Economists Ian Dew-Becker and Robert Gordon are responsible for one of the foundational findings in the inequality literature, namely that only the top decile of the income distribution has seen productivity growth show up as wage growth. The bottom 90 percent have basically seen stagnant wages and little in the way of productivity gains. they make another interesting point today when they argue that you essentially have to understand the economy as having two regions: The top ten percent, and the bottom 90 percent. Each region is seeing massive inequality, but for different reasons. For the bottom 90 percent, you've got skills premiums (though it's not really towards technology so much as towards managerial skill. "During 1979–97 fully half of the growth in the college wage premium can be attributed to the increased relative wage of the group called 'managers,' and only 17 percent to the computer-related occupational groups," they say), declines in unionization and the minimum wage, outsourcing, global competition, and a slowdown in the rate of growth of the relative supply of college-educated workers (as a proportion of the total workforce). For the top ten percent, you have to delineate between the "superstar effect," wherein public figures (actors, musicians, sports stars) now have a much wider world of possible consumers, and so can become global figures with all the associated gains. This, they say, reflects "market forces." Conversely, for CEO pay, "there is strong evidence that incomes have been driven by non-market forces," including peer effects and cozy board relationships. That requires legislation. It's provocative stuff, though probably only part of the story. The increasing financialization of the economy, for instance, really erupted after the late-90s, which may be why it plays such a small role in their story, but hedge fund managers and i-bankers have a real role in top decile inequality, and it's not explained by either CEO pay or superstar effects. In the bottom 90 percent, there's been a real tilt in public policy, not to mention tax rates, towards upward redistribution and reduced worker bargaining power. In the aggregate, what we're basically seeing is that there are a ton of factors contributing to inequality. Changing them in the economy would be almost impossible. Redressing them through the tax and social policy systems would be considerably easier.
