The main reason -- the outer layer of the onion, if you will -- is the diminished ability of most Americans to claim as much of the economy's growth as they once did.
I'll explain what I mean by that in a moment, but it may sound like a different explanation than you're used to hearing. Typically, we hear it's because of globalization, technological change and increased returns to high levels of education or superstar talents. All of which play a role, but all of which have existed forever. So something else must have changed.
Some of what's changed relates to globalization, technological change, and increased returns themselves. U.S. global trade, as measured by the sum of import and export shares of GDP, increased from around 10% in the 1960s to around 30% now, and the increased competition -- and large, persistent trade deficits -- with low-wage countries has held down wages and jobs in "tradable sectors." Technology appears to have become more "labor saving" in recent years, meaning if what you do is at all repetitive, you can be replaced by a machine. If you write the software that runs said machines, that's better. College attainment has significantly slowed in recent years, and that's been a factor as well.
But these are not the main reasons for the growth in economic inequality. These are merely time honored forces that have the potential to deliver the benefits of growth toward a narrower sliver of the income scale. What's changed -- the reason that potential is now realized -- is the absence of a countervailing force pushing back the other way.
Unions, of course, come to mind, and there's good research showing that less unionization is associated with faster growing inequality. Other labor market institutions matter as well, including the erosion of the minimum wage, sectoral policies (e.g., promoting manufacturing), and the inattention to labor standards such as wage and hour rules, overtime regulations, and workplace safety. Such policies provide some countervailing force to workers beset by the pressures of globalization, technology, and whatever else is skewing economic returns.
I've stressed the importance of low unemployment here as well. It's no accident that periods of truly tight labor markets have consistently been ones where inequality's growth was constrained. And that makes sense: full employment labor markets give working people the bargaining clout they lack when the supply of workers much exceeds the demand.
An intimately related factor at the core of the inequality problem is the toxic combination of "rational expectations," efficient markets hypothesis, trickle-down economics, and increased money in politics. The first two argue that anything that looks like a countervailing force -- whether it's full employment policy, a higher minimum wages, or even using policy to burst a financial bubble -- distort market outcomes and must be stopped.
The latter two take that dangerously wrong theory and plug it into regressive tax policy, aggressive deregulation, and the dismantling of any countervailing force that might have pushed back on inequality in earlier times.
That's about where things stand right now. We're way far away from full employment -- have been for over a decade. Unions are fighting to stay alive, especially in the public sector, with little help from national policy. Progressive taxation, another important force in dampening inequality's growth, is under constant attack. And while the Obama administration and a precious few in Congress fight the toxic combination of bad economic theory and its policy implications, they are too often no match for the power and reach of the deep-pocketed opposition, who continue to oppose any countervailing force, from health care and financial reform to countercyclical measures that might lower the jobless rate even just a tad.
As long as policy remains stymied in its ability to provide the majority of the workforce with some measure of force, some bargaining power, to push for their fair share of the growth they themselves are helping to create, inequality will continue grow apace.
Like they say in that movie, may the (countervailing) force be with you.
Would it be conceivable to require a US government inspection of labor conditions ain places where US companies export their jobs? No, will never happen. The corporate oligarchy has a lock on the US government.
Think aboiut supporting May Day USA strike this May 1. There are many ways to strike beyond staying home from work (althgough that's a good way to do so).
They howl when you say it, but Americans are literally--literally, mind you--too weak, yes, too physically weak, too very very weak to pick tomatoes. Whether they want to or not is not relevant. They CANNOT. They are incapable of it. They are weaklings. Not moral weaklings, although they are that too. No, they are physical weaklings. Their bodies and muscles are weak and their stamina nonexistent. Don't believe me? Go pick tomatoes for 40 hours a week at production rates. Then come back and talk to me. And, btw, farmers will pay $16 an hour for a good picker, whatever his "legality" whatever that means.
No one wants to admit that it would probably be better if a large part of the population didn't work at all. Because it violates some innocuous lie we tell ourselves about self-sufficiency. The definition of the truth is stuff you don't like.
ONLY progressive income tax can prevent the 1% owning the 99%.
"When economic power became concentrated in a few hands, then political power flowed to those possessors and away from the citizens, ultimately resulting in an oligarchy or tyranny." John Adams
"As riches increase and accumulate in few hands . . . the tendency of things will be to depart from the republican standard." Alexander Hamilton
Thomas Jefferson, "I hope we shall crush ... in its birth the aristocracy of our moneyed corporations, which dare already to challenge our government to a trial of strength and bid defiance to the laws of our country".
Do we not want to allow workers in other areas of the world to compete? Do we not want to allow them to improve their quality of life?
Here in the US we have had a wonderful quality of life. While we are 5% of the worlds population we are consuming close to 25% of the natural resources. This is not sustainable and if you think about it, very unfair.
Over the past 25 years the American economy has had the ability to solve much of the hunger in the world. We have also had the ability to get medicine to those desperately in need.
What have we done? We have bought a bigger house, the extra car, a boat etc.
I know this is not a popular thought train but i include myself when I say; Shame on Us.
Globalization has not helped the majority of people throughout the world, although the corporations have made out like bandits. It's time to localize.
Their creatures in Congress and the White House are paid to tilt the playing field their way.
Trade agreements that allow foreign manufactured goods to enter the country duty free and do not penalize companies that export jobs and infrastructure are a real boon to the 1%.
They have fixed things so hese profits are not taxed either here or abroand. The $$ never even trickles down. The rich use their money to make more money and to purchase more power and privilege.
Through the Federal Reserve they manage for bubbles which always result in a huge transfers of wealth upward and crush everyone else. A depressed and increasingly desperate populace is not a unintended consequence but a goal.
"As long as policy remains stymied in its ability to provide the majority of the workforce..."
Yes, stymied by the global corporatists and their Republican lap dogs.
America has already been sold out, it is too late to save our industries, they are gone.
The Union have been busted. The Black Panthers have been busted. The hippies have been busted. There is little left, yet they keep on looting and pillaging the workers of America.
I can see how this will end, as history repeats itself again...
1. It was outsourced to a low cost labor pool overseas with product returned with no tariff applied.
2. It was automated by a machine paid for with investment tax credits.
3. It was taken over by an illegal alien for half the wages, no benefits and no worker protections.
Meanwhile, big money's bought and paid for legislators did nothing while Rome burned.
Unlike the Industrial revolution where the tide lifted all boats - this tide is only lifting the boats of the richest.
And so you are beginning to see social unrest all over the world now. And it will continue as long as the unfair greed persists.
It perfectly and completely explains growing income inequality. The wealthy are able to invest in the new global economy and to profit from increased productivity. (They also profit from all the new and complex forms of financialization.) Wage-earners are shut out of this growth, and find their wages, even their very jobs, subjected to the tsunami-like force of downward pressure caused by biilions of workers entering their once limited job market.
I'm sorry, the "countervailing forces" theory is weak. Yes, it is a factor. But you have it's role exactly reversed. It is the bit player, and globalization is the star of this horror show.