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PostPosted: Mon Jul 20, 2015 7:57 am    Post subject: Inequality Reply with quote

In response to the article "Firm-specific factors in rising income inequality"


I guess, many people in France, who want to maintain the status quo, don’t understand the benefits of a dynamic and disruptive economy.

Western Europe should’ve been most competitive with the U.S. in the Information and Biotech revolutions.

Instead, the U.S. not only leads the world, in those economic revolutions, it leads the rest of the world combined (in both revenue and profit).


Western Europeans may be unhappy with U.S. market power, particularly given lower income, higher taxes, and more regulations.

In “Growth in the Residential Segregation of Families by Income, 1970-2009,” Western Europe’s class structure today is much like America’s in 1970, i.e. a large proportion of middle class with smaller proportions of upper and lower classes.

In the U.S., the proportion of families living in affluent neighborhoods doubled from 7 percent in 1970 to 14 percent in 2007. Likewise, the proportion of families in poor neighborhoods doubled from 8 percent to 17 percent over the same period.

Today, America’s two highest classes: “Affluent” and “High Income” are roughly equal in size to the “Poor” and “Low Income” classes, and also roughly equal in size to the “High Middle” and “Low Middle” classes.

All six income classes in America have become more equal in size, while in Western Europe, the classes (although with much lower average income) are less equal, because of a large middle class.

In the U.S., much of the middle class moved up, while many immigrants from dirt poor countries moved into the lower classes.

Around the turn of the 19th century, most immigrants to the U.S. were from Europe and had roughly the same skills as the domestic population (although, the domestic population had mostly low skills too).

However, in recent decades, most U.S. immigrants had lower skills than the domestic population, while relatively few had higher skills.


Europe could’ve been more competitive in emerging industries.

A firm like Microsoft didn’t exist in the early 1970s.

By 2000, it created 10,000 millionaire employees, and several billionaires.

Even median income is much lower in Western Europe than the U.S.:

Also, it should be noted, Western Europeans compared to Americans live in much smaller houses, have fewer and smaller cars per capita, and fewer shopping malls, or less sales, per capita.

In the U.S., there’s much less inequality based on consumption than income, in part, because high-income earners save more and consume less, while many low-income earners die broke or in debt.



...The trend over the last three decades is more out-sourcing and more “independent contractors” for lower income jobs, which now don’t show up on a corporate W-2. In this study, lower income workers are removed from the employee payroll which flattens the salary scale for those workers remaining on the payroll....



You’re assuming mostly low-skilled workers turned into independent contractors.

Here’s what the BLS says. "Independent contractors in 2005:"



Corporate HR departments generally perform compensation surveys within the firm, and also with major competitors, and typically establish “pay bands” for job titles with similar skill sets. So, this is not super surprising. If you work for a medium to large company and are even remotely aware of HR policies: Companies have policies designed to reduce within-firm pay inequality for (roughly) the same set of skills.

To really get a significant bump you have to jump job titles (which usually requires new skills) or move to a new company. There are indeed a lot of people who would get a significant boost if they leaped from Wal-Mart to Google or Apple, where the average salary is 6 figures+. But I doubt that they could make that leap without a crash course in coding.



Lots of truck drivers are now independent contractors. Most have seen income drop. What we really want to know, and your link does not show, is how many of those earning low incomes are now independent contractors compared with the past.



Lots of truck drivers don’t want to work full-time, including overtime. So, when they work less, their income drops.

The link doesn’t show much. However, it shows the share of independent contractors hasn’t changed much between 1995-05.

And, it states: “Fewer than 1 in 10 independent contractors said they would prefer a traditional work arrangement.”

If an aging workforce, for example, wants to work fewer hours, or hours of their choosing, why stop them?



I think Joseph has a good point that many large corporation s do not have the low wage maintenance workers on their payroll anymore.

But I suspect they did not become independent contract employes. Rather they went to work for firms that specialize in providing such services to larger firms.
Virtually every large firm and government agencies sub-contract janitorial, security, and such jobs to other firms. This still changes the composition of employment in may of the ways that Joseph suggest.

Second, in the new technology sector there are now many software firms that have and need only a handful of employes to become large capitalization firms –Facebook may be the prime example but there are plenty of others.



Spencer, in the past, firms did almost everything “in-house.”

Then, they began outsourcing both high and low skilled jobs.

Today, entire new industries, with many employees, and with many earning above average wages, serve other companies.

It isn’t just “low wage maintenance, janitorial, and security jobs.”

It’s also consulting, accounting, computer security, software engineering, high-tech equipment servicing, marketing, cafeterias, etc..

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