Inequality Trumps Productivity

There is nothing natural about our income distribution

This morning, Paul Krugman looked at the difference between France and the United States as a way of determining if governmental redistribution of wealth had an effect on economic growth. Interestingly, even though France had much more redistributive policies, which have only become more so (pdf) over the years, it hasn’t paid much of a price in terms of economic growth. From 1979 to 2007, the per capita French economy has grown by 52% and the United States economy has grown by 68%.

This doesn’t mean that the French are less productive, however. For much of the last 30 years, France’s per capital productivity was higher than the United States’. The bigger issue is that the French don’t work as many hours. This is an issue that Dean Baker dives into a little deeper. It’s all about the policies. For example, until right now, US government policies have forced many people who didn’t want to do so to work full time so that they could get health insurance. The French, however, have policies that encourage people to retire early.

But look at the reaction of conservatives in this country recently. They went crazy over the CBO report that indicated that a lot of people would choose to work less. It’s a surprising result from a group that claims to care about freedom. I think it would be better to now assume that what the Republican Party really stands for is making the lower classes work as much as possible.

Think about that for a second. The Republicans are against the minimum wage. They are against unions. They are against food stamps. These are not about freedom except in the limited case of the freedom of the rich to pay no taxes. But there are lots of programs one could cut to allow taxes to be cut. The Republicans are always focused on cutting programs that provide the poor with more choices. A higher minimum wage would allow a person who now works two or three jobs to work just one. Policies like this allow poor people to be more free—less tied down. Conservatives see this as a bad thing.

But what do we get for our policies that push people to work more than they wish? We get 16 percentage points more of growth—30% higher growth. But the United States has a Gini Coefficient (a measure of income inequality) that is almost 50% higher. So it seems that the extra gross productivity we’ve gained from all the extra working has primarily gone to those at the top. Indeed, if the minimum wage had risen along with productivity growth from 1968, the minimum wage would now be $22 per hour. Instead, it is $7.25 per hour—less than one-third this value. Today, most workers would be thrilled to get a job that paid $22 per hour.

The fact that the French work fewer hours ought to make us wonder about ourselves. The truth is that most Americans do not “live to work.” Most people take Social Security early even though they get less money, because they don’t like their jobs. The problem is that policy is mostly determined by people who do love their jobs, which are both well paying and physically easy. Most backhoe operators don’t feel the same.

Too much in the United States, we assume that the way things are is just natural. But we choose the society we live in. Even the 40-hour work week, in as much as it means anything to people now forced to work multiple jobs, is an artificial construct. At one time people worked far more than that. But our society is far more wealthy now. We have options. Unfortunately, our political class is dominated by representatives of the rich and so everything is seen through that lens. The truth is that more Americans should work. And most Americans should work less. And all the rewards of society should be more equitably shared. If we did that, the vast majority of Americans would have a better life, even if per capita productivity went down.

Afterword

Dean Baker also discussed global warming:

However there is another factor worth mentioning in this context. The United States is the world champion in greenhouse emissions per capita. While we have a bit less than five times the population of France we have over 16 times the carbon emissions. In effect we are imposing a cost on the rest of the world to maintain our standard of living.

“Our standard of living” meaning primarily the excessively high standard of living of our society’s “Winners!”

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About Frank Moraes

Frank Moraes is a freelance writer and editor online and in print. He is educated as a scientist with a PhD in Atmospheric Physics. He has worked in climate science, remote sensing, throughout the computer industry, and as a college physics instructor. Find out more at About Frank Moraes.

0 thoughts on “Inequality Trumps Productivity

  1. Stunning interview with Thomas Frank and Adolph Reed:

    [url=http://www.salon.com/2014/03/09/we_are_all_right_wingers_now_how_fox_news_ineffective_liberals_corporate_dems_and_gop_money_captured_everything/]We are all right-wingers now: How Fox News, ineffective liberals, corporate Dems and GOP money captured everything[/url]

    A lot to think about, there . . .

  2. Yeah, I tracked down Reed’s article and read it last week. He did a great interview with Sam Seder on [i]Majority Report[/i]. It is exactly what I’ve been saying. The Democratic Party is only liberal in terms of social policy. On economic policy, they are pretty much the same as the Republicans. What I think everyone is missing–and this is what I’m working on–is how the two parties have worked themselves to the right. I don’t think the Republicans became crazy all by themselves. They were forced that way by the Democrats’ move to the right. Now that’s worked out rather well for the Democrats, but it’s been terrible for liberalism. And it’s been terrible for the country.

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