The other day, I recommended the first two installments in the TPM series on “the road to inequality”—albeit with the caveat that there was too little discussion of the role of capitalism.
Now, the third installment is in. Jared Bernstein’s “digging around in the data weeds” yields a first-rate introduction to the various measures of inequality in the United States (with which, to be frank, regular readers of this blog will be familiar), all of which point in the same direction: “toward greater economic distance between people and households in their economic outcomes.”
Unfortunately, Bernstein—by his own admission—focuses on the size (individual or household) distribution but shies away from any kind of extended discussion of the class distribution of income:
Roughly speaking, the income generated in economies can be divided into income from work, which is basically wage income (including benefits); capital income, or profitability from the ownership of capital assets; and a residual income category, not counted in what follows (e.g., self-employed income, since it’s hard to know how to divide this into the other two, much larger, shares). For decades, the wage and profit shares were relatively constant, breaking down into roughly 2/3 compensation and 1/3 profits. Over the past decade or so, the compensation share has fallen, meaning the profit share has risen, by something on the order of 4 to 7 percentage points. Since wages are more equally distributed than profits, this type of shift automatically increases income inequality.
Here’s the problem: it’s not just that wages are more equally distributed than profits, thus leading to more inequality. As I see it, the opposing movements of the wage and profit shares signal a fundamental change within capitalism that puts more and more value in the hands of capitalists—to do with it what they will—and less in the pockets of workers. It thus makes workers (and society as a whole) even more dependent on capitalists, who are able to not only capture the increased surplus created by those workers, but also to use the surplus to rig the system to get even more of it now and for the foreseeable future.
It’s not just an issue of inequality, then. It’s a problem of class.