Paul Krugman links jobs and inequality in yesterday’s New York Times column. He notes that job instability has led to deepening inequality because workers do not feel confident to search for higher paying employment. At the same time he points to the work of Steven Fazzari that shows that inequality was a contributor to the economic collapse in 2007. Fazzari shows that simple job creation — especially at the bottom of the income distribution — led to significant increases in debt and the ultimate crash.
The relationship between inequality and jobs is “bi-directional” where changes in one influence the other and likely create a reinforcing feedback. Wages cannot be so unequal that lower income workers have to borrow to get by — when households reach their borrowing maximum, recessions happen (part of Fazzari’s point). We need a job creation system to get people back to work as well as an inequality strategy that helps workers benefit from economic growth.
Getting people back to work isn’t enough, nor is simply solving inequality. Jobs and inequality are hand in glove. The goal, as daunting as it may sound, is to “grow the pie” to solve unemployment and inequality, not just “re-slice the pie” (borrow the analogy from Chris Benner and Manuel Pastor’s Just Growth).
Neal Peirce discusses the challenges of poverty wage jobs at major chains – linking severe inequality with these jobs. Given the recent debate in DC over its living wage job and recent reporting on inequality, the article is apropos.
Peirce notes that Los Angeles hotel workers near Los Angeles International Airport (with support from service unions) got a living wage law passed and are now paid $12 an hour. Further efforts in LA are underway to expand the law.
Peirce also highlights the negative social and psychological effect on children of low wage workers who feel helpless, which may be one of the most lasting and damaging side effects of inequality.
There is hope – Bill de Blasio, now the frontrunner in the NYC Mayoral race, has taken low wage work up as a campaign platform. Peirce quotes de Blasio’s exasperation over a minimum wage of $7.25 an hour. He has been surging in the polls – maybe the economic populism has something to do with it.
Jodi Kantor, writer for the New York Times, chronicles class division and inequality at Harvard Business School. In addition to $50,000 plus a year tuition, students are expected to spend significant amounts of money for extracurricular events and activities. Some students interviewed in the story estimated that the costs of social events were upwards of $20,000 over the program. Kantor also noted increasing division between students of middle and lower socioeconomic status and students (both domestic and international) who come from incredibly wealthy backgrounds.
Paul Krugman commented on the article today in the New York Times. He suggests that wealth inequality is moderating the benefits of education, making upward mobility more difficult.