Inequality: Rents, Value Extraction, and Power
Friday, Jan. 6, 2017 12:30 PM – 2:15 PM
Hyatt Regency Chicago, Gold Coast
- Chair: Sanford Jacoby, University of California-Los Angeles
Wages of Power Versus Wages of Care
AbstractIncreased earnings at the high end of the labor market are sometimes attributed to rent-seeking behavior. This term is misleading for a number of reasons, among them the fact that differences in bargaining power are far more evident than differences in behavioral motivation. In this paper, I review research showing that industry and occupation-specific factors often combine in ways that enable some workers to pass on the cost of higher wages to consumers or to employers and workers in other firms. I term these "wages of power." I apply a similar analysis to wages at the low end of the distribution, describing factors that have diminished the bargaining power of a large subset of workers, especially those engaged in low wage "caring" occupations. Many of these workers work in the public sector or for non-profit firms, feel a moral responsibility toward their clients, and produce "output" whose true value is difficult to measure. All these factors reduce their bargaining power, leaving them to subsist on the "wages of care." I use industry and occupation-specific earnings data from the Current Population Survey to illustrate these points.
Shareholder-Value Ideology and Marketized Employment Relations as Sources of Increasing Income Inequality
AbstractThere is an integral relation in the U.S. economy between the explosion of the incomes of the richest households and the erosion of middle-class employment opportunities. From the early 1980s, rationalization, characterized by plant closings, terminated the jobs of high-school educated blue-collar workers, most of them well-paid union members. From the early 1990s, marketization, characterized by the end of a career with one company as an employment norm, placed the job security of middle-aged white-collar workers, many of them college educated, in jeopardy. From the early 2000s, globalization, characterized by the offshoring of employment to lower-wage nations, has left all U.S. workers vulnerable to displacement, whatever their educational credentials and employment experience. Once U.S. corporations transformed their employment relations, they often pursued rationalization, marketization, and globalization to cut current costs rather than to reposition their organizations to produce competitive products. Defining superior corporate performance as ever-higher quarterly earnings per share (EPS), companies turned to massive stock repurchases to manage their own corporations stock prices. Trillions of dollars that could have been spent on innovation and related job creation in the U.S. economy over the past three decades have been used instead to buy back stock for the purpose of manipulating stock prices, largely to the benefit of the top 0.1%.
Can Asymmetric Rent Creation and Destruction Account for the Takeoff in Income Inequality?
AbstractAlthough rent-based explanations of the growth in the incomes of the top 1% (or top 0.01%) are gaining traction in the social sciences, these explanations do not go far enough in revealing the ubiquity of rents in contemporary liberal market economies. In this paper, we argue for a more expansive accounting of the institutionalized sources of rents and their contribution to the takeoff in income inequality in the portion of the income distribution observed in conventional labor market surveys. We argue that just as pro-market liberalizing forces have weakened many of the institutions that generate rents for workers near the bottom of the income distribution, institutions that generate rents for workers nearer the top of the income distribution have strengthened or at least persisted. These top-end rents include occupation rents generated through licensure and credentialing, education rents generated through bottlenecks in the education system, managerial rents generated through non-competitive compensation practices, and industry rents generated by market concentration and quasi-monopolies. We discuss preliminary efforts to estimate a comprehensive model of the contribution of asymmetric rent creation and destruction on rising income inequality in the US.
Economic Policy Institute
- P1 - Capitalist Systems