly those with disabilities, lost their jobs to returning soldiers. It remains to be seen if the ADA can protect disabled workers who may be hired at the peak of this business cycle from firings and layoffs.
As Marx explains, “The reserve army belongs to capital as if the latter had bred it … a mass of human material always ready for exploitation.”22 The stagnant category, being the most disposable, can be rendered superfluous at the slightest downturn of the business cycle.
These scenarios, however, are “solutions” which promote conflict between groups of disadvantaged workers, rather than making it a right of every citizen to have a living-wage job and health care. Whether the unemployment rate is at 4 percent, 6 percent, or 10 percent, the capitalist system produces jobless casualties, much like a pyramid scheme where a percentage of the population gets left out of the game at all times. The reserve army of unemployed—including welfare recipients and those who could work with a reasonable accommodation but remain on disability benefits—are the unsung heroes of the capitalist system. By living in abject poverty, they buoy the entire system.
Neither civil rights, affirmative action, nor ending economic discrimination against disabled persons will assure a living-wage job for all who need one. Capitalism cannot consider the human consequences of its development, because those concerns are not included in its historical role as a transitory form of material production. Basic changes must be made in the economic, social, and political structure in order to advance economic solutions that reach beyond capitalism’s instability. The reserve army, itself, must be made a disposable concept.