Category Archives: Income Inequality/Gap

Wage Policy as an Essential Ingredient in a Democratic Society

Source: Oren M. Levin-Waldman, Journal of Workplace Rights, Volume 17, Number 1, 2012-2013
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From the abstract:
In this article, I argue that wage policy is an essential ingredient in the maintenance of democratic society for the following reasons. First, it raises the wages of those at the bottom, and thereby gives workers more independence and power as they are placed on a more equal footing with managers. This is not just a matter of affording low-wage workers greater monopoly power, as James Galbraith (1998) suggested; it is a matter of enabling these workers to develop their capabilities and thus enhance their freedom as suggested by Amartya Sen (1999). Second, because wage policy through wage contour effects might increase median wages for the middle class, it has the potential to arrest wage stagnation, thereby forming the foundation of a jobs policy. This alone forms an essential ingredient in the maintenance of democratic society: economic development. And third, by adding to personal autonomy and benefiting the middle class, wage policy can also result in reduced income inequality.

A Grand Gender Convergence: Its Last Chapter

Source: Claudia Goldin, American Economic Review, Vol. 104 no. 4, 2014

The converging roles of men and women are among the grandest advances in society and the economy in the last century. These aspects of the grand gender convergence are figurative chapters in a history of gender roles. But what must the “last” chapter contain for there to be equality in the labor market? The answer may come as a surprise. The solution does not (necessarily) have to involve government intervention and it need not make men more responsible in the home (although that wouldn’t hurt). But it must involve changes in the labor market, especially how jobs are structured and remunerated to enhance temporal flexibility. The gender gap in pay would be considerably reduced and might vanish altogether if firms did not have an incentive to disproportionately reward individuals who labored long hours and worked particular hours. Such change has taken off in various sectors, such as technology, science, and health, but is less apparent in the corporate, financial, and legal worlds.
Related:
How to End the Gender Pay Gap Once and for All
Source: Derek Thompson, The Atlantic, March 4, 2014
A Harvard economist makes the case that greater autonomy and work flexibility would bring us closer to equal pay.

Diverging top and converging bottom: labour flexibilization and changes in career mobility in the USA

Source: Young-Mi Kim, Work Employment & Society, Vol. 27 no. 5, October 2013
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From the abstract:
The purpose of this study is to explore changes in career mobility in the US labour market during the late 1990s and early 2000s, a period in which career boundaries weakened and workers’ employment options became increasingly flexible. Using multiple panel data of a nationally representative sample of US employees between 1990 and 2003, the pattern of workers’ short-term movement across various types of boundaries in the labour market is analysed, as well as change over time and by skill group. The result shows that although the probability of switching firms increased for all workers, the career trajectories of lower-skilled groups showed increasingly opposite trends from those of higher-skilled groups. In particular, occupational immobility was reduced significantly for workers in lower-skilled occupations, yet their changes of occupation occurred mainly within their origin class, resulting in strengthening of class boundaries. Implications of this finding are discussed in light of recent debate on class stratification.

New corporate elites and the erosion of the Keynesian social compact

Source: Anne Daguerre, Work Employment & Society, Published online before print September 26, 2013
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From the abstract:
The role of corporate elites – notably financial elites – has been at the forefront of political debates in Western capitalist societies since the start of the Great Recession in 2008. The major structural unbalances that had accumulated in Anglo-American economies over the last quarter of the 20th century played a key role in the build up to the financial crisis. Taking advantage of the mobility of capital, business elites promoted a model of shareholder capitalism actively backed up by the state. A process of elite competition took place: financial intermediaries acting on behalf of institutional investors marginalized the alliance between traditional managerial elites and workers that had been at the heart of the Keynesian compromise. This contribution outlines the consequences of the unravelling of the 20th century social pact for workers and their families. It concludes by outlining ‘what is to be done’ to forge a 21st century social pact.

Occupational segregation and gender inequality in job quality: a multi-level approach

Source: Haya Stier, Meir Yaish, Work Employment & Society, Published online before print, February 26, 2014

From the abstract:
Gender differences in perceived quality of employment (achievement, content, job insecurity, time autonomy and physical and emotional conditions) are examined. The study asks whether women’s occupations provide better conditions in areas that facilitate their dual role in society, as a trade-off for low monetary rewards. Specifically, it examines the association of women’s concentration in broader occupational categories, embedded in particular national contexts, with gender differences in job quality. Utilizing the 2005 ISSP modules on work orientation shows that women lag behind men on most dimensions of job quality, countering the hypothesis that women’s occupations compensate for their low wages and limited opportunities for promotion by providing better employment conditions. However, as women’s relative share in occupations grows the gender gap narrows in most job quality dimensions. The implications of these results are discussed.
Related:
Press release

Explaining Pay Disparities between Top Executives and Nonexecutive Employees: A Relative Bargaining Power Approach

Source: Taekjin Shin, Social Forces, Advance Access, First published online: February 23, 2014

From the abstract:
The widening pay gap between corporate executives and rank-and-file workers has attracted much attention in the United States, but the sources of the pay gap have not been systematically examined. In this paper, I use a relative bargaining power approach to explore the sources of pay disparity between executives and nonexecutive employees in the United States. I argue that the bargaining power of labor affects executive compensation, nonexecutive compensation, and the executive-worker pay gap and that this effect is moderated by the characteristics of the chief executive officers (CEOs) who implement organizational policies. An analysis of 185 US firms provides evidence that labor’s bargaining power reduces the pay gap between executives and nonexecutive employees. This effect is mainly through the unions’ impact on executive compensation. The results also suggest that labor’s effect of narrowing the gap becomes weaker when the CEO has a finance background or when the CEO was recruited from outside the company rather than being promoted from within. These findings shed new light on our understanding of the linkage between firm-level dynamics and the rise in income inequality.

The Demise of U.S. Economic Growth: Restatement, Rebuttal, and Reflections

Source: Robert J. Gordon, National Bureau of Economic Research (NBER), NBER Working Paper No. w19895, February 2014
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From the abstract:
The United States achieved a 2.0 percent average annual growth rate of real GDP per capita between 1891 and 2007. This paper predicts that growth in the 25 to 40 years after 2007 will be much slower, particularly for the great majority of the population. Future growth will be 1.3 percent per annum for labor productivity in the total economy, 0.9 percent for output per capita, 0.4 percent for real income per capita of the bottom 99 percent of the income distribution, and 0.2 percent for the real disposable income of that group. The primary cause of this growth slowdown is a set of four headwinds, all of them widely recognized and uncontroversial. Demographic shifts will reduce hours worked per capita, due not just to the retirement of the baby boom generation but also as a result of an exit from the labor force both of youth and prime-age adults. Educational attainment, a central driver of growth over the past century, stagnates at a plateau as the U.S. sinks lower in the world league tables of high school and college completion rates. Inequality continues to increase, resulting in real income growth for the bottom 99 percent of the income distribution that is fully half a point per year below the average growth of all incomes. A projected long-term increase in the ratio of debt to GDP at all levels of government will inevitably lead to more rapid growth in tax revenues and/or slower growth in transfer payments at some point within the next several decades.There is no need to forecast any slowdown in the pace of future innovation for this gloomy forecast to come true, because that slowdown already occurred four decades ago. In the eight decades before 1972 labor productivity grew at an average rate 0.8 percent per year faster than in the four decades since 1972. While no forecast of a future slowdown of innovation is needed, skepticism is offered here, particularly about the techno-optimists who currently believe that we are at a point of inflection leading to faster technological change. The paper offers several historical examples showing that the future of technology can be forecast 50 or even 100 years in advance and assesses widely discussed innovations anticipated to occur over the next few decades, including medical research, small robots, 3-D printing, big data, driverless vehicles, and oil-gas fracking.

The Increasingly Unequal States of America: Income Inequality by State, 1917 to 2011

Source: Estelle Sommeiller and Mark Price, Economic Analysis and Research Network (EARN), February 19, 2014

From the summary:
Economic inequality is, at long last, commanding attention from policymakers, the media, and everyday citizens. There is growing recognition that we need an inclusive economy that works for everyone—not just for those at the top.

While there are plentiful data examining the fortunes of the top 1 percent at the national level, this report examines how the top 1 percent in each state have fared over 1917–2011, with an emphasis on trends over 1928–2011 (data for additional percentiles spanning 1917–2011 are available at go.epi.org/top-incomes). In so doing, this analysis finds that all 50 states have experienced widening income inequality in recent decades.
See also:
Press Release

Inch by Inch: Gender Equity Since the Civil Rights Act of 1964

Source: Mary E. Guy and Vanessa M. Fenley, Review of Public Personnel Administration, Vol. 34 no. 1, March 2014
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From the abstract:
The Civil Rights Act of 1964 was influential in leveling the playing field for women. More than the actual protections afforded by the act itself, it triggered subsequent laws that collectively have lessened the pay gap, provided protections from harassment, and increased opportunities for women to participate in education, sports, and workplace opportunities that were previously reserved for men. However, the pace at which these changes have occurred has extended over generations, and the goal of parity has yet to be reached. This article traces legislation that has helped women advance in the workplace and concludes by arguing for the expansion of how gender is conceptualized. Rather than the dichotomous male/female view, gender equity should embrace fairness for all, wherever they fall on the continuum from masculine to feminine.