Richard Freeman's analysis
of why we should be concerned about growing inequality in the United States
and his suggestions for what we can do about it are good starting points for
discussion, but looking at the same issues through a gendered lens provides
a different understanding of the same phenomena and several alternative policy
directions to explore.
For example: In discussing the growing inequality in earnings,
Freeman stresses declining real wages for the majority of men, especially
men at the bottom, since the mid-1970s. He mentions in passing that women
were the only low-earning group who saw their real wages rise. (Actually,
women's wages have fallen at the very bottom, too, but for most women they
rose, and thus they rose on average.) During the 1980s, the wage gap between
women and men closed by about 10 percentage points-from a gap of 40 percent
at a ratio of 0.60 (women's earnings to men's) to a gap of 30 percent at the
current earnings ratio of 0.70. The gap closed both because men's real wages
fell and because women's real wages increased.
While earnings inequality was increasing among both women and
men (though more among men), the addition of women's earnings to family income
helped to equalize the income distribution among families. Thus an important,
though unmentioned, way to reduce inequality among families in the United
States would be to continue to bring women's wages up to men's. Not only would
achieving pay equity increase fairness for individuals-perhaps increasing
their faith in the markets Freeman reveres-it would also serve to reduce poverty
significantly, especially the poverty of our poorest families: those headed
by women alone. Such families now account for 24 percent of all families with
minor children and 60 percent of all poor families with children. The set
of policies Freeman proposes, though worthy of further exploration, would
do little to address the specific needs of these families. The social welfare
policies of the European states, which Freeman seems ambivalent about (on
the one hand he disparages their social insurance, tax-transfer base; on the
other he lauds their tendency to shift resources towards the early years)
do address these needs. More on this point below.
Let's consider why women's earnings rose. In doing so, we can
see both the advantages and the limits of one of Freeman's proposed strategies,
equalizing human capital accumulation through educational opportunities. At
least partly as a result of federal legislation such as Title IX, women are
closing the educational gap between themselves and men; more women than men
are now graduating from college and earning masters' degrees. And there's
no question that their more rapid accumulation of human capital contributed
to the narrowing of the wage gap noted above. Yet women's earnings, at 70
percent of men's on average, still lag far behind. Without effective anti-discrimination
measures in the labor market to monitor how the race is run, the starting-gate
equality Freeman stresses won't lead to the results we want.
More generally, Freeman's endorsement of the marketplace as
the sorting and rewarding mechanism for us all must give those of us who fare
less well in the market substantial reason for concern. While Freeman may
be right that the ascendancy of free-enterprise conservatives in US political
life behooves all of us to look for the equality-enhancing opportunities in
market-oriented policies, I hope that at least some progressive economists
(and others) will train their sights on market failure and the ways in which
we must regulate markets to help them come closer to achieving their theoretical
efficiencies. If, as has been said, markets come out of the barrel of a gun,
then it would be difficult to isolate markets and market outcomes from the
underlying distribution of power.
The only challenge to the present distribution of market power
endorsed by Freeman is the union movement. A good choice, but not sufficient
(though it is true that now that unions have become more inclusive in their
membership, they help women and minority men as much as, if not more than,
their traditional membership of white men). A strong government and rational,
reasonable regulations are needed to control the worst excesses of capital
and of markets run amok. And income transfers, taxes, and government programs
are needed when markets can't or won't work.
Transfers deal with a fundamental problem of market capitalism:
some people don't have enough dollar votes to buy what they need to survive,
and especially not to survive at a level beneficial to society as a whole.
(I'm not sure why Freeman thinks there will be less resistance to assets transfers
than income transfers, and I note he proposes to fund the transition with
taxes.)
Taxes and government programs are necessary when the operation
of markets won't result in a socially optimum outcome, the classic example
being defense. As Jesse Jackson was fond of asking during his presidential
campaigns: How many of you have Cruise missiles in your back yard? (No hands
up.) Now, how many of you have VCR's in your homes? (Lots of hands.) Jesse
was actually illustrating something else (that the US produces what no one
wants, while Japan produces what everyone wants) but his point applies here
as well: if you buy a missile it will also protect me, and I won't have to
pay; but if nobody buys one then we won't have enough defense. There's some
evidence to suggest that, on average, parents don't buy enough goods and services
for their children even when they have enough dollar votes. (And since we
expect less and less that children will take care of us when we are infirm,
why is such spending rational anyway?) So societies use taxes to transfer
resources from adults to children, in support of public education, for example.
In the United States, the share of income taxes paid by corporations has fallen,
while that paid by individuals and families has increased. Perhaps corporations
can pick up more of the tab for children.
A much greater investment in children-free, universally available
child care, more health care, and income support when needed-is warranted,
then, for many reasons. Paid family leave for working parents is another way
to shift resources to the benefit of the young. A recent study by the Institute
for Women's Policy Research shows that a program providing up to 12 weeks
of paid leave (for the same reasons that many workers are now entitled to
unpaid leave under the 1993 Family and Medical Leave Act), if all employers
were required to participate, would cost about the same as our current unemployment
insurance system. Programs such as these would help all families with children
but would do most for the poorest and for single parents who lack a spouse
for back up child care or income support.
Many social insurance programs work well. Medicare and Medicaid,
for example, have very low administrative costs compared to private health
insurance plans. Let's look twice before we abandon tried and true income-based
vehicles for the asset-based schemes of academic economists.
I fear that Richard Freeman's "ideal virgin capitalism"
will somehow wind up screwing us all.
Originally published in the December 1996/
January 1997 issue of Boston Review
