Who Cares About Economic Inequality in the United States? Critical Reflections on the Compatibility of Economic Inequality and Growth

Paper Session

Saturday, Jan. 7, 2017 8:00 AM – 10:00 AM

Hyatt Regency Chicago, Gold Coast
Hosted By: Labor and Employment Relations Association
  • Chair: Jeannette Wicks-Lim, University of Massachusetts-Amherst

Economic Equality and Non-Domination

Suresh Naidu
,
Columbia University

Abstract

There are a variety of axis of inequality in our economy and society. We can measure inequality of family incomes or individual's wages, or inequality across firms, people "by race, ethnicity, disability, gender” or inequality in access to workplace benefits and good jobs or a host of other measures. Are there some kinds of inequality that are more pernicious than others in terms of their effect on the economy more generally? If, as Thomas Piketty taught us, inequality will evermore rise if growth is slower than the rate of return on capital, should we focus mostly on the functional income distribution between labor and capital, or between or across groups of people?

Are We In It Together: Racial Stratification and the United States Economy

Darrick Hamilton
,
New School

Abstract

This paper will examine the role of worker group solidarity versus intergroup competition in forging a more productive and inclusive economy. The paper will challenge the traditional indicators of national economic health in favor of an approach more similar to Amartya Sen's human capabilities type indicators. Finally, the paper will address whether the white privilege benefits and protections that accrue to white workers as a resulting of exclusionary and discriminatory labor market practices directed at black workers are greater than the reduced labor bargaining power costs that result from a smaller and more fragmented labor movement and having to compete a reserve army of black unemployed workers.

The Inequality-Debt-Demand Story: A Critical Assessment

Josh W. Mason
,
City University of New York

Abstract

It is sometimes claimed that the steep fall in household expenditure in 2008-2009 is linked to changes in income distribution and rising household debt-income ratios over the preceding period. Specifically, households lower in the income distribution increased borrowing in order to maintain expected levels of consumption growth despite slower income growth, increasing their debt-income ratios. This debt-financed expenditure, in this story, made an important contribution to the growth of aggregate demand until it was interrupted by the financial crisis of 2008. In this paper, we survey the empirical literature on household expenditure and borrowing and ask whether it is broadly consistent with this story, and suggest that it is not. There was not an increase in the share of household debt at lower points in the income distribution. Moreover, consumption inequality appears to have increased in line with income inequality. There is no evidence that aggregate changes in household balance sheets were driven by consumption-smoothing by lower-income households. In other words, the empirical evidence does not support the argument that inequality is a major drag on demand growth, except when offset by borrowing by lower income households. There does not appear to be a clear link between the rise in income inequality in recent decades, the financial crisis, or the slow recovery since then.
Discussant(s)
Heather Boushey
,
Washington Center for Equitable Growth
Nancy Folbre
,
University of Massachusetts-Amherst
William A. Darity, Jr.
,
Duke University
JEL Classifications
  • D3 - Distribution