inequality-policy-2009-10.pdf (application/pdf Object)

inequality-policy-2009-10.pdf (application/pdf Object)
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When workers do lose their jobs, the social safety net has many holes. Historically, only about 40 percent of unemployed workers receive unemployment insurance benefits and these are stingy by international standards.13

The large majority of U.S. workers also depend on their job (or their spouse’s job) for health insurance. With the typical employer-provided health insurance plan costing about $5,000 per year for individual coverage and about $13,000 per year for family coverage,14 higher wages alone will not go far in providing quality health insurance, particularly for lower- and middle-income workers. U.S. workers also suffer from a severe time squeeze, which is exacerbated by the lack of any legally required paid time off. U.S. law, for example, does not mandate any form of paid time off for any purpose. As a result, almost one-fourth of U.S. workers have no paid vacation or paid holidays, and the average U.S. worker has only nine days of paid vacation and six days of paid public holidays per year, with many having less than the average.15 Nor does U.S. law require employers to provide paid parental leave.16 In fact, the U.S. law that requires employers to provide 12 weeks of unpaid parental leave has exemptions for employer-size and job tenure that effectively remove a large share of the U.S. workforce from coverage.17 U.S. workers are not even legally entitled to paid (or unpaid) sick days.18 As a result, over 40 percent of U.S. private-sector workers have no paid sick days, and, given the “employment at will” doctrine, are at risk of losing their jobs if they miss work when they are sick. Higher wages alone would do little to give workers the time they seek to handle their many non-work responsibilities.

All of these non-wage issues – the lack of legal job protections, the lack of a safety net for most of the unemployed, the strong dependence of workers on their employers for health insurance, the lack of paid time off, and others – are major challenges for workers at almost all levels of wage distribution. But these problems are particularly acute for low-wage workers, who are not just the worst paid, but also the least likely to have union-representation, the least likely to have employerprovided health insurance (or insurance of any kind), and the least likely to have any form of paid time off.19

Conclusion

In the standard neoclassical economics framework, low wages are simply a symptom of low levels of skill. Wage levels, however, are also a function of unionization rates; the level of the minimum wage; the entire regulatory framework governing the terms and conditions of employment, from job security legislation to paid time off; the size and scope of the public sector; the degree of competition in national and international product markets; and other fundamentally political issues, all of which have little or nothing to do with workers’ skills.

The sharp and sustained increase in economic inequality in the United States over the last 30 years is not a reflection of a national preference for inequality (discussed more blandly as “flexibility”), and not the continuation of an inexorable increase in inequality from 1776 to the present. The last 30 years, in fact, mark a significant departure from a five-decade trend toward greater economic and social equality. What changed was not the demand for skilled workers, but the balance of power between workers and their employers.