Re: Political Sci/Social Sci Term Paper Ideas Available

Donald L. Libby (
Sun, 8 Sep 1996 17:44:42

In article <> writes:
>Subject: Re: Political Sci/Social Sci Term Paper Ideas Available
>Date: Sun, 08 Sep 1996 14:55:02 -0500

>In article <>,
> (Donald L. Libby) wrote:

>[Everything snipped.]

>The Author responds:

>I think that it is best to keep the discussion focused on working
>mens' wages as opposed to income which includes dividends, interest,
>capital gains, unincorporated business income, etc. I think this
>is why what Lester Thurow had to say diverges so much from the
>income statistic tables of the U.S. Bureau of the Census. It is
>also advisable to exclude the wages of top earners such as top
>corporate executives, Oprah Winfrey, sports stars, etc.

I found two articles by Lester Thurow that deal with the problems
of falling wages and incomes of working people. Not surprisingly,
EEO is not among the reasons he gives for these problems. Here's
a brief review of Thurow's articles:

"Why Their World Might Crumble: How much Inequality Can a
Democracy Take?" by Lester Thurow, _New York Times Magazine_,
November 19, 1995. pp. 78-79

This article is about the reasons for - and consequences of -
rising income inequality in the United States. It begins with
the observation that the median real (inflation-adjusted) wage
of all men working full time fell from $34,048 in 1973 to
$30,407 in 1993, and real median household incomes have fallen
from $33,585 in 1989 to $31,241 in 1993 (adjusted for
inflation and household size), while the real per-capita GDP
increased by 29%. At the same time that wages and household
incomes were falling for some, a sharp rise took place in the
inequality of wealth: the share of total net worth of the top
one-half of one percent of the population rose from 26% in
1983 to 31% in 1989, and the share of total net worth held by
the top 1% of the population stood at 40% in the early 1990s -
about double their share in the mid-1970's.

Thurow points to four causes for this rise in inequality:
rising demand for skilled labor, competition from labor in
other countries, US monetary policy, and a change in the
"social contract" between owners and workers. In this article
he focuses on the changing social contract that has allowed
companies with high and rising profits to lower wages, slash
benefits, and lay-off hundreds of thousands of workers. He
points out that many societies of the past have existed with
enormous inequalities of wealth, because they did not believe
in the value of equality: "Democracies have a problem with
rising economic inequality precisely because they believe in
political equality".

Rather than a sudden collapse, Thurow likens our possible
future to a gradual loss of social organization like the Roman
Empire. He draws parallels between the Romans' decline in
organization to fertilize fields with our decline in public
spending on infrastructure, education, research, and
development. Unless the democratic political system can
reverse the capitalist economic system's trend toward
inequality, our society could face a slow downward spiral -
but no one really knows. Thurow adds that "a large group of
hostile voters who draw no benefits from the economic system
and don't think the government cares is not a particularly
promising recipe for economic or political success."

"The Crusade That's Killing Prosperity", by Lester Thurow, _The
American Prospect_, March/April, 1996 pp.54-59.

In this article, Thurow analyzes in somewhat greater depth the
causes of rising inequality and falling wages. While
acknowledging the attention that globalization and the shift
in demand from low skilled to high skilled labor have received
in the economic literature, he lays the lion's share of blame
on a slack labor market produced by anti-inflationary monetary
policy. His evidence for the "labor surplus" is not reflected
by the official unemployment rate of 5.7%, but is gathered
from the 8 million officially unemployed, plus 6 million not
working but not actively looking, plus 4.5 million part-timers
who want more work, plus 18 million underemployed temp workers
and "consultants", plus 5.8 million "missing males" who exists
in census statistics but not in labor statistics, plus 11
million legal and illegal immigrants.

This labor surplus has developed because anti-inflationary
slow-growth macro-economic monetary policy has prevented the
economy from growing fast enough to absorb the surplus,
according to Thurow. Add to this a campaign of union busting,
and the pressures of globalization and you get falling wages.
Besides the official unemployment figures being misleadingly
low, Thurow believes the official inflation figures to be
misleadingly high, leading to overly restrictive interest rate
control at the central banks. The bottom line is that "rising
inequality and falling wages have to come to be seen as more
important problems than the ghost of inflation when it comes
to getting elected or reelected" - looser interest rates for
faster growth would tighten up the labor market, and much
greater investment in human capital to upgrade the skills of
the US workforce would make them more competitive globally,
thus easing the downward pressure on wages.

Libby's comments:

Thurow never mentions equal employment opportunity as a cause of
wage erosion, because there are far more powerful causes at work.
None-the-less, we could add wage equalizing policy as a downward
force acting on white male wages, since their wages were
substantially higher than those of other economically disadvantaged
groups prior to the implementation of EEO. But the equalization of
wages between racial, ethnic, or gender groups is self-limiting:
it can only go so far, and when wages are equal, it stops. The
removal of this downward pressure on white male wages - whether by
abolishing EEO or by allowing it to run its course - will not
necessarily halt the decline in white male wages if the more
powerful pressures of a slack labor market, globalization, or
falling productivity are not countered by a deliberate, willful,
organized opposition.

The opposition that Thurow recommends is a combination of faster
growth to tighten up the labor market, and better education to
raise productivity and compete more effectively in global labor
markets. In addition, if the social contract between labor and
capital can be re-negotiated so that their common value of
political equality can be expressed as greater equality between
economic classes, then perhaps we can avoid the gradual dissolution
of American society. In more blunt terms, bashing EEO will not
accomplish the desired outcome of raising white male wages: ending
racial inequality does not stand in the way of ending economic
inequality. In my opinion, a campaign of hate literature that
confuses the issue by failing to identify the major causes of
falling middle class standards of living and instead blames it on
the cheap scape-goat of hated minority out-groups will not help to
prevent the gradual dissolution of American society, but rather,
will hasten its demise.