Mind the Gap
My colleague Pat Garofalo at the Wonk Room writes about some new wage and inequality data:
The ILO found that between 1995 and 2007, real wage growth in the United States was essentially 0 percent, and in 2009 wages will “decline by 0.5 percent in industrial countries and grow by no more than 1.1 per cent globally.” The Center for American Progress Action Fund has found that weekly wages were actually 0.3 percent lower in June 2008 than they were in March 2001.
This stagnation — which occurred at the same time that CEO pay steadily increased — has led to severe income inequality. The ILO found that the U.S. is one of the countries in which “the gap between top and bottom wages has increased most rapidly.” Indeed, the Organization for Economic Cooperation and Development (OECD) reported recently that “in the United States, the richest 10 percent earn an average of US$93,000 — the highest level in the OECD. The poorest 10 percent earn an average of US$5,800 — about 20 percent lower than the OECD average.”
Needless to say, conservatives’ big idea about how to turn this around is to (a) pretend it’s not happening, (b) cut the capital gains tax rate so the rich can get richer, and (c) struggle mightily to block the Emloyee Free Choice Act lest we slip back into the dystopian universe in which unionization rates were higher and the fruits of economic growth were more broadly shared.
38 Responses to “Mind the Gap”
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November 27th, 2008 at 6:33 pm
Conservatives response is to call for enforcement of immigration laws, for which they get called racists. So either they’re evil capitalists oppressing the worker or evil racists, either way they’ll get blamed.
November 27th, 2008 at 6:50 pm
either they’re evil capitalists oppressing the worker or evil racists, either way they’ll get blamed.
They’re both and they should not only be blamed, but the people who did this should be put in prison for the rest of their lives.
November 27th, 2008 at 7:11 pm
Or d) keep median income substantially higher than any OECD country (bar any tax haven or Luxembourg).
Anyways real wages are an insincere measurement of total compensation. CPI, as liberals are well aware, largely ignore rapidly rising health care costs which most US employers pay. Real wages also ignore take home pay which is also higher in the US (ask Romer why this is better).
You would expect at least one party to prefer the status quo when over half of your country compromise the richest people in the world.
November 27th, 2008 at 7:25 pm
– (c) and economic growth is lower so such prosperity as there is to ’share’ is less, well, prosperous.
It’s not as simple as that, Mr Yglesias.
November 27th, 2008 at 8:15 pm
Ha ha, wonder if Mixner will tumble to the subliminal pro-transit message encoded here.
November 27th, 2008 at 8:52 pm
When workers don’t share the benefits of economic growth or increased productivity, they can’t be blamed for thinking the game is rigged against them, because it is.
It’s as simple as that, Mr. Wilkinson.
November 27th, 2008 at 8:52 pm
DTM,
That is right, sort of. I don’t have the data but people without employer insurance, all else equal, should be getting paid more.
On top of that people without insurance aren’t forced to buy these “Cadillac” insurance policies they don’t want (or at least wouldn’t pay for if they had the choice).
November 27th, 2008 at 9:00 pm
…they can’t be blamed for thinking the game is rigged against them, because it is.
Please. This is not Mexico where you have only one employer, in some industries, who can determine the price of labour and working conditions. Workers and employers compete over wages and the best way to help the employee (with the least deadweight loss and highest possible wages) is to increase the number of employers. EFCA is not the only way to help workers. And I doubt for most 21st century American businesses it is the best way.
November 27th, 2008 at 9:14 pm
So the rewards for increased productivity were accidentally allocated to the top of the income ladder? Struggling workers will be happy to know the oversight has been noted and look forward to a prompt remedy. Thanks Gordo.
November 27th, 2008 at 9:16 pm
I’ll say this and I don’t think most EFCA people will be this honest: What it would do is flip the intimidation currently in the hands of the company (and you are never going to be honest enough to admit this) to the union. I’ve tried to figure a “fair” way to go forward and there isn’t one, and it’s not a real debate anyway. The anti-EFCA people aren’t arguing in good faith, I see no reason to be fair to them.
Leaving this aside, if you think collective bargaining isn’t going to help (and that’s bullshit, I’ve seen the results of effective collective bargaining) what do you think is going to help? You better offer up something other than juvenile libertarian bullshit because no one is going to eat that anymore.
November 27th, 2008 at 9:43 pm
I’m no fan of the labor unions, and I’m not sure if I like the EFCA. I must say, though, that the growth in income inequality is most disturbing. When AIG spends $440,000 of its bailout money on an executive retreat, and many of us are worried about home foreclosure, something is very wrong.
November 27th, 2008 at 10:08 pm
When AIG spends $440,000 of its bailout money on an executive retreat, and many of us are worried about home foreclosure, something is very wrong.
My sister is a broker and she deals with another brokerage in the same business who deals more closely with AIG. This is 2007. This broker brought his son in because he’s an idiot and was failing at his life. AIG wines and dines it’s clients in Vegas once a year and because they had bought out it’s convention space and a few floors the limo was free. A VP at AIG invited a bunch of guys out to a high end strip club including the dim son. He and dim son stiffed the limo driver on his tip, went in the club and racked up about $50k worth of drinks and lapdances. Mr. AIG VP realizes he can’t turn this in as expenses and gets dim son to put it on his father’s brokerage AmEx card promising to pay it back in some more opaque way. Then he got arrested for something, dunno what yet.
Quit worrying about unions.
November 27th, 2008 at 10:26 pm
Props for working a mass-transit joke into the title of a post about the need to spread the wealth around.
You might say that wages have declined so far in relative terms that the middle class has gone underground. Maybe somewhere in the tubes of teh interwebs there’s an answer to this problem.
November 27th, 2008 at 10:48 pm
Ed Marshall,
Do you honestly feel unions are the least distortionary method of helping labour? How about policies to reduce the supply and subsequently increase wages of low-skilled workers (i.e. education and retraining)? Or how about reducing some of the barriers for entry of new businesses (i.e. less regulation, pro-small/new business laws)? Even a negative income tax is preferable to encouraging the sort of union behaviour that brought the big three to their knees. There is a reason Thatcher rose to power and it wasn’t because of mean old capitalist.
November 28th, 2008 at 12:51 am
There is a reason Thatcher rose to power and it wasn’t because of mean old capitalist.
And there is a reason why they’ll cremate her to stop half of Britain crapping on her grave. Grow the fuck up.
November 28th, 2008 at 7:45 am
top 10% wages are severely distorted by top .01% wages. It isn’t the top 10% that is making out, it is the top 1% or really the top .01%
I make good money, but it would be extremely difficult to replace my income. I don’t want to complain, but until you are making serious money in the states, it is pretty hard to live a comfortable life due to the high variability of income. I know quite a few people making about what I do, and they are comfortable but constantly worried. The second you try to upgrade to an upper middle class community, the housing costs take a huge percentage of income. Don’t confuse upper middle class with upper class. There is a gigantic disparity between the two.
I know nearly as many people worth $10M+ as I do worth $1M. That is the problem.
November 28th, 2008 at 9:51 am
Are you trying to be funny with a statement like that? If not, you succeeded anyway.
November 28th, 2008 at 9:51 am
Gordon, microeconomic theory is not a complete guide to the wisdom of policies.
November 28th, 2008 at 10:18 am
You know what makes me happy this morning?
We’re going to get EFCA whether the right wing likes it or not, along with responsible regulation of the investment markets and a big infrastructure-based stimulus program, because elections matter.
November 28th, 2008 at 4:08 pm
Re: As health insurance costs have soared, what is happening is that more and more employers are scaling back health benefits
That, and requiring that workers pay an increasing share of the premiums themselves. It used to be (not all that long ago) that most employers paid 100% of the premium for the employee and only required employee contribution for dependents. Those days are gone, and it’s a rare private sector employer who does that– not the Wall Street banks, not even most unionized workplaces.
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