TOO MUCH (Chronicles of Inequality) —July 8, 2013

New on Inequality.Org:
Growing Apart, an interactive political history of inequality in America

“High overhead, the 1 percent fly first class; the .1 percent fly Netjets; the .01 fly their own planes. Why should it be any different up above from down below?”
James Atlas, Class Struggle in the Sky, New York Times, July 6, 2013

Can we have equal opportunity in an unequal society? Parents in America’s most affluent 20 percent have the resources to spend $50,000 per year on each child, for everything from food and housing to enrichment activities. Parents in the poorest 20 percent can afford to spend only $9,000 per child.

The rich — on both sides of the Atlantic — have seen to that. Over recent years, they’ve systematically dismantled progressive tax systems, the traditional route to redistributing top-heavy concentrations of income and wealth.

Even worse, the rich and their cheerleaders have turned redistribution into a political four-letter word. They’ve branded anything that smacks of redistribution a dangerous assault on the “natural” wisdom of our market economy.

We have to sit back, their argument goes, and let the market reward the enterprising and punish the slothful. Or else risk eternal economic damnation.

In reality, of course, markets don’t just reward the enterprising. They reward the price-fixers and the union-busters, the monopolists and the just-plain lucky. And if you inherit grand fortune, the market will merrily heap rewards your way year after year, no matter how slothfully you may behave day-to-day.

Markets, in short, don’t follow “natural” laws. They reflect existing power relationships. Those who hold power bend the rules, formal and informal, that determine how markets operate — and who profits the most from them.

Back in the mid 20th century, in both Britain and the United States, average citizens wielded enough power — through trade unions and at the ballot box — to impact those rules. But that power has ebbed over the last three decades. The rich have rewritten the rules, to line their pockets and their pockets alone.

How profoundly are our new marketplace rules — on everything from minimum wage levels to collective bargaining — depressing wages in Britain and the United States? In the UK today, 20.6 percent of employees work in jobs that rate as “low wage,” that is, pay less than two-thirds the nation’s median paycheck.

Only one other major developed nation in the world — the United States — has a higher share of workers in low-wage work. That U.S. share: 24.8 percent.

Other nations are doing far better at making work pay. In France, only 11.1 percent of workers labor in low-wage jobs. In Norway, only 8 percent.

No eternal “marketplace” realities, in other words, determine how high or how low a nation’s average paychecks go. Real decisions by real people — on the rules that shape how economies actually operate — make this determination.

And more progressive taxes by themselves, British labor analysts argue, won’t be enough to undo the stark inequality the rule changes of recent years have created.

We can’t just, in other words, redistribute anymore. We need to predistribute — end those marketplace practices that steer the wealth our economy creates away from the people who actually create it.

The British labor pamphlet Frances O’Grady introduced last week, How to Boost the Wage Share, advances a gameplan for reversing the trends that are shoving income from worker paychecks to employer profits.

The pamphlet’s authors, veteran economic analysts Stewart Lansley and Howard Reed, offer a wide assortment of short-, medium-, and longer-term proposals that endeavor to forge “a more equal distribution of wages before taxes and benefits.”

Their proposals share one underlying commonality. They all target “the root causes of rising inequality rather than concentrating on tackling the symptoms through redistribution.”

This new Trades Union Congress pamphlet, at a more nuts-and-bolts level, explores action steps ranging from hiking the minimum wage to placing worker representatives on the corporate boards that set executive pay.

Overall, many of the new pamphlet’s ideas mirror notions that also appear inProsperity Economics, a paper by Yale University’s Jacob Hacker and Nathaniel Loewentheil that Americans unions have enthusiastically embraced.

Both these American and British analyses stress the importance, as Lansley and Reed put it, of “rebalancing the economy away from low-paid work.” And what if we don’t? What if we let the wage share continue to decrease? What if we continue to let the powerful and privileged grab with such unfettered abandon?

Without measures aimed at “raising the earnings floor” and “capping excessive rewards at the top,” Lansley and Reed argue, the “recovery” from the global economic collapse that began in 2007 will remain a nonstarter.

“Ultimately,” they conclude, “creating a lower gap will depend on a fundamental shift in the balance of economic and social power.”

In a word: predistribution.

Harold Meyerson, A growing inequality, Washington Post, July 2, 2013. In America, not all kinds of inequality are created equal. Economicinequality continues to expand even as other forms contract.

James Kwak, CEO Salary Justification Season Is Open, Baseline Scenario, July 5, 2013. The utter illogic of suspending the rules of ordinary labor markets for CEOs.

Surviving the New American Economy, Moyers and Company, July 5, 2013. A moving look at the cost of inequality.

Gar Alperovitz, The Legacy of the Boomer Boss, New York Times, July 6, 2013. Why retiring business owners should sell their companies to their workers — and how they can do it.

But this link between national and generational wealth has totally broken down. Americans in their mid-30s or younger today, details this useful study from the Urban Institute, have “benefited little from the doubling of the economy since the early 1980s.”

The problem? The overall wealth of the United States has indeed grown since the early 1980s. But this wealth has grown unequally — and stunningly so.