The Real Driver of Rising Inequality – Lower Paying Jobs?

Lance Taylor and Özlem Ömer argue that the major reason for rising inequality is that jobs are moving to low wage sectors. In an article based on US jobs data Lance Taylor, argues:

Meso level analysis cannot provide microeconomic detail, but it can shed light on broad forces shaping the economy. One key trend has been the movement of jobs toward low wage sectors such as business services, education and health, and accommodation and food. The biggest observed employment losses have been in manufacturing and wholesale trade. The analysis further suggests that wage repression pushed up profits in business services, education and health, wholesale and retail trade, and parts of manufacturing.

What is really useful in this article is that they discuss several alternative explanations. These include:

There are several lines of thought about forces generating slowly growing employment and a rising aggregate profit share over the past four decades. Three are

  • wage repression
  • greater business market power which increases “rents” accruing to owners of capital, and
  • traditional rental payments received by owners of real estate.


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