Miller - explaining income inequality

Explaining Income Inequality


VARIOUS ECONOMIC AND SOCIOLOGICAL THEORIES ARE RELEVANT FOR UNDERSTANDING INCOME INEQUALITY.


Various economic and sociological theories are relevant for understanding income inequality.

HOWEVER, EACH THEORY IS LIMITED SINCE IT ONLY ADDRESSES PART OF THE COMPLEX REASONS FOR INEQUALITY.



However, each theory is limited since it only addresses part of the complex reasons for inequality.

IN OTHER WORDS, NO SINGLE THEORY PROVIDES A HOLISTIC EXPLANATION.




In other words, no single theory provides a holistic explanation.

IN THIS TUTORIAL, A FRAMEWORK IS PROVIDED TO ENABLE STUDENTS TO MORE EASILY UNDERSTAND THE REASONS FOR INCOME INEQUALITY.





In this tutorial, a framework is provided to enable students to more easily understand the reasons for income inequality.

INCOME VARIATION WILL BE SEEN AS A FUNCTION OF TWO SIMPLE CONCEPTS:





In this tutorial, a tool is provided to enable students to more easily understand the reasons for income inequality.

Income variation will be seen as a function of two simple concepts:

THE DEMAND FOR LABOR





In this tutorial, a tool is provided to enable students to more easily understand the reasons for income inequality.

Income variation will be seen as a function of two simple concepts:

the demand for laborTHE SUPPLY OF LABOR

PLEASE NOTE THAT:

$ $

Please note that:

1. INCOME INEQUALITY WILL BE IDENTIFIED IN TERMS OF VARIATIONS IN $, AND

$ $

$

Please note that:

1. Income inequality will be identified in terms of variations in $, and

2. VARIATIONS IN $ WILL BE SEEN AS A CONSEQUENCE OF THE SUPPLY OF PEOPLE WHO ARE WILLING AND CAPABLE OF PERFORMING GIVEN KINDS OF JOBS, RELATIVE TO THE DEMAND FOR THE PERFORMANCE OF THOSE JOBS.

Please note that:


2. variations in $ will be seen as largely a consequence of the supply of people who are willing and capable of performing given kinds of jobs, relative to the demand for the performance of those jobs.

THEREFORE, IF THERE EXISTS SIGNIFICANT DEMAND FOR THE PERFORMANCE OF AN OCCUPATION

Demand

Supply=

Please note that:



Demand

Therefore, if there exists significant demand for the performance of an occupation

BUT THE SUPPLY OF WORKERS IS LOW IN RELATION TO THAT DEMAND,

Supply=

Please note that:



Demand

Therefore, if there exists significant demand for the performance of an occupation

but the supply of workers is low in relation to that demand, HOW WOULD THAT AFFECT INCOME?

Supply= $

Please note that:



Therefore, if there exists significant demand for the performance of an occupation but the supply of workers is low in relation to that demand, how would that

affect income? OF COURSE, IT WOULD INCREASE INCOME.

Demand

?

Please note that:



CONVERSELY, IF THERE EXISTS LITTLE DEMAND FOR THE PERFORMANCE OF AN OCCUPATION, BUT THE SUPPLY OF WORKERS IS LARGE, HOW WOULD THAT AFFECT INCOME?

Supply

= ?

Please note that:



Demand

Conversely, if there exists little or flat demand for the performance of an occupation but the supply of workers is great, how would that affect income?

Supply

= $

Please note that:



Demand

Conversely, if there exists little demand for the performance of an occupation but the supply of workers is large, how would that affect income?

IMPORTANT TO NOTE:

ORTHODOX ECONOMIC THEORY HOLDS THAT LABOR DEMAND, LABOR SUPPLY, AND INCOME TEND TOWARD “DYNAMIC EQUILIBRIUM.”

It is important to note that Orthodox Economic Theory holds that labor demand, labor supply, and income tend toward dynamic equilibrium.

THUS, HIGHER INCOMES,

$


Thus, higher incomes,

$


Thus, higher incomes,

(REFLECTIVE OF WHAT?)

Supply

=

Demand


Thus, higher incomes,(reflective of what?)

$

Supply

=

Demand

$


Thus, higher incomes,(reflective of greater demand than supply)

WILL TEND TO ATTRACT INCREASING NUMBERS OF WORKERS INTO THE SUPPLY OF LABOR,

Supply

Demand


Thus, higher incomes,(reflective of greater demand than supply)will tend to attract increasing numbers of workers into the supply of labor,

WHO WHEN HIRED, WILL REDUCE DEMAND.

Supply

Demand


Thus, higher incomes,(reflective of greater demand than supply)will tend to attract increasing numbers of workers into the supply of labor, who will in turn be hired, thereby reducing demand.

Supply

Demand



HOWEVER, AS DEMAND FALLS,

Supply

Demand



However, as demand falls, EVENTUALLY SO TOO WILL WAGES,

Supply

Demand


Thus, higher incomes,(reflective of greater demand than supply)will tend to attract increasing numbers of workers into the supply of labor, who will in turn be hired, thereby reducing demand. However, as demand falls, eventually so too will wages,

$=

Supply

Demand

$=


Thus, higher incomes,(reflective of greater demand than supply)will tend to attract increasing numbers of workers into the supply of labor, who will in turn be hired, thereby reducing demand. However, as demand falls, eventually so too will wages,

WHICH, IN TURN, WILL DIMINISH THE SUPPLY OF POTENTIAL WORKERS AS THEY TURN TO OTHER FORMS OF EMPLOYMENT.

Supply

Demand

$=


Thus, higher incomes,(reflective of greater demand than supply)will tend to attract increasing numbers of workers into the supply of labor, who will in turn be hired, thereby reducing demand. However, as demand falls, eventually so too will wages,which, in turn, will diminish the supply of potential workers as they turn to other forms of employment,

AND THUS STABILIZE WAGES.

Supply=

Demand

$

IN ACCOUNTING FOR INEQUALITY, FOCUS ON THE SUPPLY-SIDE REQUIRES CONSIDERATION OF FACTORS WHICH MAY FACILITATEOR IMPEDE THE CAPABILITY OF PEOPLE TO PREPARE FOR MOVEMENT INTO GIVEN KINDS OF EMPLOYMENT.

Supply=

Demand

$

In accounting for inequality, focus on the supply-side requires consideration of factorswhich may facilitate or impede the capability of people to prepare for movement intogiven kinds of employment.

SUCH FACTORS MAY RANGE FROM THE QUITE FIXED TRAITS OFINDIVIDUALS WHO MIGHT ENTER THE LABOR SUPPLY.

Supply=

Demand

INTERNAL

$


Such factors may range from the quite fixed characteristics of individuals who mightenter the labor supply.

Supply=

Demand

Internal

$


Such factors may range from the quite fixed traits of individuals who might

enter the labor supply TO THOSE ENTIRELY BEYOND THE CONTROL OFINDIVIDUALS THEMSELVES.

Supply=

Demand

EXTERNAL Internal

$


Such factors may range from the quite fixed characteristics of individuals who mightenter the labor supply (Internal) to those found within the greater society entirely beyond the control of individuals themselves.

Supply=

Demand

External Internal

$

SUPPLY-SIDE FACTORS TEND TO BE EITHER:

Supply=

Demand

External Internal

$

Supply-side factors tend to be either:

INDIVIDUAL

Supply=

Demand

External Internal

$

Supply-side factors tend to be either:

IndividualEXTRA-INDIVIDUAL

Supply=

IndividualExtra-Individual

Demand

External Internal

$

Individual characteristics are largely centered within individuals themselves, and have relevance for interest, preparation, and entry into given occupations.

Supply=


Demand

External Internal

$

Some are given, in the sense that they are either inherited or ascribed.

Class circumstances Demographic characteristics (sex, age, ethnicity, etc) Innate intelligence Raw talent

GIVEN

Supply=


Demand

External Internal

$

Others may be acquired through socialization or social privilege.

Class origins / circumstances Demographic characteristics (sex, age, etc) Innate intelligence Raw talent

ACQUIRED Given

Perspectives, values, tastes Information & connections Work habits / cultivated talent Occupational aspirations Schooling attainment

Supply=


Demand

External Internal

$

Acquired

Perspectives, values, tastes Information &

connections Work habits Cultivated talent Occupational aspirations Schooling attainment


Acquired characteristics are sometimes a consequence of the interaction between characteristics that are given and existing cultural definitions or social arrangements

Given

Supply=


Demand

External Internal

$

Acquired




Likewise, they may be simply due to the social conditions that influence the content of socialization or life chances.

Given

Supply=


Demand

External Internal

$

Acquired



That is, because of class, ethnicity, or sex, we acquire specific attitudes, tastes, or behavioral styles which subsequently influence us with respect to occupational preference, preparation, or entry.

Given


Supply=


Demand

External Internal

$

Extra-individual constraints or facilitators are external to the person, and therefore, are effectively beyond the capacity of individuals to influence. They minimize or maximize the entry of certain categories of people into labor supply pools.

Acquired Given




Supply=


Demand

External Internal

$

Consider two broad categories of extra-individual constraints / facilitators:

Acquired Given




Supply=


Demand

External Internal

$

Acquired GivenActive Passive




Supply=


Demand

External Internal

$

Acquired GivenACTIVE PASSIVEPerspectives, values, tastes Information &



Supply=


Demand

External Internal

$

ACTIVE CONSTRAINTS / FACILITATORS

AcquiredPassive Given



ACTIVE Class origins / circumstances Demographic characteristics (sex, age, etc) Innate intelligence Raw talent

Supply=


Demand

External Internal

$

ACTIVE CONSTRAINTS / FACILITATORS

Purposeful actions of people/groups that hinder or help certain kinds of people in preparing for given occupations or in accessing labor supply pools which would allow entry into relevant jobs.




ACTIVE

Education / training – arbitrary restrictions / advantages


Supply=


Demand

External Internal

$

Example:




ACTIVE



Supply=


Demand

External Internal

$

Example:

1. Segregated school systems or training/apprentice programs that exclude categories of people on the basis of such criteria as sex or race.




ACTIVE



Supply=


Demand

External Internal

$

Example:

2. Elite US universities that have “legacy admission” policies, giving applicants with alumni parents admission preference over other, possibly even more qualified, applicants who are without such parents.




ACTIVE



Supply=


Demand

External Internal

$

Example:

3. Those in a given occupation who are able to limit access to the occupation through their capacity to restrict preparation opportunities. Physicians in the US through their professional organization, the American Medical Association, are often cited as a relevant example. The AMA is said to be able to limit the production of doctors by its influence on accreditation and its common political opposition to the creation of new public-supported medical schools. Thus, the “scarcity” of doctors is largely something that is “artificially created and preserved,” rather than a function of an open/free labor market.





ACTIVE Class origins / circumstances Demographic characteristics (sex, age, etc) Innate intelligence Raw talent

Supply=


Demand

External Internal

$

PASSIVE CONSTRAINTS / FACILITATORS

AcquiredActive PASSIVE Given





Supply=


Demand

External Internal

$

Are not actively imposed at the moment, but reflect existing stratification arrangements or inequalities which either constrain or facilitate human development and career preparation for given social categories.

AcquiredActive

Social / economic inequalities Social networks and contacts

Given




PASSIVEClass origins / circumstances Demographic characteristics (sex, age, etc) Innate intelligence Raw talent

Supply=


Demand

External Internal

$

Thus, certain categories of people are more likely to be in poverty and live in residential areas beleaguered by a host of problems (e.g., violent crime, poor schools, broken families). These problems will thus impede peoples’ chances to receive adequate educational and occupational preparation.

AcquiredActive Given




PASSIVE



Supply=


Demand

External Internal

$

Alternatively, youth living in affluent communities tend to have good schools, and are also more likely to have access to social networks which provide relevant modeling, information, and contacts about decent jobs and lucrative careers.

AcquiredActive Given




PASSIVE



Supply=


Demand

External Internal

$

Acquired

External conditions have great impact on us as individuals. Lacking income, we cannot invest in education or training opportunities, nor can we give up present jobs to do so as others are dependent on our income.

Given




Supply=


Demand

External Internal

$

Acquired

Or, because of class, ethnicity, or sex, we may not be exposed to information, contacts, or role models who might inform us of opportunities for preparation or entry.

Given




Supply=


Demand

External Internal

$

Acquired

Or, because of class, ethnicity, or sex, the cultural world in which we live may impose on us “disability” in the sense that we are told, and accept, that we cannot legitimately aspire to certain schooling and occupational goals.

Given




Given

Supply=


Active Passive

Demand

Acquired

External Internal

$






Supply-Side TheoriesIndividual Theories

SUPPLY-SIDE / INDIVIDUAL THEORIES ARE PRIMARILY CONCERNED WITH DEMONSTRATING THAT INEQUALITY IS A CONSEQUENCE OF VARIABLES GENERIC TO HUMANS AS INDIVIDUALS. THEY MINIMIZE, IF NOT EXCLUDE, FACTORS OUTSIDE THE PERSON THAT OTHERWISE MIGHT INFLUENCE VARIABILITY IN REWARD.


These are primarily concerned with demonstrating that inequality is a consequence of variables generic to humans as individuals. They minimize, if not exclude, factors outside the person that otherwise might influence variability in reward.

SUCH EXPLANATIONS ASSUME A LABOR MARKET WHERE PEOPLE ARE ABLE TO ASPIRE TO, PREPARE FOR, AND ENTER JOBS ACCORDING TO THEIR INTERESTS, ABILITIES, AND EFFORTS.


These are primarily concerned with demonstrating that inequality is a consequence of variables generic to humans as individuals. They minimize, if not exclude, factors outside the person that otherwise might influence variability in reward.

Such explanations assume a labor market where people are able to aspire to, prepare for, and enter jobs according to their interests, abilities, and efforts.

HOWEVER, THE VERY CONCEPT OF SOCIAL STRATIFICATION SUGGESTS THAT LABOR MARKETS IN REAL SOCIETIES ARE NOT FREE.

Given

Supply=


Active Passive

Societal

Demand

Institutional

Acquired

External Internal

$

1. Social DarwinismHerbert Spencer

As in the natural world, humans are involved in constant struggle.Those who are at the top of the hierarchy are largely there as a result of a sorting process that rewards superior personal characteristics, e.g., heightened intelligence, talent, skills, ambition, and drive. Less endowed people therefore occupy lesser positions in the structure. Those at the bottom are clearly the most deficient individuals within the society. Social programs that might help them to move out of poverty are therefore ill-advised as they will only perpetuate inferior stock.

Individual






Given

Supply=


Active Passive

Societal

Demand

Institutional

Acquired

External Internal

$

Individual






2. Human Capitalaka orthodox or neoclassical labor market theory

Low income is a consequence of low worker productivity. Productivity,and therefore, income are thought to be most sensitive to improvementIn the attributes and resources of individual workers. Investment in additional education and training, in particular, are recommended as the primary means by which one can qualify for more productive, better-paying occupations.

Given

Supply=


Active Passive

Societal

Demand

Institutional

Acquired

External Internal

$

Individual






3. Functional Theory of Social Stratification Kingsley Davis and Wilbert Moore

Inequality in reward is universal to all societies as it ensures that the most capable people are in the most important occupational roles. High rewards are necessary for attracting people into those occupations requiring special talent or training. The very high pay attached to some positions therefore reflects the scarcity of people with such attributes that would enable them to competently prepare for and perform these roles.

Given

Supply=


Active Passive

Societal

Demand

Institutional

Acquired

External Internal

$

Individual






4. Culture of Poverty

Oscar Lewis

A largely individual explanation that argues that some poor within a society, develop certain behaviors or even a way of life that enable them to adapt to the circumstances of poverty. That is, some poor have certain beliefs and behavior practices (e.g., “live for today” or fatalistic attitudes) that help them better cope with impoverished circumstances. However, these adaptations may prevent the poor and their offspring from adopting other behaviors that would allow them to take advantage of relevant mobility opportunities should they arise.

Supply-Side Theories: Extra-Individual


These explanations hold that vocational awareness, occupational aspirations, and schooling preparation are influenced by factors largely external to individuals, and thus generally beyond their control.

PASSIVE FACILITATORS/CONSTRAINTS


Passive Facilitators/Constraints

A focus on factors currently embedded in peoples’ life conditions and social circumstances that facilitate or impede schooling and occupational attainment. Often they are products of existing stratification arrangements or inequalities, and as such define “privilege.” Popular explanations include:


Passive Facilitators/Constraints

A focus on factors that are currently embedded in peoples’ life conditions and social circumstances that facilitate or impede schooling and occupational attainment. Often they are products of existing stratification arrangements or inequalities, and as such define “privilege.” Popular explanations include:

SOCIAL CAPITALCULTURAL CAPITAL

SOCIAL REPRODUCTION


Given

Supply=


Active Passive

Societal

Demand

Institutional

Acquired

External Internal

$

5. Social Capital Wikipedia reference

Mark Granovetter

People vary in the kinds and numbers of people they know. Social contacts are important sources of information, knowledge, and opportunity about preparation for entry and mobility within jobs. Social contacts and consequent social networks vary significantly across the class structure. Presumably, the higher one’s class position, the more extensive and helpful is one’s network of social relationships with regard to these matters.






http://en.wikipedia.org/wiki/Social_capital

http://si.umich.edu/~rfrost/courses/SI110/readings/In_Out_and_Beyond/Granovetter.pdf

http://si.umich.edu/~rfrost/courses/SI110/readings/In_Out_and_Beyond/Granovetter.pdf

Given

Supply=

Extra-Individual

Active Passive

Societal

Demand

Institutional

Acquired

External Internal

$

6. Cultural Capital Pierre BordieuAnnette Lareau

People in different social classes tend to be exposed to different kinds of perspectives, knowledge, beliefs, attitudes, skills, and lifestyles.

Capitalization allows for human potential to be realized, and such effects over time are accumulated. “Cumulative advantage” describes outcomes for those in the higher reaches of the class structure (i.e., capital accumulation is varied, rich, and works to their advantage, ensuring their dominant position). However, those in the lower classes experience “cumulative disadvantage,” making upward mobility difficult despite strong motivation and efforts.

Understanding the importance of acquiring cultural capital, privileged groups often engage their children in “concerted cultivation” (i.e., going to great effort and expense to provide them with special opportunities and experiences).






http://www.youtube.com/watch?v=ru66mtZ9miI&feature=related

Given

Supply=


Active Passive

Societal

Demand

Institutional

Acquired

External Internal

$

7. Social Reproduction

Samuel Bowles and Herbert Gintis

Existing social conditions ensure that one’s offspring and subsequent generations maintain one’s advantaged or disadvantaged position in the class structure. Education inequalities are viewed as particularly important in this regard. For example, schools attended by affluent children tend to offer a richer and more demanding curriculum than those in middle and working-class neighborhoods. Schools in low-income areas, moreover, tend to receive inadequate funding and suffer from a variety of deficiencies, collectively ensuring that they will fail to serve their students. Therefore, these students when adults will be in the same class position as their parents.






http://www.webster.edu/~corbetre/philosophy/education/bg/bg-ch-5.html




These explanations generally argue that vocational awareness, occupational aspirations, and schooling preparation are influenced by factors largely external to individuals, and thus generally beyond their control.

Active Facilitators/Constraints

These explanations emphasize that people are hindered or helped in preparing for given occupations or in accessing labor supply pools by the intentional actions of given groups, organizations, and institutions.

Given

Supply=


Occupational Monopoly

Political Economy Industry / Firm

Macro Society / Economy

Demographic change State of Economy Technological change Public perception / taste

Active Passive

Labor/management policy environ. Immigration law / enforcement Fiscal and tax policies Trade policies Job programs Education / training pols./progs Social welfare pols./progs.

Societal

Demand

Institutional

Labor Process Labor Market Segmentation

Division of Labor Discrimination Mechanization Internal labor market Downsizing Dual labor market Outsourcing Split labor market

Multi-tiered structure

Acquired

External Internal

$

Professionalization Legislation – Law Licensure Rights of practice 8. Social Closure - Supply

In terms of supply, social closure is present when social groups can limit access to relevant preparation opportunities (e.g., via school segregation or educational discrimination).

It is also evident when a professional organization has such influence that it can limit the volume of those who might otherwise enter the profession, and thus increase incomes for existing practitioners by significantly restricting educational or training opportunities.






Supply=

Demand

External Internal

$

FOCUS ON THE DEMAND-SIDE REQUIRES EXAMINATION OF FACTORS WHICH INCREASE OR DECREASE THE NEED FOR PERSONNEL TO PERFORM CERTAIN OCCUPATIONAL ROLES.

Supply=

Demand

INSTITUTIONAL

External Internal

$

Focus on the demand-side requires examination of factors which increase or decrease the need for personnel to perform certain occupational roles.

RELEVANT FACTORS VARY FROM THOSE EFFECTED WITHIN THE FIRM (INSTITUTIONAL)

Supply=

Demand

Institutional

External Internal

$


Relevant factors vary from those effected within the firm (Institutional) TO THOSE THAT ARE LARGE-SCALE OR MACROSCOPIC IN NATURE (SOCIETAL).

Supply=

SOCIETAL

Demand

Institutional

External Internal

$


Relevant factors vary from those effected within the firm (Institutional) to those that are large-scale or macroscopic in nature (Societal).

Supply=

Societal

Demand

Institutional

$

Industry / Firm

Supply=

Societal

Demand

Institutional


Division of Labor Discrimination Mechanization Internal labor market Downsizing Dual labor market Outsourcing Split labor market Multi-tiered structure

$

Industry / Firm

Supply=

Societal

Demand

Institutional



$

Industry / Firm

Employers may attempt to cut costs by drawing personnel from a larger and cheaper supply of less skilled workers. This may be done by decreasing the skill content of jobs by creating a more elaborate division of labor or by instituting more extensive mechanization.

Labor Process

Supply=

Societal

Demand

Institutional



$

Industry / Firm

Employers may also attempt to cut labor costs by downsizing, i.e., terminating some of the workforce, while often requiring remaining workers to produce more.

Supply=

Societal

Demand

Institutional



$

Industry / Firm

Downsizing may also be accompanied by outsourcing, a practice entailing a shift of demand to an alternative source of labor which will work for lower wages / benefits

Supply=

Societal

Demand

Institutional



External

$

Industry / Firm

Within discriminatory labor markets, workers are hired, promoted, and/or receive varying wage rates on the basis of arbitrary criteria (e.g., age, sex, ethnicity).

Creation of an internal labor market limits positions above entry-level largely to those already employed by the firm. Viewed positively, this may reflect the firm’s interest in protecting their investment in training workers or its desire to maintain worker morale. Viewed negatively, this may be a function of the firm’s desire to maintain existing discriminatory practices and/or reduce the potential of workers to develop class consciousness and collectively engage in class struggle.

.

Labor Market Segmentation

Supply=

Societal

Demand

Institutional



$

Industry / Firm

Participation in a dual labor market or split labor market provides income advantages or disadvantages, depending on which labor market sector one works in.

Multi-tiered work structures tend to provide far lower pay for newer hires. This not only diminishes the cost of labor, but also may pit older workers against them. Note: While changes in labor process tend to increase profits by decreasing labor costs, labor force segmentation often comes at the cost of profit since it tends to impose limits not generally rooted in efficiency on an otherwise much larger supply of potential hires.

Supply=


Societal

Demand

Institutional

$

Supply=


Societal

Demand

Institutional

$

Professionalization Legislation – Law Licensure Rights of practice

Supply=

Societal

Demand

Institutional

$The demand for labor may also be influenced by the power of an occupational group itself.

An occupational monopoly exists when members of an occupational category, through organizational power, are able to gain formal control over certain functional tasks via lobbying the state to impose certification or licensing requirements. Demand for relevant services are thus effectively channeled to those within this category.



Supply=

Political Economy

Societal

Demand

Institutional

$

Public policies influence both labor demand and labor supply by affecting job creation, education and training opportunities, welfare participation, foreign trade, etc.

This may be direct (e.g., the government creates job programs during periods of economic downturn which increase labor demand, or the government cuts welfare assistance and thus pressures recipients to take jobs)…

Labor/management policy environ Immigration pols. / enforcement Fiscal and tax policies Trade policies Job programs Education / training pols./progs Social welfare pols./programs

Supply=

Political Economy

Societal

Demand

Institutional

$

or indirect (e.g., immigration law and enforcement limits the number of foreign workers competing for employment, or the state board of education requires schools to lower or raise the maximum number of students in a class, therefore increasing or decreasing demand for teachers).

Policies may also influence demand by changing the status and power of labor relative to management (e.g., Taft-Hartley lessened the ability of unions to affect labor demand within firms in “open shop” states).

Labor/management policy environ Immigration pols. / enforcement Fiscal and tax policies Trade policies Job programs Education / training pols./progs Social welfare pols./programs

Supply=

Societal

Demand

Institutional

$


Supply=

Societal

Demand

Institutional

$Demographic change State of Economy Technological innovation Public perception / taste


Supply=

Societal

Demand

Institutional

Internal



Demographic change may influence the relative size of age cohorts, thus affecting the competitiveness of the labor market. Current trends of “depopulation” (i.e., birth rates below replacement) in western Europe and Japan, should give today’s youth significant labor market advantages upon later entering the work force in these societies. Similarly, Americans born just before the post-war baby boom, have enjoyed significantly greater labor market opportunities in light of their comparatively small number.

Source: http://www.prb.org/Articles/2008/luckyfew.aspx

Demographic Opportunity

Labor Market Advantaged

Labor Market Disadvantaged

http://www.prb.org/Articles/2008/luckyfew.aspx

Supply=

Societal

Demand

Institutional

Internal



The state of the economy favors some industries and occupational groups more than others (e.g., income returns for occupations related to finance and construction typically accelerate during periods of rapid economic growth). Regions of the nation may experience differential growth or decline. Chronically depressed regions are marked by too little labor demand relative to labor supply.

Supply=

Societal

Demand

Institutional

Internal



Technological innovation also works to the advantage of some groups over others (e.g., the WWW has significantly augmented labor supplies in many industries. For example, Americans employed in back-office processing operations increasing compete with those in India and similar nations.

Supply=

Societal

Demand

Institutional

Internal



Technological innovation

This development is not just among low-to-mid level workers, but may also affect professionals. Radiologists in places such as India now read X-rays and MRIs of American patients at a fraction of the fee charged by their US counterparts. http://www.outsource2india.com/Healthcare/articles/why-out

source-teleradiology-services.asp

http://www.outsource2india.com/Healthcare/articles/why-outsource-teleradiology-services.asp

http://www.outsource2india.com/Healthcare/articles/why-outsource-teleradiology-services.asp

Supply=

Societal

Demand

Institutional

Internal



Public perceptions / preferences affect what people value and wish to spend their money on. Several decades ago, American car buyers began believing that U.S.-made vehicles were of less quality and less efficient than foreign imports. Without sufficient technological innovation, this led to decreasing domestic market share, and eventually contributed to their current crisis (including loss of jobs, wages, benefits). http://www.ft.com/cms/s/0/655892fa-4c83-11de-a6c5-00144feabdc0.html?nclick_check=1

http://www.ft.com/cms/s/0/655892fa-4c83-11de-a6c5-00144feabdc0.html?nclick_check=1

Supply=




Demographic change State of Economy Technological innovation Public perception / taste

Labor/management policy environ. Immigration pols. / enforcement Fiscal and tax pols. Trade pols. Job programs Education / training pols./progs Social welfare pols./progs.

Societal

Demand

Institutional


Division of Labor Discrimination Mechanization Internal labor market

Downsizing Dual labor market

Outsourcing Split labor market Multi-tiered structure

$


Supply=




Demographic change State of Economy Technological change Public perception / taste Social movements – boycotts Revolution


Societal

Demand

Institutional




$


8b. Social Closure - Demand

At the demand level, social closure relates to attempts among those within an occupation to achieve a monopoly over work performance. That is, demand may be strongly influenced by the ability of occupational groups to generate sufficient power to gain control over particular productive functions. Such activity is evident in the efforts of occupations to “professionalize” (i.e., create standards of performance and prerequisites for entry) through an organizational vehicle which then lobbies legislative bodies to impose special requirements (e.g., training prerequisites and/or licensing) on those who would practice the craft. Demand for service is thus effectively channeled to only those who are duly credentialed.

Supply=






Societal

Demand

Institutional




$


9. Marxian / Neo-Marxian

These explanations largely center on either the labor process, or the segmentation of the labor force.

Focus on the labor process relates to how work is organized, performed, and distributed in order to decrease the demand for more expensive, skilled workers or to cut costs by shedding many employees from the firm.

Marx, e.g., noted that capitalist producers progressively lessen, or altogether remove, the skill-component of manufacturing work by first instituting a complex division of labor which simplifies production, and then further proceeds by replacing workers with machines.

Supply=






Societal

Demand

Institutional




$



Downsizing entails large-scale cost cutting, often motivated by the quest for short term profits, by terminating large numbers of workers. Remaining workers are often then required to “take up the slack” caused by such reductions. Some of vacated positions, however, may be refilled soon thereafter, perhaps by the same workers, but now employed as “temps.”

Outsourcing part or all of manufacturing to areas of cheaper labor either within the U.S. or abroad represents the most recent phase of this process.

Supply=






Societal

Demand

Institutional




$



A working class segmented by race will be likely be characterized by significant racial antagonism, and thus unlikely to oppose the interests of capitalist employers.

Supply=






Societal

Demand

Institutional




$



Marxian theory also addresses the larger political/economic environment , e.g., Marx saw the government as “the ruling committee of the bourgeoisie.”

The state accordingly acts in the interests of big business, crafting laws and policies that favor the interests of the most powerful corporations over the interests of labor, as well as those of small business.

Given

Supply=






Active Passive


Societal

Demand

Institutional




Acquired

External Internal

Education / training inequalities Social networks and contacts

Education / training – arbitrary restrictions

$


Class origins / circumstances Demographic characteristics (sex, age, race, etc) Innate intelligence Raw talent



Employing firms can be categorized as either core (large, monopolistic, capital-intensive, profitable) or peripheral (small, competitive, labor-intensive, marginal) . Each has a corresponding labor market, that is, the primary labor market for the core, and the secondary labor market for the peripheral, offering workers within it quite different chances for decent pay, promotions, job security, fair employer treatment, etc…

10. Dual Economy / Dual Labor Market

Given

Supply=






Active Passive


Societal

Demand

Institutional




Acquired

External Internal



$





Labor-market placement critically affects career development. Less-educated, less-skilled workers, often of minority background, tend to be excluded from the primary labor market, and thus are limited to jobs in the secondary labor market where they likely experience exploitative working conditions. Employers assume these workers also to be less diligent and reliable. In turn, workers participating in the secondary labor market adopt work-force attachments and behavioral styles consistent with the nature of the work they perform and how they are treated by employers.

10. Dual Economy / Dual Labor Market (cont)

Given

Supply=






Active Passive


Societal

Demand

Institutional




Acquired

External Internal



$





11. Structural TheoryJulius Wilson

Finally, Wilson’s “structural theory” represents an attempt to account for the adverse circumstances of inner-city black Americans. Although historically situated, it addresses economic inequality via extensive treatment of both supply and demand factors.

Wilson holds that black poverty today is far more a matter of class conditions than overt racism. While the legacy of slavery and historical discrimination placed blacks at the bottom of the urban class structure by the middle of the 20th century, various economic, demographic, and cultural factors have since joined to limit their mobility prospects.

In brief: Deindustrialization has created high unemployment and underemployment, while a declining tax base, due also to the flight of middle and working class people to the suburbs, has undermined provision of essential services (decent schools, health services, etc) within inner cities. Now lacking a substantial black middle-class, inner-city populations, in turn, reflect the “concentration effects” of poverty, including a preponderance of single-parent families, drug addiction, violent crime—all of which further serve to reduce individuals’ life quality and mobility potential, as well as diminish the likelihood of economic investment from outside sources.

Marxian radical

Supply=





Active Passive


Societal

Demand

Institutional




Acquired

External Internal



$

social Darwinism human

capital functional theoryculture of poverty

social closure

cultural capital social capital

social reproduction


dual labor market



Given


Summary

Marxian radical

Wilsonstructural


The End

Miller - explaining income inequality

Education

Transcript of Miller - explaining income inequality