Tag Archives: Income inequality

Economic, Government, Politics, Society

Reducing income inequality

INCOME DISPARITIES

Intro: Most people agree that income inequality is too extreme and that it needs to be reduced. But by how much?

INEQUALITY remains a major political issue in the world today. Most people agree that inequality is too extreme and needs to be reduced.

In the UK, the income ratio between the richest 0.01 per cent and minimum-wage workers has reached around 150 to one. Within the FTSE 100 firms, pay ratios between CEOs and lower paid workers hover at about 100 to one. Similar inequalities prevail in many other countries, while in the United States the figures are much worse, with pay ratios and disparities sometimes reaching into the thousands.

There is nothing natural or inevitable about extreme inequality. It is the predictable result of an economic system that distributes income based on who owns the means of production and who has the most market power, rather than according to any common-sense principle of labour contribution, human needs or justice.

Inequality corrodes society and poisons democracy, but it is also ecologically dangerous. The wealthiest in society consume an extraordinary amount of energy, resulting in high emissions and making decarbonisation more difficult to achieve. Recent research by Joel Millward-Hopkins published in Nature Communications shows that if we want to ensure decent lives for everyone on the planet, and by decarbonising quickly enough to feasibly achieve the Paris Agreement goals on the climate, we will need to dramatically reduce the purchasing power of the rich, while distributing resources more equitably.

But how much should inequality be reduced? What is an appropriate level of inequality? Millward-Hopkins’ research shows that if we are to ensure that everyone has access to resources necessary for a decent living, then a distribution where the richest consume at most around six times that level would be compatible with achieving climate stability. This may sound radical, but this distribution is very close to what people around the world say is a “fair” level of inequality. In some countries – such as Argentina, Norway and Turkey – people say they want inequality to be even lower, with ratios less than four to one.

People want to live in a society that is fair. This is apparent when we look at public sector pay scales, the closest thing we have to a democratically determined distribution. In major British institutions like the National Health Service (NHS) and within the universities, where unions representing members have a say over pay scales, the gaps between the highest and lowest salary bands rarely exceed five to one. If we correct for career-stage, the gaps are much smaller: the starting salary for a doctor or a lecturer is only about twice as high as that of a cleaner.  

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Economic, Technology

Technology and the erosion of labour…

Over the past few decades income inequality in America has exploded, but there is considerable disagreement about the cause of the shift. Are impersonal forces like globalisation and technological development to blame, or is it to do with policies designed to disproportionately benefit the rich?

A recently published study by Tali Kristal, an Israeli sociologist, says that the overall share of income by the labour workforce is declining because workers are losing the power to fight for their own interests.

Ms Kristal found that the biggest inequality spikes have occurred within industries where unions have traditionally held a lot of influence – within manufacturing, transportation, and, to a lesser extent, construction. That’s partly due to the labour movement as a whole witnessing its power sharply declining since the mid-twentieth century, but Kristal has also identified another factor which she calls ‘class-biased technological change.’

Technological development is not apolitical or self-directed, she says. New tools are always made by human beings, and those humans have their own political influences and agendas. Institutions that fund technological development also tend to have a particular motive, whether it’s winning a war, curing a disease, or increasing corporate profits. Class-biased technological change simply means the sort of development which “favours capitalists and high-skilled workers while eroding most rank-and-file workers’ bargaining power”, according to Ms Kristal.

A good example of class-biased technological change is various kinds of factory automation, which can render some manufacturing jobs obsolete. But Kristal also highlights new workplace monitoring tools and increasingly sophisticated workplace control strategies, which have given managers unprecedented levels of power to use more legal and illegal anti-union tactics, such as the illegal discharge of union activists, surveillance of union leaders, captive-audience meetings with top management, and an entrenched refusal to negotiate collective agreements.

Tali Kristal does not mention Frederick Winslow Taylor in her paper, but his ghost haunts the margins. At the turn of the twentieth century, Taylor became one of history’s first professional management consultants, explicitly advising factory owners on how they could break the power of their employees’ craft unions. Nowadays, Americans tend to regard Taylor’s most influential innovations – such as the assembly line and the role of the middle manager – as benign improvements to efficiency. The assembly line, though, was designed in part to take control over the speed of production out of the hands of workers and into the hands of management.

If Kristal’s study is to be believed, Taylorism is alive and well in the United States. Fittingly, America is now experiencing levels of inequality last seen during the lifetime of its inventor.

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