One of my college professors made a wisecrack that has stayed with me over the half century or so since I heard it. Rather than talking about “multiple choice tests” he called them “single choice multiple response tests”. That thought came back to me as I read the introduction to Richard Reeves’s thought provoking report at Brookings, “A Little Respect: Can We Restore Relational Equality?” Here’s the opening:
Equality can be thought of in three different ways: Basic equality, granted to all in the form of political or legal rights; material equality, measured principally in terms of economic and other resources; and relational equality, which is earned through respect of oneself and of others.
A primary source of relational equality is work. But workers in America are struggling. Many are out of work, and for many more paid workers, wages have remained stagnant as income inequality has widened. There has also been an erosion in the quality of work, especially with regard to autonomy, voice, status, and security.
As a result, the U.S. is becoming more unequal, both in resource and relational terms, especially along class lines. This widening respect gap not only means that the winners—those in the upper class—have less respect for the losers—those who are less successful, it also means the losers have less self-respect.
Two alternatives are presented:
- Restore work as a basis of status and respect
- Replace work as basis of status and respect
Either of these is a tall order, requiring not just a social program but an overturning of present society. We are increasingly a plutocracy, something particularly apparent to me sitting here in Illinois where two billionaires contend with one another to be our next governor. But it’s not limited to the political sphere. Consider, for example, the Kardashian-Jenner clan. They are not merely “famous for being famous”. They are influential through extreme sexuality and conspicuous consumption, practically a microcosm of our society. Wealth and notoriety leading to more wealth.
When status and respect are based on money how can one promote equality? What level of redistribution will promote equality without discouraging work? I don’t believe there is one.
When I was beginning my working life, a corporate CEO earned about 17 times what the workers working for him did. Now it’s 350 times. That change occurred as a consequence of policy.
Furthermore we already have models for what happens when work is replaced as the basis for status respect on the South and West Sides of Chicago. Work is not replaced by elevated leisure—creating works of art, playing chess, or engaging in discourse. It’s replaced by substance abuse, protecting one’s turf, and killing one’s opponents.
For those who think that Elizabeth Warren’s notion of expropriating and redistributing corporate equity is the solution, I have a question. Why don’t labor unions hold their pension funds as equity stakes in the companies for which their members work? Under modern conditions when most people work for somebody else, I don’t see how equality can be fostered without workers having a property interest in their jobs. That either means holding equity in their companies or the end of at will employment, a revolution of its own.
Celebrity worship has been with us as long as there have been celebrities. Movie stars, and then TV stars and now add sports stars. If one is willing to spend their time and hard earned money into making stars richer I don’t know what to tell you. If someone wants to spend $500 for two tickets, hot dogs and beers at the ballgame so be it, but don’t blame CEO’s or bankers for your economic plight.
As for equity considerations. It sounds great to have the rank and file own equity. The vast majority don’t want it. They want the surety of current comp. We have learned through many years that only a handful at the top want equity. The reason is simple. Risk tolerance. Now you can bet that if things work out well you will hear a lot of shoulda, woulda grousing as the equityholders count their money. But its a self determined outcome. It doesn’t make the rank and file bad people by any definition, just risk intolerant.
And as for the pension funds’ allocations: thou shalt not take concentrated investment positions. Its the 11th commandment.
I remain very skeptical that we can do much about the equality problem. The wealthy control our media, our money and now they are all running for office. And getting elected. Things aren’t changing.
Agree with Drew about the pension. Talk about putting all your eggs in one basket.
Steve
That you shouldn’t put your entire pension fund into the company’s stock is prudent but it does not imply that you shouldn’t invest any of the union’s pension fund in the company’s stock. That’s not only a “no confidence” vote; it means that everybody isn’t pulling the same way.
I don’t know how to solve the equality problem but I have some ideas on improving it. The first step is reversing the rules on the deductibility of executive stock options that were put in place in the early 1990s. That was when things really went off to the races.
The other reform is much tougher rules on corporate governance. There are too many interlocking boards of directors. The Clayton Act doesn’t go nearly far enough.
Other countries have capped CEO pay. I think that wouldn’t be necessary if some other reforms were put into place.
I certainly haven’t studied union pension fund allocations, but do you think that they have avoided their own companies? Yes, its a vote of no confidence. I wonder if independence and fiduciary duty enter into the equation.
The easiest way to deal with the stock option issue is to require purchase of stock, or options (and tax the deemed value at purchase) , even if on a promoted basis.. Money out of pocket. Its what we do.
Until the near-death experience in 2009, the UAW owned very little GM stock. They were required to purchase stock then and there was quite a bit of complaint about it at the time. The fact is that at least in part for reasons you’ve outlined unions don’t much care to hold the stock of the companies their members work for.
From my point of view ideally they would purchase more rather than selling it off as they are.
“From my point of view ideally they would purchase more rather than selling it off as they are.”
But they don’t really have much of a voice in how the company is run. A CEO who is being (partially) paid in stock has also to say in how things are run. They also make enough money besides the stock that they would survive just fine even if the stock tanks. Not so for the union member.
Steve
Im not sure that’s the way to think about it, steve. (CEO’s vs hourly workers) If they have a 401k they should have equity exposure, period. What equity exposure is a different matter. (Company stock grants are a different matter. Its found money.)
Generally pension fund management is outsourced, so the manager has fiduciary duties to choose the best they can. Yes, it may be a sad commentary that the unions money manager decisions do not include the unions employer. But the manager should not be coerced. As an aside, this is why these schemes to avoid the equity of gun makers or other out of favor companies are hairbrained.
I would assume it require ERISA and other waivers for union money managers to buy the employers stock against their best investment judgement. Im surprised lawsuits have not been brought against campaigns to avoid equity exposure to gun makers/”polluters” etc etc. But maybe the view is that the equity world is big enough to accommodate bans on politically out of favor industries.
I don’t know what to do about equality either except for some of the things mentioned previously:
– Reduce the financialization of the economy
– Rationalize immigration policies and enforcement
– Corporate reform
I’m sure I’m missing some potential policies, but pretty much everything else, I think, has to be done by communities, not government.