Summary: One of the news media’s master narratives is that the dark evolution of America just happens, much like the myth of the “invisible hand”. Inevitable. Resistance is futile. All is for the best in this, the best of all possible worlds. In fact most of the drivers of rising inequality are politics conducted by other means, invisible means. This is not new in America. We fought these battles before in the often-violent unionization struggles that accelerated after the Civil War (see section 5d here). Times differ, but we can win again.
“There’s class warfare, all right. But it’s my class, the rich class, that’s making war, and we’re winning.”
— Warren Buffet, quoted in the New York Times, 26 November 2006
- The emerging class structure of New America
- New America is made for corporations, not workers
- Corporations make millions from art while artists starve
- Academia adopts corporate comp systems: elites and peons
- For More Information
- The 99% need a raise
(1) The emerging class structure of New America
Increasing inequality of wealth and income plus changes in the structure of employment combine to return America to the 19th century class structure:
- the top few percent who own almost everything — the bourgeoisie
- elites with secure professions, high stable incomes, modest wealth
- the petite bourgeoisie — small business owners
- the proles, mostly with little job security and little or no wage growth
The major developments since 1980 have been downwards mobility of workers, even those who think of themselves as professionals and highly skilled workers. These stories fill the news media, although usually disguised. Here are three. Understanding these changes is the key to stopping them.
(2) New America is made for corporations, not workers
“Wages Stagnate as US Manufacturers Reap Record Profits“, Bloomberg, 21 November 2013 — Excerpt:
Boeing’s quest for concessions and employees’ opposition exposed a fault line in U.S. industry’s post-recession comeback: Even with hiring and output robust enough to be dubbed a manufacturing renaissance by President Barack Obama, workers are falling behind. Factory pay hasn’t kept pace with inflation and has fallen 3% on that basis since May 2009, while average pay for all wage earners slid only about 1%.
“We need to focus on how many jobs there are that give an adult a chance to earn a decent living,” said Gordon Lafer, an associate professor at the University of Oregon’s Labor Education and Research Center in Eugene. “Too much of the discussion has been about the number of jobs, and that’s obviously important, but there’s also a crisis in the quality of jobs.”
Boeing said it needed labor givebacks to keep the Seattle area as the home of the 777X jet, a new model with more than $95 billion in orders since September. Union workers said Boeing needed to share more of the wealth they help create. “This is really a symbol of what’s going on in this whole country,” said Machinist Thomas Campbell, 40. “We’re losing middle-class jobs.”
… The average hourly wage in U.S. manufacturing was $24.56 in October, 1.9% more than the $24.10 for all wage earners. In May 2009, the premium for factory jobs was 3.9% . Weighing on wages are two-tier compensation systems under which employees starting out earn less than their more experienced peers did, and factory-job growth in the South.
Since the U.S. recession ended in June 2009, for example, Tennessee has added more than 18,000 manufacturing jobs, while New Jersey lost 17,000. Factory workers in Tennessee earned an average of $54,758 annually in 2012, almost 10% less than national levels and trailing the $76,038 of their New Jersey counterparts, according to the Bureau of Labor Statistics.
(3) Corporations make millions from art while artists starve
The new media created by Silicon Valley benefits corporations and consumers, the standard New America system. Workers have low wages and insecure incomes. The Huffington Post takes this to an extreme, paying its writers nothing.
“My Song Got Played On Pandora 1 Million Times and All I Got Was $16.89, Less Than What I Make From a Single T-Shirt Sale!“, David Lowery (lead singer of Cracker), The Trichordist, 24 June 2013 — Opening:
As a songwriter Pandora paid me $16.89* for 1,159,000 play of “Low” last quarter. Less than I make from a single T-shirt sale.
… Soon you will be hearing from Pandora how they need Congress to change the way royalties are calculated so that they can pay much much less to songwriters and performers.
For you civilians webcasting rates are “compulsory” rates. They are set by the government (crazy, right?). Further since they are compulsory royalties, artists can not “opt out” of a service like Pandora even if they think Pandora doesn’t pay them enough.
The majority of songwriters have their rates set by the government, too, in the form of the ASCAP and BMI rate courts – a single judge gets to decide the fate of songwriters (technically not a “compulsory” but may as well be). This is already a government mandated subsidy from songwriters and artists to Silicon Valley. Pandora wants to make it even worse. (Yet another reason the government needs to get out of the business of setting webcasting rates and let the market sort it out.)
Of course Pandora wants to pay even less: “Should Pandora Pay Less in Music Royalties?“, Bloomberg, 1 July 2013
Photo by Marta Dahlig of Poland.
(4) Academia adopts corporate comp systems: elites and peons
Also note how this makes a mockery of the claim that higher education is the route to security and prosperity in New America.
In 2000, economist Steven Levitt and sociologist Sudhir Venkatesh published an article in the Quarterly Journal of Economics about the internal wage structure of a Chicago drug gang. … The title of the chapter, “Why drug dealers still live with their moms”, was based on the finding that the income distribution within gangs was extremely skewed in favor of those at the top, while the rank-and-file street sellers earned even less than employees in legitimate low-skilled activities, let’s say at McDonald’s. They calculated $3.30 as the hourly rate, that is, well below a living wage (that’s why they still live with their moms). 
If you take into account the risk of being shot by rival gangs, ending up in jail or being beaten up by your own hierarchy, you might wonder why anybody would work for such a low wage and at such dreadful working conditions instead of seeking employment at McDonalds. Yet, gangs have no real difficulty in recruiting new members. The reason for this is that the prospect of future wealth, rather than current income and working conditions, is the main driver for people to stay in the business: low-level drug sellers forgo current income for (uncertain) future wealth.
Rank-and file members are ready to face this risk to try to make it to the top, where life is good and money is flowing. It is very unlikely that they will make it (their mortality rate is insanely high, by the way) but they’re ready to “get rich or die trying”.
With a constant supply of new low-level drug sellers entering the market and ready to be exploited, drug lords can become increasingly rich without needing to distribute their wealth towards the bottom. You have an expanding mass of rank-and-file “outsiders” ready to forgo income for future wealth, and a small core of “insiders” securing incomes largely at the expense of the mass. We can call it a winner-take-all market.
Academia as a Dual Labour Market
The academic job market is structured in many respects like a drug gang, with an expanding mass of outsiders and a shrinking core of insiders. Even if the probability that you might get shot in academia is relatively small (unless you mark student papers very harshly), one can observe similar dynamics.
Academia is only a somewhat extreme example of this trend, but it affects labour markets virtually everywhere. One of the hot topics in labour market research at the moment is what we call “dualisation” . Dualisation is the strengthening of this divide between insiders in secure, stable employment and outsiders in fixed-term, precarious employment. Academic systems more or less everywhere rely at least to some extent on the existence of a supply of “outsiders” ready to forgo wages and employment security in exchange for the prospect of uncertain security, prestige, freedom and reasonably high salaries that tenured positions entail .
How can we explain this trend? One of the underlying structural factors has been the massive expansion in the number of PhDs all across the OECD. Figure 1 shows the proportion of PhD holders as a proportion of the corresponding age cohort in a number of OECD countries at two points in time, in 2000 and 2011. As you can see, this share has increased by about 60% in 11 years … Since 2000 the number of OECD-area doctorates has increased at an average of 5% a year.
So what you have is an increasing number of brilliant PhD graduates arriving every year into the market hoping to secure a permanent position as a professor and enjoying freedom and high salaries, a bit like the rank-and-file drug dealer hoping to become a drug lord. To achieve that, they are ready to forgo the income and security that they could have in other areas of employment by accepting insecure working conditions in the hope of securing jobs that are not expanding at the same rate.
Because of the increasing inflow of potential outsiders ready to accept this kind of working conditions, this allows insiders to outsource a number of their tasks onto them, especially teaching, in a context where there are increasing pressures for research and publishing. … In many countries, universities rely to an increasing extent on an “industrial reserve army” of academics working on casual contracts because of this system of incentives.
To understand the life of a prole in academia:
- “Adjunct professors are the new working poor“, Gary Rhoades, CNN, 25 September 2013
- “Considering Adjunct Misery – An academic novel offers an Everyman for the new American economy“, William Pannapacker, Chronicle of Higher Education, 25 March 2013 — About Alex Kudera’s Fight for Your Long Day
(5) For More Information
(a) The big picture, posts about reforming America:
(b) Posts about the conflict between labor and capital:
- The new American economy: concentrating business power to suit an unequal society, 27 April 2012
- Public employee unions – an anvil chained to the Democratic Party, 15 February 2013
- Why the 1% is winning, and we are not, 26 May 2013 — They are smart, organized, and have planned how to win.
- On this Labor Day, let’s remember what unions have done for America, 2 September 2013
(c) Posts about inequality:
- A sad picture of America, important for us to understand, 3 November 2008 — About social mobility
- An opportunity to look in the mirror, to more clearly see America, 10 November 2009
- Graph of the decade, a hidden fracture in the American political regime, 7 March 2010
- America, the land of limited opportunity. We must open our eyes to the truth., 31 March 2010
- Modern America seen in pictures. Graphs, not photos. Facts, not impressions., 13 June 2010
- Jared Bernstein examines the economic impact of raising taxes on high-income households, 30 April 2012
- How clearly do we see the rising inequality in America? How do we feel about it? Much depends on these answers., 27 September 2012
- Ugly truths about income inequality in America, which no politician dares to say, 2 October 2012
- Glimpses of the New America being born now, 18 June 2013
- Why Elizabeth Bennet could not marry Mr. Darcy. Nor could your daughter., 12 July 2013
- For Thanksgiving, Walmart shows us the New America, 19 November 2013
(d) Posts about reforming America:
- The project to reform America: a matter for science or a matter of will?, 16 March 2010
- Can we reignite the spirit of America?, 14 September 2010
- The sure route to reforming America, 16 November 2010
- We are alone in the defense of the Republic, 5 July 2012
- A third try: The First Step to reforming America, 28 May 2013
- The bad news about reforming America: time is our enemy, 27 June 2013
- Understand our problem before you prescribe a cure for America. We’ve gone mad., 17 September 2013
- How to recruit people to the cause of reforming America, 5 November 2013
(6) The 99% need a raise