Paul Krugman Writes About Trade and inequality

Paul Krugman writes about the link between expanding trade--especially between the U.S. and China--and rising income and wealth inequality within the United States. I find myself skeptical. Yes, China is exporting a lot of goods that it produces using low-skill labor. But if those goods were to be produced here in the United States, they would be produced with higher-skil labor and with lots of capital. The key question is how has the shift in economic activity created by expanding trade affected the demand for different kinds of labor and capital here in the United States. We have had:

• A shrinkage in export and import-competing manufacturing.
• A tremendous expansion in construction.
• An expansion in consumer services.

I don't see how those shifts significantly reduce the demand for factor of production "labor" and enhance the demand for factor of production "capital." Construction employs lots of capital--but so does tradeable manufacturing. I want to see Leontief input-output matrices for the U.S. before I upweight trade and downweight education, collapsing unions, migration, changing norms, monetary policy, and other factors as more likely to be responsible for the lion's share of the increase in U.S. inequality over the past generation and a half.

And "outsourcing": outsourcing seems at least as likely to me to equalize the U.S. income distribution as to give it a further inequality boost. Consider what kinds of jobs are likely to be outsourced.

But here's Paul Krugman:

Trade and inequality, revisited | vox (beta) - Research-based policy analysis and commentary from Europe's leading economists: It’s no longer safe to assert that trade’s impact on the income distribution in wealthy countries is fairly minor. There’s a good case that it is big, and getting bigger. I’m not endorsing protectionism, but free-traders need better answers to the anxieties of globalisation’s losers.

During the 1980s and 1990s, there was considerable concern about the possible role of globalisation in contributing to rising income inequality, especially in the United States. This concern was based on standard economic theory: since the 1941 Stolper-Samuelson paper, we’ve known that growing trade can have large effects on income distribution, and can easily leave broad groups, such as less-skilled workers, worse off.

After economists looked hard at the numbers, however, the consensus was that the effect of trade on inequality was probably modest. Recently, Ben Bernanke cited these results – but he recognised a problem: “Unfortunately, much of the available empirical research on the influence of trade on earnings inequality dates from the 1980s and 1990s and thus does not address later developments. Whether studies of the more recent period will reveal effects of trade on the distribution of earnings that differ from those observed earlier is to some degree an open question.”

But the question isn’t really that open. It’s clear that applying the same models to current data that, for example, led William Cline of the Peterson Institute to conclude in 1997 that trade was responsible for a 6% widening in the college-high school gap would lead to a much larger estimate today. Furthermore, some of the considerations that once seemed to set limits on the possible inequality-promoting effects of trade now seem much less constraining.

There are really two key points here: the rise of China, and the growing fragmentation of production. First, thanks to the rise of China, OECD imports of manufactured goods from developing countries have continued to rise rapidly since the early 1990s. Cline’s estimate of income distribution effects was based on data from 1993, when US imports of manufactures from developing countries were approximately 2% of GDP; now that number is close to 5%, and rising rapidly.

At the same time, the rise of China has prevented, for the time being, a development that I and others expected to mitigate the effects of trade on income distribution: up-skilling by the developing country exporters. “As newly industrializing countries grow,” I wrote in 1995, “their comparative advantage may shift away from products of very low skill intensity.” And that’s exactly what happened – for the countries that were the major exporters of manufactured goods to the OECD then. As John Romalis has shown, the exports of the original group of Asian newly-industrialising economies have shifted dramatically away from labour-intensive toward skill-intensive products.

But along has come China, which is far more labour-abundant now than the NIEs were then. A simple indicator is relative wage rates: in 1990, according to the US Bureau of Labor Statistics, the original four Asian NIEs had hourly compensation costs that were 25% of the US level. Now the BLS estimates that China’s labour costs are only 3% of US levels.

In 1995 I also believed that the effects of trade on inequality would eventually hit a limit, because at a certain point advanced economies would run out of labour-intensive industries to lose – more formally, that we’d reach a point of complete specialisation, beyond which further growth in trade would have no further effects on wages. What has happened instead is that the limit keeps being pushed out, as trade creates “new” labour-intensive industries through the fragmentation of production.

For example, the manufacture of microprocessors for personal computers is clearly a highly sensitive, skill-intensive process. Intel’s microprocessor production, however, now takes place in two stages: the “fabs,” which print the circuits on disks of silicon, are all located in high-wage advanced countries, but the assembly and testing, in which those disks are cut into individual chips and tested to be sure that they work, is conducted in China, Malaysia, and the Philippines.

Outsourcing of services, in both directions, adds to the possibilities of unequalising trade. The skill-intensive pieces of production processes that mainly take place in the third world are often now located in the OECD – for example, Lenovo, the Chinese computer company, has its executive headquarters in North Carolina.

What all this comes down to is that it’s no longer safe to assert, as we could a dozen years ago, that the effects of trade on income distribution in wealthy countries are fairly minor. There’s now a good case that they are quite big, and getting bigger.

This doesn’t mean that I’m endorsing protectionism. It does mean that free-traders need better answers to the anxieties of those who are likely to end up on the losing side from globalisation.

Comments

[banana]

If you dont understand that labor US lost in for example consumer electronics is not the same labor we gained in espresso selling I suggest you should exchange your labor for that of UC janitor.

[You need to visit a consumer-electronics factory and a construction job site.]

[Meh]

I would suggest that it's not enough to measure the amount of labour in use, but the skill level (and hence pay level) involved. Has the move to services replaced jobs at the same pay level, or not?

[anne]

Brad DeLong:

"I want to see Leontief input-output matrices for the U.S. before I upweight trade and downweight education, collapsing unions, migration, changing norms, monetary policy, and other factors as more likely to be responsible for the lion's share of the increase in U.S. inequality over the past generation and a half."

Agreed; change the dynamic by allowing a strengthening of unions, federal-state revenue sharing to allow for minimal or no tuition for public colleges and universities, move to universal health care, and emphasize green infra-structure development and the conditions for American workers are profoundly improved.

[anne]

Couple Brad DeLong's implied suggestions for worker redress with an increasingly equitable tax structure and inequality can be dramatically limited. Remember that we are the only developed country in which workers are not insured as much as a paid sick day, let alone health care insurance.

[anne]

As far as fiscal policy is related to rising inequality:

http://www.nytimes.com/2007/06/16/business/16tax.html

June 16, 2007

Tax Gap Puts Private Equity Firms on Hot Seat
By JENNY ANDERSON and ANDREW ROSS SORKIN

This week, Goldman Sachs, Wall Street’s most profitable firm, reported that it earned about $3.4 billion for the second quarter. As always, it set aside a big chunk of money — $1.1 billion, or about 32 percent — to pay corporate income taxes on its healthy profits.

Then there’s the Blackstone Group — the first big-name private equity firm to proceed with plans to go public in the United States — whose business is similar in many ways to Goldman’s. In the first quarter, Blackstone, a privately run partnership dominated by Stephen A. Schwarzman, earned about $1.1 billion before taxes. Its tax bill? Just $14 million, or 1.3 percent.

Even after the Blackstone partners pay their share, the total should still come to less than half that of their Wall Street counterparts.

The gap is the latest example of an advantage that has existed for decades but gone largely unnoticed — until now. It has allowed private equity firms, like Blackstone, to operate as partnerships and to pay far lower tax rates than corporations, giving them an advantage that critics say is unfair.

Moreover, their partners generally pay no more than 15 percent in taxes on most of the money they earn from the firm, compared with the top individual rate of 35 percent....

[anne]

http://www.nytimes.com/2007/04/02/opinion/02mon1.html?ex=1333166400&en=e2b3a2a831143a2d&ei=5090&partner=rssuserland&emc=rss

April 2, 2007

Taxing Private Equity

In the world of private equity, "2 and 20" is a formula for making money. The mavens of the industry — venture capitalists and buyout specialists — generally collect a management fee of 2 percent of the assets they manage and a performance fee equal to 20 percent of any profits. With hundreds of billions of dollars flowing through the 2-and-20 structure, the megabucks pile up quickly.

High fees, however, are only one reason that private equity lives by "2 and 20." Another is low taxes.

Partners in private equity ventures treat their performance fees as capital gains — in other words, like profits on the sale of a stock — and thus pay tax on the fees at a rate of 15 percent, about the lowest in the tax code. According to federal partnership tax rules, that's legal. But the rules were developed before private equity became the force it is today, and mainly with small business and real estate partnerships in mind.

Some lawmakers — notably Senator Max Baucus, the Democratic chairman of the Finance Committee, and Senator Charles Grassley, the committee's top Republican — have begun to question whether those rules should apply to private equity.

Adding grist to lawmakers' skepticism is a recent paper by Victor Fleischer, an associate professor at the University of Colorado Law School. Mr. Fleischer makes several arguments against treating performance pay as capital gain, starting with the increasingly huge sums that private equity firms raise from tax-exempt investors, like pension funds and endowments.

In general, when corporate executives get performance-based pay, like stock options, they don't have to pay tax right away. That's a big tax benefit, but it leaves the government no worse off because the corporation also delays taking a deduction for the payment. There is no such offset when private equity partners are paid by tax-exempt investors. The nation in effect waits longer for its tax revenue and gets less, as private equity partners get more....

[anne]

http://www.nytimes.com/2007/04/17/business/17hedge.html?ex=1334462400&en=b5ff21cd7e423b0a&ei=5090&partner=rssuserland&emc=rss

April 17, 2007

Managers Use Hedge Funds as Big I.R.A.'s
By JENNY ANDERSON

Many Americans squirrel away as much as they can into retirement investment accounts like 401(k)s and I.R.A.'s that allow them to compound their earnings tax free. The accounts also reduce what they owe when tax day rolls around. For the average person, however, the government strictly limits the contributions to about $20,000 a year.

And then there are people who work at hedge funds.

A lot of the hedge fund managers earning the astronomical paychecks making headlines these days are able to postpone paying taxes on much of that income for 10 years or more.

The key to the hedge fund tax boon is that many managers of these lightly regulated private pools of capital have the ability to earn the bulk of their compensation offshore and invest it in their funds where it grows tax-free.

"If you could compound your compensation tax-free, why wouldn't you?" asked Stewart Massey, founding partner of Massey & Quick, a consulting firm.

Few people know the power of compounding better than hedge fund managers. Consider the following calculation done by Financial Engines, a financial advisory and portfolio management firm: A hedge fund manager makes $10 million in fees and defers it for five years, earning a return of 10 percent a year. When he pays taxes at the end, he walks away with $10.5 million. Another manager who makes the same $10 million pays his taxes immediately. He still earns 10 percent on what's left, but over the same period he accumulates just $8.9 million.

Elevate the comparison to $130 million, the minimum take-home pay needed to make it on Alpha magazine's list of the 25 highest-paid hedge fund managers: the first manager receives $136.1 million; the second $115.8 million.

This closely guarded arrangement is completely legal; similar, but less generous deferrals have been commonly used by corporate executives for years....

[anne]

http://www.irs.princeton.edu/krueger/04_04_2002.htm

April 4, 2002

When it comes to income inequality, more than just market forces are at work.
By ALAN B. KRUEGER - New York Times

NEARLY 50 years ago, Simon Kuznets, the father of national-income accounting and a Nobel laureate in economic science, predicted that income inequality would follow an inverted-U pattern over time -- "widening in the early phases of economic growth when the transition from the preindustrial to the industrial society was most rapid; becoming stabilized for a while; and then narrowing in the later phases."

New research that updates and extends this classic work, however, turns the Kuznets curve on its head.

Income disparities seem to follow no automatic pattern. Instead, for long stretches the degree of inequality appears to result from norms and social policy, especially taxes, at least as much as from economic forces of supply and demand. In the United States, the Kuznets curve -- the trend in inequality over time -- is better described by a U shape than an inverted U. In Britain and France, the curve is more like an L....

[Ponzi Q. Globalization]

"And "outsourcing": outsourcing seems at least as likely to me to equalize the U.S. income distribution as to give it a further inequality boost. Consider what kinds of jobs are likely to be outsourced."

Consider the only jobs that are not likely to be outsourced. Blinderian 'Personal Services'. This will not increase equality in America. But then we're talking about religious belief -- faith and salvation and sin and the afterlife (i.e. the future in glorious equalibrium) -- and so reality must take a backseat.

American multinationals are taking advantage of lower living standards around the globe -- wages, environmental regulations, labor laws, and now product safety -- in order to reduce production costs and increase the returns to capital. Economists call it 'free trade' and pretend all is well. Ideology makes fools of the smartest men and women.

[Ponzi Q. Globalization]

A related aside.

The neoliberal's dream for all of America?

http://www.growingchicago.com/images/other/mypicsVI/

[Movie Guy]

Paul Krugman is correct.

[Movie Guy]

Advanced Global Trade and Income Inequality in the USA:

Advanced global trade and technology improvements related to such are having a much larger effects on the U.S. economy and American workers beyond those workers directly displaced from jobs outsourced or relocated offshore. Such considerations also extend beyond the remaining direct employment by competing companies and corporations.

The advanced global trade impact zone extends to the shrinking support services base of employment and associated wage levels for those company operations that lose support contracts for corporations and companies that either reduce or eliminate domestic plant and facility operations in the United States. Meanwhile, the remaining American-based employees are facing new pressures directly related to advanced global trade.

Internal corporate pressures to remain cost competitive in the global economy have resulted in multiple initiatives to suppress wage increases and benefit package increases.

The evidence of such initiatives is widespread and growing among corporations and companies with operations in the United States. If all else fails, some corporations file for federal bankruptcy to divest themselves of pension plan obligations.

Similarly, other corporations and companies are capping their health care share responsibilities by using a given year (2006, as an example) as the last corporate supported cost increase supplement for existing worker health plans. Some corporations and companies are simply reducing their health care plan coverage in terms of corporate/company share funding of such plans.

Corporations engaged in advanced global trade are pressuring domestic suppliers to rein in costs and trim profit margins to avoid additional offshore sourcing. Some corporations are directly advising their suppliers to move component and parts production offshore.

While not all corporations and companies are fully integrated into the global economy, there is evidence that many of the remaining corporations and companies are using the 'global corporate lean model' as a blueprint for also reining in such employee compensation costs. Such business models serve as benchmarks for local market pricing of wages and benefit packages.

It's my judgment that the more important issues are the economic effects of real wage and real compensation declines that are impacting a growing proportion of American employees in a wide spectrum of industries resulting from increased business competition considerations, and benchmarks established by transnational corporations, whether in manufacturing, general services, or retail. It's all related.

The decreasing purchasing power less credit extension for many income groups is not sustainable as measured against existing standards of living. The economic implications of declining real wages and real total compensation for American workers are significant.

Advanced global trade and increased business competition are most certainly having major impacts on a growing number of American industries and related employment wages and total compensation.

If economists and analysts intend to have any credibility on the subject of advanced global trade and the impacts on U.S. employment, real wages, and real total compensation, then they need to piece together the entire puzzle.

[save_the_rustbelt]

"...I find myself skeptical...."

Come to the rustbelt. I will be a most gracious tour guide. Any direction I drive from my home I will show you the shuttered factories and foreclosed home.

Berekley and the Ivy league are not the entire world for God's sake.

[save_the_rustbelt]

"... tremendous expansion in construction...."

Filled largely (especially in the south and west) with illegal immigrants who are cheaper and who are largely exempt from regulatory governance (OSHA for example).

[John]

Having worked at Hewlett-Packard for a number of years in a central strategic planning group, I can assure you that we don't outsource the high, or even mid, paying jobs much. The low paying jobs, yes. You might be surprised at how little semi-skilled labor like forklift operators make even in the U.S. ($13-$15/hour is typical in CA, maybe a little high nationwide.) But in China...

Krugman misestimates the "skill" involved in high-tech manufacturing. People who operate chip manufacture and wafer fab are not highly skilled. The machinery is, but the people aren't, because everything has to be computer controlled or the manufacture will fail, so the "skill" is in monitoring the machines, loading hoppers of components, etc. My guess, extending my semiconductor mfg. experience, is that any high-tech assembly required only low-tech workers, because there is no skill level achievable by human beings that can compete with computer-controlled manufacture.

Sure, some mid-pay jobs do get outsourced, but a whole lot more low-pay jobs do. So one question is: is the proportion of outsourced jobs that are low-pay less than, about equal to, or greater than the proportion of such jobs in the US economy to start with? My guess is "substantially greater than", but then again, there are a lot of day laborers down on San Pablo Avenue, so I don't have much faith in my guess.

[jult52]

Re Anne's assertion that changes in the tax system could largely counteract the rise in US inequality, I believe that Mickey Kaus put that shibboleth to bed back in the early 90s. He showed that even a draconian (and obviously politically impossible) increase in the progressivity of the tax system would not successfully remedy the rise in inequality just for the 1980s.

If anyone believes that position has now been discredited, I'm very interested in hearing more about it.

One of the issues with the inequality debate is that there don't appear to be any persuasive solutions.

[Ponzi Q. Globalization]

"I can assure you that we don't outsource the high, or even mid, paying jobs much."

http://h10055.www1.hp.com/jobsathp/content/search/search.asp?Lang=ENen

Try 'India' for location and 'Engineering' for the Job function. Play around for a while. Try the web sites of other 'American' companies.

Are non-Americans stupider than Americans? Do they have less potential? Are their numbers much greater and their wealth on average much less? What do economists think is going on? Free trade?

[anne]

"I believe that Mickey Kaus put that shibboleth to bed back in the early 90s."

Mickey the Mouse has always been my special favorite, since I have always beenn to afraid of frogs to care a fig for Kermit; nonetheless Mickey knows as mucvh about economics as the average frog and sorry to say is less trustworthy though we love Mickey anyway.

[anne]

"I believe that Mickey Kaus put that shibboleth to bed back in the early 90s."

Why, by the way, would mickey the Mouse want to go to bed with a shibboleth? "Minnie, he done ya' wrong."

[anne]

Shibboleths in bed nonetheless, tax structure does matter awfully much when it comes to, like, being able to foster increased opportunity and equality. Like, well, all little shibboleths should know in and out of bed.

[anne]

http://www.nytimes.com/2006/01/29/national/29rich.html?ex=1296190800&en=784822e4b0735ee5&ei=5090&partner=rssuserland&emc=rss

January 29, 2006

Corporate Wealth Share Rises for Top-Income Americans
By DAVID CAY JOHNSTON

New government data indicate that the concentration of corporate wealth among the highest-income Americans grew significantly in 2003, as a trend that began in 1991 accelerated in the first year that President Bush and Congress cut taxes on capital.

In 2003 the top 1 percent of households owned 57.5 percent of corporate wealth, up from 53.4 percent the year before, according to a Congressional Budget Office analysis of the latest income tax data. The top group's share of corporate wealth has grown by half since 1991, when it was 38.7 percent.

In 2003, incomes in the top 1 percent of households ranged from $237,000 to several billion dollars.

For every group below the top 1 percent, shares of corporate wealth have declined since 1991....

[anne]

http://www.nytimes.com/2007/03/29/business/29tax.html?ex=1332820800&en=fb472e5a466c26c8&ei=5090&partner=rssuserland&emc=rss

March 29, 2007

Income Gap Is Widening, Data Shows
By DAVID CAY JOHNSTON

Income inequality grew significantly in 2005, with the top 1 percent of Americans — those with incomes that year of more than $348,000 — receiving their largest share of national income since 1928, analysis of newly released tax data shows.

The top 10 percent, roughly those earning more than $100,000, also reached a level of income share not seen since before the Depression.

While total reported income in the United States increased almost 9 percent in 2005, the most recent year for which such data is available, average incomes for those in the bottom 90 percent dipped slightly compared with the year before, dropping $172, or 0.6 percent.

The gains went largely to the top 1 percent, whose incomes rose to an average of more than $1.1 million each, an increase of more than $139,000, or about 14 percent.

The new data also shows that the top 300,000 Americans collectively enjoyed almost as much income as the bottom 150 million Americans. Per person, the top group received 440 times as much as the average person in the bottom half earned, nearly doubling the gap from 1980.

Prof. Emmanuel Saez, the University of California, Berkeley, economist who analyzed the Internal Revenue Service data with Prof. Thomas Piketty of the Paris School of Economics, said such growing disparities were significant in terms of social and political stability.

"If the economy is growing but only a few are enjoying the benefits, it goes to our sense of fairness," Professor Saez said. "It can have important political consequences." ...

[anne]

So, as Brad DeLong implies and Paul Krugman would agree, change the dynamic by allowing a strengthening of unions, federal-state revenue sharing to allow for minimal or no tuition for public colleges and universities, move to universal health care, and emphasize green infra-structure development and the conditions for American workers are profoundly improved.

Couple these moves to worker redress with an increasingly equitable tax structure and inequality can be dramatically limited as tax structure has indeed contributed dramatically to inequality.

Remember in line with structural redress that we are the only developed country in which workers are not insured as much as a paid sick day, let alone health care insurance.

Tra la....

[John]

WRT Ponzi's reply...

I agree some engineering jobs and other mid-high range pay jobs are outsourced, no argument there. However, when you move a factory, you are moving perhaps 100-200 low skill and 3-4 medium skill jobs, plus a small number of management jobs. (Please remember I'm generalizing from my experience.) When you move a call center, all the jobs, even manager jobs, are low skill and low paying. And those types of moves are more common by far (so I believe) than moving a s/w development group (at least so far.)

But after a while perhaps you've picked all the low-hanging fruit and start working your way up the wage ladder...

[wkwillis]

Well, "skilled" factory jobs require only training. "Skilled" programming jobs require talent, and talent cannot be taught. Eighty precent of Americans are in the bottom eighty percent of the bell curve, and will never work as doctors, professors, engineers, or actors. They just have to make money by working jobs that Chinese and Mexicans can and will do.
You do understand that those eighty percent could simply vote out the present ruling class of the United States, that they don't have to keep trading back and forth between the Democratic and Republican leadership in an auction for office based on whom promises to screw them least?

[save_the_rustbelt]

"...However, when you move a factory, you are moving perhaps 100-200 low skill and 3-4 medium skill jobs, plus a small number of management jobs....."

Wow.

Try 1200 skilled jobs, 300 high skilled jobs, 60 supervisory positons, 40 front office positions and 20 management jobs.

And that is just one of many within 35 miles of my front door since NAFTA.

As far as a more progressive tax code...

A more progressive tax code in and of itself does nothing about inequality. The critical component is where and how it is spent.

A more progressive tax code gives more money to the government. Both the left and the right have a proven ability to throw it away.

So it might work, might not.

Will Prof. DeLong admit that he was wrong?
Never.

[Ponzi Q. Globalization]

"Q. Where is furniture made?

A. Some 10 years ago, 85 percent of the furniture sold in the United States was made here. But today about 50 percent of the furniture sold here is made in the United States and 50 percent overseas, with China emerging as an important resource in the past 10 years.

Q. What is the division of labor between America and China?

A. More customized furniture is made in the United States. For instance, upholstered furniture such as sofas and chairs, which is made custom in a selected fabric, is made in the United States. On the other hand, we have a lot of wood resources in the United States, but 70 percent of our wood furniture is now made overseas even though countries such as China and the Philippines have to import the wood. Because of their labor, and also the technology they have added, this furniture is made overseas.

Q. Can any American manufacturing of furniture be defended?

A. In the case of Ethan Allen, we still have plants in Vermont, Maine and North Carolina making wood furniture. We are able to make furniture in solid woods. But unless it is very specialized, the chances are that over a period of time most furniture will leave the United States."

Along with everything else that does not have to be produced domestically.

http://www.nytimes.com/2007/06/16/business/16interview.html?_r=1&oref=slogin

[andres]

""...I find myself skeptical...."

Come to the rustbelt. I will be a most gracious tour guide. Any direction I drive from my home I will show you the shuttered factories and foreclosed home.

Berekley and the Ivy league are not the entire world for God's sake."

Rusbelt, no one is denying that a broad swath of territory stretching from Pittsburgh to Chicago looks and smells like an ape's armpit (sorry, but I have driven through it; only the spiritual psyches of Bush and Cheney look worse than Gary Indiana). The real question is what exactly caused this decay.

My guess is that the rustbelt would look like the rustbelt (to Rustbelt's rusty regret) even without the Uruguay Round, the WTO, NAFTA and China joining in the WTO. In the first place, none of these trade-related developments _created_ the ability of capital to flee abroad, eg GM tranferring production to Mexico and away from beautiful and sultry Flint Michigan so that fat Michael Moore could make fat profits from that fat movie _Roger and Me_.

Quite a few problems were created by bad production decisions and management itself. Without trade, Americans would have been fleeing to Canada in droves so that they were not condemned to drive Chevy Vegas, AMC Gremlins, and Ford Escorts (to mention a few other legends besides the Edsel). Without trade, multinational corporations would still have benefited from lower startup and labor costs in steel mills in Mexico and other places abroad--growth in the global steel industry would have moved away from the US even without American steel imports.

Only lighter US industries would have benefited from decreased trade, imo, but even they would have become less profitable as the increase in available education made uneducated labor scarcer and more expensive.

Lastly, given both the average American's and the average Congress' fondness for the credit card, the large private and public deficits could only be soaked up by increased imports--the only alternative would have been a hugely ruinous inflation in which people would have complained about the abolition of their savings rather than the abolition of their jobs.

Overall, I think the savior of manufacturing in the US has to come from (a) management having to worry about foreign competition in order to keep product quality high (the Chevy Vega by itself demanded prison sentences and reparations by GM to the US consumer, or at least that's my parents' opinion) and (b) greater unionization and labor activism not so much in the US as in the rest of the world, especially China and Mexico/Central America (c) if corporate welfare must be corporate welfare, at least send it to manufacturing industries rather than petroleum and large-scale agriculture--which means that rusbelt congressmen need to be given more clout than farm belt congressmen; fat chance, and (d) slowly and gradually kicking America's credit card habit, starting with the Federal Budget and ending with consumers.

Just some few meditations--I'm sure that some Penn State or U. Illinois regional economist will kick my butt with more accurate observations, but one has to start somewhere.

[andres]

anne:

"I believe that Mickey Kaus put that shibboleth to bed back in the early 90s."

Why, by the way, would mickey the Mouse want to go to bed with a shibboleth? "Minnie, he done ya' wrong.""

Besides the question of inter-species compatibility (the genetics of shibboleths being substantially different than that of Disney characters), there is the question of species social mores. I don't think mice of the normal variety, or even of the cartoon type, follow human sexual customs. Certainly the two critters in Ratatouille look suspiciously of the wrong sexual orientation (did Mickey and Minnie ever have children, btw?), and I don't think mice of the real type have anything against poligamy either.

"What's the difference between Mitt Romney and a lab rat?..."

[save_the_rustbelt]

"...Rusbelt, no one is denying that a broad swath of territory stretching from Pittsburgh to Chicago looks and smells like an ape's armpit (sorry, but I have driven through it; ..."

Do you really expect to be taken seriously after a comment like that?

And how do you know the smell of an ape's armpit?

Back to your cage.

[andres]

I was obviously being facetious, Rustbelt, but I should point out that:

"Any direction I drive from my home I will show you the shuttered factories and foreclosed home."

Your words. Shuttered factories and foreclosed boarded up homes may not look and smell like an ape's armpit, to use my language, but they don't look and smell like a garden of roses either. And yes, I've seen quite a few of them driving through Indiana, Michigan, as well as many areas of New England.

[Movie Guy]

Seldom if ever mentioned in any detail on econ blogs (I don't recall such main posts) is the U.S.-China Economic and Security Review Commission (USCC) formed in 2000. It has economic data on record worth noting.

One of the references in the 2005 USCC Annual Report is a commissioned analytical paper which was written by Bronfenbrenner and Luce. They did an excellent job tracking offshoring movements during a three month period in 2004. If you have never read this report, you will enjoy the read if you want to understand offshoring reality. It's one of the best papers on the subject.

The paper knocks the heck out a 2004 BLS study which was revised with a soft touch prior to final release. BusinessWeek provided links to both versions in 2004. Moreover, neither the paper nor BLS account for production shifts that did not (do not) involve layoffs and plant moves.

Bureau of Labor Statistics grossly underestimates U.S. jobs lost to outsourcing, report from Cornell and U. Mass. labor experts suggests
FOR RELEASE: Oct. 15, 2004
Cornell University
http://www.news.cornell.edu/releases/Oct04/Bronf.outsourcing.rpt.lm.html

Doing a Number on Outsourcing Statistics
Labor Dept. estimates of U.S. jobs shipped overseas are laughably divorced from the reality. That's why a SBA research project is so important
By David Gumpert
BusinessWeek
July 13, 2004
http://www.cwalocal4250.org/outsourcing/binarydata/Outsourcing%20statisticts.pdf

The economic paper mentioned:

The Changing Nature of Corporate Global Restructuring: The Impact
of Production Shifts on Jobs in the U.S., China, and Around the Globe
by Kate Bronfenbrenner, Cornell University, and Stephanie Luce,
University of Massachusetts
October 14, 2004
http://www.news.cornell.edu/releases/Oct04/jobs.outsourcing.rpt.04.pdf

* 95 PDF pages; 88 report pages
** Note page 55 of the report; page 62 in the PDF format.

The commission:

U.S.-China Economic and Security Review Commission (USCC)
http://www.uscc.gov/

>>

[Ponzi Q. Globalization]

"Overall, I think the savior of manufacturing in the US has to come from (a) management having to worry about foreign competition in order to keep product quality high (the Chevy Vega by itself demanded prison sentences and reparations by GM to the US consumer, or at least that's my parents' opinion) and (b) greater unionization and labor activism not so much in the US as in the rest of the world, especially China and Mexico/Central America"

Regarding (a). The investment in higher quality by corporate America can be made overseas. With enough $$$, the non-American human beings over there can be as highly productive as the American human beings here. This is our dilemma.

Regarding (b). I guess unions have been pretty much defanged here in the U.S. Of course, all those trade agreements mentioned have nothing to do with it. In fact, the trade agreements seem to have no effect on American labor at all. Amazing!

No one should be surprised if China doesn't have a strong independent labor movement that actually gets results for a long time. By 'long time' I mean a time greater than the time it takes for American workers to suffer from the lack of a strong indepenent labor movement in China.

P.S. It's not just manufacturing anymore.

[James Galbraith]

Airy discussion of Stolper-Samuelson combined with fact-free appeal to the supposedly higher skill levels of immigrant women working in supposedly capital-intensive American sweatshops is, let me gently suggest and not for the first time, the wrong way to approach this question.

Has Brad, or Paul, ever done a simple comparative examination of the way (say) DVD players are produced in China? I seriously doubt it. But I can promise you: the sheet metal is stamped out by machines! The little electronic parts are plugged in by hand! For the screws, they use screwdrivers. And it would be the same in the US, if we produced the damn things in the US. Blueprints govern these matters and not the relative wage/profit rate.

For a theoretical discussion, please read Luigi Pasinetti. I don't have time to explain it here.

If you're interested in understanding the wage distribution in the traded goods sector, the first thing to do, let me gently suggest and not for the first time, is to look at the data. Not the household income data, which is useless for this purpose, since that depends on many things including changes in household size and the bubble and bust in information technology stocks, that are irrelevant to the effect of trade. The data for pay, please. And since we are looking at trade, it's the data for inequality in manufacturing pay that you want. Please. Thank you.

So, have we got the data? I ask again, because I'm quite sure from this discussion that neither Brad nor Paul have looked at the series that is relevant to the argument they are making. But suppose they get around to it some day, for instance by getting a graduate student to update the calculations in my 1998 book, Created Unequal. OK, if that's too much to ask, not to worry, they are forthcoming soon on the UTIP website.

What will they find?

They will find that inequality in manufacturing pay rose in the 1970s, peaked around 1982, declined, peaked again around 1990, and *declined* after 1994. Declined. By quite a lot.

What accounts for this? Most of it is due to changing rates of unemployment: full employment in the U.S. in the late 1990s helped low-wage workers! The statistical evidence on this is beyond clear; it's overwhelming.

There are some other factors, of course. The increase in labor force participation rates through the mid 1990s increases inequality in the pay structure. And the rise in the trade-weighted dollar exchange rate in the early 1980s had an important effect. This is not a volume-of-trade effect. It is a policy-driven effect of import prices, operating – as theoretically one would expect if you thought about it for ten minutes – on the margin.

But all that is concentrated in the early 1980s, which was the great period of de-industrialization in the Mid-west, to which commenters above refer. That wasn't China. That was Volcker and Reagan.

Once again: from 1994 to 2000, the dispersion of earnings in American manufacturing fell. Please put that in your pipes and smoke it.

In the Bush years, the pay dispersion stops falling, and even rises a bit. But not that much. Why? Because for all its other sins and crimes, BushCo didn't let the unemployment rate get out of hand. And the rise in labor force participation stopped.

Can you work out a link between this and the rise in trade with China? Sorry, but I can't.

And please don't come back with an argument that rests on what happens when you add in the services sector. Most of that stuff isn't traded (and Alan Blinder notwithstanding, it isn't going to become traded). It won't be affected, even in principle, by competition from China (although the real wage of low-wage service workers is certainly increased by the availability of cheap imported goods.)

But the further fact is, not much happens to distribution in low wage services anyway: pay there is strongly governed by the minimum wage, which it is perfectly within our power to raise, China or no China.

Brad DeLong once elegantly described my father as a Sisyphus, constantly pushing the social democratic rock uphill. My puny efforts to make the actual data relevant to the inequality debate, now ongoing for a decade, have a very similar feel. The latest DeLong-Krugman interchange only deepens the frustration.

JG

[jult52]

Anne: so you're conceding the point that a more progressive tax code can't even coime close to remedying the growth in US inequality since the 70s? Glad to hear it.

[Ponzi Q. Globalization]

"And please don't come back with an argument that rests on what happens when you add in the services sector. Most of that stuff isn't traded (and Alan Blinder notwithstanding, it isn't going to become traded). It won't be affected, even in principle, by competition from China (although the real wage of low-wage service workers is certainly increased by the availability of cheap imported goods.)"

If you mean 'personal services' you are correct. Other services are already being 'traded'. Is there a reason for your belief that the Chinese and others are not both cheaper than American workers (even with some investment) and capable of such work?

No argument with your last point. However, have the real wages of low-wage service workers really gone up so much in the recent past?

[anne]

Notice also:

http://rodrik.typepad.com/dani_rodriks_weblog/2007/06/a_new_mainstrea.html

June 14, 2007

A New Mainstream Consensus on Trade and Wages?
By Dani Rodrik

and,

http://matthewyglesias.theatlantic.com/archives/2007/06/inequality_and_the_china_trade.php

June 16, 2007

Inequality and the China Trade
By Matthew Yglesias

[anne]

There we have 5 interesting contributions on the trade and inequality argument. I am most impressed with the expressed frustration of James Galbraith, and share in the implied sense that we can readily deal with expanding international trade by structural protections for workers and the environment that are not trade limiting.

[anne]

Anne: so you're conceding the point that a more progressive tax code can't even come close to remedying the growth in US inequality since the 70s? Glad to hear it.

This is, of course, complete rubbish; but who would expect a troll to learn how to read or write honestly.

A fairer tax code is of course needed, as is a national health care program, minimal or no tuition at public colleges and universities, and strengthened worker protections such as sick and vacation day provision, and support for unions. We do have an improved minimum wage, now.

[anne]

To be perfectly clear, the tax code has become less and less progressive these 25 years, and especially so these last 6 years and the results show in income and wealth inequality increases as Saez and Pikkety and DeLong have well described, the effect being found both over the extended period and over the short recent period.

[save_the_rustbelt]

Anne:

Are you saying the tax code is the primary reason for wage increases in wage inequality?

Are you saying the tax code is the primary tool to reduce wage inequality?

[save_the_rustbelt]

"...(although the real wage of low-wage service workers is certainly increased by the availability of cheap imported goods.)..."

But is the increase nearly as large as the decrease from other factors?

Not likely.

Lose a job, lose healthcare, lose a pension, shop at Wal-Mart. Doesn't work.

[anne]

http://www.cbpp.org/3-29-07tax.htm

March 29, 2007

"Dramatic" Progressivity Reduction Since 1960 in the Federal Tax System: Largest Reductions in Progressivity Occurred in 1980s and Since 2000.
By Aviva Aron-Dine

In a new study, Thomas Piketty and Emmanuel Saez, economists who have done groundbreaking work on the historical evolution of income inequality in the United States, examine how the progressivity of the federal tax system has changed over time.[1] Unlike previous analyses, theirs examines effective federal tax rates going back to 1960, including income, payroll, corporate, and estate taxes, and provides data for income groups reaching up to the top one-hundredth of one percent (.01 percent) of the population.[2] Several crucial findings emerge from their study....

[anne]

http://www.cbpp.org/3-29-07inc.htm

March 29, 2007

Data Show Income Concentration Jumped Again in 2005: Income Share of Top 1% Returned to Its 2000 Level, the Highest Since 1929.
By Aviva Aron-Dine

Economists Thomas Piketty and Emmanuel Saez recently made available an updated version of their groundbreaking data series on U.S. income inequality.[1] The data are unique because of the detailed information they provide regarding income gains at the top of the income scale, because these data extend back to 1913, and because they provide the first real snapshot of income trends among those at the top of the income spectrum in 2005. The new data offer important new insight into the distribution of income gains during the current economic expansion and may shed some light on recent revenue trends.

The new data show:

Income concentration, which increased in 2003 and rose sharply in 2004, jumped again in 2005. The share of pre-tax income in the nation that goes to the top 1 percent of households increased from 17.8 percent in 2004 to 19.3 percent in 2005. Only four times since World War II has the percentage of income received by the top 1 percent risen this much in a single year (in percentage point terms). One of those four times was 2004.[2]

The jump in income concentration in 2005 brought the percentage of income going to the top 1 percent of households back to its 2000 level of 19.3 percent. The 2000 level was the highest since 1929.

The large jump in income concentration reflects another year of very uneven income gains. From 2004 to 2005, the average incomes of the bottom 90 percent of households grew by less than 1 percent, after adjusting for inflation. In contrast, the average income of the top 1 percent of households experienced a jump of 12 percent, after adjusting for inflation. Moreover, average income is pulled up by gains at the top of the income scale; thus, even the less than 1 percent gain among the bottom 90 percent of households may well be due mostly to gains in the top half of the income spectrum.

The top 1 percent of households (those with annual incomes above about $350,000 in 2005) garnered 49 percent — nearly half — of the total income gains in 2005. Three quarters of total income gains accrued to those in the top decile (the highest-income 10 percent) of the income scale. Only one quarter of total income gains went to the bottom 90 percent of households.

Income gains were even more pronounced among those with even higher incomes. The incomes of the top one-tenth of 1 percent (0.1 percent) of households grew more rapidly than the incomes of the top 1 percent of households. The share of national income received by the top one-tenth of 1 percent of households increased by 0.8 percentage points from 2004 to 2005 and was higher than in any year since 1929 except 2000....

[anne]

There are several important and obvious contributors to rising income and wealth inequality, but simply understanding that we are passing through an extended period of record and near record corporate profits since 2001 with senior corporate managers gaining immensely while employees have benefited to a remarkably little extent is critical.

We have an Administration that is and have had a Republican Congress that was singularly unresponsive to worker needs, from discrimination and safety to health care needs and on.

A period of war and military occupation now running above $15 billion a month in material cost has been met with tax cutting expressly favoring the wealthiest and continual fights to limit social benefit spending. Yes; this makes a difference, and just wait till Saez and Piketty record the inequality figures for 2006.

[Movie Guy]

James Galbraith (of UT Austin) - "Can you work out a link between this and the rise in trade with China? Sorry, but I can't."

Jamie,

I like you and agree with many of your other thoughts, but I haven't noted that you have disputed any of the following statements that I made:

Advanced Global Trade and Income Inequality in the USA:

Advanced global trade and technology improvements related to such are having a much larger effects on the U.S. economy and American workers beyond those workers directly displaced from jobs outsourced or relocated offshore. Such considerations also extend beyond the remaining direct employment by competing companies and corporations.

The advanced global trade impact zone extends to the shrinking support services base of employment and associated wage levels for those company operations that lose support contracts for corporations and companies that either reduce or eliminate domestic plant and facility operations in the United States. Meanwhile, the remaining American-based employees are facing new pressures directly related to advanced global trade.

Internal corporate pressures to remain cost competitive in the global economy have resulted in multiple initiatives to suppress wage increases and benefit package increases.

The evidence of such initiatives is widespread and growing among corporations and companies with operations in the United States. If all else fails, some corporations file for federal bankruptcy to divest themselves of pension plan obligations.

Similarly, other corporations and companies are capping their health care share responsibilities by using a given year (2006, as an example) as the last corporate supported cost increase supplement for existing worker health plans. Some corporations and companies are simply reducing their health care plan coverage in terms of corporate/company share funding of such plans.

Corporations engaged in advanced global trade are pressuring domestic suppliers to rein in costs and trim profit margins to avoid additional offshore sourcing. Some corporations are directly advising their suppliers to move component and parts production offshore.

While not all corporations and companies are fully integrated into the global economy, there is evidence that many of the remaining corporations and companies are using the 'global corporate lean model' as a blueprint for also reining in such employee compensation costs. Such business models serve as benchmarks for local market pricing of wages and benefit packages.

It's my judgment that the more important issues are the economic effects of real wage and real compensation declines that are impacting a growing proportion of American employees in a wide spectrum of industries resulting from increased business competition considerations, and benchmarks established by transnational corporations, whether in manufacturing, general services, or retail. It's all related.

The decreasing purchasing power less credit extension for many income groups is not sustainable as measured against existing standards of living. The economic implications of declining real wages and real total compensation for American workers are significant.

Advanced global trade and increased business competition are most certainly having major impacts on a growing number of American industries and related employment wages and total compensation.

If economists and analysts intend to have any credibility on the subject of advanced global trade and the impacts on U.S. employment, real wages, and real total compensation, then they need to piece together the entire puzzle.

----

Jamie, now dispute the findings of this study (it's a quick and easy read):

The Changing Nature of Corporate Global Restructuring: The Impact
of Production Shifts on Jobs in the U.S., China, and Around the Globe
by Kate Bronfenbrenner, Cornell University, and Stephanie Luce,
University of Massachusetts
October 14, 2004
http://www.news.cornell.edu/releases/Oct04/jobs.outsourcing.rpt.04.pdf

* 95 PDF pages; 88 report pages
** Note page 55 of the report; page 62 in the PDF format.

Look forward to your specific thoughts on this post, Jamie. Careful, I have more ammo.

PS: Happy Father's Day.

>>

[Movie Guy]

Jamie,

To save some time, I will also lay this out for you. I have to hit the road in a minute.

The current U.S. economic base and employment wage/benefit environments are failures by key economists, policymakers, and some analysts to fully appreciate the implications of implementing U.S. and WTO trade policies and supporting existing currency valuation regimes as depicted in the following global economic analysis statement that I developed and posted at Brad Setser's web log in 2002 or 2003:

Economic Hydrology Theory:

The Future of U.S. Domestic Production versus Offshore In-House and Offshore Outsource Production of Goods and Services

Once the WTO and national governments improved the opportunities for corporations to invest in the least expensive global production locations, the stage was set. Coupled with continually improving transportation and communications efficiencies, the successes of offshoring and outsourcing corporations which led the way were met by competitive desires of other corporations to also seek new lowest cost production sources. At present, over 450 of 500 top U.S. corporations have operations in China, as an example.

Unimpeded and with regard to available skill levels and technologies, corporations will seek out the lowest cost blue collar and white collar production sources on the planet and will create new production empires in those locations as fit their market needs. Currency manipulations and other foreign and domestic government incentives that improve foreign-based blue collar and white collar production opportunities increase the rate of flow or transference to such locations.

The larger concentration of global production in lowest cost production environments results in a convergence of foreign direct investment (FDI) monies targeted toward achieving greater scales of production at these locations. This effort, in turn, minimizes the need for investment and development elsewhere by such corporations which further eliminates the logistical and technical support chains that previously existed for duplicate operations at facility locations in other nations. The results are reduced overall investment costs, reduced production costs, labor substitution, and reduction of related supporting logistical and technical support services and employment in other nations.

Like water seeking the lowest geographic point due to the forces of gravity and available terrain features, corporations likewise seek the lowest (least expensive) and most efficient production cost environments on a global basis that meet their domestic and international market needs. The transnational corporations have not migrated to China and India by accident or through illogical business decisions. The trade tariffs (or dam gates) have been pulled down much lower and the corporate production flowed out of the U.S. as a result. The finished goods and services come back via efficient transportation and communication technology means, but the production cost savings are so great that returning such operations to the U.S. is generally out of the question at this time. This is the bottom line of Economic Hydrology Theory.

----

Some of us have repeatedly called for changes in U.S. trade policy and WTO trade rules which require minimum labor and environmental standards in all trade agreements. Some have worked with Members of Congress on such initiatives.

>>

[Movie Guy]

Correction:

"Advanced global trade and technology improvements related to such are having a much larger effects..."

Should read:

Advanced global trade and technology improvements related to such are having much larger effects on the U.S. economy and American workers beyond those workers directly displaced from jobs outsourced or relocated offshore. Such considerations also extend beyond the remaining direct employment by competing companies and corporations.

>>

[mik]

"What will they find?

They will find that inequality in manufacturing pay rose in the 1970s, peaked around 1982, declined, peaked again around 1990, and *declined* after 1994. Declined. By quite a lot. "

I thought less than 20% of US labor is employed in manufacturing. Do manuf data explain pay everywhere?

Raise in wages in 1997-2000 is due to dotcom bubble, it was almost decade since then.

Is it not a good time for a son of famous father to update his data?

[mik]

"outsourcing seems at least as likely to me to equalize the U.S. income distribution as to give it a further inequality boost. Consider what kinds of jobs are likely to be outsourced."

Any data to support that counter-intuitive assertion?

Outsourcing increases available labor in US, at least in a short run and who knows what happens in a longer run.

More available labor -> lower wages, is it not so?

[Alex]

Only if you assume the extra labour produces nothing.

[banana]

[You need to visit a consumer-electronics factory and a construction job site.]

And what would I see? The level of education of people working in both places is not that different. The big difference is that consumer electornics factory both produces and uses sgnificantly more advanced machinery. The engineers designing that machinery are in Japan or Korea or elsewhere. So?

[banana]

Brad: And "outsourcing": outsourcing seems at least as likely to me to equalize the U.S. income distribution as to give it a further inequality boost. Consider what kinds of jobs are likely to be outsourced.

Considering: the best-paying jobs that technically can be outsourced will be outsourced first. One MD in medical imaging - once the technology allows for her outsorcing - is a pure 100K a year of profit. Let the good times roll!

[Valk]

"we can readily deal with expanding international trade by structural protections for workers and the environment that are not trade limiting." -- anne

But Anne, the free traders consider environmental, labor, and product safety laws as restraint of trade.

And the Clinton administration pushed a NAFTA version that allows corporations to sue governments to get these safety regulations thrown out - without adding in those same safeguards which he reportedly felt were so important. This can also happen under the WTO from country to country complaints, for instance under the Sanitary sub-agreement the US & Canada sued EU to try and get hormone treated beef and GMO for sale into the EU).

In the name of free trade, the precautionary principle would be thrown out in favor of multinational profits. And we see from the "no global warming" crowd what lengths od denial multinationals will go to when there is scientific consensus.

Free trade proponents sound like the faith based republicans they often mock. They don't have up to date or comprehensive data, they don't have a wide array of analysis in agreement, and their statements are about how things are likely / probably better based on the theories and aggregate (and overdetermined) numbers.

Will someday the faith on how unrestricted free trade must improve our citizens be considered a folly, just as the past faith in rational, fully informed economic actors has become?

[Valk]

Addendum : Avoiding the false dichotomy

The alternative to unrestricted trade is not hermit like protectionism. Or rather the myth of free trade, as in reality isn't that free considering all the subsidies agribusiness and others get to enable their product dumping.

[JonF]

Re: But unless it is very specialized, the chances are that over a period of time most furniture will leave the United States."

Assuming that everything else stays the same, which is dubious. Rising energy costs and increased global tensions could well make it advisable to locate production closer to home again-- at least in North America, if not in the United States.

[Alex Tolley]

WSJ:

June 19, 2007, 5:00 am
OECD Warns Trade May Be Hurting Jobs, Wages

Most mainstream economists support free trade, yet more and more of them are worried about the number of people who are losing from globalization, or the growth of cross-border trade and investment as a share of overall economic activity. The latest hand-wringing report comes from the Organization for Economic Cooperation and Development, a Paris-based think tank backed by the 30 leading industrialized countries.
[oecd]
Ratio of earnings of workers at 90th percentile to earnings of workers at 10th percentile
In its annual Employment Outlook, published today, the OECD warns that the rise of trade and offshoring are hurting jobs and wages in the developed world, especially in industries that are strongly exposed to competition with developing countries such as China. That finding may not sound like news to critics of free trade or worried workers in the U.S. and Europe. But it’s notable coming from a bastion of economic orthodoxy, which champions open, competitive markets.

Job insecurity and rising inequality are hot political issues in much of Europe as well as in the U.S. One OECD finding shows why: Since the mid-1990s, the incomes of the highest paid have grown at a faster rate than those of the lowest paid in 19 out of 21 countries studied.

The OECD still insists that trade makes all countries richer overall, including high-wage countries. But the new study acknowledges rising public concerns over jobs and inequality, and frets that such fears could undermine politicians’ support for cross-border trade and investment.

There’s some truth in those fears, the group says, concluding after much number-crunching that “the expansion of trade is a potentially important source of vulnerability for workers.” The study finds that globalization has probably contributed to the recent slow growth of wages in developed countries, and to rising income inequality between highly qualified and less-skilled workers. But, the OECD says, other factors are more important, especially the spread of computer technology. Trade’s contribution is “modest”, the OECD claims. –Marcus Walker
--------------------------------------------
Nice to see some x-sectional data (chart not included in except) rather than have comments made mostly on US data. Not all the countries with growing inequality have US-like tax codes and (lack of) unions. Only Hungary exceeded US inequality growth. Spain and Ireland decreased inequality.

[JimO]

‘Moreover, their partners generally pay no more than 15 percent in taxes on most of the money they earn from the firm, compared with the top individual rate of 35 percent....’

Anne the 15 percent dividend tax rate is not applicable to partnerships, s corp’s, or LLC’s . What does this article say about the New York times.