Becker and Posner have some interesting thoughts on income inequality, envy, and whether the inequality is deserved or not deserved.
Comments
Buzzcutsays
How does one explain that inequality on a worldwide basis is decreasing as it is increasing in the US? (opening paragraph of Becker’s post, I did not fact check it)
Answer: inequality in the US is being driven by globalization. It has nothing to do with the Bush tax cuts, the Reagan tax cuts, or any of the other things that liberals attribute it to.
It is not just an artifact of trade, it is also driven by immigration. Migration from third world countries to the first world greatly increases the incomes of the immigrants, and slightly decreases the incomes of the low skilled workers who must compete with the newcomers.
Inequality is going to get worse in America until the wages of the unskilled drop to meet those of immigrants and unskilled workers elsewhere, or until there are more high skilled workers (a lot easier said than done, and perhaps impossible if IQ governs the supply of the skilled).
What the devil is meant by “unskilled”? Inequality is going to get worse in America until the wages of the “unskilled” and “skilled” immigrants are brought up to the “unskilled” and “skilled” Americans.
We don’t believe in bringing down wages to the lowest, but rather bringing up wages to the highest.
Allow people to organize themselves, and you’ll see the income disparity gap close.
Charlie, you know what skilled means. Check out my link regarding software developers.
Unionization is no answer to what we are suffering from. All unionization will do is decrease employment in the unionized sectors and decrease wages in the non-unionized sectors (to the extent that wages can fall, it will increase unemployment in cases where wages bump up against the minimum wage).
Buzz: “Answer: inequality in the US is being driven by globalization. It has nothing to do with the Bush tax cuts, the Reagan tax cuts, or any of the other things that liberals attribute it to.”
While globalization might be leading to the income inequality issue (I don’t label it as a “problem”), tax cuts do make an assist. Still, I am not sure wealth inequality is something that should be fixed by govt., as attempts at fixing wealth inequality generally bring the top down, more than the bottom up.
Charlie: If “unskilled” make the same pay as “skilled” why would anyone go through the investment to become skilled? Answer: they won’t. Which is why you will always have a skilled labor premium.
The bottom line is that unskilled labor competes for labor dollars with unskilled laborers from China, India and other places where workers earn $.30-$1 an hour. Skilled labor competes with India and others too, but to a much lesser extent. The high amount of unskilled labor ompetition will keep the average wage for unskilled labor at a very low dollar amount until American wages become competitive again, which doesn’t look like it is happening anytime soon. Payroll taxes are part of the issue here too.
I don’t understand the pro-union push whatsoever. Wages, like most things, are subjhect to the supply/demand curve. As wages go up, supply (# of workers) increases, and demand (# of potential employers and positions) decreases. Considering our current high unemployment rates in the U.S., the LAST thing we need is to increase union membership, which will increase the wages of some jobs, but force too many others into unemployment.
Within the company, if necessary to preserve competitiveness, I think there is often the opportunity to pay less to upper management and, thereby, make more available to compensate those lower down in the hierarchy.
For example, if it’s necessary to cut costs to price the product competitively, given the option, upper management would rationally want to take the cost out of someone else’s paycheck and not their own. Unionization makes it less likely that this is an option.
Unionization wouldn’t be effective in preserving wages lower down in the hierarchy if upper management is already cut to the bone; and the guys you need there simply will not work for less. But, that’s a pretty big “if.”
Example: A CEO of a growing company will say: “Our company needs to expand production. The question is where?” The CEO will then evaluate the costs of all the alternatives, and pick the cheapest one (with other factors such as quality and risk playing a part). If we add a union to the mix, costs will go up, making expansion less attractive, because what a CEO will not do is say: “I make $5 million this year, but next year, the company can become bigger, and have more employees, giving me more work, and all I have to do is take this 1-2 million dollar paycut for the owners to make the same amount of income.”
I’m thinking more like: Company needs to sell widget at $0.50 per unit. To do so, it needs to cut $500,000 in costs. It has 10 people in upper management making $200k per year that can take home $50,000 less per year or 100 employees making $45,000 per year that can take home $5k less.
My guess is that the presence of a union changes the balance of where the cost cutting takes place in that situation.
It has 10 people in upper management making $200k per year that can take home $50,000 less per year or 100 employees making $45,000 per year that can take home $5k less.
Where do I begin?
At my plant, we have operators who are represented by the USW. With heavy overtime, they make $200,000 a year.
The guy who drives me around is a Teamster, he also makes over $200,000 a year.
Pipefitters and boilermakers make $70 an hour salary and benefits.
Labor is so much we can’t make projects profitable, and slowly over time the plant is being bled to death.
The plant manager’s salary is in the $300k range. Not bad if you can get it, but the math is nothing like Doug’s fantasy.
Also keep in mind that you can’t get into a building trade union unless you have a connection. In the county that is home to Gary, there are almost no minority union pipefitters, boilermakers, or electricians. The unions are the most racist organization I have ever seen.
Hey, why complain about how much anybody earns? Why give a rip? It’s the inequality that is the subject.
You can’t get into some companies unless you have a connection. That’s life and it is what it is.
All unions are different just as all companies are different.
All the labor movement wants is a decent life, and to quote Samuel Gompers, founder of the AFL, “more schools and less jails.”
Be of good cheer and as Lynn Williams, President Emeritus of the United Steelworkers Union quoted Tommy Douglas, the former leader of the New Democratic Party in Canada the other day, “The time is not too late to build a better world.”
Charlie, I don’t care about how much anyone makes. These union folks work hard for the money. To make $200,000, you need to pretty much live in the plant (although the job itself isn’t that difficult, and you don’t need to be very intelligent to do it).
But it is laughable to say “inequality is the subject” at the same time you say, “don’t look at these guys’ salaries”.
I also like how you just gloss over the overt racism in the trade unions. It is ironic that corporations are so politically correct in their hiring (because of lawsuits) but somehow the unions get a pass.
BTW, my company does the hiring for operators (but they are forced to join the USW), and they are much more diverse than the trade unions that do work in the plant.
How does one explain that inequality on a worldwide basis is decreasing as it is increasing in the US? (opening paragraph of Becker’s post, I did not fact check it)
Answer: inequality in the US is being driven by globalization. It has nothing to do with the Bush tax cuts, the Reagan tax cuts, or any of the other things that liberals attribute it to.
It is not just an artifact of trade, it is also driven by immigration. Migration from third world countries to the first world greatly increases the incomes of the immigrants, and slightly decreases the incomes of the low skilled workers who must compete with the newcomers.
The other side of globalization is that there still aren’t the skilled workers, even globally, to do the work that needs to be done, and the returns to that work are higher than ever.
Inequality is going to get worse in America until the wages of the unskilled drop to meet those of immigrants and unskilled workers elsewhere, or until there are more high skilled workers (a lot easier said than done, and perhaps impossible if IQ governs the supply of the skilled).
What the devil is meant by “unskilled”? Inequality is going to get worse in America until the wages of the “unskilled” and “skilled” immigrants are brought up to the “unskilled” and “skilled” Americans.
We don’t believe in bringing down wages to the lowest, but rather bringing up wages to the highest.
Allow people to organize themselves, and you’ll see the income disparity gap close.
Charlie, you know what skilled means. Check out my link regarding software developers.
Unionization is no answer to what we are suffering from. All unionization will do is decrease employment in the unionized sectors and decrease wages in the non-unionized sectors (to the extent that wages can fall, it will increase unemployment in cases where wages bump up against the minimum wage).
Buzz: “Answer: inequality in the US is being driven by globalization. It has nothing to do with the Bush tax cuts, the Reagan tax cuts, or any of the other things that liberals attribute it to.”
While globalization might be leading to the income inequality issue (I don’t label it as a “problem”), tax cuts do make an assist. Still, I am not sure wealth inequality is something that should be fixed by govt., as attempts at fixing wealth inequality generally bring the top down, more than the bottom up.
Charlie: If “unskilled” make the same pay as “skilled” why would anyone go through the investment to become skilled? Answer: they won’t. Which is why you will always have a skilled labor premium.
The bottom line is that unskilled labor competes for labor dollars with unskilled laborers from China, India and other places where workers earn $.30-$1 an hour. Skilled labor competes with India and others too, but to a much lesser extent. The high amount of unskilled labor ompetition will keep the average wage for unskilled labor at a very low dollar amount until American wages become competitive again, which doesn’t look like it is happening anytime soon. Payroll taxes are part of the issue here too.
I don’t understand the pro-union push whatsoever. Wages, like most things, are subjhect to the supply/demand curve. As wages go up, supply (# of workers) increases, and demand (# of potential employers and positions) decreases. Considering our current high unemployment rates in the U.S., the LAST thing we need is to increase union membership, which will increase the wages of some jobs, but force too many others into unemployment.
Within the company, if necessary to preserve competitiveness, I think there is often the opportunity to pay less to upper management and, thereby, make more available to compensate those lower down in the hierarchy.
For example, if it’s necessary to cut costs to price the product competitively, given the option, upper management would rationally want to take the cost out of someone else’s paycheck and not their own. Unionization makes it less likely that this is an option.
Unionization wouldn’t be effective in preserving wages lower down in the hierarchy if upper management is already cut to the bone; and the guys you need there simply will not work for less. But, that’s a pretty big “if.”
Right Doug, because managers at UAW organized automakers make way less than at nonunionized automakers.
Oh, wait, they don’t.
Your hypothesis is testable, by the way. I look forward to your econometric analysis of CEO pay at unionized vs. nonunionized firms.
Doug: that is a very unrealistic view.
Example: A CEO of a growing company will say: “Our company needs to expand production. The question is where?” The CEO will then evaluate the costs of all the alternatives, and pick the cheapest one (with other factors such as quality and risk playing a part). If we add a union to the mix, costs will go up, making expansion less attractive, because what a CEO will not do is say: “I make $5 million this year, but next year, the company can become bigger, and have more employees, giving me more work, and all I have to do is take this 1-2 million dollar paycut for the owners to make the same amount of income.”
I’m thinking more like: Company needs to sell widget at $0.50 per unit. To do so, it needs to cut $500,000 in costs. It has 10 people in upper management making $200k per year that can take home $50,000 less per year or 100 employees making $45,000 per year that can take home $5k less.
My guess is that the presence of a union changes the balance of where the cost cutting takes place in that situation.
It has 10 people in upper management making $200k per year that can take home $50,000 less per year or 100 employees making $45,000 per year that can take home $5k less.
Where do I begin?
At my plant, we have operators who are represented by the USW. With heavy overtime, they make $200,000 a year.
The guy who drives me around is a Teamster, he also makes over $200,000 a year.
Pipefitters and boilermakers make $70 an hour salary and benefits.
Labor is so much we can’t make projects profitable, and slowly over time the plant is being bled to death.
The plant manager’s salary is in the $300k range. Not bad if you can get it, but the math is nothing like Doug’s fantasy.
Also keep in mind that you can’t get into a building trade union unless you have a connection. In the county that is home to Gary, there are almost no minority union pipefitters, boilermakers, or electricians. The unions are the most racist organization I have ever seen.
Hey, why complain about how much anybody earns? Why give a rip? It’s the inequality that is the subject.
You can’t get into some companies unless you have a connection. That’s life and it is what it is.
All unions are different just as all companies are different.
All the labor movement wants is a decent life, and to quote Samuel Gompers, founder of the AFL, “more schools and less jails.”
Be of good cheer and as Lynn Williams, President Emeritus of the United Steelworkers Union quoted Tommy Douglas, the former leader of the New Democratic Party in Canada the other day, “The time is not too late to build a better world.”
Charlie, I don’t care about how much anyone makes. These union folks work hard for the money. To make $200,000, you need to pretty much live in the plant (although the job itself isn’t that difficult, and you don’t need to be very intelligent to do it).
But it is laughable to say “inequality is the subject” at the same time you say, “don’t look at these guys’ salaries”.
I also like how you just gloss over the overt racism in the trade unions. It is ironic that corporations are so politically correct in their hiring (because of lawsuits) but somehow the unions get a pass.
BTW, my company does the hiring for operators (but they are forced to join the USW), and they are much more diverse than the trade unions that do work in the plant.
Unions are racist, it is a fact.