29 The Rise and Fall of the U.S. Welfare State Anwar M. Shaikh and E. Ahmet Tonak Introduction The growth of welfare states is one of the hall- ‘marks of modem capitalist democracies. European welfare states began with pension and social in- surance programs in the late nineteenth and early twentieth centuries, and then grew into compre- hensive systems of social support between the 1930s and the 1950s. By contrast, the U.S. state only began its excursions into social insurance and public assistance during the Great Depression of the 1930s, and was typically much less compre- hensive in the postwar period (Skocpol 1987). Nonetheless, in the postwar period the welfare role of the state grew rapidly throughout the advanced capitalist world, as evidenced by significant rates of increase in state expenditure and taxation, par- ticularly for social expenditures. But in thinking about the financing of the welfare state, itis mis- leading to focus on the rise in social expenditures alone, because taxes rose equally sharply (OECD 1985, 16-17). Thus when considering the impact con worker incomes, it is more appropriate to look at the net social wage: social benefit expenditures received by workers minus taxes paid by them. ‘When this is positive, it represents a net addition to workers’ wages, a net transfer from the state to workers; but when it is negative, it represents a net tax on workers, which is a net transfer in the other direction One of our principal findings is that over the 27 postwar period from 1952 to 1997, the net social ‘wage as a percentage of employee compensation is very modest indeed: it seldom fluctuates beyond +44 percent, and its average is a mere 0.6 percent (Figure 29. 3, p. 253). In effect, social wage flows largely recirculate income among wage and sal- ary carers as a whole. And even here, the redis- tributive effect within the working population appears quite limited in most countries (OECD 1985, ch. 7, section B, 203). Year-to-year movements of the net social wage are strongly affected by the level of unemploy- ‘ment, since this affects government expenditures on welfare, unemployment insurance, and so on, and the taxes paid by workers. And unemploymer in turn depends on the long waves of accelerated growth and slowdown that are characteristic of capitalist economies. Thus when in the United States the long boom of 1947-1968 gave way to a subsequent long phase of slowdown and stagna- tion from 1969 to 1989, the resulting rise in struc- tural unemployment in the latter phase triggered automatic rises in government spending and si- multaneous declines in tax revenues. Combined with the increased defense spending in this pe- riod, the average government budget deficit rose almost sixfold as a percentage of GDP. The Right was able to take advantage of the structural fiscal disequilibrium and mushrooming ‘government debt of this period by focusing an at- tack on the welfare state. Public assistance andse a 248 ANWAR M, SHAIKH AND E AHMET TONAK unemployment benefits were sharply restricted, and unions were systematically undermined Union membership declined rapidly during this period, real wages fell, worker concessions and givebacks became commonplace, and the number of people in low-wage jobs rose sharply Rosenberg 1987), On the other hand, military spending was maintained even as social spending, was slashed, and corporate taxes were lowered. These policies had their desired effect. The Reagan-Bush era ushered in a dramatic rise in profits beginning in 1982. The subsequent neoliberal Clinton era from 1992 to the present has proved equally profit-riendly, though as we shall see, the attack on labor was moderated once favorable conditions for a new round of the accu- ‘mulation of capital had been restored (Albelda 1999, 15; Mishel et al. 1999), ‘Measuring the Social Wage At the most abstract level, the net national prod- uct may be thought of as being divided into a por- tion that goes to labor, and a remainder, the sur- plus product, which is appropriated by capital. But at a more concrete level of analysis, it becomes essential to examine the role of the state in modi fying this division of the net product. Capitalist accumulation depends on the level of profits, while the standard of living of workers depends on their access to consumption, healthcare, education, and so forth. The modern welfare staie intervenes by extracting taxes from both sides while simulta- neously redirecting expenditures back toward them (Our primary focus is on the extent to which the state’s involvement in taxation and expenditures serves to redistribute a portion of the nation’s sur- plus product to, or from, the working class. In keeping with our focus on class, we define the category of “working population” as consisting ae of those members of the population not having ownership of capital as a principal income source Our task is to assess the impact of govemment activities on the income and consumption of this population by properly accounting for both the ex. penditures directed toward them and the taxes de. ducted out of their income stream. In accounting for after-tax income, itis impor- tant to note that there are two traditional methods, The first, which concerns the observed incidence of taxes, is to calculate the income workers actu- ally obtain after the deduction of all taxes flowing outof gross wages. This isthe measure with which we are concemed. But in economic analysis, its also common to try and estimate the income that workers might hypothetically obtain in the absence of some particular taxes. This latter measure of tax-shifting incidence is adopted by Miller (1988, 1989), for instance, and many others. Both are rel- evant, but they ask rather different questions (Shaikh and Tonak 1987, 193, note 8). Were we to extend our study to the second methodology, our conclusions on the paucity of the net social wage would be strengthened, because the resulting (counterfactual) measure of the net social wage would be considerably more negative, and quite similar to those reported in Miller.' On the side of government labor benefits, we count all social welfare expenditures (health, edu- cation, welfare, housing, transportation, parks and recreation, transfer payments to workers, etc.) but exclude other government spending (transfer pay- ments to businesses, expenditures for general ad- ministration, defense, etc.).? This is in sharp contrast to conventional methodology, which tends to treat all government expenditure as a direct so- cial benefit, so that an increase in military spend- ing is viewed as essentially equivalent to an increase in social welfare expenditures. On the side of taxes we count all those that are levied directly on the working population (income woo tabs oe oie ore tive be satin pati pei a cae ae Ten te porto orab ir receiv>t having source, vernment ™ of this ththeex. taxes de. 's impor. methods, ers acni- + flowing th which ysis, itis ome that absence asure of 2 (1988, rarerel- sestions Te we to ogy, our ad quite fits, we th, edu. ksand te.) but fer pay- eral ad- 1 sharp ihtends rect so- spend- tito an that are income a ‘THE RISE AND FALL OF THE US, WELFARE STATE 249 taxes, Social Security taxes, property and other faxes), but exclude those levied on businesses {ales taxes, profit taxes, ete.) As noted previ- gusly. our primary concer is with the observed incidence of taxes, not with a comparison between, ier existing levels and the hypothetical alterna- ive benchmark. This latter, counterfactual “tax- shifting” question is important in its own right Butit isa different question than the one we seck tw address here. A further issue arises because one set of so- cial expenditures (F,) and taxes (T,) is entiel associated with workers, while another set (E, 7,) encompass both workers and nonworkers. To address this, we assume that workers receive a portion of the latter set in proportion to the share of labor izicome in personal income (LS). The ret difference between overal social expenditures received by labor and taxes paid by labor is the net social wage (NSW). Finally, we compare this net social wage to total employee compensation (EC), which is the total cost to capitalists of hir- ing workers (Tonak 1984). This is the gross wage of workers, and is made up of wages, salaries, ‘employers contributions for social insurance, and ther labor income. NSW ‘SW, +NSW, =€,-T,)+@,-T, 1¢ net social wage, E, = govemment expenditures on labor training and Services, housing and community services, in- come support, Social Security, and welfare (except the small items called military disability and mili- tary retirement, which we treat as a cost of war); E, = government expenditures on education, health, and hospitals, recreational and cultural a tivities, energy, natural resources, passenger trans- portation, and postal service; T, =total (employee and employer) Social Secu- rity taxes; T, = personal income taxes, motor vehicle li- ccenses, personal property taxes (primarily on homes), and other taxes and nontaxes (a very small category, which includes passport fees, fines, etc.); LS = the labor share = the share of wages and salaries in total personal income. The preceding derivation allows us to see that changes in the measure of the labor share affect only apart of measure of the net social wage.* Table 29.1 provides a detailed derivation ofthe net social ‘wage, and depicts the typical magnitudes involved, for 1964. All farther detail is provided in the data appendix, for 19521997. Itis worth remarking thet, as in Table 29.1, NSW, is positive, and NSW, is negative (and is therefore a net labor tax) through- utthe postwar period. In effect, direct income sup- port for labor always exceeds direct (Social Security) taxes deducted for this, while general ex- penditures on health, education, and so forth, al- ‘ways fll short ofthe general taxes on income and property (see the Appendix). Over the whole pe- riod, he portion of the net labor tax that arises from. the latter virtually cancels out the labor benefit rep- resented by the former. Figure 29.1 demonstrates that, as inal advanced countries, U.S. total labor benefits and total labor taxes rise hand-in-hand over the postwar period. ‘This underscores the importance of looking at both sides of the balance in addressing the social wage issue. Figure 29.2 looks at the same two measures expressed relative to total employee compensation. ‘Three things are evident here, First, although both the benefit ratio and tax ratio rise over time, the former initially rises more rapidly than the latter during the boom period 1952-1969, as real ben- Ti250. ANWAR M, SHAIKH AND E. AHMET TONAK 2 These shares are calculated using information from various volumes of U.S. Statistical Abstracs (e.g, Table 1107 in 1979). 2This isthe sum of federal nontaxes, state and local other taxes and nontaxcs, age ber si yet Table 29.1 a ~ The Eatimation of Sock! Wage(964 (nos of cs vs Expendures rota Expects Group] Toa Ey Riceaedo Labor 308 ice upp, Sova ecu an were econ ia Br Movs ancora senses 359 = (Shera wennngsones O70 Expenditure Group Partially Allocated to Labor = E,x LS = Expos Group Tole, soo 2 Eavston an nn Fea arshosias 310 ce a Focenbonl aucun aces tz a enery ta oss ran esas io ie Post enc io oF : Pessoa Farepotaon = angen xGCONS sng wae iva “ranean te at cnerotonocassongercars = CONS! O70 a £,+£ x18 Tt beefs andincome received by lbor ras cee tenes | weiss. ‘Tax Group Paid Entirely by Labor=T, 90.08 390.08 J < homs Contributions for social insurance 30.08 30.08 ens, and employe Tex Group bor Tea: Party Aoceted to Lebor= 7x18 ear ce Tax Group Toa= 49 joe Tele ares een sano eons ses ‘ous sss Federal income taxes 45.83 33.04 | andthe e ‘State & local income taxes 4.00 2.88 Afier oir sce aortas” tio on waa Moor vice and cose tio on oar eee a5 tos are ‘rer perorl pope tases or oo | Rite ‘Tax on owner-occupied nontarm housing 7.50 Bat bs etd [ron omer ora reo 2 ce | 1 4L8)= Tot! taxes pa by bor res Ne Nsw, =E,-T, 401 | new, =(é tats ae aeasy et tal ici nage = NSW, NSH, Be | ops for vel ‘Source: National Income and Product Accounts of the U.S. statistical tables. | oF peog! etal tat cmon al alg leesLabor 2a88 350 070 36.07 2320 357 oss 0.98 147 o77 784 7015 107 in 1979), THE RISE AND F: Figure 28.1 Labor Benefits and Taxes (in bilions of $) OF THE US, WELFARE STATE 25 1600 1400 1200 200 Later Reni Later Tes ° 2 (STDS efits are raised and coverage extended. However, as the boom runs out in the late sixties, from 1969 101975, the unemployment rate more than doubles (from 3.6 percent to 8.5 percent), poverty deep- ens, and the consequent risc in payments for un- employment and welfare causes the benefit ratio to accelerate and the tax ratio to decelerate—thus automatically expanding both the net social wage and the overall goverment deficit. After 1975 the unemployment rate drops some- ‘what, and with it, the benefit ratio. But even though unemployment and poverty remain high relative to the averages in the boom phase, it isin this pe- riod that the counterattack by capital and the state begins. Under Reagan and Bush in particular, this assault succeeds in dismantling the social safety net and undermines workers’ organizations. The already low unionization rate in the United States, drops sharply, restricted eligibility requirements for welfare prevent any increase in the numbers of people being aided, total real benefits actually decrease, and the purchasing power of the aver- age benefit declines substantially (Amott 1987, a a rT 51). Thus when the unemployment rate rises sharply in the early part of the Reagan—Bush cra, the benefit ratio barely fluctuates, and even falls below the tax ratio for the first time in 14 years. The sharp rise in real profits in the Reagan— Bush era eventually restores growth and lowers unemployment—albeit at reduced real wages and worsened working conditions for most workers. The rise of the benefit ratio and the more modest fall in the tax ratio at the end of this period is ‘merely the familiar reflex of the risc in the unem- ployment rate.*Itis interesting to note, however, that in the subsequent Clinton era the tax ratio rises as unemployment falls, as one would expect, but t ratio remains stable instead of falling, This would seem to indicate that the noncyclical base ofthe benefit ratio was raised under Clinton. Figure 29.2 also shows that the Reagan-Bush cera restores the negative net social wage of the carly half of the postwar period, except in periods of peak unemployment. Once again, the excep- tion, albeit a modest one, comes in the Clinton ra, where the benefit ratio does not fall when un-[ANWAR M, SHAIKH AND E, AHMET TONAK Figure 29.2 Labor Benefit and Tax Ratios and the Unemployment Rate 03s pS 03 Nee |-- 02s 02 Reagan-Bush Clinton os 04 ‘Unemployment iN 00s Figure 233.N «a os 006 ons 02 ant] 008 19521957 —~—=«9DSSTSCTSSSCSTSSCSSSCET=SSCBDSSC 1982 oyment falls, so that the net social wage re- ofthe highest unemployment rates since the Great ‘mains positive. But of course the tax ratio is ris- Depressivu. It is only then, starting from this new ing (as increased employment pushes people back level, that the next increase in unemployment un- Figure 294 4 into higher tax brackets), and by 1997 the two ra-_ der Bush (1988-1992) gives rise to an automatic- tios are virtually the same. stabilizer rise in the net social wage. As the 3000 — Figure 29.3 combines the preceding benefit and _ unemployment rate declines in the Clinton years, tax ratios into the net social wage ratio, which is the net social wage ratio follows suit, but not to as 22000 the net social wage as. fraction of employee com- great an extent. As we noted earlier, this is be- a pensation. The three phases identified earlier are cause the base benefit ratio seems to have been immediately evident. In the boom period from raised in this period. Finally, itis interesting to Aon 1952 to 1969 the net social wage ratio is negative, note that over the whole period from 1952 to 1997, fe although the security afforded by stable growth the average net social wage ratio is 0.6 percent allows workers to improve their relative strength virtually zero! 22000 and gradually reduce the extent oftheir subsidy to _ Figure 29.4 looks at the impact of the net so- earn capital. The second phase from 19690 1975 marks cial wage in terms of the average real wage pet the onset of the economic erisisin which the sharp worker (real employee compensation per full- 6000 rise in unemployment and poverty drags the ben- time equivalent worker). From this point of view, aa efit ratio upward and raises the net social wage the true real wage is the sum of the net social ve ratio. However, in the Reagan era the counterat- wage and the observed (apparent) wage, both in 12000 tack by capital and the state initiates a dramatic constant-dollar terms. Several things are strik- secular decline in the base levels of the net social ing. In keeping with the relatively small size of a ‘wage, and this swamps any built-in rise in the face the net social wage ratio, the true wage is seldom—~ ‘THE RISE AND FALL OF THE US. WELFARE STATE 253, Figure 29.3 Net Social Wage Ratio (net social wage/employee compensation) 0.06 0.08 1997 the Great 1 this new ment un- utomatic= As the ‘on years, not to as ais is be- rave been esting to 20 1997, cont— e net so- wage per per full tof view, vet social oth in are strike size sseldom a rr rt worker, 1982 dolar) Figure 29.4 Apparent and True Real Wage (per fulltime equi 10000 = 28000 21000 pe 24000 - bite 2200 20000 soo sea 14000 ‘True Real Wage Reagan-Bush Clinton 12000 19821957 1962 1967 1972 wn 1982 1987 1992 1997— es 254 ANWAR M. SHAIKH AND E, AHMET TONAK very different from the apparent one. Indeed, the formeris frequently below the latter, particularly in the boom phase from 1952 to 1969, although this deficiency narrows over time. As the boom gives way to stagnation and decline after 1969, both measures of the real wage decelerate, and in the late 1970s to the early 1980s they even fall. Although they rise modestly for a while thereafter, they once again stagnate in the Clinton era, Overall, their post-1969 average rate of ‘growth remains much lower than that in the pre- 1969 boom phase. The legacy of the concerted attack on labor benefits and supports is clearly evident in all of this. Figure 29.4 reminds us of the fact that in spite of the great development of the welfare state, the actual basis of the average standard of living of workers remains the real wage they are able to garner from their employers. Its steady rise in the boom phase, and its stagnation and decline in the subsequent crisis phase, forcibly remind us of the important role that class struggle, and the size of the reserve army of labor, continue to play in this age-old saga Finally, Figure 29.5 looks at he net social wage in relation to the total government budget deficit; both scaled by expressing them as a fraction of employee compensation. Note that a government deficit (an excess of expenditures over receipts) is plotted here as a positive number, to make it con- sistent with the sign convention used for the so cial wage. Thus a negative budget deficit is a budget surplus, that is, a net tax receipt, while a negative net social wage is a net tax payment. It ‘quite striking to then observe that until the Reagan— Bush era, the two variables behave in very similer ways. In the boom phase from 1952 to 1969, the net tax on labor (the negative social wage) accounts for a substantial part of overall total government surpluses. On the other hand, in the crisis phase from 1969 to 1980, the net benefit to labor (posi- Se tive net social wage) is the substantial cause of the reduced budget surpluses and subsequent defi- cits. It is Reagan and Bush who break this nexus by simultaneously expanding the relative budget deficit and also slashing the net social wage. Since the net social wage is negative for most of this period, it cannot be said to have any part in the corresponding budget deficits. On the contrary, precisely because it is negative, we can say that during this interval the net tax imposed on labor made the deficit smaller than it would have been otherwise. It was the greatly expanded defense expenditures that account for the increased total government deficit in this period. In fact, the net tax on labor actually covers almost 16 percent of defense expenditures between 1987 and 1989.7 Clinton, by phasing out budget deficits and also the net social wage, effectively restores the his- toric relation between the two. Summary and Conclusions ‘The postwar history of advanced capitalist coun- tries is marked by a tremendous extension in the role of the state. In particular, the great expansion in government spending on social programs has given rise to the notion of the modern capitalist state asa welfare state. But while this may be true, it does not follow that the welfare state is a net provider of goods and services, as some have tended to claim. On the contrary, when one ac- ‘counts for the parallel rise in taxation that is an ‘equally characteristic feature of the modern state, then something surprising emerges. By and large, it is the taxes of the working population that es- sentially pay for the corresponding state expendi- tures on health, education, Social Security, unem- ployment, public assistance, housing, and a host of other social programs. Over the whole postwar period, which is effectively the last half of the twentieth century, the average net balance between Figure 29.5, 02 -— 015 0 00s 00s tH 1982 taxes direc the social correspond total emplo, effectively Weal comparisor ence betwe education, and recreat and taxes | tion (the Le curity taxe We find within fair +4 percent 29,3), and 1997 itsav to year, itsause of defi S nexus budget 2. Since of thi tin the ontrary, say that 1a labor ve been fefense total the net ‘cent of 1989.7 ad also he his- teoun- 1 in the ms has pitalist be true, s a net we have one ac- nstate, dlarge, that es- xpendi- a host rostwar of the tween ‘THE RISE AND FALL OF THE US. WELFARE STATE 255 Figure 28.5 Net Social Wage and Deficit Relative to Employee Compensation 02 ous os Net Soci rN ° 005 : DeficivEc 1 0.15 Reagan-Bush Clinton 02 1952 195719621967 1972 1977—s982—«987~—=«1992—==«1997 taxes directly paid of employee compensation and the social expenditures directly received by the corresponding population is a mere 0.6 percent of total employee compensation. tis, in other words, effectively zero. ‘We call the concept that we deploy to make this comparison the net social wage. It is the differ- ence between social benefit expenditures (health, education, welfare, housing, transportation, parks and recreation, transfer payments to workers, etc.) and taxes levied directly on the working popula- tion (the labor share of income taxes, Social Se- curity taxes, property and other taxes, etc. We find that the net social wage fluctuates within fairly narrow boundaries, largely between 4 percent of employee compensation (Figure 29.3), and over the whole period from 1952 to 1997 its average is essentially zero. But from year to year, its variations are substantially driven by variations in the rate of unemployment. This is because a rise in the relative number of unem- ployed people induces increased relative state expenditures on income maintenance and unem- ployment compensation, while the correspond- ing drop in the relative number of employed people reduces relative tax receipts (Figure 29.3). This very same mechanism increases the rela- tive budget deficit when the unemployment rate rises. For this reason, fluctuations in the net so- cial wage also tend to be highly correlated with the budget deficit (Figure 29.5) But there is more to the matter than the issue of cyclical fluctuations. The level and trend of the net social wage are also of great importance. And here, it is striking that during the long boom of 1952-1969, the net social wage was actually nega- tive—that is, there was a net tax imposed on labor during this period. But because it was a boom pe-256 ANWAR-M. SHAIKH AND E, AHMET TONAK riod with low unemployment and steadily rising real wages, benefits per worker rose more rapidly than did taxes, and over time the benefits received by labor became more and more consistent with their taxes, Al this began to unravel when the long boom ended. By the early 1970s the unemployment rate began to rise sharply, and it continued to trend upward until 1983. This period of economic pri- vation was attended by increasingly sharp attacks on the welfare state, on unions, and on other insti- tutions that supported the working population. Real employee compensation per worker began to fall in the mid-1970s, and its growth remained ane- mic afterward. And as the welfare state was dis- mantled, real benefits per worker were slashed, absolutely and relative to taxes, particularly in the ‘ReaganBush era of 1980-1992. Thus even though unemployment reached record highs in that pe- riod, the net social wage actually fell, and even became negative, Workers were living ata reduced standard of living and yet paying a net tax—in the very period touted as one of “tax-cutting” for the benefit of working people. The rhetoric and real ity of the times could not have been more discrep ant. Itis a particular irony thatthe net tax on labor helped substantially offset the greatly expanded defense expenditures of this period A ctitical result of this attack on labor, and its associated support for capital, is that it served to restore the conditions of accumulation: profitabil ity began to rise sharply after 1982, and has con- tinved up ever since, The ensuing rise in the U.S. rate of accumulation eventually began to offset the continued displacement of labor from “downsizing,” and by the 1980s the trend of un- employment reversed itself (Figure 29.2). Clinton’s neoliberal regime has benefited greatly from these events (one might say it sur- vived only because of them) and has shown litle inclination to change the structures in place. As —t gg = unemployment fell in the 1990s, the net social wage fell in typical comespondence with it. But since it seems not to have fallen quite to the same extent, there is some evidence that the noncyclieal base of benefits was raised somewhat in Clinton cera. In any case, by 1997 the net social wage had essentially come back down to zero. Our study demonstrates that the net transfers effected by the U.S. welfare state have a very lim. ited impact on the standard of living of workers, It is striking to note that the real wage of workers adjusted for the net social wage is not very diff ent from the unadjusted real wage, that is, from real employee compensation per worker (Figure 29.4), Thus in spite of the welfare state, the real basis of the standard of living of workers remains the wage they are able to win from their employ- ers. Its steady rise over the boom phase, followed by its stagnation and decline in the subsequent crisis phase, forcibly remind us that class struggle and the reserve army of labor continue to play a central role—as ever—in its determination, Notes 1. On the side of social expenditures, if we were to count veteran's benefits and services and military reliemen and lisablity (both of which we exclode as cass of war) and on the side of taxes shit $0 percent of business taxes (corporate income twxesand indirect business taxes) tothe labor ascount ‘our resulting estimates oF the net social wage would fal be ‘tween Miller's estimates ofthe SSA and O'Connor method clogies (Miller 1989, 85, Table 3). 2. The excluded expenditures consist of two hinds: (1) cen- tral executive legislative and judicial activities, inernational ssc, space, national defense, civilian safety, veteen ben efits, and agriculture, which are the general expenses of repro ‘ducing and maintaining the system fel? (what Marx cals the is fras of capitalist society [Marx 1977, 446); and 2) those ‘such as economic development, regulation and services, net interest, and others ard unallocables, which represent expen dices directed mainly toward small businesses, related ad- ministrative activites, and interest payment tothe highest n= come brackets. All of this group is therefore excluded from labor income and consumption, 3. The excluded taxes also consist of two kinds: direct and indice the formers elusively on swelth, both “4 Within nad variable tween produc level, varabl productive la Be comes ployze comps employed pe: be offseting 5.A8 i stare that exc salaries, and employed pe sation falls a receiving the toemployee people pad reduction of x bri ‘when the un dent in Figur 7. Dasaor can be derive ont Busines Bibliogra; Albelda, Ra Wroughtnet social vith it. But othe same roncyclical in Clinton ‘wage had transfers, avery lim- workers. It of workers ery differ- at is, from er (Figure Je, the real ir employ- 2, followed subsequent ss struggle 2 to playa ements and wat), and on 3 (corporate bor aceount, could fll be. nor method- nds (I) cone rterational retran bea se of epro- farxcalls the nd Q) those services, net sent expe ‘elated ad- Tehighestin- cluded from sind: direct, THE RISE AND FALL OF TH and indirect business taxes, and estate and gif taxes. Since the former sets levied on business, and the later almost ex clusively on those with substantial nonlabor income and ‘wealth, both are excluded from the labor account. 4. Within Marxian terminology this isthe same as (nomi ral) variable capital if we abstract from the distnetion be- {ween productive and unpreductive labor. Ata more concrete level, variable capital isthe total employee compensation of productive labor alone. Strictly speaking, we should remove the incomes of corporate officers and managers from em- ployoe compensation, and addin a wage equivalent for self- Employed people. But since these two corections appear to be offsetting, we ignore them in the present study. 5. As indicated in note 4, detailed estimates ofthe labor share thet exclude corporate officers and other management Salaries, and that add in the wage equivaleat of most self- employed persons, would not significantly change the labor Stare. A variation in the labor share, in tur, would only af fet NSW,, 6, When the unemployment rat rises, employee compen- sation falls and total benefits ise (since there are more people receiving them). Thus the benefit rato, the rao of benefits, to employee compensation, rises. On the side of taxes, if ll people paid the same tax rate, total taxes would go down, but the tax ratio would remain unchanged. But in point of facta rduetion of emplayee compensation moves people ino lower tax brackets, and so the tx ratio actully falls (modesty) when the unemployment rate rises. These paters are evi dent in Figure 29.2 7. Data onthe combined budget deficit and labor subsidy can be derived from the appendix. Data on defense expend? ‘res are available fom various years of BEA, Survey of Cur- emt Business. Bibliography Albelda, Randy.1999, “What Welfire Reform Has Wrought” Dollars and Sens, January-February ‘Amot, TL. 1987. “Welfare Reform. A Workhouse Without Walls” The Imperled Econamy, Book 2. New Yor: URPE. US. WELFARE STATE 257 Marx, K. 1977. Capital, Volume 1. New York: Random House. Miller, J, 1986, "The Fiseal Crisis of the State Reconsid- ‘ered: Two Views of the State and the Accumlaton of Cpital in the Postwar Economy.” Review ofRadical Political Economics 18, n0. V2 1988. A Negauve Net Social Wage and the Reproduction Crisis ofthe 1980's. Conference on International Perspectives on Profitability and Accuma- lation, New York City. 1989. “Social Wage or Social Profit? The Net Social Wage and the Welfare Stat." Review of Radical Political Economies 21, ro. 3. Mishel, Lawrence, Jared Bemsten, and Jobn Schmit 1999. The State of Working America 1998-1999. Wthaca, NY: Cornell University Press ‘OECD (Organization of Economie Cooperation and Development) 1985. “The Role of tie Public Sector: Causes and Consequences of the Growth of Govern- ment" OECD Economie Studie, Special Ieue 4,0 Role of Government Policies, Book 2. New York: URPE. ‘Skoepol, T1987, “America's Incomplete Welfare State, "The Limits of New Deal Reforms and the Origins ofthe Present Crisis.” In Stagnation and Renewal: The Rise ‘and Fall of Social Policy Regimes, ed. M. Rein, G. Esping-Andersea, and L. Rainwater. Annonk, NY: ME. ‘Sharpe. Shaikh, Anwar, and E, Ahmet Tonak. 1987. “The Welfare ‘State andthe Myth ofthe Socal Wage." The Imperiled Economy, Book |. New York: URPE. Tonak, E. Ahmet. 1984. A Concepmualizaton of State Revenues and Expenditures: The U.S. 1952-1980. Unpublished Ph.D. disseration, The New School for Social Research. 1987. "The U.S, Welfare State and the Working Class: 1952-1980." Review of Radical Political Economics 19, n0. | The imperiled Econom,iI eee) beau aaa 258 ANWAR M, SHAIKH AND E, AHMET TONAK Appendix: Estimation of Net Social Wage* DERN ATION OF AOR; 2 Eephe Coop £-Apue one ies) aoa 55 2 iia ese Tis jas den su ‘otal Beacts and Income Received by Labor=E1-(E2 15) 2246 mas ae 7 emer tas may ceeesrtcear vo tom ase ' Soca Sl Sn te tan) te a BR j Pegs pet Tenprsa"OCCRS se oak ag ‘ ‘altura tates 15) seco ss 343s Tap Tater oa Pad Estey aber a3 38 Ba Tua oma Tl uly Alcte Lbor P21 xo 2” 261 ene reper Tet ‘Other + Noetiem & Farm Owner Occupied | 22 Tax on Owner Oseupeed Non-farm Hoesing 210 quotes cores faa isa a SSW2O(E2 TD) XLS a9 nn 31 0 Sater eee Nesocd Wieneroren amas) | toot belo ‘a “on “om EaiGeconss Sousa bes seat Sta tn =8 na 130 oe 3m Ls oa 080 1% tao $4060 an «Wa on 340 1 17 om o7. Ss 430 330 S90 10 276 o701 axe O70 a8 4632 3a 190 030 190189 10 kar 00210 me sas as 5135 20 23 as to i 3 on 030 478336 os om 078 ‘30 7330 oO. ir) 510346 Bao 380 an o2 Bo S73 S358 3a “a0 to 100 5m $30 eas 577 T= as $a APPENDIX (CONTINUED) 30 am os O13 ous 2010 Os 4002 031 20m 208 239Oe 260 ANWAR M, SHAIKH AND E. AHMET TONAK Toersuretscecin ont oom 07) or Ele onynmcer0-fopr Woe wie Gis os Pt iio boee'Tm ian in ion iiss rte eon Raed yar 30825 15) is ee use us pn Gael dy lad Laer ya ae ‘ng ie frame yp Sat Se ene Sr) ui ie 2b ite Sorel tne oe om i) ia iz pent op as BB as 98 we ime io i te 1 te so i ie i Fags Feri Tomi O8S le oun ae ua Tnpomce MO tes ae Pod by abr T7219) pe am mm 25 Tecra tr a ry abr ie bh ‘Ss ee Tax rp Laer at PerlyAectete abor-r2xts | sx Tsay tears 533 lice Toy Ft Sel inom Tt oi Eve Coie rae sa Sat ectnooae iss Sar Fee Pep fare " om Sersace Owe sing & tna Oopafan ts i Ser rotat Soci wactessmnesswa an Sn [aber Tar ans = Labor Tees BC 020 “om “oat ont ‘Fanon a ne panels CAEP a oe25) xe iw ion an meee hate Moppeenereayge oes) | om att Sewn she FebTine at Epes EE oma) ais case Geer ons Fa ret Sep th ceed) a “oes “aor vo oa Gann Sopa Det eda Sd Ua Be 9s 435 a2APPENDIX (CONTINUED) «om ams ane 07m ams 07s orm ome aml om oma Sn Mss 77938 9010 Seo0_ oma ss isos eGo 1s838_ ste > 10096 i329 12529 Meas 167s SOT 2oRs? aa se ITA 3832 3 ‘ee 3a ‘sass “nse ‘ass tem teas last ie aoa > He S535 oe as 6 Hoss ao se is > ao ie im im 35 aa 2m ae 439 I Som Sean ‘aks 550 ‘sao Sid ta a3 an 3m 33 tet saa i ie 3m is a0 iss be 2% 33350 ‘so i ux Hoe ae Ome ms ms Bas aan on “om “an "09 “00 00 vats iia 135 ast iiss tase 38 km 0 am 30 Be 13% 16930 at 2390 6m 1556 mas aL 138 sn 5710 su kn bo ban he ao anon 21 on om 035038 og? Os] 030029 oon 2019 2003 vot 0m © obtr cos cuss ous 395 So 363 168 222213554678 tae 1s? 261usibasinaitenen er em eet 262 ANWAR M. SHAIKH AND . AHMET TONAK “DERIVATION OF TABOR RES} 8 = EylieeCompenttnn-EC-Apernt Wo aaa tson3s 168989 “ott Denits and come Received by LabornE10(E2 15) ase sm28 s spendue roup Teak Ene Alice i Laber-£T ere an » tncom Soper sca Seay ané Wl (xing Mary) mia ms 7 [brad Tang Servis ass se 1735 Espeniure Groep TteloE2 x15 1 Groep Tome most oe? 26 4 Elven iauia sa iazao Is ‘ecvnal and Car Atvien ‘6630 Passenger Transporation TransponatonGCONS, a perton ben 6 [Ges Consent of aseae Car GCONS 6 — ott Tees Pld by Labor=THe(T2 418) sess unr sas 2 Tus Group Labor Tota Po Ett by Labor Ime: om 22800 2 Tex Group 1 Labor Tot: Parity Alcsed 0 Labor=T2 1S toss aisas aie rp oats son an ih a ‘Stated Local Income Tass 380038204260 * Sher Fee Reps Ty eo tie : Tustoms Qs fata om a Sonera SS SS 35 & RETTOTAL SOCAL waceessunesswa ta ae te DATA FOR FIGURES: Labor Tax Ratio = Labor TaxesEC O77 eee eens oa 2 ao : no | Feline thas ope FEE: tod) ei ptf eineeer eres eer ee ss ul mos Soot bea eet Sea am aeAPPENDIX (CONTINUED) ama orm 0705 07m 070s 0707 07m 07120701 _ 0am warm were mols sia 2as0l aig aim ame sisi ws878 Has z7uio potas Silas Sunes Sams Sarvas Himes hous 38 a8 Sic mst Maat usm Sion fort dosie rae iiso eos sass Bik iast mat deses Som ar ame dates aun Seton 2B ‘nwo noo “me “asm “nat “wa “nm “iste “Sem Io us 19s aor man mass am mas BOs Ie mae wns al foe Sar en Sree Soe SoD ie Ben Toe we ‘33 ‘ne ‘ne ‘no “ho “am “ko “om “an "ae ea joo ‘pap thao tomo ata de it ua 1am i Sn ata sist ss ste ale a ast sin som 320 sao roe 7m aunas a7 oul3a sens su Mio ma xin Ses ines io Gi daw on sR seo Bis 0 se mam a 2 ota mw m2) mu ma MEN ABD wD aera OU ma Sn fs Gs ge sin ye on Se com so 29208 29008 2503 2578 3OLS 33668 35070 39413 4558 45333 47270 soe im ‘Sis “aa “art nin mat tod mm Tolan 140 > “0 iat is 3m 60 em tte tao 390 > fe 30 atm aig) 490 lo sis suo Dan 30530 30 "030 “0x0 “oa ‘oan “00 “059 “oa “tao “oo > PE H8 23 as pe Sn Sim aw ane agm Nd > a8 Se ie ie “ba ma Be ws um “se “am 8 Ome om 050030 0ak Ok OOOO aed aii coer ool ann anit aol] soit ool cum ter Soo zs aa fata dans Sued dual ant um ae a Ber ie ams Sot Ge dat umm awe esa 4 ne Sie tat Sem Sie bene bee (0 tones ete -_— oo noe ar "om om "ans om "oo get 2 “bo 273 oh 18 so si) si ae 263264 ANWAR M, SHAIKH AND E, AHMET TONAK Labor Share-L3-EC/TPI Enpones Conpesnna"EC~Appret Wage EXPENDITURES Tora nets ad lacome Receved Wy Labor=F1-(E2 x 8) Expndunre Group Toe Enrey Alcatel eater Incene Suppor Sill Seca snd Wet (edadng Mii) Recenonal and Cara Atier Penal Sere ie Ge Consumption of Pusenge Ca GCONS : “Total Tass Pa by Laorst1-12 « 15) | Tex Group Labo Foal Paid Entre by Labar=P Centon fr Sal auranee eee es on Tuten Owen Osoied Fara ost [ Sswaa(ea-TD 21s ere ces Labor Benefit Ratio ~ Labor DenefivEC Rian wage pe PEE = (EC = Ne Sval Wage CPFE Siete careers asfan 3s 20 ed 1390 a $13.50 a= | & setts sais “a0 1330 mus a7 Tea) 1839 own i300 $6436 1690 1530 050 se 2130 «589 662 ay 2» ans us ons “300 210 na sas Mes APPENDIX (CONTINUED) 6s