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Tilting at Windmills

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August 21, 2006
By: Kevin Drum

INCOME INEQUALITY AND BASEBALL....Brad DeLong has a long post today summarizing a discussion among several eminent economists about income inequality. The question is not whether income inequality has skyrocketed in the past few decades everyone agrees that it has but whether or not government policies are (partially) responsible for this rise.

I think everyone agrees that government policy is not entirely to blame. As society has gotten more technological and more complex, the value of people who can analyze and direct that complexity has increased relative to those who can't. In general, this means that smart, highly educated people are worth more today than in the past.

But I've never believed this is anywhere near the whole story. After all, it's not just the top 20% who have gained relative to the bottom 80%, it's also the top 1% who have gained relative to the 10% just below them. Do we really believe that the top 1% have an enormous educational advantage compared to the top 10%? And that this gap has increased over the past 50 years?

I don't. So if education is only part of the story, what else has contributed? Since I'm not an economist, I'm going to answer with an analogy that I suspect no self-respecting professional would be willing to make. Here it is.

Consider professional baseball. Today's top players routinely sign contracts that pay them $5 million a year. A-Rod signed one that paid more than $10 million. But 50 years ago, the highest paid player earned about $300,000 (in inflation-adjusted terms). Why the 30x increase?

It's certainly not because A-Rod is relatively more valuable to the Yankees' pennant chances today than, say, Mickey Mantle or Roger Maris were in their day. Rather, what's happened is that there's fantastically more money sloshing around in professional baseball than in the past thanks to skyrocketing TV, radio, and merchandise sales. More money means higher salaries.

But that's not automatic, of course. There's another piece to the baseball puzzle: in 1966 the baseball players union hired Marvin Miller, a former negotiator for the U.S. steel workers, to head their organization. In 1972 they went on strike, and ten years later the reserve clause was history, free agency was in full swing, and player salaries were going through the roof. This is not a coincidence.

Similarly, the broader economy has grown enormously in the past few decades, but without a Marvin Miller on their side almost none of this growing pile of money has gone to middle class workers. And this, I believe, is the root cause of skyrocketing income inequality: economic growth combined with stagnating median wages has produced a colossal amount of extra money sloshing around in the system, and it has to go somewhere. And since the rich and powerful run the system, where else is it going to go but to the rich and powerful? They aren't going to dole it out to the less fortunate out of the goodness of their hearts, after all.

This is the reason I support unionization, especially private sector unionization. Government policy since the mid-70s, increasingly obsessed with controlling inflation, has also been increasingly anti-union (remember, Jimmy Carter was all set to break the air traffic controllers strike too; PATCO endorsed Ronald Reagan in the 1980 election because they thought they could get a better deal from him), and this has been largely responsible for keeping middle class wages down. As the baseball example suggests, bargaining power is key, and absent unions, blue collar and middle class workers have never had much leverage in the job market. It's only been collective bargaining that's allowed them to make significant wage gains.

So: change the rules. Create a more union friendly environment and allow workers in service industries by far the biggest part of the economy these days to unionize more easily. Sure, there's a price to be paid for this, just as there is with any large-scale change in power: strikes, slowdowns, annoying work rules, and so forth. But the benefit would be rising median wages thanks to the bargaining power of unions, and that in turn would reduce the amount of money that's being paid out to the hyper-rich just because it's there and someone has to get it. The result would be higher middle class wages and a far healthier economy, but less money for the top 1% and a general decrease in income inequality.

I'm not pretending this is the whole story, or that there aren't plenty of other societal and governmental trends that affect income inequality. But I suspect this is one of the biggest. Give workers the power they had back in the 50s and 60s and the rest will follow.

POSTSCRIPT: Fire away in comments, but please spare me any bollocks about how globalization means we can't afford to pay workers higher wages. Maybe that's true in the auto and textile industries, but service industries have practically no exposure to globalization and they're the worst offenders of all. You can't outsource janitorial work and you can't do your grocery shopping in Bangalore, so why are janitors and Wal-Mart clerks paid so little? It's not because of globalization. It's because they aren't unionized. Needless to say, Wal-Mart is keenly aware of this.

Kevin Drum 1:22 PM Permalink | Trackbacks | Comments (163)

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Comments

Tiger Woods seems adequately compensated.

Posted by: Al's Mommy on August 21, 2006 at 1:26 PM | PERMALINK

ARod is getting around $25 million per year, not $10 million.

I'm confused by the baseball example. In baseball a strong player's union led to greater wage inequality. So, how does the example of baseball demonstrate that strong unions in other fields would lead to greater wage equality?

Posted by: ex-liberal on August 21, 2006 at 1:28 PM | PERMALINK

Agreed.

And nicely pre-emptive bollox bashing :)

You forgot the wankers who'll be bolloxing away on all thim damn illegal furriners, tho ...

Bob

Posted by: rmck1 on August 21, 2006 at 1:28 PM | PERMALINK

ex-liberal:

Compare it to pro football, where there's also a salary cap and revenue sharing.

Bob

Posted by: rmck1 on August 21, 2006 at 1:30 PM | PERMALINK

I'd have no idea where to get these sort of statistics, but I'm guessing one big difference between the top and the rest is the fact that the top owns assets, mostly stocks and other types of investments. Isn't it true, for instance, that most doctors make a lot of their money from investments, not from salary? I would believe so, because even if a doctor is paid $300,000 a year, after taxes, the number drops significantly (and, mostly, rightfully so). I'd even be willing to guess that if the amount isn't significant in the grand scheme of things, it makes a big difference.

To be honest, I just thought of this as I was reading the post. I was specifically reminded of Brad DeLong's words, either by him or by someone else, that it's a scandal the bottom half of the country doesn't have the resources to acquire any assets. Perhaps expanding the ability of those currently unable to buy stocks, for instance, would do something to help with inequality. (Just so this is clear, I am NOT advocating privatization of Social Security, but I do think add-ons in addition to a defined contribution are a good idea.)

Posted by: Brian on August 21, 2006 at 1:31 PM | PERMALINK

> I think everyone agrees that government policy
> is not entirely to blame. As society has gotten
> more technological and more complex, the value of
> people who can analyze and direct that complexity
> has increased relative to those who can't. In
> general, this means that smart, highly educated
> people are worth more today than in the past.

The problem is that this was known in the 1880s; Andrew Carnegie's chief mill designer was "worth" 1,000,000x the average laborer as he could figure out how to lower per ton costs as much as 5 cents (!) at a shot.

But after that hippie liberal Otto von Bismark and his advisors got finished reordering things (achtung!), there was a general realization that while you pay the smart guy up to, say, 5000x the average laborer, you don't pay him 10,000,000x - cause otherwise bad things result (communism, fascism).

I worked for an engineering/production company for that for over 100 years paid the laborers (today's dollars) 45,000 + overtime, the engineers 65,000 + good vacation, and the President (no "CEO" in those days) 400,000. The company got along just fine, and hunderds if not thousands of people worked their butts off for a shot at the president's office. Others just worked hard to keep their pay and benefits.

Today the "CEO" of that organization pays himself 20 /million/ per year, but I don't see it doing anything more than it did from 1890-1990.

Cranky

Posted by: Cranky Observer on August 21, 2006 at 1:33 PM | PERMALINK

ex-liberal is right, your example suffers because baseball has a strong union.

A-Rod is also a poor example because at the time he signed his contract, he was very unique -- a shortstop who hit like Mickey Mantle at his peak. In this case, the top fraction of 1% was far better even that the next 10% of the labor force.

Of course, the biggest reason for inequity in baseball is the structure of the bargained agreement. The union allows management to vastly underpay young players. With time served, stars and superstars are awarded handsomely in arbitration and free agency.

Posted by: Rodger on August 21, 2006 at 1:33 PM | PERMALINK

"John F. Kennedy was all for income inequality"

As is, well, everyone who isn't a socialist. The idea isn't that we should have no inequality whatsoever--after all, inequality provides a powerful incentive to make advances. The reason we complain about inequality is that too much of it can be an obstacle.

Posted by: Brian on August 21, 2006 at 1:34 PM | PERMALINK

You can't outsource janitorial work and you can't do your grocery shopping in Bangalore, so why are janitors and Wal-Mart clerks paid so little?

Gosh, that's a toughie. Could it have something to do with policies that Kevin Drum supports? (see the Cedillo quote).

Posted by: TLB on August 21, 2006 at 1:35 PM | PERMALINK

Has anyone done a study recently to say what middle-class incomes would be if income was spread as evenly as it was just 30 years ago? I don't think it would be that hard to do and it seems like people could grab onto it so much easier than Krugman always going off on growth rates for the top 1%. What would a family of four be making if their income hadn't stagnated in 1973?

Posted by: NM on August 21, 2006 at 1:40 PM | PERMALINK

does anyone know if western europe has experienced similiar wage stagnation?

Posted by: jk on August 21, 2006 at 1:42 PM | PERMALINK

Union is a term that just doesn't sound classy. If it were something more like 'work force' it would have panache.

Posted by: cld on August 21, 2006 at 1:42 PM | PERMALINK

I once heard or read somewhere that one significant factor has been increasing gender equality. 40 years ago men went to college, got high paying jobs, and married secretaries and retail clerks. Today men and women go to college, get high paying jobs, and marry each other while secretaries and retail clerks marry each other. Basically many more families get a double pump of high income than in the past.

Of course just one factor among many, and probably not one of the most important ones, but I still find it interesting as an example of unintended consequences.

Increasing lifespan is also probably a significant factor. Another ten years of your millions compounding makes you twice as rich. Another ten years of living off social security checks and your savings probably go down and your children inherit less.

Posted by: jefff on August 21, 2006 at 1:44 PM | PERMALINK

Wrong again, Kevin. The richer are smarter as measured by their wealth. Let's say Bill Gates IQ is 200 and he's worth 50 billion. I'm worth about 500,000 so calculating the corresponding ratio means my IQ is probably about 0.002--that sounds about right.

Posted by: Al on August 21, 2006 at 1:45 PM | PERMALINK

Any attempt to reduce income inequality in the United States must address the wholly incestuous nature of corporate governance.

Currently, corporations' top executives appoint the directors who sit on the boards that are supposed to provide oversight and set compensation policy. More often than not, the appointees at a given company's board of directors happen to be top executives of other corporations. This provides a built-in incentive for executive-compensation inflation.

Change in the structure of corporate governance could start with new administrative regulations from the Securities & Exchange Commission. Whereas management now completely controls the nomination and ratification process for filling boards of directors, the SEC could require that management accept nominees submitted by a given minimum of shareholders (say five or 10 percent) and publish their names on the proxy ballots mailed out prior to annual meetings.

Other changes in corporate governance and executive compensation might require legislative action. In any event, it is imperative that corporate directors should start being held accountable for giving outrageous pay packages to mediocre executives like John Snow, who presided over a massive erosion of shareholder value at a railroad company before he was put in charge of our nation's finances as Treasury Secretary by President George Bush.

Posted by: Ian Sterling on August 21, 2006 at 1:47 PM | PERMALINK

"You can't outsource janitorial work and you can't do your grocery shopping in Bangalore, so why are janitors and Wal-Mart clerks paid so little? It's not because of globalization. It's because they aren't unionized. Needless to say, Wal-Mart is keenly aware of this."

Why would you pay more than market value? Would you pay $100 for someone to mow your lawn if there are plenty that'd be willing to do it for $20? Why would Wal-Mart pay $20/hr for their clerks when $8/hr is already more than what they'd get at some mom and pop shop?

Posted by: Freedom Fighter on August 21, 2006 at 1:47 PM | PERMALINK

Thank you, Kevin.

Somehow we've become locked into a mentality of resenting unions because not everyone enjoys the benefits of belonging. You see statements everywhere like "Why should those union guys make more than I do? They should get a real job."

This attitude only enables people who want to steal the value of your work.

Unions are not a distortion of the market but a mechanism to *correct* distortions in the market caused by imbalances in information and bargaining power. If workers were able to bargain on an even footing with large employers, the wage stagnation of the last thirty years would never have happened.

Unions deserve far more respect than they currently get.

Posted by: dal20402 on August 21, 2006 at 1:47 PM | PERMALINK

Those who assert that employers can't afford to pay higher wages to their employees, subscribe to the "myth of scarcity". And it is a myth. The problem is not that there isn't enough money or food or goods in American society - it's that it is distributed so unevenly - thanks to prejudice, cronyism, racism and sexism. Hence the need for progressive taxation.

It's the Christian thing to do. Read Acts of the Apostles.

Posted by: A Christian Advocate on August 21, 2006 at 1:48 PM | PERMALINK

It's very strange to characterize the result of stagnating median wages as money "sloshing around" in the system. The reason wages are stagnating is because the rich and powerful are, on an ongoing basis, taking money out of wages and putting it into their pockets.

Posted by: dj moonbat on August 21, 2006 at 1:48 PM | PERMALINK

Part of the issue is also the fact that skills are less specialized, making workers more replaceable. One of the reasons that workers in service industries have had so much difficulty unionizing is that they are easily replaceable. Just about anybody has the skills to be a sales associate at Walmart or to be a janitor or to wait tables.

Negotiating leverage is directly related to how replacable you are, and these days workers in most industries are eminently replacable because their skill sets are not that unique.

After all, how many people, in any job, are so good at what they to so as to be irreplaceable? Not very many.

You want negotiating leverage, with or without a union, then make yourself irreplaceable.

Posted by: mfw13 on August 21, 2006 at 1:52 PM | PERMALINK

A great post Kevin - one that nails the missing component in economic models: Power. Those who have it, will use it, either subtly or unsubtly to get what they want.

In micro-economic models it's just assumed that buyers and sellers will come to an equitable arrangement - which by defition is optimal. But what if one side or the other has the power and can just take what it wants? Economics doesn't say.

And that failure to recognize the obvious is what led lots of free market economists to advocate "shock therapy" and quick market opening in the former Soviet Union and Eastern Europe after 1989. And guess what? It failed utterly, because those with power just took.

And the same principle holds true in the US and the industrialized world - although much more subtly. Societies still set the rules of the game through the political process. And if those rules are set up to favor powerful corporations they will use that power.

And it's not just unions. The rules for taxation, incorporation, and accounting reporting, and trade deals - all favor the powerful corporations.

Good point in the postcript too: the US is still the bellweather country, the US market is so huge that what the US wants - it can normally get. And the US has been leading, not following, the race to the bottom.

Remember the OECD tax rule agreement that the Bush administration torpedoed when it took power in 2000?

Posted by: Samuel Knight on August 21, 2006 at 1:52 PM | PERMALINK

"please spare me any bollocks..."

Kevin, 'cobblers' is the new 'bollocks'. Now you can be a hepcat like me.

Posted by: Sam Spade on August 21, 2006 at 1:54 PM | PERMALINK

I think that in five to ten years the demographics will have changed enough to create a stronger demand for labor, which could change the dynamic a lot.

It's also true that we've tapped a lot of the offshore labor markets already, perhaps we aren't that far away from the bottom, there, either.

I agree with Kevin though, that unions are necessary as a counterbalance to the legal/social/political clout of management. Not because I think they are the source of virtue any more or less than said management.

Posted by: Doctor Jay on August 21, 2006 at 1:54 PM | PERMALINK

But I've never believed this is anywhere near the whole story. After all, it's not just the top 20% who have gained relative to the bottom 80%, it's also the top 1% who have gained relative to the 10% just below them. Do we really believe that the top 1% have an enormous educational advantage compared to the top 10%? And that this gap has increased over the past 50 years?

Kevin, go back and re-read Robert Riech's The Work of Nations (you have read it, right?). This deals, to a degree, with why folks with more education/more skills will and now are fetching a lot more in the marketplace.

You can't outsource janitorial work and you can't do your grocery shopping in Bangalore, so why are janitors and Wal-Mart clerks paid so little? It's not because of globalization. It's because they aren't unionized. Needless to say, Wal-Mart is keenly aware of this. Kevin Drum

Lack of unions, but mostly lack of skills and too many people available to do the jobs.

You will only raise the overall standard of living in a country as large, physically and in population, as the U.S. with a mature economy by reducing the population at the lower end of the economic scale, and by placing the upper end in a position of top-out-of-sight skills. Of course, neither is possible.

The unionized jobs that once employed people with few or no skills, and this now includes historically non-unionized jobs with call centers, are gone and never likely to return to the U.S.

Posted by: JeffII on August 21, 2006 at 2:03 PM | PERMALINK

"Unions deserve far more respect than they currently get."

They also deserve large credit for the collapse of the American auto industry.

Posted by: Freedom Fighter on August 21, 2006 at 2:04 PM | PERMALINK

Someone way back a few months argued here for unions, but where the union was only for the one company, not spanning across an industry. So each company gets a union for it's wage grade employees.

He further argued that the union/management team acted in the company's interest in ways that were more advantageous than a board of directors/management team. I'd like to hear that one debated more.

Posted by: Red State Mike on August 21, 2006 at 2:04 PM | PERMALINK

While I agree with the point of Kevin's post, I'm not sure that baseball is the best analogy, because the circumstances really aren't equivalent.

Prior to the removal of the reserve clause, the market in ball players wasn't free, it was controlled by the owners, who kept salaries artifically low (although still high by some comparisons -- Babe Ruth bragged about earning more money than the President). Once the restrictions of the reserve claue were removed, thanks in part to the resolve of a strong Players' Union, a free (or freer) market was created, and salaries started to go up and continue to go up.

The need to compete in this market caused the owners to raise prices, create new sources of income, and generally re-think their financial structures out of necessity. In other words, it's not that baseball players earn lots of money because there's a lot of it to spread around, it's that there's a lot of it to spread around because baseball players started to get a lot of money.

I'm at a loss to see where this makes a illuminating analogy with the problem of increasing income inequality in society in general, but perhaps I'm missing the points of comparison. If someone could explain, I'd be grateful.

Posted by: Ed Fitzgerald (unfutz) on August 21, 2006 at 2:10 PM | PERMALINK

Baseball is kind of a weird place, because the employees are not at all fungible.

There's only one Alex Rodriguez in the world, and less than ten players that come near his level of hitting ability. His value over a replacement player - the kind of talent that's easily available in AAA, either on your team or a trade of one of your AAA players - is tremendous. In a by design highly competitive market, this is magnified even more. These guys are valuable like a chief software architect at Google or Microsoft - they make or break your company.

Smart baseball teams have realized that it's a lot better to pay $30M for the truly difference-making people, instead of a bunch of $3M middle relief pitchers and moderately adequate shortstops and the like. Players have a union-negotiated minimum salary, which is pretty much a sunk cost give the fixed roster size that all teams may have, so those players are free. You shouldn't pay any more than that for that level of talent.

(For a nice primer on baseball economics, I recommend Michael Lewis's Moneyball.)

This is not entirely like real-world economics. It sort of works for something that is extremely talent driven, where there's a lot of adequate employees but very few stars, and a star can do ten or a hundred times as much as the adequate people - I think that software programming can be a little like this. (And actually, I think we compensate Joe Java way too much and Steve Architect way too little.) But it doesn't apply to, say, textile mill workers at all - there's not much difference between a perfect and an adequate employee to the bottom line.

Posted by: Kirby on August 21, 2006 at 2:11 PM | PERMALINK

Ex-Lib:
A-Rod gets money from the owners. So, he's keeping Steinbrenner at $60 mil a year off the Yankees rather than $75 mil.

Good post, Kev, and one reason why still today, I have trouble considering Carter a liberal president. It's definitely why I have trouble considering Clinton a liberal president and it's one of the biggest things wrong with the DLC.

Red State Mike: Germany has something somewhat like that without liimiting unions to one company. German companies normally have union reps on their boards of directors.

Posted by: SocraticGadfly on August 21, 2006 at 2:11 PM | PERMALINK

ARod is getting around $25 million per year, not $10 million.

A-Rod signed one that paid more than $10 million.

25 million > 10 million

with why folks with more education/more skills will and now are fetching a lot more in the marketplace.

Bullshit, and not the point, Kevin addresses this pretty early on in his post. The top 1% is grossly out of step with even the top 5%. And if income corresponded with intelligence/education than 3/4 of the frat-boy investment bankers wouldn't be getting $500k bonuses because they spelled everything right in their market research report.

Everybody complains about the education system, but people that would make good teachers can't get an attractive salary and the US is struggling in the world scientific marketplace. Meanwhile dime-a-dozen MBAs are getting paid 20X what research scientists or engineers make. Priorities are in the wrong place. But instead we keep paying for expensive ad campaigns and IPOs for dick pills.

Posted by: ChrisS on August 21, 2006 at 2:12 PM | PERMALINK

"Someone way back a few months argued here for unions, but where the union was only for the one company, not spanning across an industry. So each company gets a union for it's wage grade employees."

One problem with that is that sometimes industries will act cooperatively to break individual unions. If somehow companies were similarly restricted from meta-organization it might work, but I can't see that happening.

Posted by: jefff on August 21, 2006 at 2:12 PM | PERMALINK

There was just a piece on this issue in the Atlantic.

The sports and entertainment figures are pretty clearly the market in operation. Audiences are much, much bigger than they were in 30s--worldwide in music and cinema, national in athletic. Top performers fill seats and sell ads. Pedro Martinez's first season for the Mets was a moneymaker for them, just in terms of attendence.

Also the market for tickets has become freer. It's to my mind a bad thing that going to a ball game has turned from being a casual thing into an event, but people really are willing to stump up 300 dollars or so to take their two kids to a ball game. So I can live with that.

The other, bigger piece of the top half percentile is executive compensation. And in that realm, the market is not operating. The practice of CEOs sitting on boards of other corporations and an absence of shareholder vigilance has left executive compensation completely out of control. While one can make a case for a few instances of hypercompensation (Steve Jobs, Lew Gerstein), for the most part it's all a bunch of John Snows making tens of millions of dollars a year to do a job that any number of people would do as well for a fraction of the compensation.

As for what is to be done, I'd say start by doubling the minimum wage.

Posted by: JayAckroyd on August 21, 2006 at 2:13 PM | PERMALINK

Chris Rock had a joke a few years ago about minimum wage (paraphrasing here):

"You know what sucks about being paid minimum wage is that the person paying you is really telling you if I could pay you less that $5.15 per hour I would."


Wow, think about that for a few moments.

- F

Posted by: - F on August 21, 2006 at 2:17 PM | PERMALINK

I'm guessing one big difference between the top and the rest is the fact that the top owns assets, mostly stocks and other types of investments.

This turns out not to be true. Wages exhibit this massive growth in inequality, not total income. I just read the article that has this data, but I can't find it online.

Posted by: JayAckroyd on August 21, 2006 at 2:20 PM | PERMALINK

Additionally, with the reduced tax burdens that have shifted from the 1950s, why wouldn't the person controlling the purse strings funnel a little more money their way? It's not like that extra would mostly go to the government coffers.

Raises for me!

Posted by: ChrisS on August 21, 2006 at 2:21 PM | PERMALINK

Don't forget the ascendency of shareholder primacy in the world of ideals relating to business. A great many ills trace back to that.

Posted by: demisod on August 21, 2006 at 2:22 PM | PERMALINK

The top 1% is grossly out of step with even the top 5%. And if income corresponded with intelligence/education than 3/4 of the frat-boy investment bankers wouldn't be getting $500k bonuses because they spelled everything right in their market research report. Posted by: ChrisS

While I agree that many of the people getting the six and seven figure bonus on Wall Street probably don't do much for the common good of man, the vast majority of people in the top 1% of income levels in this country don't even work for their money if they work at all. So I'm not sure why you'd even bring that up. Their money is primarily inherited or based on investments, not something gained by the proverbial sweat of the brow, which is not true of investment bankers and the like. Not dissimilar to professional athletes or Hollywood types, most of this breed burns out after about a decade because of the hours and pressure to produce hundreds of millions in profit for their evil overlords.

But instead we keep paying for expensive ad campaigns and IPOs for dick pills. Posted by: ChrisS

WTF? You may be subsidizing this through your prescription choices, but otherwise . . .

Perhaps you misspoke?

Posted by: JeffII on August 21, 2006 at 2:26 PM | PERMALINK

And the teachers..

Posted by: nutty little nut nut on August 21, 2006 at 2:27 PM | PERMALINK

Kevin-

I may be wrong about this, but it seems that "technology factors" as a reason for inequality has lost a lot of currency over the last decade.

The idea became popular because income inequality and technology growth seemed to be happening at roughly the same time, and so therefore technological change must be causing the inequality.

In any event, I hear this argument less and less these days, and we may be approaching the point where leading with "technology change" is a red herring.

At least I hope so. It's pretty flawed. Not as bad as the Heritage Foundation's claim that: (paraphrasing) "[Income inequality is up because poor people are sluttier, lazier, and wastier than ever before.]", but flawed nonetheless.

Posted by: Saam Barrager on August 21, 2006 at 2:28 PM | PERMALINK

bargaining power is everything, and absent unions, blue collar and middle class workers have never had much leverage in the job market. It's only been collective bargaining that's allowed them to make significant wage gains.

Ain't that the truth.

Posted by: Nemesis on August 21, 2006 at 2:28 PM | PERMALINK

Baseball is professional entertainment.

Players don't get paid on how well they play. They get paid on how well they sell tickets. Playing good is a part of that. But that's not all.

Hollywood pay has more in common with pro sports than with "normal" job pay.

Also - CEO pay is similar to the entertainment industry. You think Steve Jobs is a more effective CEO? Or a more effective "celebrity face" for Apple?

Posted by: Osama_Been_Forgotten on August 21, 2006 at 2:30 PM | PERMALINK

Smart baseball teams have realized that it's a lot better to pay $30M for the truly difference-making people, instead of a bunch of $3M middle relief pitchers and moderately adequate shortstops and the like. Players have a union-negotiated minimum salary, which is pretty much a sunk cost give the fixed roster size that all teams may have, so those players are free. You shouldn't pay any more than that for that level of talent. (For a nice primer on baseball economics, I recommend Michael Lewis's Moneyball.)

Actually, "Monebyball" made exactly the opposite point as what the poster above claims it does -- Lewis argued that the Oakland A's, thanks to their GM Billy Beane's rigorous statistical analysis, were able to compile such a winning record, despite paying the lowest salaries in baseball, because they were able to work smarter at the margins -- instead of wasting $30 million on a superstar they'd buy up a few $3 million relief pitchers and shortstops who, while not stars, had the sort of skills that would produce predictable gains. They'd never hit a grand slam home run, but they'd produce a lot of base hits, and the slow and steady accumulation of base hits would be what won the game.

Posted by: Stefan on August 21, 2006 at 2:31 PM | PERMALINK

I think that 50 years ago, the highest paid baseball player earned about $100,000, not $300,000.

Posted by: David in NY on August 21, 2006 at 2:33 PM | PERMALINK

The person who brought up VORP (Value Over Replacement Player) is right on target.

Now change the last word from "player" to "worker", as ask what is your value over a replacement worker? In most cases, it is very little, which is why you have very little negotiating leverage in trying to increase your wages. SImply put, there are plenty of people out there who can do your job just as well as you can, making you very replaceable.

This simple fact, that for most jobs supply is greater than demand, is what is truly holding down wages. Unionization, or lack thereof, has little to do with it.

Economics 101 people....when supply is greater than demand, prices fall.

The VORW (Value Over Replacement Worker) for a WalMart sales associate or cashier is zero....same thing for janitors or waiters or other retail salespeople. That is why their wages are not increasing, not because they are not unionized.

Posted by: mfw13 on August 21, 2006 at 2:36 PM | PERMALINK

Yeah, I'm right, in spades. $100,000 was a de facto salary cap for players for about a decade in the 1950's. See http://www.roadsidephotos.com/baseball/bb02-5.htm, for Ted Williams's probable earnings.

Posted by: David in NY on August 21, 2006 at 2:38 PM | PERMALINK

I've calculated the Lorenz curves for the distribution of major league baseball salaries in 1985 and in 2004 (which I can't get to post here). There's no evidence that the distribution of talent or performance changed, but the 2004 Lorenz curve shows about a 30% increase in inequality. So I think Kevin's hypothesis that there was a lot more money sloshing around, and no mechanism to maintain the distribution seems fairly sound.

Posted by: Donald A. Coffin on August 21, 2006 at 2:39 PM | PERMALINK

A good overview of this situation is Robert Frank and Phillip Cook's "The Winner-Take-All Society: Why Those at the Top Get So Much More Than the Rest of Us." Their argument is quite simple, and can be explained using Drum's baseball example: when a large market (as in millions of baseball fans) has some interest or investment in a winner's performance, even when that performance is minute when compared to that of the loser (as in a 9-8 baseball game decided on the last pitch), then a large reward will go to that winner, due to the amount of money injected into the system by those millions of fans.

The reward increases in value as the market becomes saturated with aspiring winners (all the young kids wanting to become major leaguers), but at the end of the day, not all of them can win and so the many losers are left with little or no recompense for their efforts, which leads to increased inequality. The few superstars at the top make millions, while everyone else in the industry gets short shrift.

Posted by: Stefan on August 21, 2006 at 2:40 PM | PERMALINK

Remember, in baseball, the union does not negotiate the salary structure (except by negotiating the minimum salary), so the individual salaries are essentially, post-free-agency--set by market forces and by the effectiveness of individual bargaining (and, on occasion, by the stupidity of owners.)

Posted by: Donald A. Coffin on August 21, 2006 at 2:41 PM | PERMALINK

I agree with Kevin that there *is* a "colossal amount of extra money sloshing around. The question is, how to get some of that into the workers' pockets?

I am not sure that depending on unions is the answer. The problem is that when times are bad and profits are down it is very hard to get unions to accept salary or benefit reductions. When a company already has big problems this can pretty much finish it off-- see airlines and autos as an example.

So how about this as an alternative-- cut corporate taxes from 35% to 25%, but mandate that the 10% saved must be distributed, pro rated according to salary, to all the workers of a company who earn less than (say) $500,000 per year? This will ensure that all workers get a cut of any huge amounts of money sloshing around (for example, oil company profits this year).

This might be achievable because (1) on the Republican side, it is a tax cut (no extra money goes to the government), and it would be an alternative to a minimum wage increase, as well as being capitalism in action-- productivity and profitability leads to higher rewards, and (2) on the Democratic side, the workers and the middle class benefits-- nobody in any company will be earning minimum wage whenever profits are high.

Posted by: paul on August 21, 2006 at 2:45 PM | PERMALINK
I think everyone agrees that government policy is not entirely to blame.

I don't think everyone agrees with that.

As society has gotten more technological and more complex, the value of people who can analyze and direct that complexity has increased relative to those who can't.

"Technological" and "complex" are two orthogonal measures, and I'm not sure what the former means as an ordinal measure of a society, and I'm not sure its established that there is a meaningful sense of the latter for which it is established that society has gotten "more complex".

In general, this means that smart, highly educated people are worth more today than in the past.

If that were the case, you'd expect not only income inequality to increase but the correlation of income with IQ ("smart") and education ("highly educated") to increase. Is there evidence of this? If not, one can hardly say that the superficial impression and the assumed result drawn from it is supportably described as even a factor to the increased income inequality.


But I've never believed this is anywhere near the whole story. After all, it's not just the top 20% who have gained relative to the bottom 80%, it's also the top 1% who have gained relative to the 10% just below them. Do we really believe that the top 1% have an enormous educational advantage compared to the top 10%? And that this gap has increased over the past 50 years?

Its an emprically testable proposition. Why is the standard the pre-scientific "Do we really believe?"

Consider professional baseball. Today's top players routinely sign contracts that pay them $5 million a year. A-Rod signed one that paid more than $10 million. But 50 years ago, the highest paid player earned about $300,000 (in inflation-adjusted terms). Why the 30x increase?

That answer is pretty obvious. "Major League baseball players" are a resource controlled by a monopolistic cartel which has maintained an artificial shortage by restricting the number of teams and players per team. Meanwhile, the fan population has increased considerably, and the ability to deliver entertainment product of baseball beyond the stands has increased due to technology.

But that's not automatic, of course. There's another piece to the baseball puzzle: in 1966 the baseball players union hired Marvin Miller, a former negotiator for the U.S. steel workers, to head their organization. In 1972 they went on strike, and ten years later the reserve clause was history, free agency was in full swing, and player salaries were going through the roof. This is not a coincidence.

Sure, its another example of the same process: effective central control of supply of a product with increasing marketable value. As with the players, so with baseball itself.

This is the reason I support unionization, especially private sector unionization. Government policy since the mid-70s, increasingly obsessed with controlling inflation, has also been increasingly anti-union (remember, Jimmy Carter was all set to break the air traffic controllers strike too; PATCO endorsed Ronald Reagan in the 1980 election because they thought they could get a better deal from him), and this has been largely responsible for keeping middle class wages down. As the baseball example suggests, bargaining power is everything, and absent unions, blue collar and middle class workers have never had much leverage in the job market. It's only been collective bargaining that's allowed them to make significant wage gains.

Unionization is important in the current environment as a tool for workers to guarantee that they share in the benefits that drive corporate profits, but its largely an inefficient stopgap based in an adversarial relationship; its like an institutionalized armed resistance movement as a check on the power of a totalitarian government. It may be better than nothing, but eventually you want to get to a state where you've got popular soveriegnty; the same thing holds for workers in firms that holds for citizens in a country: an institutional resistance is better than nothing, but an equal voice in running the show is the goal.

Posted by: cmdicely on August 21, 2006 at 2:46 PM | PERMALINK

c'mon. A-Rod or Jeter are obviously better educated than either Maris or Mantle!

Posted by: David on August 21, 2006 at 2:47 PM | PERMALINK

Mantle never earned over $100,000 a year. http://www.theswearingens.com/mick/salary.htm

And, between 1957 and 1963, only two players in the National League earned more than $75,000.
http://www.roadsidephotos.com/baseball/1957-63sals.htm Mays and who?

Posted by: David in NY on August 21, 2006 at 2:49 PM | PERMALINK

I suspect, though, that the real reason income inequality is increasing is that increasing information flow has increased knowledge and efficiency in the use of power. Combined with the fact that power (aka, "wealth") is fungible, and that a popular application of the power represented by wealth is to apply it to maximize future accumulation of wealth, and more efficiency means more inequality.

Posted by: cmdicely on August 21, 2006 at 2:49 PM | PERMALINK

Those who count the money seem to be keeping ever larger proportions of it.

Professional athletes know how much money is on the table. If they do not use their market power to increase their share of it, it does not go back to the ticket buyers or advertisers, the money they leave on the table goes back to the owners. It is the market power of the players that allowed them to increase their share of the revenue they help to create by adding value to the product.

Employees rarely know how much money is on the table and even if they did, they do not have any market power to force the employers/owners to give up any of it. In most work places, employers/owners have all of the market power, and they use it to beat down wages, thus keeping an ever larger proportion of the value added by their employees.

Markets are not pure, they are created with rules by people. Usually those people game the market in their favor or in their benefactors favor. In the US, wealth has gamed the markets at the expense of the people who add the value by corrupting the rule makers, whom we call politicians.

Posted by: Hostile on August 21, 2006 at 2:51 PM | PERMALINK

Ah, Stefan, you're also messing up the Moneyball message.

Billy's problem was that he couldn't afford A-Rod or Pujols. It is certainly the case (straight out of Bill James' Abstracts) that you build good teams around players at the far right of the talent tail. I can't easily reproduce the diagram here, but the talent distribution of professional baseball players graphically looks like a right triangle that doesn't touch at the right hand leg.

Talent at the far right is extremely valuable, and generally worth what they pay. Teams constructed around such players, like the Yankees are successful.

Beane's (and James') insight was that there were player characteristics that were undervalued, secondary average and on-base percentage and characteristics that were over-valued, like speed and looking like a ballplayer. (Billy looked like a ballplayer, was a top prospect for the Mets, but never panned out.) So he drafted players with those undervalued characteristics. They were available, because other teams didn't see their value and they would accept lower salaries than was generally associated with their position in the draft, because nobody else wanted them.

He had other insights. For example, he noticed that a closer is not hard to find, because closing is not hard to do. So he'd make someone who threw strikes a closer, have him rack up thirty saves and deal him. But the book does not claim that players like A-Rod are overvalued. They are not.

Moreover, now that I've gotten started, the players who are overpaid are the ones who aren't stars, who are not significantly better than the replacement level, but have their salaries set by arbitration. The arbitrators don't understand the distribution of baseball talent either. They figure a guy 80% as good as the best player deserves 80% of the salary. This is not true. There are many players 80% as good as Pujols. But there is only one Pujols.

Miller's genius was getting the owners to think that arbitration was a concession. It wasn't. He did NOT want complete free agency. He wanted a mechanism that would lock in salaries by limiting the market in any given year.

Posted by: JayAckroyd on August 21, 2006 at 2:52 PM | PERMALINK

I've always thought that the decline of the unions was one factor in what has happened. But another I've heard mentioned is the end of the "threat" of socialism or communism. There was a time when there was a "left" in this country (no, Democrats are not "left") that thought this was a real issue, and the suits were actually concerned about giving their arguments credence. One aspect of this brought the government in against segregation, which had been a great leftist talking point. Another, however, was a moderation in the grasping behavior of the fat-cats.

There was a time when leftists and even politicians might have used Ken Lay and Dennis Kozlowski (sp?) as examples of why the government ought to redistribute wealth. Now, that's unheard of.

I'm personally for a little more class warfare.

Posted by: David in NY on August 21, 2006 at 2:58 PM | PERMALINK

Kevin,

Your baseball analogy is a pretty lousy one. Baseball and other professional sports are meritocracies. You have a job playing until someone better and/or younger/less costly comes along.

A better attempt might have addressed the change in the distribution of revenues between clubs and the players as a whole. Based on the whining the owners, one might suppose that the players get more than in the past, but I doubt it. I think the increased wealth of the players has more to do the growth in the profitability of baseball and other professional sports. And it is not the union that keeps the owners from firing all the high priced players and hiring all new less expensive ones- it is the fans who pay $150/ticket to see Alex Rodriquez, but won't pay to see Bob Rodriquez.

Posted by: Yancey Ward on August 21, 2006 at 3:06 PM | PERMALINK

It's not a question for the economists.

It will be a question for the anthropologists to answer hundred years from now, to wit, how did the people of the greatest nation on earth let themselves be snookered by a bunch of lying thieves known as the Republican Party headed by a snake called Karl Rove?

Posted by: nut on August 21, 2006 at 3:13 PM | PERMALINK

The effects of globalization can't be ignored, specifically in regards to the loss of manufacturing jobs over the last several decades. Such jobs usually demanded very sophisticated skills and were correspondingly paid well. Janitorial work or waiting tables have always been on the lower end of the pay scale simply because the set of skills required for these jobs is minimal and highly interchangeable.

I expect the well-paid manufacturing jobs provided an upwards "pressure" upon white-collar salaries while they still existed. Now that they're mostly gone, so is this pressure as well.

Posted by: Ami in Deutschland on August 21, 2006 at 3:14 PM | PERMALINK

cmdicely: I suspect, though, that the real reason income inequality is increasing is that increasing information flow has increased knowledge and efficiency in the use of power.

Then what explained it during the Gilded Age, or for that matter the Middle Ages?

I think the Institutionalists were/are right, what we're seeing is a classic case of "the more things change, the more they remain the same". No need for any newfangled technological mumbo-jumbo.

Posted by: alex on August 21, 2006 at 3:15 PM | PERMALINK

Kevin is right on target. As the the working class' collective bargaining power has declined over the last twenty years, large corporations have found it easier and easier to crush the working masses. Unions have lost membership and prestige for many reasons, not the least of which are inevitable changes in the global economy as U.S. manufacturing jobs have migrated abroad. But Republican control either of the Presidency or Congress since 1980, has made it extremely difficult for labor to adapt relative to management.

Posted by: Bob C on August 21, 2006 at 3:17 PM | PERMALINK

In the US an individual rising above the class of his birth has become more and more a thing of the past. That has nothing to do with globalization since the same globalization harms European workers. What has happened? The Republicans, traditionally the party of the wealthy, were able to court Wallace voters and the lumpenprole Wallace types would rather be poor than broadminded. Middle class income started to stagnate when? 1973. That isn't accidental.

Posted by: Jeffrey Davis on August 21, 2006 at 3:21 PM | PERMALINK

> Beane's (and James') insight was that there were
> player characteristics that were undervalued,
> secondary average and on-base percentage and
> characteristics that were over-valued, like speed
> and looking like a ballplayer. (Billy looked like
> a ballplayer, was a top prospect for the Mets,
> but never panned out.) So he drafted players with
> those undervalued characteristics.

Sounds like a basic failure of the all-seeing, all-knowing Market(tm) to me. Those attributes should have already been identified and fully priced after 120 years of baseball.

Now, can we give up on professional sports as having any meaning for understanding how real Americans live? Yes, there is a competitive market in fungible wheat. And there is a specialized market in A-Rods and Pujholses. But that doesn't mean that the rest of us live in some linear average market in between; the economy is more like a bowl of spahghetti. And the average American these days is getting the lukewarm water left over on the plate after dinner.

Cranky

Posted by: Cranky Observer on August 21, 2006 at 3:31 PM | PERMALINK

As society has gotten more technological and more complex, the value of people who can analyze and direct that complexity has increased relative to those who can't. In general, this means that smart, highly educated people are worth more today than in the past.

You know, just for once, I'd like to see a serious argument that this really plays a significant role in what's going on.

Yesterday's bosses directed the efforts of N people under them. Do the same bosses with the same N people under them REALLY do a much better job of directing them than before? Is it really that much better than the underlings are themselves doing, relative to their peers from the past? Aren't the underlings doing all kinds of things with their computers that vastly outstrip their peers?

Isn't this whole line of argument so much garbage thrown up simply to justify inequalities in terms that people feel instinctively they must respect, namely by basing those inequalities on the wonders of education and technology?

Posted by: frankly0 on August 21, 2006 at 3:33 PM | PERMALINK

I have a question:

If every American belonged to a union, what do you think would be the effect?

Posted by: Yancey Ward on August 21, 2006 at 3:39 PM | PERMALINK

If every American belonged to a union, what do you think would be the effect?

Nice vacation packages.

Posted by: frankly0 on August 21, 2006 at 3:41 PM | PERMALINK

> If every American belonged to a union,
> what do you think would be the effect?

We would have food and vacation days like the French, and high-quality single-payer health care?

Admittedly we might have to put up with French cars, which would be a problem, but I bet we could work out some sort of deal with Honda that would be win-win.

Cranky

Posted by: Cranky Observer on August 21, 2006 at 3:42 PM | PERMALINK

A temp worker uprising, yes and a Democrat in the White house who isn't a wussy. And Fox news babes tripping over their high heels on the way to Mr. Murdoch's office.

Posted by: Supple Facts on August 21, 2006 at 3:46 PM | PERMALINK

Yancey Ward: If every American belonged to a union, what do you think would be the effect?

I don't know, but since it isn't going to happen, why worry about it?

I have very mixed feelings about unions myself. However, one of the nice things that happened when more people were unionized, is that the the threat of unionization caused many non-union employers to treat their employees well. That's why I strongly support the right to organize.

You don't think that your German employers came up with 36 vacation days/year out of the goodness of their hearts, do you?

Posted by: alex on August 21, 2006 at 3:58 PM | PERMALINK

Just to follow up a bit on my point about the relative efficiencies of low level workers, consider the case of, say, a worker for the electric company who takes your payment coming through the mail and enters the information into the system. I would expect that such a person might do the work of many workers from the fifties. And the ability of the worker to do this work may indeed require significant training in a fairly complex software system.

So is that vastly more efficient worker being paid more, relatively, than the worker from the fifties?

Of course not. If anything, they are probably paid less -- certainly relative to people above him or her.

So why pretend that it's the relative efficiencies that count? All that really counts, it seems to me, is where you are on the totem pole, and what class of people has the power to decide who gets paid most.

Posted by: frankly0 on August 21, 2006 at 3:59 PM | PERMALINK

I bet Mark Thoma - who has been trying to argue the same point - will be impressed with this analogy. Let's just say I was.

Posted by: pgl on August 21, 2006 at 4:03 PM | PERMALINK

alex:

Thorstein "the bard of savagery" Veblen is one of my heros :)

Behavioral economics is another antidote to neoclassical orthodoxy and unchallengable a prioris like "subjective utility."

Bob

Posted by: rmck1 on August 21, 2006 at 4:04 PM | PERMALINK

alex,

My German employers also pay me less than I could get elsewhere in the US for a similar position, so I don't get the extra vacation for free, but I value it enough not to look elsewhere for employment.

My question is an important one, however, even if it will never happen.

Posted by: Yancey Ward on August 21, 2006 at 4:09 PM | PERMALINK


sam knight: one that nails the missing component in economic models: Power. Those who have it, will use it, either subtly or unsubtly to get what they want.


and to that end....

the ussc ruling that equated money to free speech instead of property

Posted by: thisspaceavailable on August 21, 2006 at 4:14 PM | PERMALINK

This simple fact, that for most jobs supply is greater than demand, is what is truly holding down wages. Unionization, or lack thereof, has little to do with it.

On the contrary, unionization has a *lot* to do with it, since a union contract prevents an employers from using every potential worker in the supply pool *and* makes it considerably more difficult to trade one worker for another without some due cause.

Posted by: Ed Fitzgerald (unfutz) on August 21, 2006 at 4:15 PM | PERMALINK

One other thing about the baseball player market -- it's somewhat skewed by the arbitration scheme that it employs, where management presents one salary, along with statistical comparisons to other players, and the player presents another salary, along with statistical comparisons to some *other* players, and the arbitrator has to chose between the two salaries -- no splitting the difference. Since (it turns out) the players' comparisons turn out to be better more often, this has the effect of pushing salaries upward faster than they might otherwise go.

Posted by: Ed Fitzgerald (unfutz) on August 21, 2006 at 4:18 PM | PERMALINK

thisspaceavailable:

Very good point.

Buckley v Valleo is one of the all-time worst SCOTUS decisions of all time, almost in the same league with Plessy and Dred Scott for my money, YMMV of course.

This is a decision that needs to be flat-out repealed before it becomes even more sclerotic with precedent from subsequent rulings.

Bob

Posted by: rmck1 on August 21, 2006 at 4:21 PM | PERMALINK

They also deserve large credit for the collapse of the American auto industry.

Um, no.

Who made the decisions about what products to produce, what plants to open, and, ultimately, what to ask from the union when negotiating the next contract?

That would be, like, management.

The union didn't stick its head in the sand and keep producing giant gas guzzlers in spite of a clearly approaching fuel crisis... three times.

Management gave the union too easy a time in negotiations. It should have insisted on sustainable benefit and pension plans.

Unions are responsible for protecting their workers, not making business decisions. While the farsighted unions may be able to offer assistance, it is ultimately management's job to perceive upcoming challenges, envision contracts with those challenges in mind, and explain them convincingly to the union reps on the other side of the table.

The union didn't somehow impose the contracts. Management approved them.

Posted by: dal20402 on August 21, 2006 at 4:28 PM | PERMALINK

"more union friendly"

This sounds an awful lot like "Let's take away from individual states the power to decide whether they'll be 'right to work' or 'union' states."

So much for the states being individual laboratories of democracy, eh?

Posted by: Birkel on August 21, 2006 at 4:30 PM | PERMALINK

The all-time worst decision of all time. Heh, nice one there, Bob.

Someone alert the Department of Redudancy Department -- and mobilize the Natural Guard !

Bob

Posted by: rmck1 on August 21, 2006 at 4:30 PM | PERMALINK

rcmk....how soon do you think it will be repealed?


and this needed to be repeated...

Hostile: Employees rarely know how much money is on the table and even if they did, they do not have any market power to force the employers/owners to give up any of it. In most work places, employers/owners have all of the market power, and they use it to beat down wages, thus keeping an ever larger proportion of the value added by their employees.

too true...

Posted by: thisspaceavailable on August 21, 2006 at 4:33 PM | PERMALINK

Birkel:

Yeah ... too damn bad about segregation, also.

Maybe you could petition George Allen to do something about it if he becomes president :)

Bob

Posted by: rmck1 on August 21, 2006 at 4:33 PM | PERMALINK

thisspaceavailable:

I'm not really the one to ask. Cmdicely and/or Stefan would doubtless have something pertinent to say about it.

A lot of civil libertarian types defend the idea of money as free speech, which is something I find incomprehensible.

My speech is as free whether I'm loaded or broke.

Bob

Posted by: rmck1 on August 21, 2006 at 4:37 PM | PERMALINK

They also deserve large credit for the collapse of the American auto industry.

My strong sense is that high level executives in the US even in the auto industry are vastly better paid than their counterparts in Japan.

So why don't we conclude that the real problem is that we overpay our executives, creating an effectively unaccountable elite who have no important incentive to make correct decisions, and who damage company morale due to their repulsively excessive compensation?

Why is that argument any less plausible than blaming it on unions?

Posted by: frankly0 on August 21, 2006 at 4:46 PM | PERMALINK

Yancey Ward: My German employers also pay me less than I could get elsewhere in the US for a similar position, so I don't get the extra vacation for free, but I value it enough not to look elsewhere for employment.

Well, nothing is free, but as you say, the tradeoff is one that you like. It's good to be able to make the choice. Many people can't.

My question is an important one, however, even if it will never happen.

Why? Seriously.

Posted by: alex on August 21, 2006 at 4:46 PM | PERMALINK

please spare me any bollocks about how globalization means we can't afford to pay workers higher wages.

Another reason that's an absurd argument: our GDP keeps on growing quite nicely. Wingnuts, feel free to explain to me why dividing up the pie in a more equitable fashion is going to somehow shrink the pie.

Posted by: RT on August 21, 2006 at 4:49 PM | PERMALINK

rmck1,

So if I am a candidate and I want to spend my own money to buy advertising for my run, you think the government should have the right to limit how much I can spend?

Or if I want to use my own money to buy advertising to support a candidate running for office, you think the government has the right to limit this as well? What part of the 1st Amendment gives the government the right to do this?

Posted by: Yancey Ward on August 21, 2006 at 4:52 PM | PERMALINK

A more complete analysis would not compare superstar salaries of today to yesteryear, but "middle class" player salaries of today to yesteryear.

My guess is Kevin's analysis would still be true, though perhaps not as lopsided.

Posted by: Jimm on August 21, 2006 at 4:57 PM | PERMALINK


frankly0: Why is that argument any less plausible than blaming it on unions?


because freedom fighter who blamed the unions upthread..

is part of that blame america first crowd...

Posted by: thisspaceavailable on August 21, 2006 at 4:58 PM | PERMALINK
Buckley v Valleo is one of the all-time worst SCOTUS decisions of all time, almost in the same league with Plessy and Dred Scott for my money, YMMV of course.

Scott wasn't a bad decision so much as it was Constitutionally correct result of the bad provisions in the Constitution of the time; the Civil War Amendments were the right way to deal with the problem, though of course it would have been better if we hadn't had to have a civil war to get them.

But Buckley, I would say, is correct, both Constitutionally and even more fundamentally. Freedom of political expression is certainly a hollow right if the state can arbitrarily limit what resources you can apply to that expression.

Posted by: cmdicely on August 21, 2006 at 4:58 PM | PERMALINK

feel free to explain to me why dividing up the pie in a more equitable fashion is going to somehow shrink the pie.

Because the rich reinvest all their money for the good of the country, whereas the poor burn their money in their back yards.

Posted by: Disputo on August 21, 2006 at 4:58 PM | PERMALINK

Bob,
First, nice job going straight for the racism charge. I never could have seen that one coming. Wow, your intellect is dazzling. Kinda like a Bedazzler.

Next, you'll kindly remember that segregation was approved by the SCOTUS. That's a federal institution. And they got it wrong. So I'm not quite sure that cuts in favor of your argument that decisions about unionization should be made at the federal lever, if that is indeed your point.

Finally, you'll recall from your ConLaw class that intrastate trade was left to the states. Something about the Constitution, iirc. And while it is surely the case that the federal government can tell a farmer exactly how much wheat (s)he can grow on their own farmland to feed (her)his own livestock* -- a decision I'm sure you fully support and are not in the least concerned that the Republican controlled Congress will ever use toward 'bad' ends -- I'm not sure the employ of citizens would pass muster.

Oh, who the heck am I fooling. I'm sure you think it's fine to give more power to the feds. But just remember to be careful with your petard for fear of being hoisted upon it some time from now.

*Wickard v. Filburn

Posted by: Birkel on August 21, 2006 at 4:58 PM | PERMALINK
I suspect, though, that the real reason income inequality is increasing is that increasing information flow has increased knowledge and efficiency in the use of power.

Then what explained it during the Gilded Age, or for that matter the Middle Ages?

Largely, the same thing. Increasing practical knowledge with time is pretty much a universal constant of human society, it isn't a new feature of the 20th Century. And power tends to concentrate itself until the bottom rung of society stops putting up with it, new formal or traditional rules are put into place to placate them which temporarily reverse the trend, and then new knowledge and experience leads those in powers to find better and better ways of subverting the controls put into place, until the cycle repeats.

Posted by: cmdicely on August 21, 2006 at 5:02 PM | PERMALINK

This sounds an awful lot like "Let's take away from individual states the power to decide whether they'll be 'right to work' or 'union' states."
Posted by: Birkel on August 21, 2006 at 4:30 PM | PERMALINK


Yeah. Just like the states had the right to decide whether Corporations have the same rights as humans.

Posted by: Osama_Been_Forgotten on August 21, 2006 at 5:03 PM | PERMALINK

Kevin,

It's pretty apparent that you aren't an economist, and it's also pretty apparent that you are not much of a baseball fan, either. A-Rod's salary is about $25 million per year, not $10 million.

Posted by: DBL on August 21, 2006 at 5:07 PM | PERMALINK

OBF,
I assume you're aware that each state does have its own corporate law, right?

Posted by: Birkel on August 21, 2006 at 5:07 PM | PERMALINK

I'd prefer a basic upgrade to american democracy to even dramatic campaign finance reform. Broad franchise was hot tech 200 years ago, but our winner take all election system is quite archaic today. Instant runoff and proportional representation would dramatically improve representation in government without impinging on anybody's rights in even a minor way.

Posted by: jefff on August 21, 2006 at 5:08 PM | PERMALINK

I think the argument is that it will slow down GDP growth -- not necessarily stop it, which would be really bad given the increase in population and world competition -- we are all in big trouble if the pie actually shrinks.
Posted by: Thomas1 on August 21, 2006 at 4:55 PM | PERMALINK

Productivity is up.
Inflation is up.
Real employment is down.
Real wages are down.

The pie IS shrinking, assclown.

Posted by: Osama_Been_Forgotten on August 21, 2006 at 5:11 PM | PERMALINK

I'd prefer a basic upgrade to american democracy to even dramatic campaign finance reform.
Posted by: jefff on August 21, 2006 at 5:08 PM | PERMALINK

Personally - I think we should have campaign finance reform:

No limits. No holds barred.

I think the current system lends an undue illusion of fairness, to the point where people still believe what they see on TV.

If there were no limits on campaign spending, imagine how bad the ads would get. I reckon a lot of reasonable people would simply shut their TV's off for about 12 months before every election.

And that would be a very good thing.

Posted by: Osama_Been_Forgotten on August 21, 2006 at 5:16 PM | PERMALINK

cmdicely - I concur with your opinion that "Freedom of political expression is certainly a hollow right if the state can arbitrarily limit what resources you can apply to that expression." I prefer, as Mao put it (in between killing his opponents and assorted class enemies), to "let a thousand flowers bloom." I think that we are headed for a terrible regime, where federal bureaucrats will police what politicians, public interest groups and ordinary citizens can and can't say about elections and public issues.

Posted by: DBL on August 21, 2006 at 5:20 PM | PERMALINK

alex,

A union raises the salaries of its members by limiting to potential supply pool of workers available to the employer, thus part of the rise in salaries comes at the expense of those workers excluded who did not belong to that particular union- the excluded workers pool of potential employers is less than it would have been. The rest of the rise in salaries has to come in a reduced return on capital and/or from an increase in the prices of the employers products.

Now follow the logic until the point I proposed: Every worker belongs to a union, with the law stating that the employer must reach an agreement with its union or go without workers (Workers today already have the right to organize, but in a lot of states, employers have the largely unfettered option of hiring replacements if they wish).

I think it more enlightening if the readers think it through from this point.

Posted by: Yancey Ward on August 21, 2006 at 5:24 PM | PERMALINK


Supply and demand matters. And illegal immigration increases supply. As Cesar Chavez, founder of the United Farm Workers, testified to Congress in 1979:

" when the farm workers strike and their strike is successful, the employers go to Mexico and have unlimited, unrestricted use of illegal alien strikebreakers to break the strike. And, for over 30 years, the Immigration and Naturalization Service has looked the other way and assisted in the strikebreaking. I do not remember one single instance in 30 years where the Immigration service has removed strikebreakers. The employers use professional smugglers to recruit and transport human contraband across the Mexican border for the specific act of strikebreaking"

http://www.amconmag.com/2006/2006_02_27/article.html

Posted by: Steve Sailer on August 21, 2006 at 5:27 PM | PERMALINK
I'd prefer a basic upgrade to american democracy to even dramatic campaign finance reform. Broad franchise was hot tech 200 years ago, but our winner take all election system is quite archaic today. Instant runoff and proportional representation would dramatically improve representation in government without impinging on anybody's rights in even a minor way.

I think this is really the answer (well, as usual, I would prefer "sensible preference" as a more general replacement for "instant runoff" voting; there are a number of usable preference voting schemes for single-winner and multi-winner elections, and instant run-off isn't, among them, one I'm all that particularly fond of), and I think that futile finance "reform" and other half-measures are the frequently offered "alternatives" because they tend not to challenge the dominance of established power.

Posted by: cmdicely on August 21, 2006 at 5:32 PM | PERMALINK

Thanx for the post. Agree completely.

You are never going to get a sensible explaination for stagnant wages and rising inequality from most modern economist. Their understanding of everything starts with the assumption that the market is fairly assigning value, and then proceeds to find out the reason why that everything has the value it does. The idea that the market is not perfect and does not assign value fairly or correctly is too much for them to comprehend.

Posted by: still working it out on August 21, 2006 at 5:32 PM | PERMALINK

Just to make another point about unions which I think is key.

The real importance of unions in the US historically is that they have shamed the elite into not awarding themselves obscenely. It's very hard indeed to bargain with unions about not raising pay of workers when the compensation of executives is disgustingly high.

In Japan, mostly it's a matter of social mores: in order to have a harmoniously run company, with something approaching a team spirit, the executives can't seem like an arrogant, entitled class unto themselves.

In the US of course, that is exactly what our executive class seems like to most workers, and it damages the company in all kinds of ways, not least because it fosters a completely "top-down" kind of organization, in which crucial feedback from those below is dismissed, or not even offered up.

Posted by: frankly0 on August 21, 2006 at 5:35 PM | PERMALINK
A union raises the salaries of its members by limiting to potential supply pool of workers available to the employer

This might be true in some cases, but it is certainly an invalid generalization. Many union contracts do not prevent hiring from outside of the union, instead, they tend to require permanent employees to join the union within a specified period after being hired.

Unions improve employment conditions (including, but not limited to, salary and compensation) by providing a legally-protected vehicle for collective organization, bargaining, and action, which enables the credible threat of negative consequences for adverse conditions.

Posted by: cmdicely on August 21, 2006 at 5:39 PM | PERMALINK

franklyO,

I would agree with you that it is our weakening mores that is one of the root causes of the escalating salaries of the top management of corporations, but I really don't see the link to unionization.

As one commenter wrote earlier, the inequality might be addressed by a different form of corporate ownership. The present corporate structure makes it unwieldly (but not impossible) for shareholders to exercise control over management compensation. This lack of shareholder control is the missing regulator of management compensation.

Posted by: Yancey Ward on August 21, 2006 at 5:41 PM | PERMALINK

mfw13 says:

The person who brought up VORP (Value Over Replacement Player) is right on target.

Now change the last word from "player" to "worker", as ask what is your value over a replacement worker? In most cases, it is very little, which is why you have very little negotiating leverage in trying to increase your wages. SImply put, there are plenty of people out there who can do your job just as well as you can, making you very replaceable.

This simple fact, that for most jobs supply is greater than demand, is what is truly holding down wages. Unionization, or lack thereof, has little to do with it.

Economics 101 people....when supply is greater than demand, prices fall.

The VORW (Value Over Replacement Worker) for a WalMart sales associate or cashier is zero....same thing for janitors or waiters or other retail salespeople. That is why their wages are not increasing, not because they are not unionized.
WRONG. That is exactly what unions are designed to prevent.

Go back to the WSJ drawing board and start over.

Paul says, and is also wrong:

I am not sure that depending on unions is the answer. The problem is that when times are bad and profits are down it is very hard to get unions to accept salary or benefit reductions. When a company already has big problems this can pretty much finish it off-- see airlines and autos as an example.

Paul, when in any of these situations, did corporate execs ALSO sign up for major cuts? No unions going to sign off on a one-sided bottom line.

CMDicely has an interesting point, but

I suspect, though, that the real reason income inequality is increasing is that increasing information flow has increased knowledge and efficiency in the use of power. Combined with the fact that power (aka, "wealth") is fungible, and that a popular application of the power represented by wealth is to apply it to maximize future accumulation of wealth, and more efficiency means more inequality.

Not necessarily; thats only the case if part of the power of wealth is used to buy out the power of government through lobbying, campaign contributions, etc. Efficiency, in and of itself, does not lead to inequality; only efficiency in the service of some other goal.

Jeffrey Davis is spot on:

The Republicans, traditionally the party of the wealthy, were able to court Wallace voters and the lumpenprole Wallace types would rather be poor than broadminded.

Yancey doesnt understand that advertising already isnt totally protected speech:

So if I am a candidate and I want to spend my own money to buy advertising for my run, you think the government should have the right to limit how much I can spend?

Or if I want to use my own money to buy advertising to support a candidate running for office, you think the government has the right to limit this as well? What part of the 1st Amendment gives the government the right to do this?
In such SCOTUS actions as not accepting an appeal on the Nike case a couple of years ago, the courts have given some indication that public relations as well as advertising are not totally protected speech. How SCOTUS squares this with Buckley, I dont know. I do know that, contra Emerson, SCOTUS can and does often show a foolish inconsistency.

CrankyObserver is right that baseball has little to do with the real world of the dismal science.

OTOH, if you dont like the salary A-Rod (or Tom Hanks) makes, dont buy the tickets; dont expect government to do this one for you.

CMDicely is also wrong on Dred Scott

Scott wasn't a bad decision so much as it was Constitutionally correct result of the bad provisions in the Constitution of the time

Dred Scott was the most egregious SCOTUS ruling beyond the bounds of what was called for by the case, this side of Gore v. Florida. And, perhaps even more politicized.

The incoming Buchanan Administration had been pushing for such a broad ruling, including the Mo. Compromise being declared unconstitutional, even before Old Buck was sworn into office. Then, to switch things around, Taney leaked back to Buck what the ruling was going to be so that he could incorporate comments into his inaugural address.

Sorry, CM, but Dred is possibly the worst SCOTUS decision ever, in total context.

My own thoughts:
1. Globalization. I love to see DNC-type Democrats hoist by their own petard after voting for NAFTA and WTO and abandoning union concerns. Now, if we could only outsource trial lawyers and the entertainment industry, wed really make them howl. At the same time, if we could outsource K Street to India, wed make Grover and his gang howl too.

2. Unions may only be a block, as CM says, but theyre a helluva good one when given the chance. If we had the German style, with unions on boards of directors, the adversarlial relationship would change.

Posted by: SocraticGadfly on August 21, 2006 at 5:43 PM | PERMALINK

In addition to the decline of unions, the end of communism as threat to capitalism has made it possible for both industry and government to be less responsive to the needs of the middle class.

It could be said that eventually industry came to embrace, or at least accept, unions in order to eliminate that threat. As communism collapsed and fell, the protection unions provided was no longer necessary. One would hope that it will take less than the threat of a violent backlash before government and industry leaders will begin to take a long-term view of the damage that will be done if the U.S. middle class is squeezed out of existence. Perhaps, at least, if capital gains taxes were restored to resonable levels, so that stock ownership was again a matter of long-term investment, rather than short-term speculation, it would encourage -or enable- more long-term thinking. But it seems to me that increased unionization alone is not enough.

Also, the baseball analogy doesn't take into account the fact that players have agents to negotiate the best individual deals possible for them. Perhaps in the "free-agent" society that's evolving every worker will have an agent (perhaps that's what we're already seeing as the pool of "temps" grows).

Posted by: buhwhahduiknow? on August 21, 2006 at 5:45 PM | PERMALINK

I agree with cmdicely, its time for a socialist revolution. Shoplifters of the world unite and take over.

Posted by: Psiniq on August 21, 2006 at 5:45 PM | PERMALINK

Here we go again.

1. Median wages have not "stagnated" over the past several decades. They have increased.

2. Wages alone are not a meaningful measure of employment compensation, because they do not include the value of non-wage compensation such as benefits and employer-paid payroll taxes.

3. There are many forms of income other than wages. Examples include child support, alimony refundable tax credits, dividends, annuities, interest, pensions, retirement plans, social security, inheritances, rental property income, gifts, charity, and income from casual labor.

Posted by: GOP on August 21, 2006 at 5:50 PM | PERMALINK
Not necessarily; thats only the case if part of the power of wealth is used to buy out the power of government through lobbying, campaign contributions, etc.

Power is fungible. That's the point of power. And, yes, that's one of the way it is used to perpetuate itself. So?

Dred Scott was the most egregious SCOTUS ruling beyond the bounds of what was called for by the case, this side of Gore v. Florida. And, perhaps even more politicized.

It was certainly even more nakedly politicized; nevertheless, I don't think it was so much Constitutionally wrong in its result as a result of a Constitution that was badly morally broken at the time.

Sorry, CM, but Dred is possibly the worst SCOTUS decision ever, in total context.

In terms of application of the law and precedent, I disagree. In terms of judicial conduct surrounding the decision, and in terms of the morality of the result, perhaps.

Unions may only be a block, as CM says, but theyre a helluva good one when given the chance. If we had the German style, with unions on boards of directors, the adversarlial relationship would change.

Well, certainly that might be much better for workers than what we tend to have here; I see the ideal, though, as being something like Mondragon-style worker-ownership, though.

Posted by: cmdicely on August 21, 2006 at 5:51 PM | PERMALINK
I agree with cmdicely, its time for a socialist revolution.

You either don't agree with me, or you are using "socialist revolution" in an unusual sense.

Posted by: cmdicely on August 21, 2006 at 5:52 PM | PERMALINK

I would agree with you that it is our weakening mores that is one of the root causes of the escalating salaries of the top management of corporations, but I really don't see the link to unionization.

My argument on this point is basically that it's very hard for management to bargain down the amount of money they pay workers when they compensate themselves at amazing and rising multiples of what the workers make.

The effect is all psychological of course, on both sides. Yet I have very much come to the conclusion that a vast portion of what people try to explain in economics really does come down to psychology and perception. The invisible hand is in truth guided by those invisible and subjective and socially loaded forces.

Fundamentally, the rich are getting richer because they think very well of themselves and how important they are to the economy, and in the end they get to decide who gets what.

At base, it's really not more complicated than that.

Posted by: frankly0 on August 21, 2006 at 5:53 PM | PERMALINK

cmdicely:

Hyperbole focused on the buttom rung no longer putting up with it and the limits of union advocacy.

Posted by: Psiniq on August 21, 2006 at 5:57 PM | PERMALINK

cmdicely,

If the company is growing or is replacing retiring union members (the assumption being there are no idle union members who want to work), then the company has no choice but to hire from outside the union. However, no union I know of allows the employer to hire a new worker at whatever wage the employer can negotiate. This means the employer must hire only those employees for which the set minimum wage is not higher than the value the employee can add. This is a restriction on the potential pool of workers.

As for your second point, I pretty much agree with it.

Posted by: Yancey Ward on August 21, 2006 at 6:03 PM | PERMALINK
cmdicely:

Hyperbole focused on the buttom rung no longer putting up with it and the limits of union advocacy.

I'm not sure what you intend to mean by this sentence fragment.

Posted by: cmdicely on August 21, 2006 at 6:06 PM | PERMALINK

"I think everyone agrees that government policy is not entirely to blame. "

what weasely sophistry; of course *NOTHING* is *ENTIRELY* to blame for just about anything; but to pretend that gummint policies aren't the dominant influence on wealth/profit making in amerika, is avoiding reality...

'freemarket capitalism', what a fucking joke...
we have privatized profits for the power elites, and socialized costs for the bottom of the food chain...

"As society has gotten more technological and more complex, the value of people who can analyze and direct that complexity has increased relative to those who can't. In general, this means that smart, highly educated people are worth more today than in the past."

bull-fucking-shit...
1. there is NO ONE who is 200-300-400 times more smart/capable than ANYONE else, in ANYTHING PERIOD...

in fact, i can PROVE that i'm 'smarter' than bill gates, right here, right now:
who hasn't absentmindedly smooshed the 'wrong' icon in the upper right of your windoze, and minimized when you meant to maximize, closed when you went to maximize, etc, etc ? now, not like it happens everytime, but it sure is annoying that it happens at all, when it can be EASILY fixed by MERELY SPACING the damn icons apart...
simple, no ?
thus proving i am smarter than stupid fucking bill gates, who hasn't been able to figure that out in twenty years, EVEN WITH a million mercenary monkeys at the keyboards...

where do i go to pick up my billion dollars, mr. kevin (been-beat-like-a)drum ?

2. i'd bet dollars to donut holes that i can take the lowest of the low, and within six months, have them doing as competent a job as ANY overpaid corporadoe...

these CEO's etc didn't get to where they were by being super-smart, super=competent; they got to the top of a rapacious system by being sociopathic monsters, by knowing the right people, by internalizing all the required memes and behavior that a pseudo-capitalist has to perform...

3. your assumption that this disparity is born of talent, desire, and intelligence is such laughably power elite crapola, that it calls into question your very worldview and competence...
(and whether you've ever had a 'real' job...)

4. the CEO's who earn the 200-300 times more than their employees often run the companies into the ground, sell off the assets, vote themselves golden parachutes, then skate off to another cushy postion (or company-paid retirement) without ANY consequences for destroyng a viable company...
yeah, they are super-smart allright, super-smart con men...

this pattern repeats itself over and over, the inescapable conclusion is: crony capitalism pays well; competence, profits, company health, etc are incidental to whether upper management/boards get renumerated beyond their 'worth'...

if ALL the CEO's, board members, pocket-lining cronies were swept from the face of the planet tommorrow (*sigh* a fellow can dream, can't he), life would go on (more pleasantly), work would get done (more efficiently), and all those profits which used to line the big cheese's pockets, will now be redistributed to the actual people who actually do the work...

conversely, take away all the workers tommorrow, and NOTHING will get done, PERIOD...

workers of the world, untie!
you have nothing to lose but the thin threads of economic slavery they bind you with...

art guerrilla

aka ann archy

eof

Posted by: art guerrilla on August 21, 2006 at 6:09 PM | PERMALINK
However, no union I know of allows the employer to hire a new worker at whatever wage the employer can negotiate. This means the employer must hire only those employees for which the set minimum wage is not higher than the value the employee can add.

Well, no, it doesn't.

It means the employer shouldn't do that out of simple prudence, but its not the same thing.

This is a restriction on the potential pool of workers.

No, it simply a factor in the calculus of desirable workers. More importantly, they aren't, as you suggested, improving wages through the means of restricting the pool of available workers. Instead, the shrinking of the pool of desirable workers is an effect of the wage terms, not the means by which they are acheived.

Posted by: cmdicely on August 21, 2006 at 6:10 PM | PERMALINK

In general, this means that smart, highly educated people are worth more today than in the past.

Bullshit, Drum.

Posted by: Lettuce on August 21, 2006 at 6:12 PM | PERMALINK

SocraticGadfly,

I understand that the court thinks commercial advertising is not totally protected by the 1st Amendment, but that is not what I was writing about. I was explicit in writing about political advertising. I cannot square the restrictions that some wish to put on this form of expression with the clear language of the 1st Amendment.

What if I owned a newspaper read by millions, and I decided to put in ads that supported a specific candidate on every page? Is it proper for the government to restrict this?

Posted by: Yancey Ward on August 21, 2006 at 6:13 PM | PERMALINK

CMDicely:

Unionization is important in the current environment as a tool for workers to guarantee that they share in the benefits that drive corporate profits, but its largely an inefficient stopgap based in an adversarial relationship; its like an institutionalized armed resistance movement as a check on the power of a totalitarian government. It may be better than nothing, but eventually you want to get to a state where you've got popular soveriegnty; the same thing holds for workers in firms that holds for citizens in a country: an institutional resistance is better than nothing, but an equal voice in running the show is the goal.


Maybe we can agree: you work hard to help build up this "inefficient stopgap based in an adversarial relationship" and I'll work hard to ensure workers eventually have an equal voice in running the show.

Posted by: Friend of Labor on August 21, 2006 at 6:16 PM | PERMALINK

What if I owned a newspaper read by millions, and I decided to put in ads that supported a specific candidate on every page? Is it proper for the government to restrict this?

What if you were a medical specialist and you decided to refuse treating people with whom you disagreed politically?

Posted by: Disputo on August 21, 2006 at 6:33 PM | PERMALINK

Let's start by stopping the weasely habit of calling the working class "middle class workers." Part of the reason unions were broken is because it became Capital Party strategy to disappear the working class in a welter of bullshit about them all being middle class. Whatever social engineer thought up that one deserves the all-time Orwell Award for Newspeak. What Lou Dobbs and Kevin Drum are trying to say is "Middle income workers," but that's too many words for them. Hey, you two, the middle class is traditionally thought of as that class that OWNS the means of production. Your mysterious "middle class workers" don't own much more han a mortgage and a pay check. A plumber might make as much as a lawyer, but neither are middle class; they're just well-paid workers. Stop trashing the working class by disappearing its class identity. No wonder they're so hard to organize they think they're the middle class.

Posted by: buddy66 on August 21, 2006 at 6:39 PM | PERMALINK

cmdicely:

Well, this will probably turn out to be our most serious disagreement ever. Please be gentle; the law is not my area of expertise and I'm just using reasoning power to make my case.

I'm with SocraticGadfly. There are classes of speech that are content-regulated and advertising is the best example of "commercial speech." Some company can't get on TV and claim that its acne medicine cures cancer while making your schlong grow three feet long (in the 27th dimension) if these claims aren't true. Medical advertising, especially for prescription drugs, likewise has to submit to all sorts of added disclaimers that the copywriters would doubtless love to axe if it weren't mandated by federal law.

And likewise, paid poliical advertising is a form of commercial speech. It's not disinterested; it's aiming for a certain result just as assuredly as Glaxo wants you to take its brand of medicines. It should therefore be just as subject to having its truth claims verified. Unmitigated bullshit can and should be regulated out of the discourse.

Campaign finance reform is an effing disaster because there are just oodles of clever lawyers out there waiting to pounce on any new regulation to undermine it. The '72 reforms that opened the primaries up brought with them the rise of the PAC. McCain-Feingold banned soft money and 527s sprung up, whack-a-mole like. I agree that the system that currently exists is not, strictly speaking, improvable until we reexamine the fundamental principles upon which it rests. One of the biggest blows against free speech came in the '96 Telecommunications Act which gutted the Fairness Doctrine. *That* was free speech as the Framers envisioned it -- not Rupert Murdoch and Time/Warner buying up as many media outlets as their grubby little monopolists' tentacles can wrap their oozing, corrugated suction cups around (apologies to Thomas Pynchon for the octopus imagery).

Money is *property*, not speech. The two aren't even orthogonal as you like to say; to conflate them is a category mistake.

I don't need money to get my ideas out if I can persuade someone to disseminate them. And while deep pockets guarantees message penetration -- it guarantees nothing about the salience/accuracy/relevance/necessity of the message.

We can yank cigarette billboards. No reason on god's grey earth that we can't pull lying swiftboaters off the tube with the proper foundation of legal precedent.

Buckley v Valleo needs to go, Chris.

Bob

Posted by: rmck1 on August 21, 2006 at 6:41 PM | PERMALINK

middle class is traditionally thought of as that class that OWNS the means of production.

Doesn't leave much for the upper class to own, does it?

Posted by: Disputo on August 21, 2006 at 6:42 PM | PERMALINK

Kevin,

Your baseball analogy is a joke and does not apply at all. When free-agency became the name of the game baseball became more free enterprise not less.

Prior to free-agency a baseball player could not shop his skills around for what the market would bear.

The truth is a player like A-rod really is worth that much more than a standard player based upon the wealth he generates.

I am not saying anything about the topic of income inequality. Only that your analogy is a inapplicable example. Go take some econ classes.

Posted by: John Hansen on August 21, 2006 at 6:45 PM | PERMALINK

This Wikipedia article describes some common criticisms of labor unions.

Quote:

Common Objections to Unions:
A union prevents workers from negotiating their own pay, making them settle for "lowest common denominator" wages which represent the minimal value of a worker of their tenure.
Unions force workers to take specific benefits instead of higher pay, again because of the collective contract. If a worker does not need his employer's health insurance, or does not want to take a five minute coffee break every hour, and be paid more in return, the worker has no recourse.
Some union-negotiated contracts, along with employment legislation, may impose limits on companies' otherwise arbitrary power to dismiss their employees. This, it is argued, may exacerbate firms' problems with the unused labor costs and eventually force massive layoffs not experienced in non-union industries.
Where closed shops or union shops have been established, unions can become monopolies, where the worker is not allowed to choose not to belong, and the company is not allowed to hire non-union workers[1]. This can have the very same problems as any other monopoly.
Unions are sometimes accused of holding society to ransom by taking strike action resulting in the disruption of services used by the general public.
One "benefit" of unions, citing by some corporate advocates, is that they can force uniformity and predictability on the workers. The union management negotiates often in secret, with the corporate management, not directly with an employee.
While the disadvantage to exceptional workers, who are forced to take lowest common denominator pay, is obvious, union contracts also harm below-average and inexperienced workers, as they cannot negotiate lower pay in order to be worth hiring while they seek to improve their skills and experience. Getting a first job in a union industry therefore often becomes a matter of "who you know", shutting out many people who could otherwise start a career in the occupation.
Where a union which has a monopoly on an occupation, company, or industry, the union becomes a mere middleperson where the worker is forced to pay in to the union to obtain a job, which the worker might have been able to negotiate as an individual.


Posted by: GOP on August 21, 2006 at 6:50 PM | PERMALINK

If only idiots site wikipedia as anything more than a curiosity, what should we call people who actually post badly formatted wikipedia articles?

Posted by: Disputo on August 21, 2006 at 6:54 PM | PERMALINK

Let's try that again:

"Common Objections to Unions:"

"A union prevents workers from negotiating their own pay, making them settle for "lowest common denominator" wages which represent the minimal value of a worker of their tenure."

"Unions force workers to take specific benefits instead of higher pay, again because of the collective contract. If a worker does not need his employer's health insurance, or does not want to take a five minute coffee break every hour, and be paid more in return, the worker has no recourse."

"Some union-negotiated contracts, along with employment legislation, may impose limits on companies' otherwise arbitrary power to dismiss their employees. This, it is argued, may exacerbate firms' problems with the unused labor costs and eventually force massive layoffs not experienced in non-union industries."

"Where closed shops or union shops have been established, unions can become monopolies, where the worker is not allowed to choose not to belong, and the company is not allowed to hire non-union workers[1]. This can have the very same problems as any other monopoly."

"Unions are sometimes accused of holding society to ransom by taking strike action resulting in the disruption of services used by the general public."

"One 'benefit' of unions, citing by some corporate advocates, is that they can force uniformity and predictability on the workers. The union management negotiates often in secret, with the corporate management, not directly with an employee."

"While the disadvantage to exceptional workers, who are forced to take lowest common denominator pay, is obvious, union contracts also harm below-average and inexperienced workers, as they cannot negotiate lower pay in order to be worth hiring while they seek to improve their skills and experience. Getting a first job in a union industry therefore often becomes a matter of "who you know", shutting out many people who could otherwise start a career in the occupation."

"Where a union which has a monopoly on an occupation, company, or industry, the union becomes a mere middleperson where the worker is forced to pay in to the union to obtain a job, which the worker might have been able to negotiate as an individual."

Posted by: GOP on August 21, 2006 at 6:55 PM | PERMALINK

art guerilla, good comment. CEO's do not add value to any products or services their companies sell for revenue.

Posted by: Hostile on August 21, 2006 at 7:23 PM | PERMALINK
There are classes of speech that are content-regulated and advertising is the best example of "commercial speech."

Well, yes, if you are trying to use speech to sell something, it is part of commerce and restricted. That's certainly one of the areas where speech is farthest from the kinds of things "freedom of speech" is meant to protect.

Political speech is about as far from commercial speech as you can get in this context*.

And likewise, paid poliical advertising is a form of commercial speech. It's not disinterested; it's aiming for a certain result just as assuredly as Glaxo wants you to take its brand of medicines. It should therefore be just as subject to having its truth claims verified. Unmitigated bullshit can and should be regulated out of the discourse.

No, its not "commercial". Engaging in commerce to distribute speech does not make it "commercial"; commercial speech is speech with a commercial purpose, not speech which is distribute through channels which require money changing hands.

And, sure, its not disinterested. The founders protection of "freedom of speech" was particularly focussed on the protection of political advocacy, not mere "disinterested" speech with no purpose.

Campaign finance reform is an effing disaster because there are just oodles of clever lawyers out there waiting to pounce on any new regulation to undermine it.

Campaign finance reform is a disaster because it is focusses on something that is not the route of the problem, and because most campaign finance reform maneuvers are written to gain political advantage for one faction or another (or with different sides trying to gain advantage), not to deal with any real problem.

One of the biggest blows against free speech came in the '96 Telecommunications Act which gutted the Fairness Doctrine. *That* was free speech as the Framers envisioned it -- not Rupert Murdoch and Time/Warner buying up as many media outlets as their grubby little monopolists' tentacles can wrap their oozing, corrugated suction cups around (apologies to Thomas Pynchon for the octopus imagery).

No, neither is "free speech" as the founders envisioned. Free speech as the founders envisioned it was more like the latter, though, than the former: it certainly did not involve government mandates of "balance", but the free marketplace of ideas. Of course, many of them may have believed that a free marketplace of ideas would inherently remain diverse, which was certainly contrary the experience at the time, and the naturally predictable results of the governing systems they established, but even the founders were not immune to exuberant, unrealistic optimism.

Money is *property*, not speech.

Money is property, true. But the use of money, no less than the use of any other property (like a printing press, one's own land to hold meetings or simply to stand on and shout your message, etc.) to disseminate ideas is part and parcel of the essential protections necessary for meaningful freedom of expression (whether in the guise of "speech", "press", "religion", etc.) under the First Amendment.

yI don't need money to get my ideas out if I can persuade someone to disseminate them.

If you are prohibited from using your property to disseminate ideas, you will find it much harder to persuade anybody of anything.

We can yank cigarette billboards. No reason on god's grey earth that we can't pull lying swiftboaters off the tube with the proper foundation of legal precedent.

There is no reason we can't prohibit any kind of speech from being disseminated, that's true.

There are very good reasons we shouldn't restrict political speech, though.

Buckley v Valleo needs to go, Chris.

I disagree. The structural underpinnings of duopoly need to go; once that happens, people and people have meaningful, substantive choices, the utility of swiftboating and related manuevers will be diminished, because you won't be able to win simply by attacks which make people dislike you more slightly less than they make people dislike your strongest opponent more.

You can't correct the problem by finance reform because the source of the problem isn't how campaigns are financed.

* Except, of course, "political" speech by a for-profit corporation, rather than a natural person. Any action by a for-profit corporation is inherently commercial and, misguided precedent aside, their speech quite arguably ought to be regulated as commercial speech regardless of superficial content.

Posted by: cmdicely on August 21, 2006 at 7:28 PM | PERMALINK

I look at it another way. I think everpresent power inequities make wealth naturally float to the top unless there are government policies to actively keep it from doing so -- unions, progressive and estate taxation, looser monetary policy, etc.

In the 70's we lost that goal. Pretty simple.

Posted by: Minivet on August 21, 2006 at 8:21 PM | PERMALINK
...the middle class is traditionally thought of as that class that OWNS the means of production. buddy66 6:39 PM
Nah, lower class: workers; middle class: managers; upper class: owners, inheritors.
1. Median wages have not "stagnated" over the past several decades. They have increased. 2. Wages do not include the value of non-wage compensation such as benefits .3. There are many forms of income other than wages. GOP at 5:50 PM
You keep saying that as if by repetition it will become so. Here you can see that the median is less than the average wage. Here is data on median wage by President. Here is a nice little chart showing median wage peaking in 1973, 33 years ago. Your second point is irrelevant in that benefit costs rose for everyone equally and more Americans are losing or seeing a reduction in those benefits. The third point is irrelevant. Very rich people have more of their income as investment income, not wages. Posted by: Mike on August 21, 2006 at 8:31 PM | PERMALINK

Median wages have not "stagnated" over the past several decades. They have increased.

Nonsense. Check any graph of media wages. Until 1973 increases were palpable. Following 1973, real wages declined for years. They increased again in the 90s but have declined since then. Their current margin over 1973 levels is tiny. The increase from '53 to '73 was over $10,000 in constant dollars. ($19,305 to $29,668). Following '73 there was a steady decline until the 90s. The rise peaked in Clinton's last year ($31089) and wages have fallen since then.

Wages. when not lower, have hovered around '73 levels. That's s functional definition of "stagnate".

Posted by: Jeffrey Davis on August 21, 2006 at 8:35 PM | PERMALINK

Who or what is ARod? Is that a porn star? But seriously, it's time to consult right-wing screwball and baseball fairy Little Georgie Will. After all, it is he who has his mighty hand on the pulse of America and it's so-called national passtime. Twenty-five million is a small price to pay to keep Little Georgie and his fellow baseball geeks occupied for a few months. Besides, all that jewelry those pseudo athletes wear must cost a fortune.

Posted by: Pechorin on August 21, 2006 at 8:47 PM | PERMALINK

It seems to me the baseball players and airline pilots are the ones who taught the CEOs and Corporate Boards how to cartelize, exploit the bottlenecks of the economy and confiscate all productivity growth for themselves. I share your desire for a more equitable distribution of income, but the antique labor structure you're advocating just won't get the job done. Compare Toyota to GM, better yet, limit your comparison to Toyota in the US to GM in the US, and you will see my point. Working people who play by the rules need someone to represent them against the two predator parties feasting on them today. That's why Reagan caused an earthquake in this country, that's why Perot got 21% of the vote despite the Cuban Hit Team remarks, and it's why I'm supporting McCain.

Posted by: minion of rove on August 21, 2006 at 8:57 PM | PERMALINK

Unions distort the labor market and create inefficiency. It's a simple fact of economics. It may be true that in-person service sector jobs are not directly up for outsourcing, but that doesn't change the fact that the price distortion of unions adversely and unfairly affects consumers. Unions should be illegal in a market economy.

Posted by: Rock on August 21, 2006 at 9:03 PM | PERMALINK

The problem is that hardly any young people know anything about union history (or any other history) and don't know how badly wage-earners were treated before widespread unionization. I have a brother who works in a big Vegas casino where unionization has been repeatedly rejected by the entire workforce after being subjected to company propaganda, even though they are treated like serfs. And by the way, never mind the damn "median wage," let's just worry about the bottom 90%.

Posted by: carolanne on August 21, 2006 at 9:13 PM | PERMALINK

The problem is that hardly any young people know anything about union history (or any other history) and don't know how badly wage-earners were treated before widespread unionization. I have a brother who works in a big Vegas casino where unionization has been repeatedly rejected by the entire workforce after being subjected to company propaganda, even though they are treated like serfs. And by the way, never mind the damn "median wage," let's just worry about the bottom 90%.

Posted by: carolanne on August 21, 2006 at 9:15 PM | PERMALINK

Very interesting stats on median vs mean wages. Conservatives would point to 1973 as when the social revolution started impacting women's participation in the workforce and the dissolution of the traditional family structure in this country. A more informative chart would show the income of married parental households throughout the same period - the people think of themselves as "playing by the rules." These are the people that keep Repubs in power because they feel like they are played for chumps by the feckless Democrat "special interests" demanding "handouts" to subsidize their dysfunctional lifestyles. If the Dems want to regain the majority they will have to show this "forgotten middle class" in Clinton's maudlin phrasing, that there will be benefits for them as well as for the single moms.

Posted by: minion of rove on August 21, 2006 at 9:23 PM | PERMALINK

I think one of the primary contributors to the shift in income to the richest segment of society has been the virtual elimination of anti-trust act enforcement by the Reagan administration which continues to the present.

This also led to increased job insecurity as the purchased companies shed jobs to enable the purchasing company to pay off the debt. No wonder that people were willing to take what they could get.

Posted by: FS on August 21, 2006 at 9:24 PM | PERMALINK

Red State Mike: Someone way back a few months argued here for unions, but where the union was only for the one company, not spanning across an industry. So each company gets a union for it's wage grade employees.

That is the norm in Japan. There are a few cross-industry unions, but most are "company unions". At one company I work with, I was very surprised one day to discover people who we would consider typical of US salaried professionals were members of the company union. They would leave the union and officially become a member of "management" when they were promoted above a certain level.

It does tend to promote an attitude where employees tend to look out for the company. However, generlizations are dicey, becuase there are many, many other differences in the labor laws, the structure of the workforce and compensation, and typical career advancement.

Posted by: has407 on August 21, 2006 at 9:25 PM | PERMALINK

correction to previous post: "cross-industry" should be "cross-company"

Posted by: has407 on August 21, 2006 at 9:26 PM | PERMALINK

that's why Perot got 21% of the vote despite the Cuban Hit Team remarks

Perot got 21% of the vote because of his dog.

He reported that his dog had broken up an attack by 4 armed men.

Think about that.

BAD DOG

Who wants to have a president who owns the Hound of the Baskervilles? I don't even like people who keep Bull Terriers. A dog that isn't afraid of 4 armed men? Forgetaboutit.

GOOD DOG

Who wants to have a president who owns a dog that can count, identify armaments, and make reports? Really. Perot should have simply been that dog's campaign manager.

Posted by: Jeffrey Davis on August 21, 2006 at 9:29 PM | PERMALINK

"I look at it another way. I think everpresent power inequities make wealth naturally float to the top unless there are government policies to actively keep it from doing so -- unions, progressive and estate taxation, looser monetary policy, etc."

There is some fascinating economic modeling about wealth concentration under market capitalism. Google "yard sale economy". It is a highly simplified toy economy where a number of agents start out with equal wealth and trade with each other. The agents have no skill so either party in any particular transaction is equally likely to come out ahead. Most would at first glance assume that wealth would slosh around in such an economy pretty much randomly, but that is not what happens. In fact one agent quickly ends up owning everything.

The basic mathmatics (read about it on google) of trade favors the concentration of wealth. Even a perfectly fair market to the point of transactions being completely random tends toward a state where one person owns everything.

Modifications to the model, like redistributive income taxes (where we take 15% of all income and distribute it equally to everyone) above 15% or so prevent the collapse, as does death with inheritance taxation.

A real economy probably can't collapse completely, but a real economy is also considerably less fair. Being rich gives one advantages far beyond the inherent mathmatical advantage aparrant in these models.

Income taxes: saving the world from economic collapse. :)

In the eternal words of the right wing economic hack "Its econ 101!".

...or maybe more like econ 400.

Posted by: jefff on August 21, 2006 at 9:31 PM | PERMALINK

I don't think the typical American is really aware of how far we are from an economy based on merit, i.e., we are not close to being a meritocracy.

The Clinton folks talked a lot about meritocracy.

Republicans seem more inclined toward a Daddytocracy.

Posted by: little ole jim from red country on August 21, 2006 at 9:56 PM | PERMALINK

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Posted by: 天天免费电影 on August 21, 2006 at 10:09 PM | PERMALINK

If I was allowed to back date my stock options and trade after the market closed I would be a lot wealthier.

Posted by: Techie on August 21, 2006 at 10:38 PM | PERMALINK

Ahhh! Stop it with the numbers they scare me

Posted by: GOP on August 21, 2006 at 10:41 PM | PERMALINK

The Yankees make tons of money not because they win (they have been good but haven't won the Series since 2000)but due to their local television contract. However, they are apparently not profitable enough to build their own stadium.

This is how you become extra rich, you leverage your wealth to get a better deal from the government whether it be tax breaks, cap gains, favorable tax rulings, shelters, sweetheart deals, etc etc

Posted by: Amazins on August 21, 2006 at 10:48 PM | PERMALINK

The Clinton folks talked a lot about meritocracy.

Republicans seem more inclined toward a Daddytocracy.

Either way, it's the Harvards, Yalies and Princetons running the show, alas. American government now is largely an Ivy League class election.

Posted by: Vincent on August 21, 2006 at 11:05 PM | PERMALINK

Perhaps this is covered above, but information technology frequently increases the capacity of the most talented workers and in the process commoditizes the less talented. Take retail. Today, an executive sitting in Bentonville AK can get essentially real time information on sales in thousands of Walmart stores and, with the aid of sophisticated computer programming, quickly make key management decisions at the local level. Before that technology, effective retailing required a savvy manager in each store, whether a chain or a mom and pop, and there was little that an executive 1,000 miles away could do about day to day decision making, other than get in the way. Today, the local manager of a Walmart really has no responsiblites other than to make sure that other employees do their job as cheaply as possible. A lot more people can do that reasonably well than can make good pricing, marketing and product selection decisions.

Posted by: sklein11 on August 22, 2006 at 6:13 AM | PERMALINK

cmdicely,

You are simply wrong. Unions raise wages by restricting the pool of workers that an employer can choose from. None of your attempts to contradict this fact are successful. If it were not true, then unions would not push for union shops or the elimination of right to work laws. The employer either reaches an agreement with the union or it does not operate in the manner as before, if at all.

Posted by: Yancey Ward on August 22, 2006 at 10:08 AM | PERMALINK

Re: stagnant wages

http://www.census.gov/hhes/www/income/histinc/p08ar.html

GOP makes a distinction between income and wages. Fine. I've never been anything but a wage earner. Income means wages to me. I've never been anything but a man. Median income for men has stagnated since 1973. If that makes him happy, he has some splainin' to do.

Posted by: Jeffrey Davis on August 22, 2006 at 10:32 AM | PERMALINK

jefff,

Thank you for the pointer to 'yard sale economy.' What a fascinating subject that I had not seen analyzed this way before.

It certainly shows that a perfect market may not produce desirable results, at least not for the non-winners.

In a nutshell, in a perfect and perfectly fair market once you get ahead it becomes easier and easier to climb up, and once you fall behind it becomes harder and harder to climb out of your hole.

That is assuming completely fair and honest transactions and everyone being equally smart - no difference in abilities.

Add in the normal differences of abilities and human greed and the market collapses all the quicker.

Posted by: Tripp on August 22, 2006 at 11:16 AM | PERMALINK

I am not a numbers cruncher, and do not know if Arod's salary can be justified in economic terms, but I do know that the Yankee's have not won a World Series since he joined the team, and that most Yankee fans would prefer buying the tickets, merchandise, etc. of World Series winners to merely watching Rodriguez play. In fact, he's often booed by the NY fans who remember the pennant winning Yanks of the nineties with their potent combination of stars and role players. Kobe Bryant makes more than Michael Jordon did (in salary, not endorsements). Can anyone argue that he is more productive for his team in terms of selling tickets or TV ratings that generate ad revenues? There is something wrong with this picture. Compensation is a complex issue, and I agree that workers with fewer skills will never catch up as long as their numbers seem to increase endlessly and the tendency for all rewards to float to the top continues.

Posted by: Barbara L Hill on August 22, 2006 at 1:45 PM | PERMALINK

"Don't forget the ascendency of shareholder primacy in the world of ideals relating to business."

I don't think this factors in to the explosion of CEO salaries, as shareholders should want that money paid to them in dividends instead.

Cronyism, however, in the setting of exec salaries, that DOES explain it.

Posted by: Cal Gal on August 22, 2006 at 2:03 PM | PERMALINK

Kevin seems to have forgotten what may be the most important factor of all: the pay of many at the top is determined by committee members that aren't spending *their own* money as a true competitive market requires. They can just set the pay about as high as they want. "Each other's poodles" as even George Will, and Bill O'Reilly, admitted.

Posted by: Neil' on August 22, 2006 at 2:49 PM | PERMALINK

I may come back to read the comments later.

In the mean time I've seen an excellent discussion of the incredible rise in 'entertainment' (which includes pro sports) compensation. It was about monopoly pricing and the increasing ability of 'stars' to convert themselves into brands over which they have complete marketing control.

I'm bound to have it around here somewhere.

Short answer: Monopoly pricing.

Posted by: CFShep on August 22, 2006 at 2:58 PM | PERMALINK

Cronyism, however, in the setting of exec salaries, that DOES explain it.
Posted by: Cal Gal

"The salary of the chief executive of the large corporation is not a market award for achievement," John Kenneth Galbraith noted back in 1980. "It is frequently in the nature of a warm personal gesture by the individual to himself."

Posted by: CFShep on August 22, 2006 at 3:02 PM | PERMALINK

Give high-tech workers free agency.

Most companies force high-tech workers to sign non-compete agreements, which make it difficult to go to work for competitors. These are not enforceable in California, which not coincidentally, has the nation's most vibrant tech sector in Silicon Valley.

If Repubs believed in free markets, instead of free reign, they'd be pushing for similar laws everywhere. If Demos want to be friends to well-paid labor, they'd do the same.

Posted by: Robin Harris on August 22, 2006 at 9:20 PM | PERMALINK




 

 

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