NEWS RELEASE, 4/2/96 Growing class inequality and stagnant wages are by design not accident, say six UC Berkeley sociologists in a combined analysis

by Pat McBroom

Berkeley -- Over the past twenty years, the United States has "dismantled" many of its historic structures for spreading wealth out among the people, which goes far toward explaining the growing gap between rich Americans and everyone else in the country, according to six sociologists at the University of California at Berkeley. "The current level of inequality is neither inevitable nor tied to talent; it is a matter of choice," the sociologists concluded after a year of combining their expertise to expose the root causes of inequality. Their analysis traces the outlines of far-reaching changes in the balance of power between workers, corporations and communities that once allowed most Americans to share in expanding affluence. It also provides a new perspective on why working people have lost so much ground since the 1970s, even while productivity has continued to rise, and it offers some solutions. Two of the structures that have been dismantled, according to these sociologists, are strong unions and the rootedness of corporations in given communities. Neither has been lost because of so-called natural forces in the economy, but because of political decisions, the authors say. They argue that the resulting imbalance has led to an increasing concentration of wealth at the top. "The United States is now more unequal than at any point in the last 75 years," the sociologists write. "We are choosing our level of inequality by the rules we make, including how we regulate corporations and unions, how we distribute the tax burden and how we set wages." This diagnosis of growing inequality in the United States comes from a unique collaboration among six professors of sociology at UC Berkeley: Claude S. Fischer, Michael Hout, Martín Sánchez-Jankowski, Samuel R. Lucas, Ann Swidler, and Kim Voss. The six worked for a year to synthesize their knowledge across broad academic fields including economic stratification, labor, education, poverty, race and American social history. They have written a book, titled "Inequality by Design: Cracking the Bell Curve Myth" which begins with an analysis of genetic sources of inequality and ends with a broad societal view. Prior to the book's publication by Princeton University Press in September, the group has written a working paper which takes aim at five myths of inequality: Inequality is inevitable Inequality reflects differences in talent Inequality is necessary to promote economic growth Stagnant wages are the just desserts of unproductive workers Reducing inequality will require huge federal programs. The group is currently presenting the working paper titled "Myths about inequality in the United States," at universities around the country and abroad. In the paper, they demonstrate that class inequality is greater in this country than in any other industrialized nation, mostly because of recent corporate and political decisions. They show that workers in European countries as well as in the United States have had to deal with globalization of trade and new technology, but only workers in the U.S. have lost so much ground. Only in the United States has the gap between rich people and everyone else become dramatically bigger. A main reason for the greater inequality in the U.S. is weak unions, the group writes. Moreover, they say, direct union-busting policies, combined with labor laws that discourage strikes, lie at the heart of this weakness. They say a deliberate assault on unionization is responsible for the rapid loss of union membership in the past twenty years. Compared to other industrialized nations, the rate of unionization in the United States is extremely low today, according to Kim Voss, one of the six who is an authority on the history of labor. Unionization in Canada, for instance, stands at 35 percent of the workforce, more than double the U.S.'s 15 percent. Other countries all have higher rates than the United States: Japan's rate is 27 percent, Germany's, 34 percent and Sweden's, 85 percent, in 1989 figures, said Voss. In 1980, a quarter of America's workers were in unions, still low compared to other nations, but strong enough, the sociologists say, to counterbalance the pull of employers and stockholders when it came to sharing the riches. "It used to be that every time a CEO started to raise his own salary or dividends to stockholders, a union man would be sitting in his office. As a result, every increase in productivity was rewarded by higher wages. That face-to-face confrontation does not take place much anymore," said Michael Hout, director of UC Berkeley's Survey Research Center. Hout said the link between wages and economic growth, which rose together from the turn of the century, was broken in the mid 1970s. As graphic evidence of this change, the UC Berkeley group points to new data from the U.S. Bureau of Labor Statistics which shows that compared to earlier years, workers' wages have not kept pace with increases in productivity since 1974. Instead, the gains in productivity -- which has continued to climb upwards for 40 years -- have all been taken in the past twenty years by corporate officers and stockholders, say the authors. The UC Berkeley group cites evidence that, in 1974, American chief executive officers made $35 for every worker's dollar. American CEOs now make over $200 for every worker's dollar, a 500 percent increase in twenty years. By comparison, the ratio of CEO-to-worker compensation in Germany is DM21 to 1. Also, between 1974 and today, the Dow Jones Industrial Average has more than tripled, from 1500 to more than 5500. By contrast, the average working wage has remained static and blue-collar wages have actually declined, the sociologists show. As another example of inequality by design, the sociologists point out that American CEO's, who receive stock options, have a direct stake in what happens to shares on the stock market. By contrast, in Japan, top corporate officials cannot own stock in their own company and therefore have no personal incentive for driving up its price. "We choose to make these rules," said Claude Fischer, one of the six authors who wrote the book's final draft. "To assume they are natural and can't be changed is silly." But reducing inequality will take political courage and the willingness to look at what other nations have done, the authors point out. As a prime example, they reached the conclusion that national wage setting policies as carried out in Germany are the most important way to limit marketplace dynamics that create growing levels of inequality. "In Germany, owners and workers bargain through national associations, arriving at wage policies that ultimately are accepted in most, if not all, workplaces in the industry. The worker-employer agreements are binding in all union settings. In practice, they are usually extended also to non-union settings as well," said Hout. By contrast, Voss added, "the American pattern is for everybody to bargain individually which creates wide differences in wages from place to place. As a result, employers have an incredible incentive to break unions." She said that they also have strong incentives to pull up roots and move from one community or state to another in search of better labor and tax deals. "National wage negotiation would be a huge leap for the United States, but well worth the risk," said Hout. ### For further information, contact Kim Voss at (510) 642-4756, Michael Hout at (510) 643-6874, and Claude Fischer at (510) 642-4772.