A new study shows low wages are really caused by low minimum wage, weakened unions and the effects of globalization:
Inequality may be the greatest economic challenge of our generation. Yet despite extensive academic debate, there is still no consensus as to its causes. Earlier this year, Tyler Cowen sparked a debate on the subject with his book “Average is Over,” in which he argues that inequality is driven by new developments in technology that give some workers who can capably use the technology a wage premium over those who can’t. Future innovations in technology, he argues, will contribute to hyper-meritocracy and further inequality.
Now, Lawrence Mishel, Heidi Shierholz and John Schmitt have released a new study that questions SBTC as an explanation for increasing wage inequality. Mishel et al. argue that “job polarization,” the premise that more jobs have been created in low-wage sectors and high-wage sectors, thus driving wage inequality, doesn’t actually explain the problem.
If inequality were inevitable, as many on the right believe, we would expect to see inequality rising internationally. But, in truth, different societies have responded to inequality in different ways. I talked to Janet Gornick, professor at the Graduate Center at CUNY and director of Luxembourg Income Study Center, about her work in the field of inequality. She tells me that “these transnational factors matter — globalization, technological change, neoliberal reforms — but what matters, perhaps more, is national-level policies and institutions. What is our evidence for that? Stark variation across relatively similar countries.” She tells me that some two-thirds of OECD countries have faced rising levels of inequality, however “the increase in inequality in OECD countries has been modest. The rise in the U.S. has been greater; there is something clearly going on at that national level, that is absolutely certain.”
Mishel echoes the sentiment: “Other countries have institutions which don’t allow as much inequality — a more robust welfare state, a strong role for collective bargaining, a stronger tax and transfer system.”
If inequality were the result of economic fundamentals, it would not matter who was in the White House, but rather inequality would be correlated to underlying economic trends. This is not true either. Larry Bartels finds in “Unequal Democracy” that income growth is more equal under Democratic presidents than it is under Republican presidents, pointing to the possibility that political systems drive inequality.
Since inequality is “man-made,” it can be ameliorated by changing our institutions. As Mishel said, “My interpretation that the outcomes we see are the products of policy decisions made or not made — not raising the minimum wage, not reforming labor law — is optimistic. We have it in our power to shape the future.” A recent article by Harold Meyerson in the American Prospect echoes this sentiment: “The extinction of a large and vibrant American middle class isn’t ordained by the laws of either economics or physics. Many of the impediments to creating anew a broadly prosperous America are ultimately political creations that are susceptible to political remedy.” Blaming technology is an excuse to abdicate responsibility. Calling for more education and upward mobility, while noble, is useless when wages are falling for college graduates and will still leave many workers behind. Social mobility is good, but it shouldn’t supplant the goal of reducing inequality (and it’s unlikely that high levels of upward mobility can co-exist with rampant inequality). As Terry Eagleton writes in “Across the Pond,” “As long as you have enough willpower and ambition, the fact that you are a destitute Latino with a gargantuan drink problem puts you at no disadvantage to graduates of the Harvard Business School when it comes to scaling the social ladder. All you need to do is try.”
Workers must exercise political power to change the institutions that shape their lives. Walmartdoesn’t have to pay its workers starvation wages and could easily pay them more. There is no celestial law that the richest 1% can plunder our common inheritance. We don’t have to crush workers when we globalize and we don’t have to destroy the environment in the pursuit of profits. Just as inequality is a choice, equality is a choice. By shifting the discussion away from the policy changes that have caused inequality, we legitimate it. As Eugene Debs said, “the class which has the power to rob upon a large scale has also the power to control the government and legalize their robbery.”
I am afraid that inequality is the result of human-primate nature and it is not so simple: “All you need to do is try.” I am afraid that the only ‘solution’ of this problem is the collapse of the old society and rising a new one.
It is impossible to change a human nature (greed) by some declarations (like communists tried). I.V.
Sean McElwee is a writer and researcher of public policy. His writing may be viewed at seanamcelwee.com