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Full Employment: A Force Against Rising Inequality and Stagnant Incomes

Jared Bernstein | Posted 05.04.2012 | Business
Jared Bernstein

From 1947-79, when inequality was relatively unchanged, incomes just about doubled for low, medium and high earners. But between 1979 and 2010, income growth at the middle and bottom was pretty much flat. There is of course a lot more than unequal growth delineating the two periods, but there's no question that inequality was a major factor in play. Another big distinction between these two roughly 30 year periods was the tightness of the labor market. And there's an important, substantive linkage between growth and inequality: at full employment, middle and low-income workers have much more of the bargaining power they require to claim their fair share of the growth they're helping to generate.