More on the wages question for me is why wages, minimum wages, expanded in what is coming to be called the golden age of modern capitalism, 1945 to 1980, consistently and at semi-regular intervals, and and then collapsed after that. I know or know some of Sven Beckert’s account of the golden age, his name for the period, and its aftermath from his massive tome, Capitalism: A Global History (2025). And I’ve read Piketty’s books, some of my economic history favorites. But The Wage Standard gets into the historical nuts and bolts of wages since World War 2 and makes an honorable effort to revive the value of wage standards. And it turns out the guy who wrote the book, Arindrajit Dube, went to Roosevelt High School, a crosstown rival of the high school where I taught. So that’s cool; local kid made good. Fighting for a good cause.
For Professor Dube the wage standard established after WW2 was rooted in a popular conviction that workers should earn enough to support a dignified life and living wages. Rising working class expectations back then included jobs, family-supporting wages, decent benefits, health care, and two-week’s vacation. These were widely regarded as the legitimate rewards of full-time work. The wage standard reflected a national commitment to fair compensation and economic security that grew out of the New Deal, manifesting a peak in a "Free Labor" movement going all the way back to the Civil War. Specifically, the wage standard was constructed out of the Wagner Act of 1935, which formally established the right of workers to form unions and engage in collective bargaining. This legal backing empowered labor unions to negotiate for higher wages and better working conditions.
Another defining moment in this movement was the 1941 “Battle for Detroit” when the United Auto Workers (UAW) led a massive strike against the Ford Motor Company. After intense strike confrontations, the union secured recognition and better labor contracts, setting a precedent that resonated throughout the manufacturing sector and beyond. And in a important sense culminated in the “Treaty of Detroit” in 1950, a breakthrough labor contract between the UAW and General Motors. GM, the largest employer in the US at the time, then set the pattern for the post-WW2 wage standard. This is one of Dube's most trenchant points: Peak labor union participation in the 1950s never exceeds 35% of the national workforce (and fallen to about 10% today, btw) but because the largest employer at the time recognized unions and raised wages their relatively large market power set a wage standard that many other industries followed.
Big historical lesson? Strict labor protections on the largest employers optimizes the macro economy. Of course if left to their own ends with rare exceptions big business will lowball and squeeze, outsource and offshore, labor down to sweatshop slavery conditions.
Additionally, the federal minimum wage—established in 1938 and regularly increased through the 1960s and 1970s-- provided a wage floor that reinforced the new wage standards across the labor market. The purchasing power of a minimum wage peaked in 1968.
Such victories, coupled with the postwar economic boom, investment and trade in parts of the world devastated by the world war, helped entrench the wage standard as a norm, even for many non-union workers. A rising tide raises all boats wage standard that lasted more or less until 1979.
The Collapsing Wage Standards after 1980
The erosion of The Wage Standard after 1980 can be traced to several key shifts. Union membership steadily declined, as new policies made organizing more difficult and industries began to outsource and offshore labor. Fed Chair Paul Volcker—yes, put in that position by President Carter-- was known in the early 1980s to have carried in his back pocket a list of pending union contract negotiations, plotting and celebrating union defeats. Gov't institutions in the period turned against labor unions and, in effect, wage standards.
The Reagan administration’s crackdown on striking air traffic controllers in 1981 marked a sharp turn against union power by the government and had a devastating effect on union organization. Globalization and automation further weakened worker’s leverage, leading to offshoring, stagnant wages, and a growing precariat, with worker’s hustling multiple jobs in a growing informal economy. The results, all around us today, was widening inequality and a break from the era of broadly shared prosperity rooted in New Deal order wage standards.
(Keeping score like Volcker, as an economic history aside, I’d say no post-Keynesian (1936) error of mainstream economics is more egregious than the macro wage-price spiral account of ‘70s stagflation, basically, blaming ‘70s inflation on labor unions and workers. Krugman likes to say economics is not a morality tale. In this instance, at the very least, I’d beg to differ. The academic ratification of this account of ‘70s inflation, Milton Friedman’s fundamentalist “free market” ideology, set-up the neoliberal order of political economy that has ruled since 1980, with all its dreary and relentless anti-tax, anti-worker, anti-consumer, and anti-government trappings, all in the name of "free markets" and "growth economics.")
Remember, crucial to Dube’s golden age wage standards was the “pattern setting” role of large employers. In the 1950s "What's good for General Motors [was] good for America," or at least in terms of the wage standard. A blue collar solidly middle-class life (living wages, benefits, pensions, job security) developed around the automotive industry, and trickled down significantly from that large employer base. My dad, a truck mechanic, was a way down stream beneficiary of increasing union wages in the 1960s and 1970s. By the 1980s, by contrast, Walmart, the largest employer of the new era, begins outsourcing labor to undermine union organization, cuts worker benefits, and posts directions to local food banks on worker lunchroom bulletin boards. The collapse in wage standards indicated just by comparing these two largest employers of their eras is stunning. Adjusted for inflation, average workers at GM in the 1960s made wages that would be worth today $30-$35 per hour, while the average wages for workers at Wall Mart in the 1990s represent a purchasing power today of $9 to $10.50 an hour.
There are multiple causes for this demoralizing collapse in wage standards but none more central than a transition in corporate leadership and management. Before the 1980s management in large companies often came from internal operations or production. Shop floor engineers or operations managers moving up the ladder. But in the 1980s, increasingly management positions were being filled by business schools. In a broad stroke: corporate management was professionalized.
The center of gravity inside big firms moved away from the older New Deal bargain regarding wage standards—good jobs, living wages and benefits, and a commitment to shared economic prosperity—and toward an internal elite business doctrine that celebrates "greed is good" business tactics and treats labor foremost as a cost center to be minimized. Business school graduates didn’t invent this logic. It is right there in free market dogma peddled by Friedman and the Chicago school of economic neoliberalism, or even all the way back to classical 19th century economic liberalism. But as MBA’s took over key roles in finance, HR, and corporate strategy in the 1980s and ‘90s they helped undermine the wage standard that had prevailed during the New Deal order, chiseling labor however and whenever possible. What had been an implicit social promise (“a full-time job should support a dignified life”) became a line item to be minimized, and “the free market” became the moral cover for decisions that were, in fact, choices that ridiculously privileged employers over workers. And, Yes, ripped workers off.
That matters because large employers don’t just hire; as we've seen, they set the terms of employment for whole regions and sectors. Monopsony is the counterpart to a seller’s monopoly. When an employer is so big in a local labor market that they can set the pattern for wage setting and working conditions they are exercising monopsony powers. When the biggest corporate player in town normalizes subcontracting, temp work, tiered pay scales, “flexible” scheduling, and the weakening of seniority pay ladders—in short, squeezing workers-- the effect is a competitive race to the bottom and contagious. In the older New Deal union-era wage standard collective bargaining at the largest employers pushed wages up and outward; in the modern corporate playbook wage setting often pushes risk down and outward—onto subcontractors, franchisees, gig workers, and ultimately onto households trying to stitch together a life from unstable cheap labor opportunities.
Most mainstream economic accounts of this historical transition attribute it to globalization and technological progress. Labor’s losses are then the incidental consequence of the creative destruction of free market capitalism, the inescapable collateral damage of economic growth. But this is a big business gloss on what really happened. Central to the Friedman doctrine spread by the new MBA’s in corporate management in the 1980s and 1990s was maximizing profits and returns to shareholders.
A SEC rule change in 1982 helped normalize stock buybacks as a mainstream way to “return value to shareholders.” The effect was to elevate short-term share value above living wages or any other social contract expectations of democratic government: paying taxes, not dumping your shit into the environment, etc. The new “Greed is good” ethics rationalized union busting and tax evasion and a merger mania in the towering heights of the economy. General Electric’s Jack Welch is a notorious villain in this story; see The Man Who Broke Capitalism (2022). Then an Internal Revenue Code rule change in 1993 linked executive pay to stocks and accelerated the explosion in CEO-pay. The class war trajectory in economic outcomes is, again, stunning. In 1978 CEO’s were paid 31 times more than the typical worker; by 1989 this ratio had risen to 60 times the typical worker’s pay, and by the year 2000 the ratio of CEO pay had exploded to 380 times that of the typical worker.
Also, by the early 1990s guaranteed worker pensions are giving way to 401(k) retirement plans, tying worker retirements to the stock market, a market whose preoccupation with share value squeezes worker pay. Thereby putting workers in the awkward position of supporting stock market growth that actually works against raising wage standards. Likewise, the privatization pressures on government unleashed by the Reagan Revolution and neoliberalism and Friedman’s free market ideology works to undermine wage standards again, as government work is possibly the last big sector of the economy upholding the New Deal wage standards.
In another point crucial to the collapse of the wage standard, Dube underscores the importance of tight labor markets. Low unemployment gives workers leverage in the labor market. If it is easy to leave a job and find another job this pressure moderates the ability of employers to lowball and squeeze workers. To promote full employment the Congressional Budget Office sets the “natural” rate of unemployment at 4.4%, another dubious metric if you ask me, but using this figure as our line between a “tight” and “slack” labor market let's consider unemployment before and after 1980 in the US. Between 1949 and 1979 unemployment exceeds 4.4% only 31% of the time; i.e., a “slack” labor market that disadvantages workers exists less than a third of the period. By contrast, between 1980 and 2023 unemployment exceeds 4.4% nearly two-thirds or 64% of the time. So slack labor market conditions that disadvantage workers more than doubles in the post-1980 period when wage standards are collapsing.
As if this were not enough, federal minimum wages that had risen since first being set in 1938 stalled out in the 1980s and again in the 2000s, under republican administrations, and haven’t budged at all under either party since 2009, by far the longest stint without any increase in federal minimum wages since they were first instituted.
Bottom line: Between 1980 and 2019 the labor productivity of the median worker rose 79% while their wages rose only 23%, and it was even worse for the lowest wage labor. Labor productivity is another dubious macro-economic statistic in my book but these numbers illustrate in conventional mainstream economic metrics just how dramatically bad post-1980 neoliberal economic policy has been for wage workers.
It's a devastating story for US wage workers by almost any measure, contributing to Rust Belt labor pathologies, "deaths of despair," and almost certainly a significant amount of the illiberal reaction of the non-college educated working classes in recent times. And while Dube would never call this story a conspiracy or a class war, he piles on the evidence for a massive conspiracy against wage standards and the working classes after 1980. A reactionary conspiracy that I'd trace back to Paul Volcker being named Chairman of the Federal Reserve in 1979 or even the infamous Powell Memorandum penned by Supreme Court justice Lewis Powell in 1971 and titled, “Attack on American Free Enterprise System.”
Reviving The Wage Standard
All that last conspiricizing stuff, though, is mine, not Professor Dube’s. Almost miraculously, after reviewing in some meticulous detail the dismal economic collapse of the post-WW2 wage standard, the freshest part of this book is Dube’s constructive optimism about reviving the wage standard. His best-known work in Economics so far are studies showing that raising minimum wages (or up to at least 2/3's of the local median pay level) does not significantly reduce employment or trigger inflation.
Dube’s bigger case laid out here is that reviving the wage standard requires rebuilding the institutional and legal enforcement that once enabled it. He advocates for renewed protections for collective bargaining and union organizing—pointing to the need for legislation akin to the Wagner Act to restore workers’ power; something to stop today’s oligarchs and billionaires from spending millions to defeat union organization. He takes heart in the recent labor contract resolving the Hollywood writer’s strike, protecting content creators from the takeover of AI slop. He supports raising and indexing minimum wages and strengthening enforcement of labor standards. Democratic measures in support of workers that all republicans and a big chunk of centrist Dems have ignored, if not impugned, for going on a half century.
To a degree, all of the above ought to be Dem boilerplate positions at this point and are a little obvious. Yes, the gov’t should do more to protect workers from the worst forms of labor exploitation by large business interests. That they don’t is stupid and of course ultimately alienating to the working classes, many of whom then become prone to bigot conspiracies that blame all their problems on some scapegoats and hated others: poor immigrants, people of color, non-English speaking people, non-Christian people, LBGTQ people, women, Dems, liberals, etc. Maybe the most positive part of Dube’s account is how comparatively wage standards have fared better in other parts of the world. The neoliberal fundamentalist crusade is global but in terms of wage standards that protect lower wage workers some places outside the US have resisted better than others the “free market” assault on wage workers.
Dube draws particular attention to the success of wage setting boards in countries like Australia and Germany and France. In Australia, wage boards—known as “industrial awards”—have established minimum standards for wages and conditions across industries, resulting in substantial improvements in pay and job quality. These boards, composed of representatives from labor, employers, and government, regularly review and update standards, ensuring that wage growth keeps pace with economic conditions. They make sure worker’s get their fair share of economic growth and aren’t made to shoulder an unfair burden for economic downturns.
Similarly, Germany’s system of sectoral bargaining, where wage standards are negotiated for entire industries by unions and employers, has produced higher wages and reduced inequality, especially in sectors like manufacturing and services. These boards and bargaining structures have proven resilient, maintaining wage standards even amid technological and globalizing economic shifts.
Dube argues that these models could be effectively applied in key growth industries such as health care in the US. Health care, which employs millions and is projected to expand rapidly in the future, and often suffers from persistent low pay in certain roles. I’ve seen numbers suggesting over 50% of workers in health care are not paid a living wage. By establishing wage boards for health care, with representatives from employers, unions, and government, minimum pay and benefits could be standardized and regularly adjusted. This approach would not only improve compensation and working conditions but also help address labor shortages and enhance the quality of health care services—reviving the wage standard for a new era and for a critical and large sector in the 21st century US economy.
And this isn’t just a theory exercise in comparative government either. California is already running something close to these wage-board experiments in real time, in exactly the kinds of sectors Dube highlights. California created a “Fast Food Council” meant to set sector-wide standards for pay and working conditions—an Americanized version of the wage board idea—which has already raised wages in the fast-food industry significantly. And the state’s recent moves on health care compensation (setting higher minimum wages on a sector basis, with ongoing political fights over implementation and coverage, of course) point in the same direction: moving from firm-by-firm bargaining to industry-level wage setting to promote better-- i.e., closer to “living”-- wage standards.
Additionally, Dube recounts how living wage campaigns in the 2010s raised minimum wage floors at Amazon and Wall Mart. Not enough but at least in the right direction. And in Massachusetts the minimum wage for Uber and Lyft divers is now $32.50 an hour. If Dube is right, these are the early institutional prototypes of a revived wage standard in the US—contentious and imperfect but aimed at overcoming weak labor unions and raising wages for working-classes stuck in an economy where growing credit card debt and low pay are endemic.
Professor Dube underscores the importance of fostering a cultural climate that values fair wages and work dignity, echoing FDR’s unrealized New Deal “Second Bill of Rights” or “Worker’s Bill of Rights” (1944), and drawing inspiration from the labor victories and political commitments that defined the mid-20th-century wage standard established during the last golden age of capitalism. Dube’s book is pragmatic and constructively optimistic. If the collapse in the post-WW2 wage standard was driven by the disappearance of pattern-setting institutional supports that pulled wages up, then the answer for Dube is to rebuild mechanisms—minimum wages that actually rise, bargaining that covers the biggest sectors in the economy, and gov’t legal enforcement that makes wage standards or worker’s rights real again.
My own more cynical take always gets stuck on why the wage standard collapsed after 1980. The people running the largest employers, CEOs and upper management, agents and lieutenants to the super rich, trained in the Friedman’s fundamentalist “free market” ideology (profit maximizing, labor cost cutting, maximizing short-term stock values), beginning in the 1980s and ongoing to this day are rewarded for an anti-wage standard orientation—one that assumes wage standards are distortions or cost threats, not achievements. They are rewarded for low-balling labor and evading taxes and regulations, in the pursuit of short-term profit gains and share value. In such a business environment, it becomes easier to tell a story where stagnating wages, and "affordability" problems amongst the working classes, are just economics, modernization, technological advance, the creative destruction of capitalism, rather than the political economy of the richest capitalists and the billionaires, whose arrogance is boundless, and whose disregard for the rights of wage workers or democratic government is relentless.
If nothing else, Dube’s book helps explain why, once unions were put on the defensive and the minimum wages stopped rising after 1980, there wasn’t an institutional counterweight inside big business to keep the old post-WW2 wage standard alive. But The Wage Standard is also a striking history, perhaps inadvertently, of what lengths the rich will go to defeat democratic institutions set-up to support the rights of wage workers. And on the most bogus grounds, and largely ratified by mainstream economics. And so the book also grimly illustrates how difficult it’s going to be to reverse this trend.
Government capture by big business is as old as is our 250 year old republic, for sure. However, The Wage Standard history Dube tells is more detailed evidence that it is precisely the New Deal period, 1930-1980, when the power of big biz in gov't is moderately checked by democratic gov't that economic growth nearly doubles the "secular stagnation" after 1980. Over that half century heart of the 20th century economic prosperity becomes increasingly more broadly shared than the neoliberal period that has followed since or any other economic period in American history that preceded it. This is the macro econometric case, as far as I understand it. Again, thanks Piketty. This is why Beckert calls it the golden age of capitalism.
It isn't about how the New Deal was perfect liberal gov't. It had many compromises, many racist-bigot shortcomings, FDR never actually followed through with his Second or Worker's Bill of Rights. The New Deal economic period is at its most humble a simple economic history proposition, a historical reminder, that the period, 1930-1980, when gov't checks on corporate rule and investments in workers were new and expanding, with more taxes and regulations than during any other period, this mixed economy, welfare capitalist Big Government, democratic socialist, or whatever you'd like to call it, actually proves obviously more pro economic growth and more pro shared prosperity than any other period in American history, periods when gov't capture by big business was more the rule.
Like, sadly, now. I mean, when big business elites obviously have more power over the gov't than perhaps ever. Billionaire AI and Crypto economics are good for the stock market, or for now anyway. It's bubble economics; building out more AI data centers, blitzscaling, enshittification, more gig economy. Some people are getting crazy rich. And then add on to that Trump's economic model, his Art of the Deal, which is basically how to impress and rip people off, pardon the crooks, and everything that wasn't already crooked (come on, Trump didn't invent corruption but he is corruption at a scale the country has never seen before) is now crooked as hell. And a billionaire oligarchy that just fucked up the China shock of the 2000s and 2010s is now doubling-down on its mad comic book villain AI techno-feudalist dystopia.
This is what Dube's The Wage Standard is up against. Class war. Dube wouldn't call it that but I will. Between 1980 and 2020 over 50 trillion in wealth is transferred from the bottom 90% of the income scale to the top .001 or some ridiculously small number like that. Something like 400 families own more wealth than the bottom 64%. The heartening part in all this, of which Dube is a scholar and advocate, is that some hunkering down Blue cities and states, like Seattle, in particular since about 2010, have been trying to support a better deal for low wage workers and actually made some progress, if still fitfully and not enough.
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