How Corporations are Remaking America, One State at a Time
In his new book, The One Percent Solution: How Corporations Are Remaking America One State at a Time (Cornell University Press, 2017), Dr. Gordon Lafer outlines yet another of the ugly truths about how the concentration of economic and political power in corporate America is reshaping the country.
This time the story builds on the 2010 Supreme Court’s Citizens United ruling as a trigger point for the latest waves of change, with it now being possible for corporations to pour virtually unlimited amounts of money into lobbying to support their interests and into election manipulation. Those corporations and their various industry associations are now making much of that power felt not just at the federal level but also at the state level in ways never seen before.
Those corporations are now using the fact that most people pay very little attention to what is being proposed and passed in their state legislatures, combined with major shifts in recent years in the power of economic control to the states, to make major changes in the rules under which all of us must live and work. Even more concerning is that they are mass-producing similar legislation in a number of somewhat centralized “shadow organizations” and then delivering that legislation across the states with similar results in many locations.
In the interview below, Dr. Gordon Lafer goes into detail about how this all works, who the players are and the effects it is already having on citizens virtually everywhere in the United States. Dr. Gordon Lafer is an associate professor in the University of Oregon’s Labor Education and Research Center. His work focuses on industrial and policy research, a topic he has written widely about for many years. His background includes serving as Senior Labor Policy Advisor for the U.S. House of Representatives’ Committee on Education and Labor from 2009-10 and a position that he has held as a research associate of the Economic Policy Institute in Washington, D.C., since 2011. He currently teaches extension classes on contract negotiations and labor policy at the University of Oregon. He is also currently heading up the launch of the university’s Labor Research Colloquium, an interdisciplinary research forum for faculty and graduate students at the university.
Dr. Lafer has a PHD in political science from Yale University, which he received in 1995.
Trillions spoke with Dr. Lafer at his office in Eugene, Oregon.
Trillions: The title of your book, The One Percent Solution: How Corporations Are Remaking America One State at a Time, is an interesting one in many respects because it implies that there is almost a work-around over the federal government
that is being used, on a state-by-state basis, to manipulate, to change laws and everything, that is effectively making a lot of different types of changes.
Can you give us an overview of what you mean by this, about how corporations are changing the country “one state at a time”?
Dr. Lafer: It is like you said, that a lot of the most important issues in recent years are being decided at the state level, rather than at the federal level. And that’s for a number of reasons. Part of it is that the federal government moves very slowly and [is] often politically deadlocked. Another part of it is that, over 30 to 40 years, a lot of responsibilities that had been federal responsibilities have been [given] to the states. The states have a lot more authority now. Even over federal funding agencies, it gets decided by the state how to do it. Because there’s no filibuster in state legislatures, it’s much easier to move bills, to get bills passed, in state legislatures. And because state [political] races are much cheaper, the power of money goes much further.
Speaker of the House Tip O’neill famously said that “all politics is local.” So that, you know, even if you’re running for Congress, you’re basically running on fixing potholes and taking care of local problems.
We’ve kind of seen that stood on its head, where state politics has become nationalized. And that’s through the biggest, best-funded and most powerful corporate lobbies in the country, the Chamber of Commerce, the National Federation of Independent Business, the [National] Association of Manufacturers, industry associations. Most importantly, at the state level, they’re working it through the American Legislative Exchange Council [(ALEC)], which counts as its members hundreds of the largest corporations, a lot of industry associations and the Chamber of Commerce. What ALEC does, in brief, is about a quarter of members of state legislatures are members, they pay about $50 a year in dues, all the other expenses are paid by the member corporations. They meet several times a year in resorts, where they sit in committees where they’re composed half of state legislators and half of corporate lobbyists. They write model bills, which have to be approved by an all-corporate board [and] which are then introduced in cookie-cutter fashion in state after state across the country. Which is how you see the same laws popping up in very different places.
And then the companies which help to write the laws fund those same candidates’ campaigns, fund independent expenditure campaigns on issue ads or candidate ads and fund state-level think tanks that produce white papers and experts to be on TV for those issues. So it’s a very wellcoordinated, well-funded, smart, very ambitious 50-state campaign to try to remake a lot of the laws governing economics, governing public services, governing taxation and governing employment.
Trillions: The American Legislative Exchange Council that you spoke about there is one of those “almost shadow” organizations that the general public doesn’t hear much about. They work in the background for the most part, and I’m sure that’s intentional.
Dr. Lafer: That’s right. And we learned a lot about ALEC in 2010-11 because there was a whistle-blower inside who dumped thousands of documents into the public domain. So they’re not as in the shadows as they used to be. But I think one of the important points is that since Citizens United, the Supreme Court’s 2010 decision that allowed for unlimited corporate spending in politics, also made it much easier for money to be spent secretly on politics in ways that nobody can trace on where it comes from.
The other thing that’s in the shadows is that almost nobody’s paying attention to state politics, which is another reason that the power of money is amplified there. There is a famous study by a political scientist at Princeton – Martin Gilens is his name. He looked at federal legislation and compared how politicians vote with what the public thinks, broken down by income level. What his big conclusion was [is] that the opinions of the bottom 90% of Americans don’t really matter. If there’s an issue where the richest 10% think one thing and the bottom 90% think something else, in general the politicians vote with the richest 10%. The one time that that changes and there’s more attention paid to the majority of the people is when
a lot of people are paying attention to something, which is usually during the Presidential election years.
So, at the state level, less than a quarter of Americans even know who their state legislator is. Less than half know which party controls the legislature. So, for the most part, except for the very small number of activists, things happen at the state that probably couldn’t happen [in] Congress or the Senate, because more people are paying attention to Washington, D.C., because, for the most part, nobody’s paying attention.
Trillions: One of those “poll” categories that’s been a hot topic of yours for years is the whole issue of “right to work” laws. “Right to work” laws have that delightful characteristic that I always love about legislation, how it gets renamed so it sounds good. Things like the Clean Water Act actually allowed more pollution, but it sounded good. And the Patriot Act, which I don’t want to get into here… that was obviously framed in a specific way. And so are the “right to work” laws. For the purposes of this group, and keep in mind you’re talking to American business, who hear about this stuff all the time, what exactly is it that is going on with “right to work” laws, what’s the logic that is used to try to push them through and why are they a problem for us as citizens?
Dr. Lafer: First of all, as you mentioned, “Right to Work” is a misleading name. “Right to Work” laws unfortunately have nothing to do with anybody having a right to a job if [they] are willing and able to work. They also have nothing to do with having to be a member of a union. It’s already law that nobody in America can be forced to be in a union or forced to pay even a penny to social and political causes that they propose. What is legal in states like Oregon is [that workers] and employers [who] agree to negotiate a contract which includes a clause that requires that everybody who benefits from the terms of the contract [have] to pay their fair share of the cost of negotiating that contract and enforcing it. What “right to work” laws do is make it illegal to have a clause like that.
So that puts you in the position where, by law, a union is required to cover everybody under the terms of the contract and to provide all of its services for free, even for somebody who doesn’t pay dues. For example, on national average, if you take two people who work in the same industry, same occupation, same age, same education, one has a union, one doesn’t, the person with the union makes about 15% more in wages and has a 20 to 25% better chance of getting health insurance or pensions through their job. If someone in a “Right to Work” state says “I don’t want to pay dues,” they don’t get paid the non-union rate for their industry; they still get paid everything the union negotiated. And if they have trouble, [say] they’re supposed to be paid a dollar an hour more for working the graveyard shift and they don’t get it, and they want to file a grievance, the union has to represent them, including providing an attorney for free, if they would do that for a dues-paying member.
So that creates an incentive for people to not pay dues. It’s like, if the government would say “The part of your taxes that goes to pay for the fire department is now optional,” they’ll still come out to put out the flames if your house catches on fire. I don’t have to be anti-fire department to not pay that. I just have to be “times are tight, and somebody told me that one of my bills is optional.” So when fewer and fewer people pay dues, obviously that organization becomes less financially stable and less able to do a good job representing people, [which] ultimately leads to the dwindling of or extinction of labor unions.
I think that’s the real goal of the bill. What it gets promoted as is “this is going to bring jobs to a given place.” And the basic logic is that, by undermining unions, you’re going to drive down wages and therefore make a given state more attractive to, primarily, manufacturers. This is the key claim that’s made in every state legislature where it’s been promoted. Unfortunately, the evidence shows that it succeeds in lowering wages for both union and non-union workers, but it does not do anything to attract jobs.
It might have attracted jobs in the 1960s or 1970s, when a lot of companies were moving from the upper Midwest to the South and Southwest for a variety of reasons, including cheap labor. But big manufacturers whose decisions are decided by low wages predominantly now are going to China or Vietnam or Pakistan or Mexico. They’re not
going to Arizona or North Carolina.
When you look at non-political surveys of manufacturers – Area Development Magazine is the premier magazine of the site location industry – and they ask people, the actual decision makers, not the lobbyists, what are the key reasons [they used to select a site], “Right to Work” is not among the top 10 reasons, historically. It’s things like how close am I to my suppliers or customers [and] how close am I to an airport or a highway? So it doesn’t work to attract jobs.
I think the ultimate hypocrisy is where you can see that that’s not really the goal, is that all the business lobbies that are pushing for “Right to Work” in states, saying “Hey, you need this in Illinois, because you will attract jobs” and “You need this over here,” are also pushing for a federal “Right to Work” law. If a federal “Right to Work” law passes, that means no state will have a competitive advantage over any other state, and everybody’s wages will be lower. Clearly, I hope we’re not going to lower our wages to the point where we’re going to try to compete with Mexico or China.
So, I think the real goal is just to undermine the possibility of workers organizing in unions. And one thing I would say to the kinds of companies which read your publication is that this is one of many issues of which there is a divided interest between small business and big business. Almost all of the big corporate lobbyists that I’m talking about in this book, they like to say they represent small business. But really they’re dominated by a small number of very large corporations. When you talk about small business – small business that is not in the position of saying “Do we want to be in Arizona or do we want to be in New Hampshire?” but is rooted in the community that it is in, and depends on, above all, local people having discretion to buy food and clothing and housing and all the other things that people spend locally, or is dependent on healthy tax revenues to have a healthy government – those companies suffer when wages go down. The big companies that are just trying to play everybody off against each other, that are invested elsewhere in the world, may make out better. I think this is one of the places where you see a division. In some states, there has been a mobilization by small businesses against “Right to Work.” Particularly in New Hampshire, that was one of the things that stopped “Right to Work” from passing. [Those businesses] convinced moderate Republicans to oppose “Right to Work.”
Trillions: The surprise to me is not that “Right to Work” will drive wages and benefits down, and of course businesses aren’t going to admit that that’s what they’re doing. It’s that, somehow, they’re going to be talking instead about the great things this means for the people and all. It’s an interesting, manipulative thing.
You actually talked about that in some of the other examples you gave. [One] was a big shock to me, in part because time has passed. Things like paid sick leave, which used to be around for a while, are now being eliminated, with various games and tricks being done. And yet on the other hand, this is the sort of thing that unions would have stood behind, that this is only reasonable that people do that. Because what happens when you don’t have paid sick leave, sick people come to work. That’s what happens. It’s actually the opposite of what you want, because you have somebody carrying the plague come in and you’re all “down for the count.”
[Please] talk about some of these other things that are happening. Examples that I had were everything from paid sick leave going away to things like the child labor laws that look like they’re doing great things for allowing children to experience the wonder of working and yet they actually benefit business by doing so. There are issues of the minimum wage laws; there are issues of “reclassification wages.” And there are things like how the service charge on your restaurant tab, which I always thought and still think was one way of providing money [normally] in the form of tips back and [now] know it’s just another way to add a fee to your bill that gets distributed back to your employer. The legislature takes care of [this redistribution] and you [as the customer] have no clue that this just happened. How is it that these get passed?
Dr. Lafer: I’ll start with the first one that you raised, which is sick leave. It used to be a norm that people
had a certain amount of paid sick leave. Now there are over 40 million Americans who don’t have a single day of paid sick leave, either for themselves or their kids or parents. The labor movement does not represent a lot of those people. There have been efforts in some places to pass laws to say everybody has a right to three days a year, five days a year, some minimal number, of paid sick leave. These have been very forcefully opposed by the big corporate lobbyists.
So, I agree that this is something that is kind of shocking, that you could oppose that. And I think that this is something again that could fall particularly hard on small business – because, if you’re a large company, you can decide to do this. Certainly, if you’re the government, these people have sick leave. If you’re a small business and you’re in a very competitive industry, you usually can’t afford to be the only one who is offering paid sick leave. And the way to make it possible to offer paid sick leave, to [do] right by your employees and be able to compete for the highest-skilled employees who might otherwise go to government or big companies, you need to have a law passed so that you and all of your competitors are doing the same thing and you’re not putting yourself at a competitive disadvantage by doing right.
The way in which passing the laws levels the playing field in competitive businesses, when there’s no law like that, every small business is at the mercy of the person who’s willing to have the most [benefits]. One of the things that surprised me was that, in a number of places, there were cities in states that passed laws that said “We want to have a right to paid sick leave.” And then the state legislature, which again is the place where the corporate lobbyists exert the greatest influence, more than either the federal government or the local governments, came in and said, “No, you’re not allowed to vote to have a right to have paid sick leave.”
The first place this happened was in Wisconsin. In 2009, in the city of Milwaukee, the people voted by referendum on the right to paid sick leave. In 2011, legislators in the state of Wisconsin overturned that and said that’s illegal and it’s illegal for any other city or county within Wisconsin to have a right to paid sick leave. Similar things have happened with minimum wage. One of the things that is important is people vote for candidates for a whole lot of reasons. But across both parties there’s very strong bipartisan support for a right to paid sick leave, for a higher minimum wage and for a few other things.
As you’ve said, the increased use of child labor… Everyone knows that politics is a realm where there’s a lot of lying, a lot of spin; and, as you’ve said, the polluters’ industry is always called something [like] “Citizens for a Green Economy” or something like that. But this was one where, at the national level, ALEC is on record for opposing any increase in the minimum wage. One of the reasons that they give, officially, is if you increase the minimum wage, it’s going to induce high school kids to work more hours during the school week. And that’s terrible, because they won’t do well in their school then.
Then, when they had the chance, in Wisconsin, Michigan and a few other states, to expand the use of teenage labor, they said, “Hey, this is great because it will get kids working and gives them the great experience of a first job.” Apart from the issue of having high school students work more hours and labor at night during the school week, which is what those laws made possible, there’s also the issue of replacing adult labor with teenage labor. In Michigan, at the height of the recession, when there was 10.5% unemployment, the restaurant association went into the legislature and said, “We can’t find enough adults to work in restaurants.”
So, I think when we see a lot of the same big corporate lobbyists that are lobbying for the expanded use of teenage labor [and] are also lobbying for expanded use of guest workers on H-2B visas to come into the country, these are companies that can’t physically move to China or Mexico and are trying to move those kind of labor conditions into America – and to undercut paid adult jobs.
One of the other things that I found among the most outrageous is wage theft. Wage theft is about when people are not paid wages that everybody agrees that they deserve. They’re not paid minimum wage, they’re not paid overtime, and many people are in a situation where they’re not paid at all. They
work for a restaurant [and] they’re not paid their last check. They work on a construction site for a month, and they’re not paid their last check, or the company goes out of business and hasn’t paid them. Everybody accepts that this happens, but for the most part if you see your recourse is to go to court and it could cost you $500 or $1,000 for a lawyer and you’re only out $300, going to court is not a real remedy.
Starting in 2010, in Miami-dade County in Florida, [they] created a local wage-theft mechanism that works kind of like small-claims court. Very quick, it’s an administrative procedure, there’s no cost to the taxpayer and they started recovering millions and millions of dollars in wage theft. In response to that, the Chamber of Commerce and other big business lobbyists started passing bills that make it illegal for any city or county within a state to establish a mechanism for wage theft [recovery]. They passed that in Michigan, they passed that in Tennessee, they passed it in Iowa.
So that, to me, is among the more outrageous things. To say everybody agrees you’ve earned this money, [and] if you believe in any economic principle, [that] has to include the right to get what you’ve [earned]. So that was one of the shockers for me.
Trillions: Here’s a related thing. I remember when I was in Silicon Valley, one of the things that you ran into all the time was what I believe you phrased as “misclassification of workers” as independent contractors, which is basically playing the game that you don’t need to be paid benefits because you’re really an independent contractor. That’s in spite of the old [line] “If it looks like a duck and walks like a duck, it probably is a duck.” Employers would provide an office. They would provide computers. They would provide email systems. A place to park. Things like that which make it look like you’re an employee. And maybe this is the only person who you work for all year long. You’re entitled to benefits, in many places, when you are a full-time employee. And if you’re an independent contractor, you don’t get those at all. So it was a bit of a game, and there would be lawsuits that would happen on a regular basis where somebody would finally stand up and say “No, this is not right.” But the problem is, they risked losing their contract when they did that.
Dr. Lafer: There have been laws on independent contractors. Each state has a law that defines the line that defines the difference between an independent contractor and an employee. You might take the risk of losing a contract by filing suit, and will [the person] win or not? Most states have very clear definitions of what it takes for somebody to be an independent contractor. For instance, one of the requirements is, you have to have more than one client. If you’re really an independent business, then you don’t just work for one place. If you’re an independent contractor, you have to do work that is not the core work the business does. [But] then, lobbies have been passing laws that undo that – [laws that say] no, you can be an independent contractor even if you only work for one client and you do work that is the core work of their business. Which gets to the point that someone can be brave enough to lose in court.
Almost all these things are invisible. You’re probably one of the, I don’t know, 1 or 2% of Americans who are paying attention to these kinds of things, and there are things you didn’t know about. Almost nobody knows about these until you get to the point where you need it. Your life runs into it, and suddenly you discover you don’t have rights that you thought you had.
Another one of these is unemployment insurance. Which, apart from the amount of unemployment insurance that you get, a number of states have been passing laws that define who’s eligible for unemployment insurance. Traditionally, what the law always said is that if you quit, you’re not eligible. But if you’re fired, you’re eligible, even if you’re fired for doing a bad job. [Like] you’re incompetent so you got fired, you’re now unemployed [and] you can get unemployment insurance. The only thing that you couldn’t get unemployment insurance for is if you were fired for a willful, intentional refusal to do your job. Someone says “You need to do this,” you refuse, you’re fired [and] then you’re not eligible.
The states have been rewriting those laws to say if you’re fired for breaking any rule of the workplace, then you’re ineligible for unemployment insurance.
If they have a “no excuse” attendance policy, where you have no days off and you have to be there, if they say there’s no socializing with coworkers outside of work and you socialize with coworkers outside of work, any rule of the workplace gets defined as the equivalent of a willful refusal to do your job. And then you’re ineligible for unemployment insurance. That both threatens to leave people stranded in a time of need, with no support whatsoever, and to exert more discipline and intimidation over people while they’re on the job. If you feel like any little thing that I’m told to do, if I don’t do it exactly as I’m told, I could make myself ineligible for unemployment insurance, God forbid I’m in that position, is also exerting more discipline over people while they’re on the job. And this is another thing that nobody knows about until it hits your own life.
Trillions: I remember we would regularly have conversations when I lived in your city of Eugene, because unions were constantly working to talk with people in the production area [at my company there] about organizing. I was one of the handful of executives who ran the place, and the issue was always, [if the unions get in], this is going to cost [the employees] to be part of this, and yes it could cost us as a company. One of the things that I argued was that you need to understand that if the unions weren’t there, the very good benefits that we do have for our employees might not be there in the first place. Because they’re there in part not just because they’re the right thing to do but because some of the people that set this [company] up felt that this was a way to keep the unions from being able to get a foothold. Because those things are in there. So, it was a kind of backwards kind of logic.
Dr. Lafer: It also creates a kind of competitive standard in the labor market. Here in Eugene, as you know, the single biggest employer is the university. The secretaries of the university have health insurance because they have a union. That creates pressure on the non-union employers in the private sector in the Eugene area to either match the union standard or come close to it if they want to attract the best clerical workers or else the best people will go work for the university.
That’s why the data shows that when “right to work” get passed, it results in lower wages for both union and non-union workers. It’s true in places where unionized employers are one of the biggest employers in the local labor market. When you knock down that wage rate, it has the followon effect of allowing other employers not to have to compete for the same standard. It’s just the normal working of the market. I think sometimes non-union workers or private-sector workers are encouraged to feel like “Damn those public-sector workers who are living high off the hog on my hard-earned tax dollars” and think, when they get cut down, “I’ll have more money in my pocket.” Instead what happens is that when they get cut down, “I get cut down in some follow-on way.” But most people don’t connect those dots.
Trillions: This seems like a juggernaut that is so well-organized, so well-structured, [with] so much money behind it that it’s a difficult thing to reverse or fight. Do you hope for pushing back against this? On an individual basis [and in specific cases], perhaps. But nationwide it looks like we’re going in the wrong direction – fast.
Dr. Lafer: I agree. I was not hopeful, but I’m not hopeless, either. The key thing is that on an issue-by-issue basis, a lot of this agenda is broadly unpopular. Why [do] they end up in the position of passing laws saying “It’s illegal to vote on this. We’re not going to let you vote on sick leave, on minimum wage or other things”? Because they see the same polling everybody sees, that a majority of Republicans support these things as well. The ability of these lobbyists to pass laws that, I would say, shrink democracy by reducing the number of things that citizens are allowed to vote on, is very concerning.
But it’s also a sign that there’s kind of a struggle going on, between corporate lobbying’s power in the state legislature and public opinion, at a time when the economy’s gotten gradually, steadily harder for the majority of the people in the country. I don’t think it’s a done deal.
I would say, too, that, for whatever it’s worth, small business may have a critical role to play in weighing one way or the other. I assume that most businesses would prefer not to have unions and not to pay higher wages. [Those are some of] the things you’re trying to aim at [when] running a
business. But one of the things that’s important to see is that there are ways in which the big corporations are kind of disinvesting in America. And I think this has to do with their being driven by some very big forces that play out very differently in big corporations than small.
One of those is the extent of globalization. That for many, many companies that remain major political actors, like ALEC and the Chamber and other things, a majority of their earnings are made overseas and Americans are not unimportant but are less important than ever before – either as workers or as consumers.
The second is the financialization of big corporations. Over the last 30 years, [it has] turned almost all publicly traded corporations into a situation where they’re really driven by very shortterm shareholder return. The amount of retained earnings that are reinvested in companies has dropped dramatically over the last 40 years. Everything goes into dividends or share buybacks. And so when you come up with things that might be in the objective long-term interests of companies but they have a long time horizon, like rebuilding the electrical grid or education, you’ve got people saying it would be better for you. [But] when you have companies which are operating with an average CEO tenure of 2, 3 [or] 4 years, and looking at very short-term time horizons, they’re making very different kinds of decisions. And those end up being decisions that drive divestments in the country, both in public services and making government not have enough tax revenue to control the quality of water, not having 40 kids in a classroom, as well as for infrastructure.
That is another place where small business and big business are two different trajectories in the things that they serve. To some extent, I think your readers [here at Trillions], on some of these issues, may have a critical role to play as companies who have a longer-term interest in local communities. They’re not thinking if everything goes down the drain, “I’m set in Shanghai” or something.