Facts:
·
Between
1947 to 1973 economy grew faster and income more equally distributed.
·
Between
1979 to 1993 top 20 percent gained 138 percent in real income, while bottom 60
percent lost real income.
·
CEOs
earned 35 times as much as blue collar workers in 1974, by 1990 it was 120 times
and now closer to 200 times. Not related to increases in profitability of firms.
Response
by Economists:
·
A result
of slow growth in 1970s disproportionately affecting low-skilled workers.
·
Temporary
bulge in labor market due to baby-boomers and women entering labor market.
·
Some
effect due to international trade (and competition with lower-wage foreign
workers) but in long-term this just matter of comparative advantage – i.e.,
good for allocative efficiency. (see remarks by Greg Mankiw et al in
administration).
Response
by government:
·
Talk of
retraining and paying losers some transitional benefits.
·
Reality
was that benefits to unemployed and poor were cut in Reagan years and taxes on
payroll were increased while corp. profits taxes and the wealthy were cut.
·
Kuttner
argues it’s due to increased marketization – incomes, benefits and job
security are not protected by unions and government.
2
·
Why? Some
argue it’s due to merit being the true determinant of income – it’s what
you deserve. A true meritocracy. So, it you’re not rich, you’re inferior.
·
But
globalization has allowed wages of workers around the world to converge
downward.
·
Third
world workers are making products they can’t afford to buy. Keynes’ solution
to Say’s law flaw is not available on a world scale. So, advanced countries’
workers will find that capital-labor accord is broken – they will not share in
productivity increases of their firms.
·
Credit
contraction in exchange for neo-liberal opening of domestic countries’ markets
slows the growth of economies. (End of Bretton Woods system).
Now bankers’ bias is to slow growth rather than risk inflation
devaluing investments.
·
Higher
unemployment exacerbates inequality (similar to Marx’s reserve army of
unemployed).
Facts:
·
Federal
reserve raised interest rates seven times in 1990s to slow growth and job
creation.
·
Despite
belief among U.S. policy-makers in the Natural Rate of Unemployment, Swedish
government able to keep unemployment low and not incur inflation through social
cooperation between capital and labor.
·
Social
bargaining in U.S. doesn’t exist.
·
Shift
away from Manuf. Jobs to service jobs also accounts for greater inequality since
jobs vary from baby-sitting to software engineers and “symbolic analysts”.
·
Besides
reduced social safety net (min. wage etc), deregulation of business has
increased price competition among giant firms increasing downward pressure on
wages.
·
Labor
bashing has worked: from Wagner Act (1932) to Taft-Hartley (1947) and Reagan’s
open warfare against labor (PATCO) reduced labor from 35 percent of labor force
in late 1940s to 11 percent by 1995.
3
Supposed New Realities:
·
Knowledge
Age benefits everyone except those less-skilled 20 percent who won’t make the
transition.
·
But 80
percent of Americans (many with college degrees) haven’t benefited – their
real incomes have declined.
·
Solutions:
Democrats à
increased funds for education & retraining
Republicansà
trust the private sector (Hamburger U.)
·
Kuttner
says skills gap a mirage. Workers becoming more literate. Not lack of skills but
lack of good jobs.
Facts:
·
“Since
1989 productivity has increased by 1.5 percent per year yet median wage has
steadily declined.”
·
“In
1980s as educational levels increased, economists calculated that upwards of 20
percent of college graduates were performing jobs that did not require a college
degree.”
Answers:
·
Social Labor Market: Policy changes à
full employment, stronger unions, fair trade, wage subsidy and social income,
education and training, gain-sharing commitments, responsible corporations.
Claims that it’s still possible to have a humane
workplace: Many firms still consider employees as long-term assets.
Examples:
Harmon International avoids layoffs by bringing outsourced work back into
plants. Powersoft has in-house team of contingent employees. Magma
Copper negotiated 15-year contract with United Steel Workers
productivity-gains profit sharing.
But these are exception: “globalization and
IT have eroded power of labor and the state.”
·
Free
market ideologists ignore power à
discrimination must be rational otherwise it wouldn’t be undertaken. “groups
do not exist, only individuals.” – allows them to ignore potential gains to
some by excluding whole groups (minorities, women) from labor pool and wage and
working condition benefits.
·
Marginal
Disutility of Labor: work is onerous, wages compensate for pain. Workers
therefore prone to shirk and need to be monitored.
·
Marxian
view: Class issue à
employers treat workers badly, therefore workers encouraged to shirk.