Inequality & Development Inequality & Development in the World System IIin the World System II

Current and Future Current and Future Inequality Trends: The Inequality Trends: The

Great U-TurnGreat U-TurnAri BerenbaumAri Berenbaum

4-19-034-19-03

Overview of DiscussionOverview of Discussion Post-Industrial Visions of Society (Bell Post-Industrial Visions of Society (Bell

1973)1973) Trends in U.S. Earnings Inequality (Morris Trends in U.S. Earnings Inequality (Morris

and Western 1999; Nielsen and Alderson and Western 1999; Nielsen and Alderson 2001)2001)

International U-Turn (Alderson and Nielsen International U-Turn (Alderson and Nielsen 2001)2001)

Theories of Postsocialist Stratification (Nee Theories of Postsocialist Stratification (Nee 1996)1996)

““The Coming of Post-Industrial The Coming of Post-Industrial Society” – Bell (1973)Society” – Bell (1973)

Assumptions of Post-industrial societyAssumptions of Post-industrial society “…“…the primacy of cognitive and the primacy of cognitive and

theoretical knowledge.” (805)theoretical knowledge.” (805) The centrality and codification of The centrality and codification of

theoretical knowledgetheoretical knowledge The creation of new intellectual The creation of new intellectual

technologytechnology

Bell’s Assumptions (Cont’d)Bell’s Assumptions (Cont’d) The spread of a knowledge classThe spread of a knowledge class

1975: technical and professional class –25%1975: technical and professional class –25% 2000 (predicted): Largest class in society2000 (predicted): Largest class in society

The economics of informationThe economics of information ““……for the optimal social investment in for the optimal social investment in

knowledge, we have to follow a “cooperative” knowledge, we have to follow a “cooperative” strategy in order to increase the spread and strategy in order to increase the spread and use of knowledge in society.” (808)use of knowledge in society.” (808)

Hittites: Iron forgers in 1400 B.C.Hittites: Iron forgers in 1400 B.C. 200 year 200 year copyright protection / competitive advantagecopyright protection / competitive advantage

Bell’s Assumptions (Cont’d)Bell’s Assumptions (Cont’d) The The situs situs vs. stratavs. strata

Power distributed along vertical Power distributed along vertical situses situses rather than horizontal stratarather than horizontal strata

Functional situses: Functional situses: scientific, scientific, technological, administrative, culturaltechnological, administrative, cultural

Institutional situses: Institutional situses: economic economic enterprise, government bureaus, enterprise, government bureaus, universities and research complexes, universities and research complexes, social complexes, militarysocial complexes, military

Situs conflict preempts traditional class Situs conflict preempts traditional class solidarity, especially a coherent solidarity, especially a coherent professional social classprofessional social class

Bell’s PredictionsBell’s Predictions 1) Technical skill, not property or 1) Technical skill, not property or

inherited wealth, as the new basis for inherited wealth, as the new basis for power and positionpower and position This does not imply that technicians will This does not imply that technicians will

necessarily consolidate power and manage necessarily consolidate power and manage the political orderthe political order

2) Rather than examine class 2) Rather than examine class distinctions along traditional status distinctions along traditional status lines, lines, situsessituses will be the major political will be the major political interest units in society (e.g. military, interest units in society (e.g. military, economic enterprise, research economic enterprise, research organizations)organizations)

Evaluating Bell: QuestionsEvaluating Bell: Questions 1) The knowledge class, although having 1) The knowledge class, although having

expanded since 1973, is not largest group expanded since 1973, is not largest group in society in 2004. Given the assumption in society in 2004. Given the assumption of unlimited resources in the U.S., is this a of unlimited resources in the U.S., is this a valid endpoint prediction over any future valid endpoint prediction over any future time period, or are there structural time period, or are there structural mechanisms inhibiting knowledge class mechanisms inhibiting knowledge class dominance?dominance?

Is the situs (vertical structure) a valid Is the situs (vertical structure) a valid sociological unit of examination? Does it sociological unit of examination? Does it signify a new class, or just a macro signify a new class, or just a macro perspective of structural political power? perspective of structural political power? ((situsessituses: economic enterprise, government : economic enterprise, government bureaus, universities and research bureaus, universities and research complexes, social complexes, military)complexes, social complexes, military)

U.S. Inequality Trends: Morris U.S. Inequality Trends: Morris and Western 1999and Western 1999

U-Turn Backdrop:U-Turn Backdrop: Median incomes increasing, 1950-1970, Median incomes increasing, 1950-1970,

especially for lower classesespecially for lower classes Reversal starting in 1973, by 1990s, Reversal starting in 1973, by 1990s,

80% of workforce earning less than their 80% of workforce earning less than their counterparts in the 1960scounterparts in the 1960s

Supply Side Hypotheses, Morris Supply Side Hypotheses, Morris and Western 1999and Western 1999

Population: Baby Boom, born 1946-1964, Population: Baby Boom, born 1946-1964, in workforce 1964-1982. Unsubstantiated. in workforce 1964-1982. Unsubstantiated. Education effect of 1970s.Education effect of 1970s.

Women in workforce, 34%Women in workforce, 34%59%, 59%, 195019501994. But wages rose at every 1994. But wages rose at every decile. Unsubstantiated.decile. Unsubstantiated.

Immigration. SubstantiatedImmigration. Substantiated Education: “Skill-based technological Education: “Skill-based technological

change” – collapse of earnings of high change” – collapse of earnings of high school grads and dropouts. Implied school grads and dropouts. Implied college premium.college premium.

Demand Side Hypotheses, Demand Side Hypotheses, Morris and Western 1999Morris and Western 1999

Decline in manufacturing employment, Decline in manufacturing employment, rise in “service economy” rise in “service economy” Outsourcing, subcontracting, temporary, Outsourcing, subcontracting, temporary,

contingent, part-time workcontingent, part-time work But inequality growing within sectors, not But inequality growing within sectors, not

only between themonly between them 1970s: Cost reduction, end of the 1970s: Cost reduction, end of the

internal labor market, “downsizing”internal labor market, “downsizing”

Institutional Hypotheses, Institutional Hypotheses, Morris and Western 1999Morris and Western 1999

Minimum Wage Freeze, $3.35/hr, 1980-Minimum Wage Freeze, $3.35/hr, 1980-19901990 Explains 17% of gap growth between college Explains 17% of gap growth between college

and high school gradsand high school grads Decline in UnionizationDecline in Unionization

Decrease in union density may explain 20% of Decrease in union density may explain 20% of male wage inequality, 50% of the inequality for male wage inequality, 50% of the inequality for male blue-collar workersmale blue-collar workers

Mixed results on imports from LDCs (less Mixed results on imports from LDCs (less developed countriesdeveloped countries

Question: Morris and Question: Morris and Western Western

Policy: WWYD? Although this is not a Policy: WWYD? Although this is not a class in labor market policy, do any class in labor market policy, do any of you bring outside knowledge on of you bring outside knowledge on what may the best avenue of change what may the best avenue of change if further intensification of the Great if further intensification of the Great U-Turn is to be avoided? Min. Wage U-Turn is to be avoided? Min. Wage = living wage? Trade protectionism? = living wage? Trade protectionism? Federally mandated Wal-Mart Federally mandated Wal-Mart Unionization? Immigration control? Unionization? Immigration control? Free college education?Free college education?

U.S. Inequality Trends: Nielsen U.S. Inequality Trends: Nielsen and Alderson (2001)and Alderson (2001)

Over 3,100 U.S. CountiesOver 3,100 U.S. Counties Institutional Mechanisms:Institutional Mechanisms:

DeunionizationDeunionization Declining Minimum WageDeclining Minimum Wage Deregulation – minimal impactDeregulation – minimal impact

Labor Supply Changes:Labor Supply Changes: Baby boom / Education: Preference for higher ed. in Baby boom / Education: Preference for higher ed. in

1970s. Deceleration of high-skilled workers in 1980s1970s. Deceleration of high-skilled workers in 1980s Declining skills of high school gradsDeclining skills of high school grads Immigration: modest effect among high school gradsImmigration: modest effect among high school grads Female labor force: decline in male-female wage gapFemale labor force: decline in male-female wage gap Government transfers: Murray, unsubstantiated, Government transfers: Murray, unsubstantiated,

welfare benefits declined after mid-1970swelfare benefits declined after mid-1970s

U.S. U-Turn: Nielsen and U.S. U-Turn: Nielsen and AldersonAlderson

Labor DemandLabor Demand Deindustrialization – decline in Deindustrialization – decline in

manufacturing.manufacturing. Significant but does not explain why inequality Significant but does not explain why inequality

has increased within manufacturing industries.has increased within manufacturing industries. Globalization – significantGlobalization – significant

Direct investment (DI), deindustrializationDirect investment (DI), deindustrialization North-South trade, depressing wagesNorth-South trade, depressing wages

Stability (Variance) of Earnings Stability (Variance) of Earnings (Danziger and Gottshalk 1995): (Danziger and Gottshalk 1995): increased part-time work, job turnover, increased part-time work, job turnover, use of temporary or contingent workers. use of temporary or contingent workers. Explains 1/3-1/2 inequality rise. Explains 1/3-1/2 inequality rise.

U.S. U-Turn: Nielsen and U.S. U-Turn: Nielsen and AldersonAlderson

Median Family Income (-): By countyMedian Family Income (-): By county Household CompositionHousehold Composition

Female-Headed Households (+)Female-Headed Households (+) Female Labor Force Participation (-), Female Labor Force Participation (-),

nonsignificantnonsignificant Elderly (marginal + to -): social security benefitsElderly (marginal + to -): social security benefits

Income Distribution CompositionIncome Distribution Composition Sector Dualism (marginal): Kuznets’ central Sector Dualism (marginal): Kuznets’ central

assertion. Only important for developing assertion. Only important for developing countries.countries.

Educational Dispersion (-): enrollment in Educational Dispersion (-): enrollment in secondary schoolsecondary school

International U-Turn (Alderson International U-Turn (Alderson and Nielsen 2001)and Nielsen 2001)

16 OECD Countries, 1967-1992 16 OECD Countries, 1967-1992 (N=187)(N=187)

10 of 16 countries experienced 10 of 16 countries experienced inequality upswinginequality upswing

Domestic U-Turn Factors, Domestic U-Turn Factors, Alderson and Nielsen 2001Alderson and Nielsen 2001

GDP/capita (+): significant at 10% levelGDP/capita (+): significant at 10% level Sector Dualism (+): significant in core Sector Dualism (+): significant in core

modelmodel % labor force in agriculture: nonsignificant % labor force in agriculture: nonsignificant

in core model, positive in global model in core model, positive in global model (unexpected), Kuznets is less important in (unexpected), Kuznets is less important in industrialized countriesindustrialized countries

Natural rate of population increase (+): In Natural rate of population increase (+): In core modelcore model

Diffusion of Education (-): significantDiffusion of Education (-): significant Period Effects (+ in core model, disappear Period Effects (+ in core model, disappear

in global model): 1973-1981>1967-1972in global model): 1973-1981>1967-1972

Global U-Turn Factors, Global U-Turn Factors, Alderson and Nielsen 2001Alderson and Nielsen 2001

Direct Investment Outflow/labor force (+)Direct Investment Outflow/labor force (+) Contributes to deindustrializationContributes to deindustrialization Weakens labor’s bargaining positionWeakens labor’s bargaining position Affects capital/labor distribution, unskilled Affects capital/labor distribution, unskilled

labor demandlabor demand Import Penetration/GDP(North-South Import Penetration/GDP(North-South

trade)(+)trade)(+) Migration (+): Significant when DI outflow Migration (+): Significant when DI outflow

and import penetration are controlled forand import penetration are controlled for

Institutional/Other U-Turn Institutional/Other U-Turn Factors, Alderson and Nielsen Factors, Alderson and Nielsen

20012001 Union Density (-): significantUnion Density (-): significant Wage Setting (-): significantWage Setting (-): significant Decommodification of Labor (-): E.g. Sweden, Decommodification of Labor (-): E.g. Sweden,

Finland, social welfare benefits, significantFinland, social welfare benefits, significant Female Labor Force Participation (+): does Female Labor Force Participation (+): does

not account for single-headed housesnot account for single-headed houses % of Labor Force in Manufacturing (-): flat % of Labor Force in Manufacturing (-): flat

incomes, significantincomes, significant

““Postsocialist Stratification,” Nee Postsocialist Stratification,” Nee 19961996

Central Q: How does a society stratify in Central Q: How does a society stratify in transition from redistribution to markets?transition from redistribution to markets?

Primary Hypothesis: Market transition Primary Hypothesis: Market transition theory:theory: ““……there will be a change in the distribution there will be a change in the distribution

of rewards favoring those who hold market of rewards favoring those who hold market rather than redistributive power…incentives rather than redistributive power…incentives are improved as producers retain a greater are improved as producers retain a greater share of the economic surplus.” (847)share of the economic surplus.” (847)

Thus, returns to owners of political capital Thus, returns to owners of political capital (i.e. officials) decline relative to producers.(i.e. officials) decline relative to producers.

Secondary Hypotheses, NeeSecondary Hypotheses, Nee

Human capital hypothesis: higher returns Human capital hypothesis: higher returns for human capital as incentives for for human capital as incentives for individual effort and productivity increaseindividual effort and productivity increase

Sector mobility hypothesis: higher returns Sector mobility hypothesis: higher returns for producers who shift to marketized for producers who shift to marketized sectors relative to sectors still controlled sectors relative to sectors still controlled by redistributionby redistribution

Entrepreneurship hypothesis: Entrepreneurship hypothesis: entrepreneurship as a new mechanism for entrepreneurship as a new mechanism for upward mobilityupward mobility

Evaluation, NeeEvaluation, Nee If the old redistributive elite occupy If the old redistributive elite occupy

strategic positions in political markets, strategic positions in political markets, which allow them to capture emerging which allow them to capture emerging newly privatized markets, Nee’s theory is newly privatized markets, Nee’s theory is not especially helpful in predicting the new not especially helpful in predicting the new elites. His data do not dismiss this elites. His data do not dismiss this alternative.alternative.

Nee instead advocates a long-term shift Nee instead advocates a long-term shift away from the importance of old regime away from the importance of old regime redistributive capital and towards human redistributive capital and towards human capital and entrepreneurship.capital and entrepreneurship.