Book reviews
Income disparity
Labor and freedom
The Inequality Paradox: Growth of Income Disparity. Edited by James A. Auerbach and Richard S. Belous. Washington, National Policy Association, 1998, 264 pp. $19.95.The Inequality Paradox examines the growth in income disparity that has taken place in the United States over the last two decades. The paradox, at least in the minds of the editors, is that this trend has taken place during a period characterized by generally favorable macroeconomic conditions: steady economic growth, low unemployment, and stable inflation. Through a series of 14 essays, the book describes the trends in income and earnings inequality; identifies some of the factors affecting the trends; provides an argument as to why society should care about the growth in income disparity; and recommends a number of public policies that might help alleviate the effects of rising inequality. The editors of the book have brought together a variety of writers who, although having very different backgrounds and perspectives, all share a common concern over the impacts of the rise in inequality. Introductions to the sections were written by representatives in the labor, business, or policy arenas. Contributing authors include researchers from both academia and private research institutes.
The book does a thorough (but at times redundant) job of describing and explaining the various dimensions of the growth in economic disparities. For readers who are already familiar with the by now well-documented trends in income and earnings inequality, much of the book will be old news. Two of the five sections are devoted to describing trends. Unfortunately, many of the subsequent essays in the remaining three sections of the book also begin with tables or charts highlighting the growth in inequality. This may leave some readers feeling that the book is needlessly repetitive. On the positive side, the chapter by Richard Freeman is particularly good in laying out the "facts" in a concise and accessible manner. The book also includes a very informative chapter by Sheldon Danziger and Peter Gottschalk examining the trends in income mobility (for example, the extent to which people change relative positions within the income distribution)—providing a nice complement to the extensive information provided on inequality. This essay shows that mobility patterns have not changed in such a way that would offset the redistribution effects of rising inequality. Another commendable aspect of the book is that it includes information on the inequality patterns that have been experienced in other countries so that the U.S. experience can be viewed in an international context.
The book does a less impressive job of explaining the causes behind the rise in income inequality. Although "no smoking-gun" has been identified in the economics literature, the book does not provide a balanced presentation of the various explanations that have been offered to date in the literature. Considerable attention is given to explanations involving the decline in labor unions and the rise in immigration, while little attention is paid to the importance of skill-biased technical change or industrial change.
In my opinion, the least convincing empirical work was presented in the chapter by Johnson and Farrell who examine the role of conservative public policies during the 1980s on the trends in income inequality. In this essay, the authors claim to be examining the "impact of policies" on inequality, yet they only have income data for one year, 1992, making it impossible for them to measure the change in income inequality that has resulted from various types of policies. In much of their discussion leading up to the empirical work, the authors make definitive statements such as, "The growing schism between the haves and the have-nots in American society reflects policies implemented at the Federal, State, and local levels of government in the post-1980 period to foster the competitiveness of U.S. businesses and communities in the global market," and then cite their own work as support. Although the authors present some interesting findings on the levels of economic disparities between various ethnic and immigration groups in Los Angeles, they tend to read too much into their empirical findings. For example, in their multivariate analysis, they find that females, undocumented workers, and green card holders tend to hold positions in the lower end of the Los Angeles income distribution. From this finding, based on a single-year of data, they go on to conclude that this supports the hypothesis that "the growing supply of women and immigrants in the civilian labor force over the past two decades has depressed wages in the restructured American economy and thus account at least in part for growing inequality."
An interesting feature of the book is that it not only documents the trends but also discusses the negative consequences that result from growing economic inequality. Freeman, in his essay entitled, "Is the New Income Inequality the Achilles Heel of the American Economy?" discusses the economic hardships faced by people in the lower parts of the income distribution. He mentions the adverse effects that widening inequality has had on the health and well-being of children and the broader consequences for society in terms of increases in social tensions, increased criminal activity and increased animosity between the groups divided by economic lines. He uses the provocative phrase "apartheid economy" to describe an economy where the rich live in aloof separation with little connection to the poor or struggling middle class.
Tim Smeeding, in his essay in the book, also touches on similar themes when he attempts to answer the question, "Why should we care about growing income inequality?" He argues that inequality is highly correlated with increased mortality rates and poor health among the poor as well as increased property crime and violence. He contends that "if the rich and the poor share no common economic and social reality, there will be little or no agreement on common social goals or how to achieve them." In short, he advances the position that inequality poses a threat to democracy. While less politically liberal readers may not be convinced that there are potentially serious consequences associated with rising inequality, I found this part of the book very thought-provoking.
Although the last section of the book is entitled "Policy Responses," similar to the discussion on inequality trends, policy recommendations appear in a number of essays throughout the book, often reflecting the personal favorites of the particular author. For example, Morton Bahr, former president of the Communications Workers of America, states that "any discussion of cures for wage inequality cannot ignore the influence of unionization and the role of collective bargaining." Janet Yellen, chair of the White House Council of Economic Advisers, recommends that existing policies such as the Earned Income Tax Credit be used to enhance the return to work and increased spending on policies such as Head Start, Pell grants, and Job Corps can be employed to create opportunities for persons from disadvantaged backgrounds. The essay by Lynn Karoly provides a clear summary of the various policy options, but she is reluctant to recommend the exact mix of policies that should be pursued.
Overall, The Inequality Paradox is recommended for readers who have an interest in understanding the many dimensions by which we have become more unequal. The book is also recommended for those who already know the trends but are interested in contemplating the consequences and possible policy solutions.
—Mary Joyce
Laboring for Freedom: A New Look at the History of Labor in America. By Daniel Jacoby. Armonk, NY, M.E. Sharpe, Inc., 1998, 209 pp., $61.95, hardcover; $22.95, paperback.When Europeans colonized North America, they brought with them a fundamental tension between the desire for individual freedom and the demand for constraints on that freedom. The desire for personal liberty was demonstrated when 13 British colonies declared themselves independent. Colonial rules governing treatment and rights of workers reflected constraints to this liberty. This tension still exists today in labor relations and labor law in the United States, and provides the underlying theme of a new book, Laboring for Freedom: A New Look at the History of Labor in America, by Daniel Jacoby.
Typically, labor history in the United States is described as a struggle for shares of the value created through labor. Jacoby provides new insights by examining the issue from a novel perspective—as a conflict between personal freedom and social constraints with labor as the context. This conflict generates a constant tension in the abstract, but it also generates actions and history in the specific.
In this context, personal freedom includes freedom from want and freedom to pursue economic actions for one’s own benefit. Constraints on that freedom include protection of property and protection from despotic masters. In the book, Jacoby discusses labor in the broadest terms, whether independent entrepreneurs, indentured servants, slaves, craftsmen, industrial workers, or information professionals. His examination of the history of labor in this broad context is thought provoking and well written.
Jacoby begins his thoughtful examination in colonial times, examining the yeoman farmer and master craftsman as colonial symbols of the independent worker. These archetypes were regarded as the ideals of a free society. As commerce grew, though, more labor was needed. One way to supply this labor was with the indentured servant, who contracted labor for a specific period of time in return for transportation to the colonies and the future prospect of landed independence. Continuing competition for labor, and the alternatives this competition offered to such servants, made it difficult for plantation owners to enforce these obligations. "Human progress is often linked to expansion of free markets," says Jacoby. In this way, competition limited enforcement of contracts for labor, but also gave greater freedom for those under such contracts.
The book then explores the institution of slavery. Jacoby reviews the economics of ownership practices in slavery, and he cites slavery as an extreme example of the tension between personal freedom and constraints to that freedom. He shows that slavery was part of this tension for the slaves and slave-owners no less than for wage workers and shop-owners. He makes a good case that the abolition of slavery was both a moral action and an example of the prohibition to owning slaves overcoming the personal freedom to own another human being.
The book also covers early collective actions, including walkouts and strikes. As craftsmanship gave way to manufacturing, lower skilled labor supplanted higher skilled labor and pay declined. However, workers’ efforts to combat this through collective actions were found to be illegal. Jacoby shows that, in these circumstances, courts ruled against such actions as the "...unlawful coercion employed to control the freedom of the individual in disposing of his labor."
The 20th century brought rapid industrialization and large business organizations. The development of the corporation as an institution introduced greater standardization to management of the shop floor. Standardization of production was accompanied by additional deskilling of labor processes. Jacoby notes that this was met by increasing strength and radicalism of organized labor to protest workers’ pay and jobs. Jacoby’s critical friction between the rights of individuals (in the form of corporations and individual workers) and the drive to limit those rights (through collective bargaining) was clear in the historic labor/management conflicts of the 1930s. When the Federal Government got involved in these conflicts, laws were developed to protect the collective bargaining rights of labor unions.
According to Laboring for Freedom, World War II decreased the impetus to protect individual freedoms through such influences as widespread military service and the need for domestic support for the war effort. Industrial efficiency was needed in war production; organized labor could help provide that efficiency. Labor organizations achieved gains in bargaining power and legal rights through this period. Some of these rights were later offset by later legislation. Nonetheless, Jacoby argues, the rights of collective action over individual freedom were well established.
Throughout his examination of these major historical events, Jacoby maintains the reader’s focus on the struggle between individual freedom and economic and social requirements restricting that freedom. In this way, Jacoby provides a stimulating interpretation of the history of the U.S. labor movement. Beyond being insightful, the book is well written and adds interest to the activities and issues examined. In all, this is a good book to read and discuss.
—Stanley W. SuchmanWithin Monthly Labor Review Online:
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