Winnipeg Free Press - ONLINE EDITION
Posted: 05/8/2013 5:11 PM | Comments: 0
VANCOUVER — The past two years have witnessed considerable public and media interest in the issue of inequality, as evidenced by the emergence of the Occupy Wall Street movement in the United States and its counterparts in several other countries.
Many studies confirm that income inequality has grown in many affluent nations. The trend is especially pronounced in the United States, where the richest 10 per cent of households have almost six times as much income as the bottom 10 per cent.
The ratio is lower in Canada, but income disparities have widened here as well. And in many advanced economies a rising share of all income seems to be accruing to the top one per cent of earners.
Economic research points to a number of factors that have increased inequality and boosted incomes at the upper end of the distribution: globalization, the impact of technological change, competition from emerging economies, and (until recently) rapid growth of the financial sector.
Fast-climbing compensation for chief executives, professional athletes, entertainers, and some successful business owners has also played a role in driving income gains at the very top.
But the most important contributor to greater earnings inequality is increases in what economists refer to as "the education wage premium" — the economic returns to individuals who possess one or more university degrees (or other high-value work-related credentials). Continued growth in the demand for better-educated workers has raised earnings for people in the top 20 per cent to 25 per cent of the income distribution.
Another phenomenon that has fostered larger gaps in household (as opposed to individual) income is what social scientists refer to as "assortative mating." This awkward term captures the realty that marriages now increasingly occur among individuals from the same socio-economic strata. Today, people with university degrees are more apt to marry other degree-holders than to wed someone with lesser educational qualifications.
Combined with the fact that a large majority of working-age women are now full participants in the labour force, "assortative mating" has significantly accentuated divergences in household income.
Also contributing to greater income inequality are other forces that are affecting the quality of jobs and, arguably, recasting the earnings distribution.
One important trend, operating on the "demand side" of the labour market, is employment polarization. Across many advanced economies, more job opportunities are tending to concentrate at the two ends of the skills spectrum: skills-intensive positions that demand high-level cognitive abilities and formal educational credentials, and a plethora of less skilled jobs that offer substantially lower compensation.
American economist David Autor has explored this topic in detail in the U.S. context. Looking at patterns of job creation and employee compensation, he distinguishes three broad groupings of occupations.
The first consists of managerial, professional and technical jobs that require several years of post-secondary education and typically pay well above-average. Most households in the top 10 per cent of the income distribution have one and frequently two members who work in these kinds of occupations.
The second group is made up of what Autor refers to as "middle-educated, middle-paid" occupations; these include sales, office, production, and repair occupations along with fabricators and operators. Workers in these fields commonly have some tertiary education, but not usually a full-fledged university degree. In the past, such occupations formed part of the bedrock of the American middle class and provided an important pathway to upward mobility.
A final set of occupations spans a diverse mix of service-related jobs in which employees generally don’t have any formal post-secondary qualifications. Workers in many of these jobs are engaged in performing manual or other "in-person" tasks that can’t easily be replaced with technology, or out-sourced to jurisdictions with lower labour costs. Examples are food preparation, cleaning, home and building maintenance, basic retail services, and a wide range of personal care services.
Autor’s research, supported by other academic studies, shows that job creation differs across the three groups of occupations. Since the 1980s, employment in the U.S. has grown briskly across most managerial, professional and technical occupations, as well as in many relatively lower-skilled service positions. But the picture is different for middle-educated/middle-paid occupations. Here, employment gains have lagged the economy-wide average and actually trended down over time. And these shifts in job creation among occupational groupings are expected to continue for the rest of the decade.
A notable consequence of rising demand for both highly educated workers and less educated workers performing manual or service tasks is a growing polarization of employment opportunities in America.
But broadly similar occupational dynamics are unfolding in the Canadian job market. This may well herald a "partial hollowing out" of middle-income employment opportunities over time. If so, this trend can be expected to magnify concerns over income and earnings inequality.
Jock Finlayson is executive vice president of the Business Council of British Columbia.
Having problems with the form?Contact Us Directly
Time for West to stand up against Russian president
Council ripe for third-party rule?
PST court challenge was risky political ruse
Cut the bull on animal treatment rationalizations
Fear drives young Central American migrants
Difficult to get true picture of crash site
Time for open discussion of nanoparticles in our food
Gun deaths overtaking vehicle deaths south of border
Hope in short supply around Lake Manitoba
Downing of jet makes Ukraine conflict uglier, unavoidable
Impossible to argue away collateral damage
Tsilhqot'in ruling raises questions in Atlantic Canada
One-child policy casts long shadow
Carbon tax fight politically costly down under
Big oil gambles on high prices, lack of regulation
Merchants of death facing hard times
Prospects for independence
Tightly controlled Morocco turmoil-free, for now
Israel, Hamas: perversely codependent
Clinton book-tour missteps could point to weaknesses
'Blood of martyrs' the only endgame for nihilistic Hamas
Flood recovery initiatives need better oversight
Young radicals wooed by false picture of jihad
Sanctions against Russia are toothless
Russian propaganda machine struggling
Chinese crash would dwarf 2008 collapse
Northern band says 'no' to nuclear waste
No military solution for Gaza
It's time to scrap provincial trade barriers
Pallister's pricey political theatre won't pay off for anyone
Obama shouldn’t just pick political theatre that suits him
Canadian policies don't meet 'genocide test'
No escaping Koch brothers in U.S. politics
‘Mission match’ a dangerous fantasy in Iraq
Attack ads' negative aims producing positive gains
Decision on refugee health a victory for compassion
Central American child migrants deserve due process
U.S. drags heels on joining treaty banning land mines
Iron Dome no substitute for diplomacy