Piketty and Saez (2003, updated) estimated the share of income held by the top 1% from 13 percent in 1991 to 23 percent in 2012. The new Bricker et al. research shows only a 7 percentage point increase to 18 percent in 2012. The share held by the super-rich, the top 0.1% has increased much at all.
Looking at 74 million job listings between 2007 and 2013, Clifford and Shoag found that employers started to become pickier, especially in cities where there were a lot of workers with low credit scores. If a credit-check ban went into effect, job postings were more likely to ask for a bachelor’s degree, and to require additional years of experience.
There are other ways that employers could have also become more discerning, Shoag says. They might have started to rely on referrals or recommendations to make sure that applicants were high-quality. In the absence of credit information to establish trustworthiness, they may even have fallen back on racial stereotypes to screen candidates. The researchers couldn’t measure these tactics, but they’re possibilities.
…after a pro-testing law is passed in a state, African-American employment increases in sectors that have high testing rates (mining, manufacturing, transportation, utilities, and government).
These increases are substantial: African-American employment in these industries increases by 7-30%. Because these industries tend to pay wage premia and to have larger firms offering better benefits, African-American wages and benefits coverage also increase. Real wages increase by 1.4-13% relative to whites. The largest shifts in employment and wages occur for low skilled African-American men.
I also find suggestive evidence that employers substitute white women for African-Americans in the absence of testing. Gains in hiring African-Americans in these sectors may have come at the expense of women, particularly in states with large African-American populations.
Employers test for drug use both for health and safety reasons and as a way of screening out less reliable employees. People who break the rules are not reliable employees and that includes taking drugs. In low skill jobs, what employers seek is a recruit who is friendly and reliable.
Employers already had an accurate stereotype of the average skills of different ethnic groups. Administration of tests allow them to identify which members of each group were the most productive.
It is a standard result that statistical discrimination improves the chances of below-average applicants subject to the stereotype but harms those of above average quality. For that reason, applicants look for what methods of counter-signalling to show that they are indeed a quality applicant – make themselves stand out from the crowd.
Employers profit from developing screening devices that go beyond stereotypes to identify above-average applicants. They want screening devices that find those who do not otherwise stand out from the crowd because of difficulties in transferring credible information about their quality. This is a special difficulty with low-skilled vacancies because hiring is made based much more than on character than experience.
45% of New Zealand employers work at least 50 hours per week and 25% of the work at least 60 hours per week. Less than 15% of permanent employees work similar hours. Who is exploiting whom in the inherent inequality of bargaining power between employers and workers?
The self-employed in the above chart employ no one else. Self-employed who also hire others are included in employers. In consequence, many of the self-employed are contractors rather than small business owners.
New Zealand working class is wealthier than the entire capitalist class. Their human capital, shown in the chart below as the human capital of the unskilled and non-degree workers, far exceeds the value of the physical capital stock of New Zealand.
Source: Lˆe Thi. Vˆan Tr`ınh, Estimating the monetary value of the stock of human capital for New Zealand, University of Canterbury PhD thesis (September 2006).
Only part of this physical capital stock is owned by the capitalist class given we live in the era of pension fund socialism. About a 3rd of that physical capital stock is owner occupied homes.
Source: Lˆe Thi. Vˆan Tr`ınh, Estimating the monetary value of the stock of human capital for New Zealand, University of Canterbury PhD thesis (September 2006).
The only reason that the share of unskilled and non-degree workers is in any way declining is the withering away of the proletariat. More and more people are joining the middle-class and going on to higher education.
Tring Le found that the human capital stock was consistently 2.6 times the value of the physical capital stock of New Zealand.
I decided to apply that ratio to the net capital stock of New Zealand estimates of Statistics New Zealand back to 1987 to see what we get. It is pretty standard for the value of human capital to be two to two and one-half times the value of physical capital.
Source: National Accounts (Industry Benchmarks): Year ended March 2013 andLˆe Thi. Vˆan Tr`ınh, Estimating the monetary value of the stock of human capital for New Zealand, University of Canterbury PhD thesis (September 2006), Table 4.8: Human and physical capital stocks.
All the above chart says it is most wealth in New Zealand is held by ordinary people either as their human capital or the value of their homes.
The welfare states in Scandinavia do not make their societies any less unequal than most other welfare states once you take into account taxes and transfers – after-tax redistributions.
Living wage activists believe that businesses can profitably pay their low-paid workers a lot more. The living wage pay increase will not jeopardise the survival of the business or jobs because their workers will be more productive because of the living wage increase. Morale will be higher and job turnover will be lower. Both of these will increase productivity perhaps enough to offset the increase in labour costs.
In a nutshell, living wage activists have discovered a hitherto untapped entrepreneurial opportunity for profit. These living wage activists are happy to disclose this secret to lower costs to the world at no fee.
What they are arguing is businesses do not notice a profit opportunity that these political activists have noticed and are now publicising widely. Entrepreneurs are leaving money on the table that could easily be snapped up simply by paying their low-paid employers higher wages.
Source: Mancur Olson (1996) “Distinguished Lecture on Economics in Government: Big Bills Left on the Sidewalk: Why Some Nations Are Rich, and Others Poor.” Journal of Economic Perspectives 3-24.
This money on the table metaphor is similar to the big bills left on the sidewalk metaphor. There is easy money to be had from paying low-paid workers more because these workers will quickly become more productive because of the higher wages.
Living wage activists do not address why entrepreneurs had not discovered this insight into cost saving themselves. After all, every entrepreneur, every employer knows that if they pay more, they will get a better class of job applicant.
Of course, if this insight by the living wage activists is true, all workers should be given a similar increase in their pay because their productivity will go through the roof as well.
Entrepreneurs profit directly from spotting every new opportunity for profit. They have no reason to turn money down particularly when it is obvious and straight under their nose.
The modern theories of the firm focus, in part or in full on reducing opportunistic behaviour, cheating and fraud in employment relationships. The cost of discovering prices and making and enforcing contracts and getting what you pay for are central to Coase’s theory of the firm put forward in 1937.
The profits of entrepreneurs for running a firm is directly linked from their successful policing of the efforts of employees and sub-contractors to ensure the team and each member perform as promised and individual rewards matched individual contributions (Alchian and Demsetz 1972; Barzel 1987). Alchian and Demsetz’s (1972) theory of the firm focused on moral hazard in team production. As they explain:
Two key demands are placed on an economic organization-metering input productivity and metering rewards.
The main rationale in personnel economics from everything ranging from employer funding of retirement pensions to the structure of promotions and executive pay including stock options is around better rewarding self-motivating employees who strive harder and reducing the costs of monitoring employee effort.
At bottom, the efficiency wage hypothesis is entrepreneurs are unaware of the higher quality and greater self-motivation of better paid recruits for vacancies but wise bureaucrats and farsighted politicians notice these gaps in the market. Bureaucrats and politicians notice these gaps in the market before those who gain from superior entrepreneur alertness to hitherto untapped opportunities for profit do so and instead leave that money on the table.
Why Evolution is True is a blog written by Jerry Coyne, centered on evolution and biology but also dealing with diverse topics like politics, culture, and cats.
“We do not believe any group of men adequate enough or wise enough to operate without scrutiny or without criticism. We know that the only way to avoid error is to detect it, that the only way to detect it is to be free to inquire. We know that in secrecy error undetected will flourish and subvert”. - J Robert Oppenheimer.
Utopia, you are standing in it! 
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