Right wing economists claim it will. But in a word: No.
To talk about it at longer length: The core problem is that the labor market is inherently redistributionalist, redistributing money from the worker classes to the employer classes, because it is an oligopsony, i.e., a market characterised by relatively few buyers (employers) and many sellers (the 150,000,000 Americans who are workers in the 80%).
So why does an oligopsony inherently redistribute money to the oligopsonist? Consider that you have one buyer, and there are five sellers. The buyer wants an orange. The sellers each have one orange. So, what happens? Well, duh, what happens is that the buyer bids for one orange. The sellers then each must reduce their price to the bare minimum of what’s possible without taking a loss. The seller with the lowest overhead cost ends up selling the orange to the buyer for basically his cost of production. The oligopsonist then can obtain additional profit from when he processes this orange into orange juice compared to the situation where the number of buyers and number of sellers was matched. The oligopsonist has, in essence, transferred income that would have otherwise accrued to the producer to himself.
So let’s look at the labor force. How does this work out there? I checked out some Census Bureau numbers. There are roughly 100,000 employers, those with over 100 employees, who provide the majority of jobs in America, 76,000,000 worth. There are 1.5 million other employers who provide 14,500,000 other jobs. There are 116,000,000 Americans actually employed in the workforce. In short, those 100,000 employers who provide the majority of jobs have significant oligopsony power because the size of the American labor force is around 155,000,000, which means there’s literally 790 potential employees trying to sell their labor to each of these employers. 790 sellers of oranges for each buyer of oranges. And you’re likely just an orange, unless you possess esoteric skills in obscure areas where the supply of labor is very low. Most of the new jobs being created are service jobs that require no special skills or training. So what theory and practice both say is that, in the absence of reverse redistribution caused by, say, tax policy or minimum wage laws, the wages of the bottom 80% of workers will be driven down to the bare minimum of what’s necessary for bare survival. And practice bears this out — actually, our current wages at the bottom of the wage scale are already below what’s necessary for bare survival. We’re subsidizing companies like Walmart by providing Medicaid, food stamps, and other benefits to their workers in order to bring their workers’ effective incomes up to the bare survival level. Otherwise Walmart would not be able to keep employees, because they’d starve to death as fast as Walmart hired them at Walmart’s current wages. So much for that whole “free market” thing, eh?
So, what’s going to happen as the economy goes up? Well, people like me in the top 20% of income who have unique and irreplaceable skills will see our market prices rise as income is redistributed from the 80% to our employers. Employers will raise our wages to keep us from jumping ship to other employers, because we are not just labor units, we’re critical to the operations of the company and if we leave, we’re irreplaceable. But the other 80% of the workforce? Not one thin dime. Their wages will continue to be slammed to the bottom.
In short, what happens is that any additional production generated by the bottom 80% will be taken by the top 20% due to the oligopsonist marketplace for labor. It doesn’t matter that a better income means that the bottom 80% (the actual workers) are creating more wealth, that wealth will simply get transferred to the top 20% due to oligopsony power. So what you will see is inflation in commodities prices as people at the top of the wage scale park the new money somewhere, and continued effective deflation of buying power and effective income at the bottom of the wage scale, due to both increased commodity prices and stagnant wages.
The only thing that can change this situation is redistributionalist government tax and wage policy to counter the redistributionalist nature of the current labor market. Yeah, good luck with that. Going back to the tax code of Eisenhower doesn’t seem to be in the cards… the sociopathic lizard people who run our country today have no concepts called “fairness” and seem to admire the policies of Marie Antoinette. Hint: She lost her head. Just sayin’. But the lizard people think that today’s super-duper police state here in the United States, that sees all and has more people in prison than any other nation in the history of the world, will keep that from happening. We’ll see, I guess. We’ll see. But in the meantime… yes, you’re screwed.
– Badtux the “Yep, you’re screwed” Penguin
Tux, the effective end of this power will come when the Lizard-people get what they want, the severing of the social safety net. When that happens, then Wal-mart will start to become unable to hire people because they cannot physically survive on those wages. Then, with no safety net, the people with no jobs they can live on, and no other means of survival, will stage the long mooted Second American Revolution. Will it succeed, perhaps, but likely results are either a new Soviet Union with a “Bill of Rights” or the redistribution of wealth similar to that seen between 1890 and 1970 (the Golden Era of the Middle Class)
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New Soviet Union? I think not. I think more like Franco’s Spain. The anti-Communist canard will be pulled out and waved even though modern-day socialism is more beholden to anti-Communist Scandinavia than to Communism for its intellectual underpinnings, and the ignorant sheeple will eat it up as the excuse for all their problems.
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What will reduce income inequality is increasing the wages at the bottom end (increase the minimum wage) and reduce income at the top end (increase the top tax rates).
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In other words, redistributionalist tax and wage policy that encourages redistribution of profits gained via oligopsony power to the victims of oligopsony power. Certainly not happening with the current Congress, which is beholden to powers that wish no such thing, and in thrall to an intellectually bankrupt “science” of economics whose purpose is to provided solace to the powerful rather than provide truth.
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All taxes and wages are a redistribution of profits. It is only a question of whether or not they increase or decrease income inequality.
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