Economic Inequality: A Review of Selected Recent Articles
CLUJP Meeting September 13, 2016
Last year our intrepid little group of curious people began a study of economic inequality. We heard presentations on several major current books, including: Joseph Stiglitz, The Price of Inequality; Michael Sandel, What Money Can’t Buy; The Spirit Level: Why Greater Equality makes Societies Stronger , by Richard Wilkinson and Kate Pickett; and Capital in the 21st Century, by Thomas Piketty, a French economist. We also watched a You Tube presentation by Raj Chetty, Professor of Economics at Harvard University, in which the case was made for greater equality. We did not review for CLUJP another book that addresses equality in broader economic and social terms: Nancy Isenberg’s White trash: The 400-Year Untold History of Class in America.
What I have offered to do today is to present a summary of related op-ed and other articles, as a means of both bringing us back into conversation about economic inequality and preparing us for our participation in the Virginia Festival of the Book. Your steering committee is excited about the coming year!
I will begin this review with the older articles and conclude with the most recent ones. It is my intention to post this summary on our web site with links insofar as possible. Let me also point out that Wikipedia also has an excellent section on economic inequality, with references and links, and YouTube also has a variety of talks on this issue. Please feel free to offer comments or ask questions during my presentation. We will also have time at the conclusion of my summary.
First, in case you are still wondering about the reach and relevance of our topic, let me share a cinematic reference. Most of us know that the subject of the popular novel and film, Fifty Shades of Grey, is sex in some variety. But it also involves a very unequal relationship between the two main protagonists. In an essay in Christian Century reviewing several novels, Benjamin Dueholm includes a statement by Elizabeth Stoker Bruenig of the New Republic “…that Fifty Shades is at heart a film about negotiating our acceptance of dramatic economic inequality.” Dueholm then mentions several earlier films whose main characters come from divergent economic strata. But he concludes that, in Fifty Shades of Grey, “We have entered an age of pulp inequality.” [CC, August 19, 2015]
Given the current presidential campaign, it seems appropriate to include an article from the NY Times entitled, “Inequality Concerns Cross Party Lines, Poll Finds.” [http://www.nytimes.com/2015/06/04/business/inequality-a-major-issue-for-americans-times-cbs-poll-finds.html ] “The (NY Times/CBS News) poll found that a strong majority say that wealth should be more evenly divided and that it is a problem that should be addressed urgently.” “More than half of higher-income Americans said that money and wealth should be more evenly distributed. Across party lines, most Americans said the chance to get ahead was mainly a luxury for those at the top.” The poll also addressed related issues such as increases in the minimum wage, paid family leave, and paid sick leave.
An earlier Times article offered an extended response by Thomas Piketty to criticisms by the Financial Times of his use of the extensive data in his book, Capital in the Twenty-First Century, which we briefly reviewed last fall. “The short version: He doesn’t give an inch.” (!!) [http://www.nytimes.com/2014/05/30/upshot/thomas-piketty-responds-to-criticism-of-his-data.html ]
On the related matter of equal opportunity, a Times article entitled “Smart Social Programs” asked “if government efforts to support low-income families work?” In a recent paper by Harvard economists, including Raj Chetty, whose You Tube presentation we watched, traditional rental vouchers to families with children increased the later earnings of the children (as adults) by 15 percent. So-called “experimental vouchers,” which required people to move to less poor neighborhoods, increased adult earnings of the children involved by 31 percent. The finding of other similar studies were also included in the article.
Another subordinate topic under the rubric of economic inequality is that of increased employee ownership of corporations. Three researchers make the case in a new book, which they also summarize in a NY Times article. One review of the book, The Citizen’s Share, states: “Based on comprehensive data and painstaking historical research, The Citizen’s Share provides a superb overview of employee ownership in the United States. At a moment when economic inequality has reached an apogee and trust in corporations a nadir, when the employment relationship has frayed in companies across the U.S., and American industry faces challenges from around the globe, the authors’ message could not be more important.”
[http://www.nytimes.com/2015/07/18/opinion/capitalism-for-the-rest-of-us.html ], [http://thecitizensshare.com/reviews/ ]
Many of you will recognize the name Emmanuel Saez, an economist at the University of California Berkeley, who worked jointly with Thomas Piketty. Saez’ June, 2015 paper, “Striking it Richer: The Evolution of Top Incomes in the United States,” provides the data to show the huge increases in top earner’s incomes (the one percent) since the mid-1970s. The numbers are astonishing, documenting the increasing share of wealth accruing to a very few.
A short Brookings paper from June, 2015 mentions inequality as the first of five “economy-wide problems” that result from damaging financial incentives. The authors propose five policy changes to address those problems.
In a NY Times article cleverly entitled “Welcome to Hooverville, California,” Hector Tobar describes the increase in homelessness world-wide as yet another negative result of rising inequality. One familiar example of the widening gap between rich and poor is the cost of attending a Dodgers baseball game! Only the few relatively wealthy families can afford a day at the ballpark. As another sign of the growing gap, Tobar writes that the cost of annual tuition at some private high schools in Los Angeles is half again more than the federal poverty line figure of $24,250.00. [http://www.nytimes.com/2015/07/06/opinion/welcome-to-hooverville-california.html?_r=0 ]
In “Billionaires to the Barricades,” NY Times writer Alan Feuer discusses the perhaps surprising support from some of the world’s wealthiest people for greater income equality. It is not common for people to press for a reduction in their advantages, even mentioning the possibility of revolution by the poor, so this viewpoint deserves a wider audience. [http://www.nytimes.com/2015/07/05/opinion/sunday/billionaires-to-the-barricades.html]
Almost as a response to that article is one by Noam Scheiber entitled “Why a Meaningful Boost for Those at the Bottom Requires Help from the Top.” Citing Piketty and Saez, Scheiber demonstrates why and asserts, “…if reducing inequality is the goal, there’s simply no alternative to slowing the income growth of the high earners ….” He cites Joseph Stiglitz as one of a variety of economists who make a similar case.
Even Pope Francis has stepped into the discussion of economic inequality. Francis “does not just criticize the excesses of global capitalism. He compares them to the ‘dung of the devil.’ He does not simply argue that systemic ‘greed for money’ is a bad thing. He calls it a ‘subtle dictatorship’ that ‘condemns and enslaves men and women.’ Having returned to his native Latin America, Francis has renewed his left-leaning critiques on the inequalities of capitalism, describing it as an underlying cause of global injustice, and a prime cause of climate change.” An interview with Pope Francis in Sojourners magazine expands on those points and even includes Francis’ disparaging comment “on so-called ‘trickle-down economic’ theories.” [http://www.nytimes.com/2015/07/12/world/americas/in-fiery-speeches-francis-excoriates-global-capitalism.html ] [https://sojo.net/magazine/septemberoctober-2015/economy-kills ]
If you wonder what inequality looks like in practice, at least at the upper income level, another NY Times article describes wage growth and salary negotiations by employees making at least $75,000.00 per year. It’s a familiar story about the gains of the top 10%, but here are real examples. [http://www.nytimes.com/2015/07/25/business/economy/salary-gap-widens-as-top-workers-in-specialized-fields-reap-rewards.html ]
Steven Rattner describes the impacts on the “millennial” generation (here between ages 18 and 34) of inequality across much of the economy, and he describes the financial obstacles and bleak futures of this generation, at least when compared to their parents and grandparents. [http://www.nytimes.com/2015/08/02/opinion/sunday/were-making-life-too-hard-for-millennials.html ]
Peter Georgescu echoes the concerns of the billionaires cited above and describes meetings with other CEOs to address the problems of income inequality. To avoid a revolution or the imposition of punitive taxation, these wealthy corporate leaders propose such remedies as fairer compensation of employees and greater investment by businesses in their own operations. [http://www.nytimes.com/2015/08/09/opinion/sunday/capitalists-arise-we-need-to-deal-with-income-inequality.html ]
Two Times articles document the long-term negative effects of economic inequality on health and life span. “The inequality that shapes our lives from birth onward,” said sociologist Corey Abramson, doesn’t end with the first Social Security check.” He also commented that socioeconomic inequality helps determine who even gets to grow old…. [http://www.nytimes.com/2015/10/13/health/income-inequality-grows-with-age-and-shapes-later-years.html ]
The second article states that “At the heart of the disparity, said Elizabeth H. Bradley, a professor of public health at Yale, are economic and social inequities, ‘and those are things that high-tech medicine cannot fix.’”
In international news, the 2015 Nobel Prize in Economics was awarded to Angus Deaton, whose career has focused on “improving the data that shape public policy, including measures of wealth and poverty, savings and consumption, health and happiness.” Deaton is quoted in a NY Times article as saying, “I think inequality has gone past the point where it’s helping us all get rich, and it’s really becoming a serious threat.” [http://www.nytimes.com/2015/10/13/business/angus-deaton-nobel-economics.html ]
A Public Broadcasting System report highlights the plight of the shrinking middle class: “The middle class has taken center stage in this election cycle, and it turns out there are increasingly fewer Americans who qualify. A new Pew analysis finds their ranks have shrunk since 2000 and that in at least 160 metro areas there’s been a rise in both lower and upper class families.” Other reports may be found by searching such terms as “middle class” and “inequality” (economic or income). [http://www.pbs.org/video/2365753602/ ] A chart of the changing class proportions from 1971 to 2015 was presented in the Christian Century early this year; its source was the same Pew data as in the Times article. [http://www.christiancentury.org/archives/Vol133-Issue1 ]
A May 2016 NY Times article also addressed the shrinking middle class, with graphs depicting the change in 15 major metropolitan areas. The corresponding changes in upper and lower classes were also depicted. [http://www.nytimes.com/interactive/2016/05/13/upshot/falling-middle-class.html]
Two of the more common ways of examining economic inequality are measures of income and measures of wealth. Piketty found that these measures correlated highly. Another article cites the current version of an annual Oxfam report on inequality with startling statements such as: “Just 62 people own as much wealth as the 3.5 billion people in the bottom half of the world’s income scale.”
A primary facilitator of inequality is the tax haven.
Supporting the idea that one way to reduce economic inequality is to increase wages at the low end of the pay scale, Wall Street executive Jamie Dimon of JP Morgan Chase announced that his firm would be increasing its minimum pay for 18,000 workers. Dimon also announced that “lower-compensated employees” would receive a medical plan with subsidies up to 90% in addition to other benefits such as a 401(k) “pension,” paid family leave, and paid vacation and bereavement leave. We can hope that Dimon’s proposals have a ripple effect on other large employers!
Is there a relationship between income inequality and happiness? While some may find this question extraneous, the authors of this article from Harvard Business Review offer an expansive view, stating that “income inequality makes us all less happy with our lives, even if we’re relatively well-off.” More specifically, they “found that a 1% increase in the share of taxable income held by the top 1% hurts life satisfaction as much as a 1.4% increase in the country-level unemployment rate.”
Finally – and I know some of you thought that I might never use that word! – the trail leads us back to one of our favorite economists, Joseph Stiglitz. In this case, however, Stiglitz is not the main character in the article but is one very important part of an organization established to promote the legacies of Franklin and Eleanor Roosevelt. Known as the Roosevelt Institute, it had recently published, over Stiglitz authorship, Rewriting the Rules of the American Economy. The article, in a recent NY Times Sunday Magazine, opens with its director listening to a speech by presidential candidate Hillary Clinton, who seemed to be quoting from that recent book. The main thesis of the book is that: “Inequality … is a function not of economic laws but of the preferences awarded to the powerful to extract rents – to exploit people who have little choice – especially on necessary goods like housing and health care. … The economy has stalled because too much wealth is being generated in nonproductive activity, hoarded to preserve for the rich all the things government no longer provides.”
Rewriting offers 37 policy recommendations, resulting eventually in changing the fundamental structure of the economy. Would it not be a treat to sit with Joseph Stiglitz and discuss the means of bringing these changes into reality?
That concludes my little review. What I have learned in our year of study on inequality is just how pervasive are the special privileges granted to the rich and powerful. While acknowledging the difficulties of implementing structural change, we might take hope from the knowledge that some very bright folks are offering to lead the way.
Thank you for your attention. Are there questions or comments?