Economic Inequality Flashcards
Productivity vs Wages
As workers got more productive, their wages went up during the war.
Yet in the late 70s, workers got more productive, the wages didn’t go up as before
Wealth inequality
The richest 1% of US households control 1/3 of all wealth.
The richest quintile controls 84% of the nation’s wealth
What were the Post-WWII economy norms?
The firm as family
Internalized careers
Wage-setting procedures
What is the norm of the firm as family?
The company/workers are close-knit, having mutual respect and trust
If there were layoffs, workers would be hired back once business conditions improved
What is the norm of internalized careers?
Unskilled workers were hired into entry-level positions and then progressed upward on job ladders within firms
Employees and companies were investing in each other for the long-term
What is wage-setting procedures that emphasize relative equity?
Companies tended to avoid large internal wage disparities
The expectation that some of the growth in profits would be shared with workers (bonuses)
Organized labor is strong, so we don’t want to upset unions.
A possible limitation of the Post-WWII Economy
Not all workers benefitted equally.
However, stable and secure employment opportunities were being extended to more people than ever before.
What is the Post-WWII Economy Broader Context?
The dearth of international competition
The strength of organized labor
Government regulation of the labor market
Executives incentivized to expand employment
What is the dearth of international competition?
After the war, most industries in Europe were destroyed except for the US
So, the US no longer had international competition, thus allowing the companies to dominate world markets
What is the strength of organized labor?
Unions were strong at this time, thus allowing the workers to have more leverage for higher wage
People working together
Unions with wage-setting
What is government regulation of the labor market?
Worker regulation works its way to law
Laws protecting workers being enforced
Leads to workers to take home more of the gains they are producing
What are executives incentivized to expand employment?
Low shareholder pressure on corporate executives
What is the Crisis?
The crisis of profitability of the 1970s which led to the new economy era
During this time there was high inflation, high oil prices, and increased exposure to domestic and international competition
What is the New Economy context?
Investors hold executive accountable for reinvigorating profits
Executives and managers enact strategies designed to increase a company’s stock price
Economic elites advocate for tax policies that allow them to consolidate their gains
What are investors hold executives accountable for reinvigorating profits?
Executives feel pressure from investors to create shareholder value
The importance of having shareholders and get the stock price up even at the expense of the worker
What are executives and managers enact strategies designed to increase a company’s stock price?
From retaining and reinvesting (profits, staying in the company) to downsizing (cutting costs) and distributing (the money saved to shareholders)
The quickest way to maximize stock prices is to cut labor costs
Leading to outsourcing, cutting employee pay, closing plants, layoffs, subcontracting
Don’t have to partner with unions and fight back against unions
Stock buybacks- executives can take the money from laboring costs and buy its own stock
What are economic elites advocate for tax policies that allow them to consolidate their gains?
get tax cuts
What are the New Corporate norms?
The firm is a vehicle for generating shareholder value
Less job security and mobility inside firms
Increasing inequities in compensation
What is the dominant industry in post war economy?
manufacturing
What is the dominant industry in new economy?
Services
What is the ethos of the post war economy?
Stability, loyalty, mutual obligation
What is the ethos of the new economy?
Flexibility, just-in-time production, gig economy
