Are Economic Elites Awaking to the Need to Do Something About Inequality?

Stephen Herzenberg |

The first in an occasional series on reducing inequality

Are American opinion leaders and policymakers finally ready for a serious effort to reduce economic inequality and rebuild opportunity in America?

In a series of blog posts, we will point to growing evidence that they might be, thanks to a powerful mix of unrelenting data on economic polarizations and worker campaigns demanding a change. Better late than never.

In this first entry, I want to set up the series with some context.

To working families and a small community of data-driven labor economists, it has been obvious since the 1980s that economic inequality has been growing in the United States. (The Economic Policy Institute’s first The State of Working America came out in 1988.)

Since the 1990s, a central cause of this inequality has been the low wages and benefits provided to workers in service-sector jobs that cannot relocate because they have to be near their customers. We are talking about jobs in fast food and other restaurants, janitorial services, health care, early childhood and higher education, child care, long-term care, and retail—the growth of internet shopping notwithstanding. These sectors account for the vast majority of the lowest paid third of wages.

The obvious, and simplest, way to reduce inequality—rebuilding the middle class—would be to pay lower-wage workers in non-mobile services more money. After all, the employer can’t relocate.

There are two basic ways to lift wages a lot in low-wage service jobs that can’t relocate. You can raise wages directly through public policy (e.g., minimum and living wage laws, and occupational or industry wage standards such as prevailing wage laws in construction). Or you can provide workers a real right to form labor organizations that include all the workers within a geographical area that are employed within each industry. These unions would bargain regionally, similar to building trades unions, and lift wages and benefits to levels that can support a family—$15 per hour in fast food, for example. (For more on these types of unions, click here or here.)

You with me so far? This really isn’t rocket science.

In fact, a study undertaken at a little-known Congressional research agency called the Office of Technology Assessment in late 1993 was aimed at explaining all this. The study also aimed to explain (perhaps too academically or technocratically) that smart policies could fix inequality AND make the economy more productive. Unfortunately, the Gingrich Congress closed OTA (as we wrote about here).

The study focused on non-mobile industries—in other words, most of the economy—was reworked for publication outside OTA and received little attention. Even if OTA hadn’t closed, the economy probably needed to become further polarized, and workers readier to challenge their lot, before opinion leaders and policymakers would actually consider real fixes.

Do we have a level of inequality and worker discontent adequate now to wake opinion leaders and policymakers into a (deep baritone now) “serious discussion” and, heaven’s to Betsy, action in some place? In future blog posts over the next year, we’ll point to some hopeful signs and make suggestions on how to build on those, including at the state and local level in Pennsylvania.