What about the converse? Lately, there has no real threat from disease or war and the population has been growing nicely. That made me wonder if perhaps the supply of labor has been increasing and therefore the balance of power has been shifting to capital.
Certainly the US has developed an increasingly inequal income distribution over the past 30 years. The US census bureau has historical data on the Gini coefficient you can download and play with, which will yield a graph like this.
Lower numbers are "more equal", so we've been getting worse. Reaganomics at work! Since it has been growing over the past 30 years we could regress against anything that has been growing during this time and get what looks like a meaningful correlation, including regressing against either population or working age population. So that seems like cheating. Therefore I tried not to cheat by looking at the current distribution of the Gini coefficient across the world courtesy of the CIA world factbook. However I couldn't find anything by regressing this against measures of "labor supply". For instance, here's a scatter plot of Gini coefficient vs. working population fraction.
So back to the US historical data. I decided to feel ok about regressing it against the balance of payments normalized by GDP. This is only partially a measure of labor supply in that importing alot means people from other countries are doing work for you.
Don't take this as proof of causality; it's too easy to find all sorts of stuff that essentially monotonically increase over the past 30 years. However, if you already think that globalization has shifted the balance of power from labor to capital by radically increasing the labor supply (which I do), then you can take this as an estimate of the size of the effect. That's not a meaningless result, because we can say that eventually the US will have to have a net zero balance of payments; the globe will not labor for us indefinitely. Thus, once we are in balance, we can predict what the Gini coefficient of the US will be: about 0.41. This is substantially lower than the current Gini coefficient (circa 0.47), comparable to Russia's current Gini coefficient and the US coefficient in 1982.Ross Perot's giant sucking sound notwithstanding, to get back to the Great Society 1968 levels of equality (Gini coefficient 0.38) we'll need to change more than our trade policies; we'll have to change the tax code and social net as well.
I wonder how the US Gini Coefficient would look if the US counted income after bennies were handed out instead of before (that is, if the US followed France's method of calculation).
ReplyDeleteA significant percentage of our population pays a negative income tax, but that transfer payment comes after we've calculated income. The magnitude of this payment, however, is small. It obviously doesn't equalize people with the upper income quintiles. But it does smooth the curve.