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Breaking Down Inequality
“Divided, The Perils of Our Growing Inequality,” edited by David Cay Johnston (New York: The New Press, March 2014)
Truck drivers do an essential job. No society can exist without them. Truck drivers work hard; they drive long hours, they sleep in their trucks, and they hardly see their families. Why are truck drivers making only a meager living, then? Sociologist Lisa Dodson, the contributor of the last chapter in this page-turner of a book, posed this question to Joe [not his real name], a truck driver. “That money came from somewhere, didn’t it?” Joe responded. “It came out of my pocket and my kids’ mouths.” Is inequality really the result of the rich taking money that belongs to the poor? And if so, why do the poor let them? [Full disclosure: I am one of the 46 contributors included in Divided.]
The route from pocket to pocket that Joe sees is direct. But the most popular explanation for the growing inequality in the US involves an indirect route. When managers can threaten workers that they would shift work overseas, the workers have no choice but to agree to low wages; and when they do, managers can then pay themselves huge salaries and bonuses and they can also consume huge quantities of perquisites, such as corporate jets, on the job. Thus, the falling wages workers and the rising incomes of executives in the US are both attributed to globalization.
If one looks only at the United States, this appears to be true. This review is written a day after the workers in a Volkswagen factory in Chattanooga, Tennessee, voted against having a union. Wages in the VW plant are low. The workers who managed to become VW employees are paid $19.50/hour, lower than most other auto workers in the US. New employees make even less. They are hired by and work for Aerotek, a staffing contractor and their wage is only $12.50/hour. Several weeks before the vote the majority of the VW employees (Aerotek employees do not get to vote) signed cards that indicated their preference for a union and it appeared that they would have a union. But then a senator claimed that if they were to vote for a union Volkswagen would shift a new factory that was intended for Chattanooga to Mexico instead.
Christopher Jencks, a professor of social policy at Harvard, points out, however, that globalization does not have the same effect elsewhere. Inequality was quite similar among rich countries in the 1970s, but today the degree of inequality in the US is by far the highest. In those other countries work still pays, and Jencks attributes the difference to a difference in political systems. In The US there are just two parties and the winner takes all. Workers are therefore just one faction in a party that represents a great number of interests. In Europe, because of proportional representation, there are many parties, and workers can therefore have parties that represent them exclusively. The result of this difference, according to Jencks, is that in Western European countries the law protects workers from the race-to-the-bottom that in the US is blamed on globalization.
One law that protects workers in Germany, for example, is the law that requires that half of the members of board of directors in all companies with more than 2,000 employees be workers’ representatives (this is far from true equality, though, because the tie breaker is the chairman of the board, who is not a workers’ representative). Several European countries also have “extension laws” that permit the government to extend the benefit of a union contract that is negotiated in some workplaces to all workplaces, regardless of whether these workplaces are themselves union shops or not. These laws assure that employers who pay union wages are not at a disadvantage. It is notable that Germany, with its strong pro-labor legislation, had a significantly lower rate of unemployment than the US throughout the sub-prime crisis, and this advantage continues today.
At one time unions were strong in the US. In 1954 about one third of workers belonged to unions. But this was a long time ago, and today this rate is only 12%, and unions continue to lose. The most recent loss was in Chattanooga, but just a year ago public employees lost their right to collective bargaining in the state of Wisconsin. It may be tempting to conclude that in the US unions are a thing of the past. Kim Bobo, founder and executive director of the Interfaith Worker Justice organization, tackles this question first by listing the enormous advantages to union membership even today. Union workers receive higher pay, and this is also true for the VW workers in Chattanooga who receive lower pay than almost all other autoworkers in the US. Unionized workplaces are also safer, pay their workers when they are on sick leave, have a retirement fund, are prohibited from firing workers for staying home to tend to a sick child and are in general unable to fire workers arbitrarily. Bobo then explains why workers do not vote for unions despite these advantages. We already know of the threat against the VW workers. But Bobo lists many more intimidation methods that employer can use to dissuade workers from joining unions. They are harsh, and readers will probably be surprised to learn that they are legal. It is important that none of these laws were changed even during periods that both the presidency and Congress were in Democratic Party hands.
The VW unionization vote is not the first time that Chattanooga served as the site of a workers’ calamity. In the 1950s and 1960s, when they had a strong union, truck drivers made a good living. But the union was continually attacked by the government (Robert Kennedy led the charge), and under pressure it succumbed. In 1964 the union achieved an unprecedented national contract that covered all the drivers in the country. But in 1964 Jimmy Hoffa, the head of the union, was brought to trial on bribery charges. At first the government could not get a jury to convict him; but then it asked for a change of venue. Hoffa was retried in Chattanooga, and there he was convicted and sent to jail. Had unions been protected by laws as they are in Western Europe, this would not have mattered. Had rank and file workers been dedicated to their union, the union would have continued to thrive even with weak leadership. But neither condition held, and with the charismatic leader gone, the union practically collapsed. When in 1980 the industry was deregulated, the drivers found themselves defenseless. Their lives were destroyed.
Unpreparedness, i.e. the lack of an instinctual workers’ perspective and a strong organization to back it up in the political arena, was most acutely felt in the way the US dealt with the subprime crisis. A pro labor president came into office in a period when Congress was in Democratic hands and the direction that the country would take was up for grabs. It would have been easy to put the country on a pro-worker path then, but workers did not have their own independent analysis and understanding of what was the best way for them out of the crisis. Without it they had no choice but to accept, if not believe, the analysis of Timothy Geithner, the secretary of the treasury, and the chairman of the Federal Reserve System, Ben Bernanke, that the best policy for workers was for the country not to change direction at all, but instead to give close to a trillion dollars of tax payers’ money to the bankers that created the problem to begin with and to shore up the corrupt system that had just failed one more time.
Why does the US government side with managers and bankers and not with workers? President Obama addresses this question in a speech that is reproduced in the first chapter of the book. The chapter is illuminating not for what Obama says—he is not the first to point out that in the US bankers and executives use the money of the corporations they run to buy politicians—but for the fact that it is the president who says it. If Democracy means equal representation, then the president tells us that the US is not a democracy. Income inequality equals political inequality. But does this mean that workers are doomed?
As Jencks explains, having a workers’ party in the US would be practically impossible. But the National Rifle Association shows that it is possible to have a powerful political organization even if it is not in a political party. For far too long workers have pretended that they are not workers but instead members of “the middle class.” A member of the working class works for an employer and his or her interests are clear: When the employer earns more, the worker earns less. But how does a member of the middle class make a living? What are his or her interests?
As the chapters in Divided show, many aspects of life in addition to the distribution of political power are affected by inequality, from the structure of the family to the structure of the tax system, and from the decision what crimes to prosecute to people’s personal aspirations. But here we will touch on only two of these, education and health.
All colleges in the US require the SAT test (Scholastic Aptitude Test) for admission. The test has a scale of 0-800 points. Sean Reardon, a professor of education at Stanford University, discovered that in 1980 the difference in score between a poor student (family income at the bottom 10%) and a rich student (top 10%) was 90 points. Today the difference is 125 points. In the past, when only the poor were poor, middle class students did just as well as rich students. But today a gap has opened between the scores of the children of the rich and the children of the middle class and this gap is just as wide as the gap between middle class children and poor children. Obviously inequality affects children performance in school. But how?
In research that is not part of this collection, the economist Amy Schmidt discovered that the level of income in a school district has no effect on the level of enrollment in private schools but as the degree of income inequality in the district increases enrollment in private schools increases as well. In other words, when the rich live only with the rich, they prefer public schools. It is only when they have middle class neighbors that they send their kids to private schools. The reason for this must be that well financed public schools are better than well financed private schools, but well financed private schools are better than poorly financed public schools. Therefore, when the degree of inequality is low, the rich agree to pay the taxes that are needed to finance good public schools because their share would be only slightly larger than the rest of the families in the district. When the degree of inequality is high, the share of the taxes for good schools that would have to come from them would be large, however, and then the rich opt for underfinancing the public school while sending their own children to private schools. The result is that regardless of whether they go to public or private schools, rich kids go to better schools.
Of course, if the middle class voted for higher taxes and if schools were financed nationally instead of locally, schools would have been better. So the rich invented a slogan: “You cannot throw money at education.” Is it true that when it comes to school quality money doesn’t matter?
Learning and teaching are both hard work. Students need many homework assignments and these have all to be read and corrected and then reassigned and re-read and re-corrected; and they also need their teachers’ personal attention and encouragement while they are doing this hard work. Mike Rose, a professor of education at the University of California, points out that with too many classes to teach and too many students in each class, teachers in underfinanced schools simply do not have the time to do their job. They have no choice but to short change their students. Furthermore, Cornell University professor Robert Frank discovered that in under financed schools the teachers themselves are less prepared to be teachers. In 1963 the starting salary of a teacher was 118 percent of the salary of college graduates, but by 1994 that ratio decreased to only 97 percent. The result has been a sharp decline of in SAT scores of people who become public school teachers.
Professor Reardon shows that in addition to producing unequal schools, inequality also produces unequal homes. In the 1950s and 1960s the median family in the US had one person working (see the chapter by Massachusetts Senator Elizabeth Warren) but today in the median family both parents are working and in many families there is just one parent. The result is that all children have absent parents, but children with rich parents have substitute care givers and good (but private) enrichment programs, and while middle class and poor children fall behind even when they are out of school.
How are the schools and how are the children in anti-union Tennessee? The magazine Education Weekly rates the schools in the different states and in 2014 it gave Tennessee an F for its level of school financing and another F for the educational achievement of its students.
But to focus the discussion about education on test scores is to miss the elephant in the room. The economic system in the US is plagued by recurring, devastating and long periods of unemployment, and even those who work earn only low wages; the political system serves the rich. Yet the schools teach our children that this is the best economic system possible, and that our form of government should serve as a model for the rest of the world. To paraphrase economist Amartya Sen, our schools are creating educated fools. If workers are to know the value of their own work they must be taught that the rich are rich because they take more than their fair share.
Inequality is a health indicator. Mary O’Brien is a physician at Columbia University who volunteers at a clinic in the Mississippi Delta each summer so the regular physician can take a vacation. She tells of a worker gravely ill with diabetes who is unable to get treatment not because he cannot afford the doctor—Mary and her clinic work for free—but because he lacks job security. He came to her for medicine that will ease his earache—a symptom of diabetes—but refused to go to the hospital even though he had very high blood pressure and fever for fear that is he misses work he will be fired. The worker is not a probationary worker or a worker with poor standing. On the contrary, he is a supervisor. But there is no federal law that requires employers to let their workers be sick. Thus, even when workers have the same access to doctors, in the US diabetes follows a different progression than it does in other countries. In this case the difference was not in the healthcare system but in workers’ rights.
Stephen Bezruchka, a lecturer at the University of Washington’s School of Public Health, reports that even Americans who have health insurance and live healthy lifestyles have poorer health results than their counterparts in other rich countries. Bezruchka bases his report on research by the Institute of Medicine that attributes the poor results among Americans to several factors, chief among them marketing by the food industry and the greater stress that Americans are subjected to. Advertising is better regulated in other countries and as for why life is more stressful in the US, the Institute of Medicine attributes it to two factors. One is unemployment and the fear of it. Unemployment insurance in the US is far less generous, and its duration is far shorter, than unemployment insurance in other rich countries. Furthermore, in addition to the loss of income, in the US unemployment can lead to other devastating results: With no housing policy unemployment can easily result in a loss of a home; with no universal health insurance, unemployment may mean inferior health care; and with schools that are financed locally instead of nationally, unemployment can mean that children will be condemned to a bad school. The other source of stress that the Institute of Medicine identified is the lack of adequate resources for young children. This neglect produces adults with poor social skills, and such adults experience stress themselves and impose it on others.
If Berzuchka focused on a comparison of health in the US and other rich countries, David Cay Johnston, the Pulitzer Prize-winning journalist and the editor of Divided, focuses on a comparison of health and healthcare costs in the US and in poor countries. By using the CIA World Factbook as his source, he discovered that infant mortality in Cuba, a country with a GDP per capita that is less than 20% of GDP per capita in the US, is substantially lower than it is in the US, 4.76 vs. 5.9 per 1,000 live birth, while overall life expectancy is practically the same in the two countries, 78.05 vs. 78.62 years in the US. Johnston also discovered that the US has poor health in spite of very high expenditures. Medical expenses in the US are 17.9% of GDP while in Cuba they are 10%. It is interesting that with much greater expenditures on healthcare the US has 2.42 physicians per 1,000 people, while in Cuba the number is 6.72. It appears that the problem in the US is that there are too few doctors. If the country were to open more medical schools, the quality of medical care would increase, while both healthcare expenditures and income inequality would decrease.
As Divided poignantly shows, inequality is different from poverty; it is an independent force that systematically wastes the lives of tens of millions of Americans. The book also shows that it need not be this way. As Johnston writes, “inequality is the product of rules,” and these rules can and should be changed. But those who benefit from them deny it. They pretend that our economic system is the best there is, and that inequality is just the inevitable result of this optimal system. The task is to expose this fallacy; Divided is just the kind of spotlight that is needed for the task.
Moshe Adler teaches economics at Columbia University and at the Harry Van Arsdale Center for Labor Studies at Empire State College. He is the author of Economics for the Rest of Us: Debunking the Science That Makes Life Dismal (The New Press, 2010), which is available in paperback and as an e-book.
 Achievement status is student achievement. See http://www.edweek.org/media/ew/qc/2014/shr/16shr.us.h33.pdf page 8