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News Flash: Rich Get Richer!
Even though it's behind a stupid login barrier over at the New Republic (Bugmenot has logins), this is a good article.
A couple of relevant quotes, sort of a cliff notes version of the story.
"This seems to run in the face of economic theory. If workers grow more productive, logic suggests, they're making more money for their employers, which means businesses will find it profitable to hire more of them. The more workers get hired, the more businesses have to bid up their price to hire them, which means that their wages will rise. Yet that final step is not happening. The vast new wealth being created by U.S. business is going to owners of capital and nobody else."
"And so, in setting about to unravel the mystery, economists (especially those on the center left) have looked closely at a deeper trend, one that has been going on much longer than the current administration: rising inequality. Although the post-1973 decline in productivity growth was long considered the primary economic problem facing the nation, lurking in the background was a more or less concurrent trend of widening inequality. Put simply, the fortunes of the very rich and the fortunes of everybody else have been diverging sharply. Over the last quarter century, the portion of the national income accruing to the richest 1 percent of Americans has doubled. The share going to the richest one-tenth of 1 percent has tripled, and the share going to the richest one-hundredth of 1 percent has quadrupled."
"I, on the other hand, you reject the theory of skill-biased technological change, you are left with an altogether more discomfiting explanation. Rising inequality must not be the logical outcome of the free market, the invisible hand working its magic. Instead, it must reflect the rising social, economic, or political power of the rich."
Cynicism about the rich: CONFIRMED
A couple of relevant quotes, sort of a cliff notes version of the story.
"This seems to run in the face of economic theory. If workers grow more productive, logic suggests, they're making more money for their employers, which means businesses will find it profitable to hire more of them. The more workers get hired, the more businesses have to bid up their price to hire them, which means that their wages will rise. Yet that final step is not happening. The vast new wealth being created by U.S. business is going to owners of capital and nobody else."
"And so, in setting about to unravel the mystery, economists (especially those on the center left) have looked closely at a deeper trend, one that has been going on much longer than the current administration: rising inequality. Although the post-1973 decline in productivity growth was long considered the primary economic problem facing the nation, lurking in the background was a more or less concurrent trend of widening inequality. Put simply, the fortunes of the very rich and the fortunes of everybody else have been diverging sharply. Over the last quarter century, the portion of the national income accruing to the richest 1 percent of Americans has doubled. The share going to the richest one-tenth of 1 percent has tripled, and the share going to the richest one-hundredth of 1 percent has quadrupled."
"I, on the other hand, you reject the theory of skill-biased technological change, you are left with an altogether more discomfiting explanation. Rising inequality must not be the logical outcome of the free market, the invisible hand working its magic. Instead, it must reflect the rising social, economic, or political power of the rich."
Cynicism about the rich: CONFIRMED
no subject
This will only happen if all business want to and are able to effortlessly expand to take a greater slice of an infinite-demand pie. In practice, such workforce expansion runs up against training costs, business reorg costs (a small business does not run the same way as a multinational corporation), and the current level of demand in the market(s) the business is in. Businesses are much more likely to simply keep the same number of workers and slowly ramp up output levels, increasing profits without (initially) having to deal with associated costs.
Of course, if demand eventually outstrips (for a sufficiently long time and by a sufficient amount) even the absolute top-level output the employees can generate with their new efficiencies, then the business may look at increasing their hiring rate. It will take a while to use up that buffer, though, and in that period the increased profits are likely to go to the business warchest first, bonus-seeking executives next, maintenance and upkeep third, and fixed-salary employees last.
Another way of looking at it is that there's suddenly much more 'spare' money sloshing about, and the people who are rich are the ones who already have the best mechanisms in place for accumulating some of that. It's like a pyramid scheme - tell everyone that they'll be getting a bonus and their boss will get whatever they're getting. The plebs get $10, the boss with ten employees gets $100 ($10 for each worker), the manager supervising ten bosses gets $1000, the exec supervising ten managers gets $10,000, and so on.
no subject
Of course, through most of history, capital's had a lot more power than labor, that's part of why most of history's sucked unless you're the dude with the capital.