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Global Warming and Income Inequality

What’s the connection between global warming and income inequality in the United States?

Republican lawmakers denied both for years, and only recently have some reluctantly come to believe both exist.

This thought-provoking comparison comes to us compliments of Massachusetts Rep. Barney Frank, who recently spoke about strategies for tackling the nation’s income inequality during a forum at the Economic Policy Institute (EPI). A couple weeks ago, while we were in the middle of our fight for the Employee Free Choice Act (lots of coverage on the bill at Firedoglake here, here and here), EPI held its sixth Agenda for Shared Prosperity event, where economists, policymakers and others came together to discuss ideas for moving America forward after 2008.

Frank keynoted the More Jobs, Good Jobs forum, where he notes many Republicans

now acknowledge that we have increased inequality. But the latest figures by the best measures show there is now greater income inequality than at any time since 1929. Think about what that means. It’s now worse than it was in 1929. That means Hoover made it better than it is today.

And Hoover’s approval ratings were probably higher than Bush’s. But back to income inequality.

The point Frank makes, which was reinforced by two scholars who presented papers after his keynote, is this: U.S. figures on job growth seem to indicate a rosy economy (last Friday’s jobs growth report, for example). But these statistics are belied by less-reported data deeper down the economic pipeline, such as those demonstrating the extent to which the rich are getting richer while the middle class is disappearing.

In fact, from 1979 to 2004, the percentage of households in the “middle class” category—those with incomes between $30,000 and $90,000—fell from 47 percent to 39 percent, according to no less a economic mainstreamer than Washington Post columnist Steven Pearlstein.

Further, as Frank points out, productivity and wages, which rose together until the mid-1970s, have split far apart. In fact, workers’ productivity grew an impressive 18 percent between 2000 and 2006—but most people’s inflation-adjusted weekly wages rose only 1 percent during that time. This was the first economic expansion since World War II without a sustained pay increase for workers.

But this group is not about sitting around and complaining. The network of experts who have participated in Agenda for Shared Prosperity forums are all about finding concrete solutions. Addressing the nation’s health care crisis is the first step, says Frank. But so is getting across to Republican lawmakers that unions are part of the solution.

I keep telling them to get over this dislike of unions and accept unions as a very important thing…whatever the argument was about whether unions raised wages in the 50s, it is clear that the absence of unions has helped lower wages today. Unions are important and they are one of the prerequisites. The restoration of unions to a central place in the economy, particularly for these low-wage workers, is one of the things that has to be done to diminish inequality.

Republican aversion to unions is no exaggeration, as Jane Hamsher pointed out here last month. In June, all Republicans in the Senate—except Pennsylvania’s Arlen Specter—voted against moving the Employee Free Choice Act bill forward to a vote.

Here’s the quick version why union membership leads to a stronger middle class:

  • Union workers earn, on average, 30 percent more than nonunion workers.

  • Union workers are much more likely to receive employer-paid health insurance and participate in an employer-provided retirement plan.

  • Union women earn $179 more a week than nonunion women; African Americans $187 more a week; and Latinos $217 more a week. (Get more on the union difference here.)

In addition to getting Republican lawmakers to understand how unions are instrumental to a strong middle class, speakers at the Agenda for Shared Prosperity event all called for greater government involvement in stimulating growth.

Frank says:

It is very clear any effort to diminish the growth and inequality in America that’s caused by globalization, technological trades, and all these other factors will require a much more active government role, and I think we have got to insist on that.

Jamie Galbraith, professor of government at the University of Texas, describes the need to restructure what’s left of government after the Bush administration. His discussion was focused on global warming, where again we see the connection between global warming and income inequality: Both require the same solution.

…government will have to be rebuilt. The competencies necessary will have to be learned. The necessary powers will have to be legislated. Safeguards—against corruption, against abuse, against predation, against regulatory capture—will have to be designed.

Galbraith further bolsters his point with a quote from The Affluent Society, written by his father, John Kenneth Galbraith:

The role of the government, when one contemplates reform, is a dual one. The government is a major part of the problem; it is also central to the remedy. It is part of the problem of unequal development, inequality in income distribution, poor distribution of public resources, environmental damage and bogus or emasculatory regulation. And it is upon government that reliance must be placed for solution.

Another speaker at the event, Jeff Madrick, a visiting professor of humanities at the Cooper Union and director of policy research at the Bernard Schwartz Center for Economic Policy Analysis at the New School, made an excellent point.

The business section [of newspapers] is always talking about—oh my gosh—wages are going up. What kind of nation talks about wages going up in fear? But we’ve been fearful of that for 30 years.

Higher wages, says Madrick, do not ruin the national economy. Quite the opposite.

America paid the highest wages in the world since the colonial years according to the best economic history we can come up with. We always paid the highest wages available in the world, first in agriculture, then in construction and manufacturing, even though we didn’t pay enough often, especially in manufacturing. We had the highest wages in the world and what did we do? We grew like crazy. When did we stop paying the highest wages in the world? In the early or mid-70s, the trend started downward. How did it happen? It happened partly because business had to invest in productivity equipment because we paid the highest pages in the world.

And it happened because unions began losing strength. Madrick, the author of Why Economies Grow, also takes on the “low-tax, high-growth” neocon mantra.

I read in Fred Thompson’s piece that low taxes mean high growth. The fact of the matter is, taxes rose in America throughout the 20th century on average as a percentage of GDP and we became the greatest, most powerful and productive economy in the world. When serious people—and these are not especially progressive economists—do international studies of whether high taxes suppress growth in other advanced countries, they find no relationship.

EPI is compiling the proposals from this Agenda for Shared Prosperity event and all the others throughout the year into a briefing book for 2008 candidates. All of them. And let’s hope that, like Brookings fellow and moderate Democrat Isabelle Sawhill, they’ll “start talking about wages being down,” as Madrick puts it, and come to see that

oh my gosh—maybe even some hints of a class society, the lack of social mobility.

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