Howell continues his “Metrics of Protest” series. -Jeff
Extreme inequality has finally made it to prime time. Occupy Wall Street helped focus attention on the problem last Fall, and President Obama finally rose to the challenge with what was perhaps the best speech of his presidency. He spoke forthrightly about the massive and continued growth in inequality, linking this to the collapse of the middle class and to the obstructionism of the Republican-controlled Congress.
Concern over rising inequality has even made its way into the Republican presidential primary debates. While Mitt Romney has announced (with the Supreme Court) that “corporations are people” (see Stephen Colbert’s hilarious PAC advertisement), he has also said that he is really concerned about the poor and that we should address income inequality, but only in “quiet rooms.”
The argument on the right has always been that people should not bemoan extreme inequality as long as America remains the land of opportunity, where anyone who goes to school and works hard can make it. Those of a certain age will remember the 1960s pop hymn to American mobility “Only in America” by Jay and the Americans (who else?). Did anyone question the reality behind these uplifting lyrics? At least for white people?
But now the reality behind mobility promise of America has also hit prime time. The New York Times ran a front page story on the compelling evidence, quite well-known for some time among labor economists (at least progressive ones), that Americans actually have far lower chances of moving up the income ladder than those in other rich countries. Extreme inequality and low social mobility have become definitive of the American social condition, an apparent refutation of the American dream.
The . . .
Read more: Inequality and the Fantasy of American Upward Mobility: The “Great Gatsby Curve”
The headline on the front page of the Thanksgiving Day The New York Times: “Opening Day for Holiday Shopping Shows Divide.”
The next day – Black Friday – Bloomberg ran a story with the headline “U.S. Workers’ Pay Slide Poses Consumer Risk. ”
It may turn out to have been a “Black Friday” for top end retailers, but it’s a bleak season for low income America and the businesses that cater to it. According to the Times’ story: “Wal-Mart’s profits declined in the third quarter as it kept many prices low so its shoppers could afford them.” Michael T. Duke, Wal-Mart’s chief executive, told analysts that ‘There is a real sense that the economic strain is taking its toll.” Without the fuel of credit that had increasingly been required to power spending by low-income workers, Wal-Mart now has to resort to layaway plans for its shoppers.
As 10 percentage points of national income has been directed away from the bottom 80% to the top 1% since 1979, those paid the lowest wages have seen their buying power erode the most. While the quality and quantity of education force can explain much of the distribution of income within the bottom 99% (together with personal networks, effort and luck), differences in educational attainment have nothing to do with the transition of the American economy to extreme inequality since the 1970s. It is also quite clear that among developed countries, America is exceptional: only the UK comes close to US-style extreme inequality.
The lesson is that extreme inequality is the outcome of political choices that have empowered a tiny minority. It has to do with political choices, the way institutions function, and social norms; it is not a natural market payoff to investments in education. The shift of income to the top .1% (which has driven the growth of the top 1%) reflects the market power of a small number of CEOs and finance, medical and legal professionals.
Here are some metrics that focus on what has happened to the wage/salary earnings of American workers.
Employee compensation in . . .
Read more: The Metrics of Protest: Black Friday and Low-Wage America
Not so long ago, during the first several decades of the post-war era, the American dream of a broad and growing middle class was a significant reality. But since the 1970s the shape of the American distribution of income has steadily become more like an hourglass: as the middle has collapsed, large numbers of workers earn very low wages and at the other end of the scale, very few take home gigantic sums.
Figure 1 shows the extraordinary reallocation of national resources from the bottom 80 percent of the population to the top 1 percent, while those in between (81st-99th) have, as a group, shown no change in their share of total income.
Source: CBO Report “Trends in the Distribution of Household Income Between 1979 and 2007″
Not surprisingly, over the last three decades many households in the bottom 80 percent have faced sharp declines in their standard of living as the costs of health care, higher education, food and energy have risen far faster than the wage check. The result has been the accumulation of unprecedented levels of mortgage, credit card, and student debt.
I have argued that the roots of the economic crisis can be found in the shift in economic thinking and public policy toward free market fundamentalism in the 1970-80s, which fueled the rise in debt, financial instability, and extreme inequality. We’ve seen a toxic mix of financial deregulation, evisceration of protective labor market institutions (like collective bargaining and the minimum wage), a political system corrupted by campaign contributions, and an increasingly polarized education system that performs poorly for most of those in the 80 percent and terribly for the most disadvantaged communities.
But this is not at all the conventional wisdom. Rather, it has become widely accepted that the government is the root cause of the economic crisis of 2008-11 and the decline in living standards for the vast majority. The problem in this conservative vision is too much regulation, too much taxation, too much encouragement of . . .
Read more: The Metrics of Protest: Extreme Inequality and the Payoff to College Degrees
Occupy Wall Street protests have spread across the country behind the rallying cry that the “99 percent” have been left behind. There is a sense of outrage that the “system” is not just rigged in favor of the elite – something like the top 1% – but has spun out of control, leading to an accelerating concentration of wealth and power in the hands of the very few.
Wage stagnation, the explosion of health and education costs as the American welfare state shrinks, and above all the financial manipulation of debt has generated extraordinary profits on Wall Street and massive indebtedness and housing foreclosures on Main Street. Losses from outrageous risk-taking by too-big-to-fail financial institutions are made good by the taxpayer, who is told there is no alternative.
This new gilded age political-economic system can be thought of as the interlocking trifecta of a mostly degraded and increasingly dual educational system, a financial system that became mostly unregulated by either law or social norms, and a political system increasingly corrupted by money.
The educational system has promoted a meritocracy of cumulative advantage. The vast majority of American students experience primary and secondary schools during which they fall far behind their peers in much of the rest of the developed (and even less-developed) world, and then face costs of post-secondary education that produce a level of debt that cannot possibly be repaid out of earnings. But the elite reproduces itself with an ability to pay for college and graduate school educations whose superiority has steadily grown, while at the same time feeling entitled since the educational process has also become extraordinarily competitive.
The financial sector was systematically deregulated as free market orthodoxy took off in the 1980s. This deregulation served to extract resources from the “real” economy and concentrated it in the bank accounts of a tiny elite, who are increasingly those same victors of the Darwinian educational competition. As the concentration of income at the very top of the distribution proceeded in the . . .
Read more: The Metrics of Protest: “99 Percent”
Rachel Sherman is a sociologist at the New School. Her specific field of study is social class and service work.
Last week, the legislation known as the “Domestic Workers Bill of Rights” took effect in New York State, having been signed on August 31 by Governor David Paterson. The existence and passage of this bill is due primarily to several years of organizing by Domestic Workers United (DWU), an organization of nannies and housecleaners in New York City.
DWU offers computer literacy and child care training to its members, helps protect workers against abusive employers, and has produced a report on domestic employment, “Home is Where the Work Is,” based on original research. Their main policy effort, however, has been campaigning for the passage of this bill, which will affect over 200,000 workers in the state.
The law includes the following provisions: The right to overtime pay (at time-and-a-half) after 40 hours of work in a week, or 44 hours for workers who live in their employer’s home; a day of rest (24 hours) every seven days, or overtime pay if the worker agrees to work on that day; three paid days of rest each year after one year of work for the same employer; protection under New York State Human Rights Law, and the creation of a special cause of action for domestic workers who suffer sexual or racial harassment.
Although these demands are not especially radical (more controversial provisions, such as paid holidays and two weeks notice prior to termination, were removed from the final version), this law will materially influence the lives of many workers. Perhaps equally important, the law is symbolically significant, for a number of reasons. First, domestic workers have traditionally been excluded from labor legislation, beginning with the New Deal laws covering collective bargaining and minimum wage and hour regulations.
Although over the years some laws (such as those covering the minimum wage) have been extended to apply to domestic workers, their work remains largely unregulated. Thus the bill, which also mandated investigation into the feasibility of granting collective bargaining rights to these workers, is a step toward establishing . . .
Read more: Domestic Workers Gain Visibility, Legitimacy