Showing posts with label Income distribution. Show all posts
Showing posts with label Income distribution. Show all posts

Friday, October 17, 2014

Tony Aspromourgos on Piketty, future of capitalism, growth & theory of distribution

By Tony Aspromourgos

From the abstract:
This essay reviews Thomas Piketty’s Capital in the Twenty-First Century (2014). The focus is upon the conceptual framework and theoretical interpretation of the empirical findings assembled in the book, rather than those empirical findings themselves (which are, in any case, broadly incontestable). The core theoretical logic of the distributional dynamics is explained and subjected to scrutiny with respect to the theory of distribution in particular, but also the theory of growth. 
Read rest here. For other posts on Piketty, see herehereherehere, here, and here.

Wednesday, August 27, 2014

Elise Gould on Why America’s Workers Need Faster Wage Growth

In the previous post, see here, Matias shared an EPI video on the need for significant wage growth to curb inequality, specifically starting with raising the minimum wage. As a follow up, below is from a briefing paper by EPI economist Elise Gould.

By Elise Gould
The last year has been a poor one for American workers’ wages. Comparing the first half of 2014 with the first half of 2013, real (inflation-adjusted) hourly wages fell for workers in nearly every decile—even for those with a bachelor’s or advanced degree. Of course, this is not a new story. Comparing the first half of 2014 with the first half of 2007 (the last period of reasonable labor market health before the Great Recession), hourly wages for the vast majority of American workers have been flat or falling. And even since 1979, the vast majority of American workers have seen their hourly wages stagnate or decline—even though decades of consistent gains in economy-wide productivity have provided ample room for wage growth. The poor performance of American workers’ wages in recent decades—particularly their failure to grow at anywhere near the pace of overall productivity—is the country’s central economic challenge. Indeed, it’s hard to think of a more important economic development in recent decades. It is at the root of the large rise in overall income inequality that has attracted so much attention in recent years. A range of other economic challenges—reducing poverty, increasing mobility, and spurring a more complete recovery from the Great Recession—also rely largely on boosting hourly wage growth for the vast majority.
Read rest here.

Sunday, August 10, 2014

Mishel, Shierholz & Schmitt on Wage Inequality, A Story of Policy Choices

Economists Lawrence Mishel, Heidi Shierholz and John Schmitt have published a new paper in New Labor Forum titled Wage Inequality: A Story of Policy Choices about the causes of wage stagnation and wage inequality in the United States.

Full PDF here.

Thursday, June 5, 2014

EPI | Raising America’s Pay - Why It’s Our Central Economic Policy Challenge

By Josh Bivens, Elise Gould, Lawrence Mishel, and Heidi Shierholz

From the introduction:
Slow and unequal wage growth in recent decades stems from a growing wedge between overall productivity and pay. In the three decades following World War II, hourly compensation of the vast majority of workers rose in line with productivity. But for most of the past generation (except for a brief period in the late 1990s), pay for the vast majority has lagged further and further behind overall productivity. This breakdown of pay growth has been especially evident in the last decade, affecting both college- and non-college-educated workers as well as blue- and white-collar workers.This paper argues that broad-based wage growth is necessary to address a constellation of economic challenges the United States faces: boosting income growth for low- and moderate-income Americans, checking or reversing the rise of income inequality, enhancing social mobility, reducing poverty, and aiding asset-building and retirement security. The paper also points out that strong wage growth for the vast majority can boost macroeconomic growth and stability in the medium run by closing the chronic shortfall in aggregate demand (a problem sometimes referred to as “secular stagnation”). Finally, the paper argues that any analyses of the causes of rising inequality and wage stagnation must consider the role of changes in labor market policies and business practices, which are given far too little attention by researchers and policymakers.
Read the rest here.

Saturday, April 26, 2014

Krugman and the neoclassical theory of distribution: will he recant on the natural rate of interest

In the previous post I noted that Krugman suggests incoherently that: "saying that capital gets its marginal product in no way says that the people who own that capital deserve what they get." The point is exactly that if you receive according to productivity, it cannot be blamed on exploitation or other social factors. Capital gets higher profits because it is productive, and unskilled labor does not for the reverse reason.

If we do not mince words about the meaning of deserve, 'to be worthy' in my dictionary, by the way, it is evident that a theory that says that remuneration is accrued according to productive capacity, and again we take productive to mean, using the same dictionary, doing or achieving a lot: working hard and getting good results, then you have that those that work hard are worthy of their remuneration. But does Krugman believe in the notion that productivity determines pay you, enlightened reader, might ask.

From the 2014 3rd edition of Krugman's Essentials of Economics:
The factor market most of us know best is the labor market, in which workers are paid for their time. Besides labor, we can think of households as owning and selling the other factors of production to firms. For example, when a corporation pays dividends to its stockholders, who are members of households, it is in effect paying them for the use of the machines and buildings that ultimately belong to those investors. In this case, the transactions are occurring in the capital market, the market in which capital is bought and sold. As we’ll examine in detail later, factor markets ultimately determine an economy’s income distribution, how the total income created in an economy is allocated between less skilled workers, highly skilled workers, and the owners of capital and land [italics added].
Fair enough, Krugman said back in 2007 in his book The Conscience of a Liberal that: "there is something wrong with textbook economics." Apparently he has not read his textbook.

So, yes Galbraith, Palley, Syll, and others that have pointed out the connection of neoclassical economics with the specific idea that inequality results from market forces, and represent what people deserve are correct. That is why this blog has insisted that Krugman's notion of a natural rate of interest undermines his own policy views on the need for social policies to redress inequality.

Wednesday, April 23, 2014

The American Middle Class Is No Longer the World’s 'Richest'

While the American rentier class is outpacing global peers, a New York Times analysis shows that across the lower- and middle-income tiers, citizens of other advanced countries have received considerably larger income raises over the last three decades. Mind you, while the report suggests that the majority of Americans made more than their European counterparts thirty years ago, it must be noted noted that their ancestral cousins have long enjoyed the extensive benefits & security of a much stronger well-established welfare-state (though significantly diminished from recent neoliberalization, before & after the crisis of the Euro).
The numbers, based on surveys conducted over the past 35 years, offer some of the most detailed publicly available comparisons for different income groups in different countries over time. They suggest that most American families are paying a steep price for high and rising income inequality. Although economic growth in the United States continues to be as strong as in many other countries, or stronger, a small percentage of American households is fully benefiting from it. Median income in Canada pulled into a tie with median United States income in 2010 and has most likely surpassed it since then. Median incomes in Western European countries still trail those in the United States, but the gap in several — including Britain, the Netherlands and Sweden — is much smaller than it was a decade ago. 
Read rest here

Sunday, February 2, 2014

EPI: Recovery Fails To Reach Escape Velocity in 2013

By Josh Bivens
We now know that the U.S. economy grew at a 3.2 percent annualized rate in the last quarter of 2013, and grew 1.9 percent during all of 2013. This is simply too slow to generate a full recovery from the damage inflicted by the Great Recession in a reasonable amount of time. Too many policymakers seem eager to move on to other economic issues, but the necessary condition for addressing almost every other economic challenge—be it boosting job quality or increasing opportunity or checking the rise of extreme inequality—is a return to full employment, and that should be the nation’s first priority.
See rest here and here

Saturday, February 1, 2014

Pivetti on Advanced Capitalism and the Determinants of the Change in Income Distribution: A Classical Interpretation

Massimo Pivetti
Technological change, though paramount in the dominant theoretical approach to distribution in terms of the relative scarcity of factors, also plays a significant role in the alternative classical surplus approach.
See rest here

Monday, January 6, 2014

Foster & Magdoff: The Plight of US Workers

By Fred Magdoff & John Bellamy Foster
Modern capitalism, sociologist Max Weber famously observed early in the twentieth century, is based on “the rational capitalistic organization of (formally) free labor.” But the “rationality” of the system in this sphere, as Weber also acknowledged, was so restrictive as to be in reality “irrational.” Despite its formal freedom, labor under capitalism was substantively unfree.This was in accordance with the argument advanced in Karl Marx’s Capital. Since the vast majority of individuals in the capitalist system are divorced from the means of production they have no other way to survive but to sell their labor power to those who own these means, that is, the members of the capitalist class. The owner-capitalists are the legal recipients of all the value-added that is socially produced by the labor in their employ. Out of this the owners pay the wages of the workers, while retaining for themselves the residual or surplus value generated by the social process of production. This surplus then becomes the basis for the further accumulation of capital, leading to the augmentation of the means of production owned by the capitalist class. The result is a strong tendency to the polarization of income and wealth in society. The more the social productivity of labor grows the more it serves to promote the wealth and power of private capital, while at the same time increasing the relative poverty and economic dependency of the workers.
Read rest here

For more extensive analyses on the plight of the US working class, see here

Friday, December 20, 2013

Real average family income growth in the last decade

Yep, it went all to the top. But not just the 1%. More like the 0.01%! If you take a 10% real increase (meaning 1% per year) it would be the 0.5%.

Wednesday, December 11, 2013

Gennaro Zezza: Fiscal and Debt Policies for Sustainable U.S. Growth

New paper by Gennaro Zezza

From the abstract:
In our interpretation, the Great Recession which started in the United States in 2007, and propagated to the rest of the world, was the inevitable outcome of a growth trajectory based on fragile pillars. The concentration of income and wealth, which started rising in the 1980s, along with the stagnation in real wages made it more difficult for the middle class to defend its standard of living, relative to the top decile of the income distribution. This process increased the demand for credit from the household sector, while deregulation of financial markets increased the supply, and the U.S. economy experienced a long period of debt-fueled growth, which broke down first in 2001 with a stock market crash, but at the time fiscal and monetary policy managed to sustain the economy, but without addressing the fundamentals problem, so that private (and foreign) debt kept increasing up to 2006, when a more serious recession started. At present, the long period of low household spending, along with personal bankruptcies, has been effective in reducing private debt relative to income, and, given that the problems we highlight have not been properly addressed yet, growth could start again on the same fragile basis as in the 1990-2006 period. In this paper, adopting the stock-flow consistent approach pioneered by Wynne Godley, we stress the need for fiscal policy to play an active role in (1) modifying the post-tax distribution of income, which along with new regulations of financial markets should reduce the risk of private debt getting out of control again; (2) stimulate environment-friendly investment and technological progress; (3) take action to reduce the U.S. external imbalance, and (4) provide stimulus for sufficient employment growth.
Read the rest here.

Tuesday, September 24, 2013

US CEO-to-Worker Compensation Ratio: A Radical Redistribution of Income

As EPI noted in this recent paper on the ratio of CEO to average worker pay, from 1978–2011, CEO compensation grew more than 876 percent, more than double the growth of the stock market and remarkably faster than the growth of annual compensation of a typical private-sector worker, up a meager 5.4 percent. The increased divergence between CEO pay and a typical worker’s pay over time is revealed in the CEO-to-worker compensation ratio, as shown in the figure. This ratio measures the gap between the compensation of CEOs in the 350 largest firms and the workers in the key industry of the firms of the particular CEOs.
See rest here.

Thursday, September 19, 2013

Income inequality and stagnation again

Brief post, prompted by comment on previous post. Below the Mean Household Income Received by Each Fifth and Top 5 Percent.
Note that in real terms the bottom has had no gains since the early 1970s really. And that's true of the lowest three quintiles. Only the two highest quintiles have seen some increase in income, but at least at this level of aggregation since the 2000s there is no growth at the top too (if you open up the top 5 percent, things might change). Data here.

Wednesday, September 18, 2013

US Income Growth Has Stalled for Most Americans

The US Census released new income data, which revealed more evidence of the widening income gap between the rich and poor, prolonging the trend of the last 40 years.

See more data here and here.

Tuesday, September 17, 2013

Income Grew More When It Grew More Equally

Note: The light blue is the average annual growth rate during the earlier time period, and the dark blue is the average annual growth rate during the later time period. For each pair of bars represents a different income quintile.

Source: Economic Policy Institute

Wednesday, August 21, 2013

A Decade of Flat Wages: Protracting The Long-term Trend

Wages for the typical U.S. worker did not rise at all in the 2000s, and annual compensation only grew slightly, protracting a long term trend (since roughly the early 1970's) of declining labor share of the total product of the US economy. An extensive analysis has been produced by Lawrence Mishel and Heidi Shierholz in a new EPI briefing paper, which can be seen here.

Sunday, May 26, 2013

Marx on Absolute and Relative Wages and the Modern Theory of Distribution

Given recent reconsiderations of the Marxian 'falling rate of profit' hypothesis, I reckon it be of readers' interest to consider this article by Enrico Sergio Levrero (see here).

From the abstract:
"This paper aims at clarifying some aspects of Marx’s analysis of the determinants of wages and of the peculiarity of labour as a commodity, focusing on three related issues. The first is that of Marx’s notion of the subsistence (or natural) wage rate: the subsistence wage will be shown to stem, according to Marx, from socially determined conditions of reproduction of an efficient labouring class. The second issue refers to the distinction between the natural and the market wage rate that can be found in Marx, and his critique of Ricardo’s analysis of the determinants of the price of labour. Here the ‘law of population peculiar to the capitalist mode of production’ (that is, Marx’s industrial reserve army mechanism) will be considered both with respect to cyclical fluctuations of wages and to their trend over time. Moreover, a classification of the social and institutional factors affecting the average wage rate will be advanced. Finally, the last issue concerns Marx’s analysis of the effects of technical progress on both absolute and relative wages (that is, the wage share). It will also be discussed by relating it back to the longstanding debate on the Marxian law of the falling rate of profit, and addressing some possible scenarios of the trend of wages and distribution."

Saturday, May 25, 2013

Technology, distribution and the rate of profit in the US economy: understanding the current crisis

New paper by Deepankar Basu and Ramaa Vasudevan - published by CJE (see here - subscription required)

From the Abstract:
"This paper offers a synoptic account of the state of the debate among Marxist scholars regarding the current structural crisis of capitalism, identifies two broad streams within the literature dealing, in turn, with aggregate demand and profitability problems, and proceeds to concentrate on an analysis of issues surrounding the profitability problem in two steps. First, evidence on profitability trends for the non-farm non-financial corporate business, the non-financial corporate business and the corporate business sectors in post-war USA are summarised. A broad range of profit rate measures are covered and data from both the US Bureau of Economic Analysis (NIPA and Fixed Assets Tables) and the Federal Reserve (Flow of Funds Account) are used. Second, the underlying drivers of profitability, in terms of technology and distribution, are investigated. The profitability analysis is used to offer some hypotheses about the current structural crisis."

Thursday, May 23, 2013

Sweden’s 30 years of income redistribution

By David Ruccio

"Sweden, which has long been the shining example for liberal economists of what we should be aiming for, seems to be losing its luster.
That’s because the growth in Swedish inequality between 1985 and the late 2000s was the largest among all OECD countries, increasing by one third.
Sweden has seen the steepest increase in inequality over 15 years amongst the 34 OECD nations, with disparities rising at four times the pace of the United States, the think tank said.
Once the darling of the political left, heavy state control and wealth distribution through high taxes and generous benefits gave the country’s have-nots an enviable standard of living at the expense of the wealthiest members of society.
Although still one of the most equal countries in the world, the last two decades have seen a marked change. Market reforms have helped the economy become one of Europe’s best performers but this has Swedes wondering if their love affair with state welfare was coming to an end.
The real tipping point came in 2006 when the centre-right government swept to power, bringing an end to a Social Democratic era which stretched for most of the 20th century.
Swedes had grown increasingly weary of their high taxes and with more jobs going overseas, the new government laid out a plan to fine-tune the old welfare system. It slashed income taxes, sold state assets and tried to make it pay to work.
Spending on welfare benefits such as pensions, unemployment and incapacity assistance has fallen by almost a third to 13 percent of GDP from the early nineties, putting Sweden only just above the 11 percent OECD average.h
At the other end of the spectrum, tax changes and housing market reforms have made the rich richer.
Since the mid-80s, income from savings, private pensions or rentals, jumped 10 percent for the richest fifth of the population while falling one percent for the poorest 20 percent."
Read the rest here.