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The Causes of Inequality

VOX provides an interesting analysis on the causes of inequality.  I think Coen Teulings analysis in “Why does inequality grow? Can we do something about it?” is accurate in identifying the issue at hand between our changing labor force and skillets. Although I disagree to varying degrees with his further analysis, I thought the paper painted a good picture of some causes.

Where do I disagree?  I think his interpretation of how the labor market works, while theoretically sound, inaccurately depicts the placement process in a “best negotiator wins” framework.  No one is ever forced to accept employment or remain with an employer indefinitely.  What may be the best decision for you now may not be six months from now – a better opportunity may arise.

Second, though politically difficult be against, increasing the minimum does little to address income inequality or lift anyone out of poverty.  What is ironic is how economists find ways to minimize the impact of increasing the minimum wage which goes against the grain of lessons in basic economics.  A topic for another discussion.

Coen Tuelings:

Over the past couple of years, the OECD asked attention for the rapidly widening income dispersion in OECD countries (see e.g. OECD 2008, OECD 2014). The recent publication of Thomas Piketty’s Capital in the 21st Century, gave new impetus to this debate.

There were large shifts in the distribution of total income, both from labor to capital, and within the labor share – from low- to high-earning workers. This growing inequality has a large impact on many aspects of society, from diverging educational opportunities, to the distribution of health and overall well-being. Though there are marked differences between countries, the rise in inequality has been a general phenomenon. Hence, there is a quest for more inclusive strategies that allow larger parts of society to benefit from the growth of GDP.

Causes of income inequality

There has been much debate on the causes of this trend.

  • At the turn of the century, skill-biased technological progress was considered to be the main culprit.

The skill bias in the change in production technology reduced the demand for high school dropouts and raised that for college graduates. To the extent that the education system could not keep pace with the increased demand for graduates, the skill premium soared.

The rapid pace of technological progress makes that we move increasingly to a ‘the-winner-takes-it-all’ society, where early entrants in new industries capture an incredible amount of rents, with Microsoft, Google, and Facebook as the most extreme examples. This contributed to a steady shift in the distribution of income from labor to profits.

  • More recently, the attention shifted to the role of globalization.

Where the share of the BRIC countries in the world economy was too small to account for the large shifts in relative wages during the nineties, this share has grown so rapidly in the last two decades that its impact on the income distribution can no longer be ignored. However, this impact of globalization is more subtle than an outright increase in inequality. For the BRIC countries, globalization is equivalent to a large increase in GDP and, hence – a large improvement in the standards of living for the majority of their population.

For the developed countries, the effect of globalization on the income distribution is more subtle. The wage distribution becomes increasingly skewed to the right. Low and medium educated workers earn more and more similar wages, forming a large mass on the left side of the income distribution, while the share of the top 10% in total income skyrocketed, leading to a long and fat right left tail of the distribution.


  • The middle class loses (see Autor et al. 2013).

The middle class is employed exactly in the type of jobs that both face fierce global competition and are highly vulnerable to automation. Demand for workers with intermediate levels of education, therefore, falls and hence their wage surplus above workers with lower education. Despite the overall growth, US real wage of the median worker has fallen since 1990.

  • The upper class commands specialized human capital that is in high demand in a technology-driven world.
  • The lower class is mainly employed in personal services that are non-tradable and cannot be imported from the BRIC countries.

Moreover, jobs in these industries are less sensitive to technological innovation than jobs in manufacturing.

From a policy perspective, this diagnosis poses new challenges. The old story for emancipation relied on investment in human capital, for the lower strata of society, education was the best means for improving their position. The future of your children was safeguarded most effectively by better education – make sure that they spend all effort to obtain the highest possible degree. That story no longer applies for everybody. It still works for the upper tale of the distribution of educational attainment, since the return to obtaining a degree from good university has gone up. It no longer works for the lower tale of the distribution, since the return to the completion of high school, or adding some years of college, has gone down.

However, trade and technology are not the only explanations for the dramatic increase in inequality over the past couple of decades.

  • The liberalization of labor-market institutions since 1980 has also contributed substantially.

DiNardo, Fortin and Lemieux (1996) have shown that the fall in minimum wages and the demise of the union increased inequality in the United States during the 1980’s. Later work by Lee (1999) and Teulings (2003) suggests that a large part – if not all – of the rise in wage inequality in the lower half of the distribution is due to the fall in minimum wages during that period. This applies in particular for females, who earn lower wages anyway, and for whom the minimum wage therefore has a larger impact. Starting from the low levels of the minimum wage that prevail in the US currently, the job-losses of an increase in that minimum are limited. This fits the recent experience in the UK, where the introduction of a minimum wage had a substantial effect on wage inequality, but hardly any effect on the chances of low skilled workers to find a job. It might be different in France, where minimum wages are much higher to begin with. In that case, further increases in the minimum wage have large detrimental effects on the job opportunities for low-skilled workers.

  • Minimum wages – provided that they are not set too high – therefore have a large effect on wage inequality, and a relatively small effect on employment.

The obvious question is then what wage would be not too high. I use as a rule of thumb that at most 4% of the workers may actually earn the minimum wage. If more than 4% earns the minimum, job loss becomes substantial. However, there is no empirical evidence to support the rule of thumb other than the differences in outcomes between the US and France. Regrettably, the strategy of a limited increase in the minimum wage reaches this critical point of 4% earlier now that the wage differential between low and medium educated workers has gone down, and more workers earn wages not that far from the minimum wage.

Institutions and the labor market

Why are institutions so important on the labor market? Why would the free market not lead to the best possible outcome? We gradually start to understand why the institutions for wage setting matter so much. The standard auction model taught in economics 1.01 is a bad representation of how labor markets actually operate. The auction model assumes that all job seekers and all firms with vacancies meet at the same place and time. A hypothetical auctioneer calls a potential wage rate, records potential supply and demand at that wage, and then adjusts his call until he arrives at an equilibrium rate that sets supply equal to demand. Reality looks different. Individual job seekers and firms meet and bargain bilaterally on an acceptable wage. If they fail to reach agreement then both continue search for other options. The point is that there is no auctioneer to set the wage. The worker and the firm have to agree among themselves. Hence, it is critical which of the two parties has the best bargaining skills – the worker or the firm? There is no guarantee whatsoever that the free market yields a proper distribution of bargaining power from the point of view of social well-being.

When the theoretical apparatus for analyzing these models was first developed by Pissarides (1990) and Burdett and Mortensen (1988) – who received the Noble prize for this work – it looked as though, by a kind of divine miracle, the actual distribution of bargaining power was reasonably in line with the social optimum. Later on, Stevens (2004) showed that firms can save on their wage bill by using deferred compensation schemes. Workers get paid low wages initially, only to receive higher wages after staying at the same firm for a couple of years. If the worker quits before, the firm never has to pay these higher wages. Deferred payment binds a worker to the firm and, therefore, reduces the threat of outside competition. No practical man would be surprised by this result because this is what we see employers do every day. Most wage contracts contain extensive experience and tenure scales. However, what is surprising is that these schedules shift the balance of power in favor of the employer beyond what is desirable from societal point of view. Hiring a worker becomes too attractive. Firms start poaching workers from each other, leading to a waste of resources on recruitment activity, excess job mobility, and training cost to make workers familiar with their new job, from which they are likely to quit shortly afterwards by new incoming job offers anyway. This change in the balance of power might also have contributed to the shift of the distribution of total income from labor to capital.

Joint with Gautier and Van Vuuren (2010), I showed that even when firms don’t use Stevens’ seniority profiles, but instead offer a fixed flat wage contract, efficiency emerges only when there are strongly increasing returns to scale in job search, and when firms can commit to pay hiring premiums before even meeting a potential candidate. In all other cases, firms have too much bargaining power.

Robin and Postel-Vinay (2002) have shown that firms can use even more aggressive strategies, by paying wage increases only when an outside firm threatens to poach its worker. A firm can then hire apprentices and other young workers for very low starting salaries, waiting for outside offers to these workers before paying any wage increase. Empirical evidence shows that this type of arrangements is used in practice indeed, in particular for low skilled workers. This type of wage contract shifts the balance of power even more in favor of employers, so even further beyond the social optimum than in Stevens’ analysis.

In this type of environment, small institutional details in wage setting can have a large impact on the outcome. Hence, the wave of liberalization of labor-market institutions in the eighties and nineties of last century might have a negative impact on society after all. It has made labor markets more flexible and thereby created many jobs, but beyond a certain point, the net effect of further liberalization might be negative from a societal point of view. Both the Financial Times and the Economist expressed sympathy for the idea of raising the minimum wage in the United States and introducing it in Germany. This support might be well taken. There is likely to be some kind of an optimum degree of liberalization of labor- market institutions. In some instances, the world might have moved beyond that point.


Autor, David, David Dorn and Gordon Hanson (0213), “Untangling Trade and Technology: Evidence from Local Labor Markets”, NBER working paper 18938.

Burdett, Kenneth and Dale Mortensen (1988), “Wage differentials, employer size, and unemployment”, International Economics Review, Vol. 39, No.2, May, pp. 257-273.

DiNardo, John, Nicole Fortin, and Thomas Lemieux (1996), “Labor market institutions and the distribution of wages, 1973-1992: A semiparametric approach”, Econometrica, Vol. 64, No.5, September, pp. 1001-1044.

Gautier, Pieter, Coen Teulings, and Aico van Vuuren (2010), “On-the-job search, mismatch, and efficiency”, The Review of Economic Studies, Vol. 77, Issue 1, pp.245-272.

Lee, David (1999), “Wage inequality in the United States during the 1980s: Rising dispersion or falling minimum wage?”, The Quarterly Journal of Economics, Vol. 114, No.3, August, pp. 977-1023.

OECD (2008), Growing Unequal?: Income Distribution and Poverty in OECD Countries, OECD Publishing, 21 October.

OECD (2014), Society at a glance, Directorate for Employment, Labour, and Social Affairs, OECD.

Piketty, Thomas (2014), Capital in the 21st century, Harvard University Press.

Pissarides, Christopher (1990), Equilibrium Unemployment Theory, MIT Press.

Postel-Vinay, Fabien and Jean-Marc Robin (2002), “Equilibrium wage dispersion with worker and employer heterogeneity”, Econometrica, Vol. 70, No.6, November, pp. 2295-2350.

Stevens, Margaret (2004), “Wage-tenure contracts in a frictional labour market: Firms’ strategies for recruitment and retention”, The Review of Economic Studies, Vol. 71, pp. 535-551

Teilings, Coen (2003), “The contribution of minimum wage to increasing wage inequality”, The Economic Journal, Vol. 113, Issue 490, October, pp.801-833.

{ 118 comments… add one }

  • Larry Gade June 16, 2014, 6:32 pm

    Back when I was growing up many heads of families worked in factories at unskilled union jobs. Heck, I even did for a time. Now many of those jobs have been lost to technology or moved outside the US. Why is it that the service jobs, that we have so many of now, have not taken the place of those jobs? The work is comparable, as are the skills to do the jobs and many of the large fast food restaurants, for instance, are making huge profits. I can’t figure out why these jobs are so undervalued, when in the past, as long as it was a factory with mostly men, jobs of similar difficulty were the plum jobs of the day.

  • Josh Crutcher June 16, 2014, 7:37 pm

    I hear what you are saying. I worked at UPS for awhile and remember getting yelled at for helping a co-worker that was falling behind. I think we are also losing sight of what we call skilled vs. unskilled. Many factory workers that were unskilled were highly overpaid and vice versa.

    Is this price of technological advancement? I think in many ways it is. Many 12-year-olds operate computers better than 30-year olds.

    I also think it is an over-generalization to say fast-food workers are undervalued. I believe entry level has essentially always paid low wages, but there was opportunity for advancement. I know a few in my small graduating class alone that started from the bottom and have worked their way up as managers and are highly valued. In addition, what is value? Often, these entry-level fast-food positions are jobs EVERYONE in the country above 16 can do. How much value is that worth?

  • Larry Gade June 16, 2014, 7:55 pm

    It depends on how you look at it. Fast food worker jobs are less likely to be replaced by technology and most would be impossible to be replaced by someone in India, so maybe those jobs should be valued more. I see lots of people over 40 working those jobs, so is that entry level? Why? Because they have always been filled by teenagers and college students? That’s not true any more. People with families are working in restaurants and fast food places. I’m not sure why unskilled labor in factories used to be so well paid and now it’s not ok to be unskilled and paid well. As far as it being easy to replace fast food workers, that argument doesn’t hold up, because back in the hay day of the factory jobs, there were all kinds of people waiting to get one of those jobs. Was it all unions? I don’t know. What I do know is that all kinds of workers are needed, including unskilled. If a larger percentage of the population were educated and could do your job and my job, we might be working at McDonalds. 😉

  • Josh Crutcher June 16, 2014, 8:11 pm

    If they pay $15/hr, mark it down that I’ll be working there part-time… :) They will have a much more competitive job market.

    To your argument, if I start nearly any NEW career, it will most likely be entry level in many respects. If I jump to oil and gas sales, I’m entry level. If I go to work at McDonald’s, Nissan’s floor, or UPS on the floor – I’m entry level. I have to learn that job.

    Not sure I follow your reasoning: “As far as it being easy to replace fast food workers, that argument doesn’t hold up, because back in the hay day of the factory jobs, there were all kinds of people waiting to get one of those jobs.” Those jobs have always paid better than fast food, so

    I know their jobs are needed, but that doesn’t mean they should make more, does it? I made minimum wage at the golf course from age 12 and 13. They needed someone to pick up those range balls – how much should I have been paid?

  • Larry Gade June 16, 2014, 8:13 pm

    How many kids did you have?

  • Josh Crutcher June 16, 2014, 8:14 pm

    So pay should be determined on how many kids I have?

  • Larry Gade June 16, 2014, 8:20 pm

    At some point don’t you believe that no matter what bad choices someone(s) (and there are a lot of them) have made, that they deserve to have some kind of life? Should their bad choices be handed down to their children or should all children have an equal opportunity? The only mistake they made was being born into the wrong family. Everything can’t be measured in dollars and cents and if it ever totally comes to that, I’m not sure any of us should look forward to an after life, because it might be a little steamy.

  • Josh Crutcher June 16, 2014, 8:36 pm

    I think if they want some kind of life, they can do it. They just may be starting 5, 10, 20, or 30 years behind. It is never too late to make that decision. Nobody is forcing anyone to do anything… The work to get there is the challenge – no one said it was easy.

  • Tim Crutcher June 16, 2014, 9:33 pm

    Many of the jobs at fast food places can be and have been replaced by technology and machines . Who fills your drink at McDonalds? $15 an hour will end many of these jobs. There used to be at least two employees at every grocery and department store checkout lane. Now there is one that oversees 6-8 self checkout terminals.

  • Tim Crutcher June 16, 2014, 9:42 pm

    I believe we have become a society of entitlements. People get paid what the job they are doing is worth (absent of outside influences) . This generation of everyone gets a trophy regardless of talent or EFFORT has has created people doing menial task expecting high wages. If you want to earn more money, prove to you boss you are worth more.

  • Josh Crutcher June 16, 2014, 9:56 pm

    Larry Gade, I don’t think any choices prevent anyone from having a life… I have made very poor ones myself. I think it is how you respond to those decisions.

  • Tim Crutcher June 16, 2014, 10:13 pm

    Bad choices should not prevent people from advancing, however, they may make it more difficult. Like John Wayne said ” Life is tough, even tougher when your stupid”. I made choices that were not the best and my solution was 60-70 hours of work each week while taking 12-15 hours at ECC. It can be done if people want it.

  • Josh Crutcher June 26, 2014, 8:05 pm

    Financial Nudity: Looking at Others’ Bare Budgets and Net Worth commented on Economic Nudity:

    […] from Consumerism Commentary’s series Naked With Cash is recently divorced earning $120,000/yr as an IT project manager. He is […]

  • Gayle McDanal Norton June 27, 2014, 12:13 am

    I haven’t read all of this, but a couple of comments. If a person has an education and moves to a new field, they do not go in as entry level. I have worked in many different fields and never worked entry level. I did do some internships in college.

    As to value to society…who decides? Sometimes, I believe we place values in the wrong place.

    Got to check my chops. 😉

  • Josh Crutcher June 27, 2014, 12:32 am

    Gayle, you may be the exception. I am running through the list of all my friends, colleagues, etc. and can only think of a few that did not start entry level – this was because they joined a family business. I started at entry level. Twice. Once in marketing and again in accounting. If I wanted to go into investments, I’d start from scratch. The same goes for most sales opportunities.

    If you have 20 years experience in anything but taxes and want to do taxes – guess where you start? You may advance more quickly, but you must learn the basics first… right?

    Who decides? Definitely not the job seeker… In law firms, CPA firm, etc. its about billable hours, effectiveness and efficiency… You can measure how much the contribution is worth…

  • Tabitha S. Metcalf June 27, 2014, 12:55 am

    Between lots of people’s entitlement/trophy mentality, and our government’s “let them eat cake” and make $15 an hour outlook we are running our selves into the ground. I’m not saying that we shouldn’t help people that honestly need help, widows, orphans, the disabled. But as a 20-something who has a college degree, interned in college, been laid off twice, and started my first post-college job making $10 an hour, I don’t have any sympathy for those who don’t see the need to work hard to make more money.

  • Gayle McDanal Norton June 27, 2014, 1:04 am

    Josh, I wonder if it is the current job market? There is a glut of college grads and business can be selective and hire for less money, sort of supply and demand in the marketplace. In other words, college grads are no more valued than the McDonald’s people.

    I am going to read the info and the rest of the conversation, but my thoughts are…the going wages have been stagnant for 30 years when adjusted for inflation. There have been periods of time when the demand was high for workers, but wages have not kept pace. Why not?

    I agree, there were many factory workers who made middle class wages, but if the job they do is necessary for society and the company is making an adequate profit, why is making a decent wage considered being over paid?

    As to today’s workers, are people working in factories in other countries any more educated than American workers? Many of the American workers have years of accrued job knowledge. Now when those jobs come back to America, the jobs are offered at $13 an hour. Are the company profits going down? How does the salary of the CEO and management compare to 15 years ago when adjusted for inflation?

    As to the minimum wage jobs, most of those people do not work fulltime anyway, but Larry is correct, many of those people are not kids because jobs are scarce, in part because corporations have moved overseas. If minimum wage had kept pace with inflation over the past 30 years, what should it be? In Illinois, minimum wage was $8.25 an hour 5 years ago, and it did not cost jobs.

  • Gayle McDanal Norton June 27, 2014, 1:11 am

    Tim, (reading though the comments) why would any person do self-checkout. It takes a worker’s job and saves nothing on the bill. It is just like pumping gas. The companies got us to take over the job so they can make more profit. (And hi! Are you Josh’s dad? If so, you have one smart son. :) )

  • Cory Kaufman June 27, 2014, 1:20 am

    My wife has a masters and just received a entry level job in the pharmaceutical field. More than likely, you will get entry level. The only interviews she ever received was for entry level. And they were in many different jobs

  • Josh Crutcher June 27, 2014, 1:25 am

    Would you pay someone to tie your shoelaces? Would you pay someone to start your car in the morning?

    I’d prefer to go through self checkout because it’s faster. I’d rather pump my own gas because it’s easier.

    I just don’t think the companies had anything to do with it. It just makes more sense

  • Cory Kaufman June 27, 2014, 1:25 am

    And if you keep making bad decisions then why do they deserve the same as someone who makes good decisions. Makes zero sense.

  • Larry Gade June 27, 2014, 1:30 am

    I find it very hard to fathom that you can’t understand that there are differences…huge differences, but with you guys it’s all because someone is not trying. I give up.

  • Gayle McDanal Norton June 27, 2014, 1:35 am

    Josh, you are wrong about the pumping gas and the checkout. It was before your time, but I loved having my gas pumped. They also washed your windows and checked your oil. Why is it easier to check your own groceries? Because there are not enough cashiers?

  • Cory Kaufman June 27, 2014, 1:35 am

    And with you it’s all about giving people everything for nothing. I gave up along time ago

  • Larry Gade June 27, 2014, 1:35 am

    Yeah, never worked a day in my life.

  • Gayle McDanal Norton June 27, 2014, 1:43 am

    Cory, you make my point about jobs. I received an MA, did a fellowship for a governor and was offered an executive director job and a state job answering to a deputy director. I chose which job I wanted in two totally different fields and my degree is history. I think it may very well be the job market. In past years, a pharmaceutical would only have required a BA and sometimes not that. With an MA, there is no reason to have an entry level job except the market allows it. Skills and knowledge are transferrable.

  • Cory Kaufman June 27, 2014, 1:46 am

    I see it as I disprove your point. Lol. I’d say a person with a BA and a masters should be able to find over 25-30k pretty easily. Not the case now.

  • Gayle McDanal Norton June 27, 2014, 1:46 am

    Josh, any thoughts about the questions I posed. I am reading the article now, and was going to mention the BRIC nations prior to reading this, but I was curious about your thoughts.

  • Josh Crutcher June 27, 2014, 1:47 am

    Larry, it has nothing to do with trying. There are things I know I could spend 80 hours a week doing and not accomplish what others do in 40. And vice versa.

    Larry, if I told you I would try unlike any other (and I would) to build you a deck, I can promise you wouldn’t be pleased with the result no matter how hard I tried…

    While people like Tabitha have made all the right moves and are searching for decent work (I started at $10 too -http://economicnudity.com/2014/06/25/tax-foundation-income-and-education-and-econ-nudist-history/) why just give to someone what Tabitha has worked so hard to earn?

  • Cory Kaufman June 27, 2014, 1:47 am

    Didn’t know we were talking about you specifically Larry. I would say all of us on this thread have made a lot of good decisions. Not saying we didn’t make mistakes but we obviously learned from it and improved ourselves.

  • Tim Crutcher June 27, 2014, 1:49 am

    Gayle, I go to the grocery to buy food not to provide jobs. Somewhere along the people have decided that companies exist to provide jobs. They exist to make a profit! I’m do believe the more profitable companies will be the the ones that treat their employees fairly. To me, it’s all about service.

  • Gayle McDanal Norton June 27, 2014, 1:50 am

    But that is my point, Cory. It is because of the glut of workers now. With so many jobs moving overseas, employers have a greater selection of workers, so can hire more educated for less money. It pushes the pay scale down, and keeps wages stagnant. (Globalization) Still, college degrees add monetary value over time, bit I guess it also depends on the cost of the degrees.

  • Josh Crutcher June 27, 2014, 1:50 am

    I’ve been around with pumpers – Swifty’s did in E-town. I’d prefer not to have to tip. I go faster at the grocery. If there is only 1 person in line – I will still beat them out the door…

  • Larry Gade June 27, 2014, 1:51 am

    There were no tips for pumping gas.

  • Gayle McDanal Norton June 27, 2014, 1:51 am

    True tim, but packing your own groceries is not exactly a service and you don’t get a discount for doing the work.

  • Gayle McDanal Norton June 27, 2014, 1:52 am

    No, it was a service provided with no tip expected.

  • Tim Crutcher June 27, 2014, 1:53 am

    It often amazes me how many of the same people that complain about how capitalism is all about corporations making profit,(implying at employee expense) are the same people that complain about their retirement account or 401k are not earning enough.

  • Josh Crutcher June 27, 2014, 1:54 am

    Let me tell you this, the market decided they didn’t want someone pumping… The companies did not make that decision

  • Larry Gade June 27, 2014, 1:54 am

    I think you’re wrong.

  • Gayle McDanal Norton June 27, 2014, 1:56 am

    At any rate, buying groceries does provide jobs, just like what you do for a living is because some person uses what you do. Josh, if there were adequate checkers, someone who does it all the time would be faster than you. It is because they have less workers knowing you will choose the self-check to get out faster. Now those lines backup, too.

  • Josh Crutcher June 27, 2014, 1:56 am

    Gayle, market has changed. PhD’s apply for entry level jobs.

  • Josh Crutcher June 27, 2014, 1:56 am

    I go to self checkout if every line is empty. It is just easier.

  • Emily Mathis Alexander June 27, 2014, 1:57 am

    This is Drew not Emily. So when a person is pumping your gas u think that was free? You don’t think the price of the gas was raised to compensate for his/her wage? Anytime people are doing something you are paying for it.

  • Gayle McDanal Norton June 27, 2014, 1:57 am

    Originally, Larry, they offered cheaper gas to those who pumped their own, until of course people did it.

    Look up the history of Standard Oil and you will understand the manipulation by corporations. People are duped and don’t know it.

  • Larry Gade June 27, 2014, 1:58 am

    And now gas is so much cheaper because we pump ourselves. Geez

  • Larry Gade June 27, 2014, 1:58 am

    You’re right, Gayle, I had forgotten that.

  • Josh Crutcher June 27, 2014, 1:58 am

    Drew, that drove the market and consumers’ decisions.

  • Cory Kaufman June 27, 2014, 1:59 am

    And you’re comparing oil prices from 20 years ago?? Geeez haha

  • Gayle McDanal Norton June 27, 2014, 2:00 am

    My point, Josh. The market has changed because they have a glut of workers, but corporations, CEOs and upper management are not seeing their salaries reduced. The workers are not keeping up with inflation, even when educated.

  • Gayle McDanal Norton June 27, 2014, 2:01 am

    Cory, the history of Standard Oil was much more than 20 years ago, but the strategy does not change.

  • Gayle McDanal Norton June 27, 2014, 2:06 am

    Why do you believe jobs have gone overseas? Better workers with more education?

  • Tim Crutcher June 27, 2014, 2:08 am

    The pumping gas example is bogus to me. People buy from the cheapest station. How much business would a gas station get if they advertzed a price ten cents higher than the competition but said we pay our people more? Also, I know “Big Oil” is a favorite target, but the next time you buy $4.00 gas research how much the Federal and State governments “earn” off of that gallon as compared to the company that drilled the well, transported the crude, refined it into gasoline and delivered it to the station. They usually have a 5-8% profit margin. I’m fine with the taxes because, unlike so many we pay, these are actual user fees.

  • Gayle McDanal Norton June 27, 2014, 2:09 am

    The price difference was minuscule and offered at the same station.

  • Josh Crutcher June 27, 2014, 2:10 am

    Gayle, you are going to have to hang with me as I try to catch up on your comments…

  • Larry Gade June 27, 2014, 2:11 am

    I know most in this crowd will find this hard to believe, but I would gladly pay extra to patronize a business that pays their workers more.

  • Larry Gade June 27, 2014, 2:12 am

    You mean those oil companies that get all those subsidies?

  • Josh Crutcher June 27, 2014, 2:13 am

    Miniscule or not, ANY difference drives the market. My grandmother gets very excited when she finds cheap gas – VERY EXCITED. And there’s an app for that

  • Gayle McDanal Norton June 27, 2014, 2:15 am

    I am well aware of the taxes on gas…18% is federal and I understand Ky has high state taxes but remember back then gas was much cheaper anyway. When I say look up the history of Standard Oil, I am discussing how the company pushed mom and pop stations out of business by undercutting them. Then when they controlled the area, they raised the prices. They controlled the business horizontally and vertically. The practice still exists today as a business model.

  • Cory Kaufman June 27, 2014, 2:16 am

    Whaaaat??? A democrats who doesn’t want to pump his/her own gas??? I’m entitled to have someone pump my gas! Lol

  • Larry Gade June 27, 2014, 2:18 am

    Damn right.

  • Josh Crutcher June 27, 2014, 2:20 am

    I know everything about Standard Oil, Gayle. Business in general was cutthroat. It is inaccurate to use the same labels today as those from the late 1800s and early 1900s. Business is completely different today. Any big corporation would cut lifelines off to acquisition targets… Completely different environment… But glad you have studied it… :)

  • Larry Gade June 27, 2014, 2:21 am

    I call bullshit.

  • Josh Crutcher June 27, 2014, 2:23 am

    Larry, I once thought I would bring peace to the Middle East and found it very necessary to read The Prize, become a Judaism an Islam expert, and find the energy independence cure…

  • Gayle McDanal Norton June 27, 2014, 2:24 am

    No, what I am saying is people pumping their gas cost jobs, and as a result more people needed jobs, which filters up. The reason Drew doesn’t have a job is there are too few jobs and too many workers. It is why people with Ph.Ds are looking at entry level jobs, and why people with a BA cannot get those. Globalization has much to do with it. Even states were sending jobs offshore because they could hire it cheaper. Then we get to the part where companies are not hiring and sitting on their money and guess what productivity has not gone down. Why are we doing more with less people? It is not automation because those jobs are not automated. Then we can look at how the laws have changed and impacted workers. Why are wages stagnant?

  • Gayle McDanal Norton June 27, 2014, 2:25 am

    Josh, so you think business has changed it practice? How about grocery stores and Starbucks?

  • Josh Crutcher June 27, 2014, 2:26 am

    I am getting to why wages are stagnant, hold on’… Too many issues…

  • Gayle McDanal Norton June 27, 2014, 2:27 am

    I suggest if you want to understand the Middle East you read “A Peace to End All Peace.” 20th century foreign and domestic policy was my emphasis , Josh. I have studied and worked in many areas.

  • Larry Gade June 27, 2014, 2:29 am

    So all these educated people that are unable to find jobs? Too bad, so sad? They kind of messed up…wrong major?…aren’t trying hard enough?…makes no difference what holds you back, does it? Like a golfer with the yips, makes no difference why you score badly, does it?

  • Josh Crutcher June 27, 2014, 2:30 am

    I’m comfortable saying that I may have read nearly every scholarly piece on the Middle East at one time

  • Gayle McDanal Norton June 27, 2014, 2:34 am

    So then you know the west screwed up. We have a habit of doing that.

  • Josh Crutcher June 27, 2014, 2:35 am

    Larry, you make choices even in your major. I chose marketing first. I was educated but those skills aren’t as transferable… I felt I needed to acquire more technical training…

  • Larry Gade June 27, 2014, 2:36 am

    So when the computer genius comes up with software that eliminates most of the accountants, you’ve got other skills. Good, had me worried. 😉

  • Larry Gade June 27, 2014, 2:37 am

    You didn’t answer the question.

  • Josh Crutcher June 27, 2014, 2:38 am

    Gayle, I think everyone has made miscalculations. I do not think it is “the west”. I think the conflict is far deeper than most can fathom. How can such deep emotions rest upon actions thousands of years ago….

  • Gayle McDanal Norton June 27, 2014, 2:39 am

    I agree there are some specific skills that must be taught, however, my grandfather was an accountant who did not have a degree. Why do we need one now? Because the laws are so convoluted and favor business and the wealthy.

  • Tim Crutcher June 27, 2014, 2:39 am

    I’m going to call BS on Larry’s comment on subsidies. The tax structure in the US is all about Government control. We have one of the highest corporate tax rates in the world, but to get corporations to invest here our government gives tax breaks (subsidies) but, they always have strings attached. Most all of us commenting on this are receiving or have receives subsidies . By the way, Gayle, Josh is my son and thank you for your kind words.

  • Josh Crutcher June 27, 2014, 2:39 am

    Larry, I don’t believe yips exist. It is an excuse. I have never in my life ever had the yips. This might be the first time I have said the word

  • Josh Crutcher June 27, 2014, 2:42 am

    Larry, you have do what you have to do to survive. I pressure washed for a year. Learned a lot from it. Oh, and I already had my MBA…

  • Gayle McDanal Norton June 27, 2014, 2:44 am

    I agree regarding Sunni and Shia, but the point was, the West arbitrarily partitioned the Middle East, without regard for ethnicity, religious differences and an understanding of the culture.

  • Gayle McDanal Norton June 27, 2014, 2:45 am

    See, Josh, but why with an MA should you need to powerwash? Ridiculous!

  • Gayle McDanal Norton June 27, 2014, 2:48 am

    Tim, you are welcome! We do all receive tax breaks, and the middle class receives more than the poor, but we don’t like to know that. :) But while corporations do have a higher tax rate, what they pay is totally not. Hiring the best corporate lawyers and tax experts gets them around the laws.

  • Josh Crutcher June 27, 2014, 2:49 am

    Because I am not entitled to any job. As Ashton Kutcher said, “I’ve never had a job I am better than.” My parents taught me that too!

  • Larry Gade June 27, 2014, 2:51 am

    If i ever got any, I don’t remember it. And if I got as much as the major oil companies get, $400,000,000.00 a year, I’m sure I would remember that.

  • Gayle McDanal Norton June 27, 2014, 2:51 am

    But you are entitled to work at your capabilities or else why go to college. I can power wash with no degree.

  • Josh Crutcher June 27, 2014, 2:53 am

    Gayle, unfortunately you couldn’t be further from the truth on corporations and taxes… I have a post in the works but I will share a chart.

  • Josh Crutcher June 27, 2014, 2:54 am

    Corporations have been in decline ever since the tax code of 1986…

  • Josh Crutcher June 27, 2014, 2:55 am

    They make up such a small portion of our revenue… I think you give too much weight to their impact

  • Gayle McDanal Norton June 27, 2014, 2:57 am

    But how much of their profits are now off shore!

  • Josh Crutcher June 27, 2014, 2:59 am

    If someone offers you a better deal on a vehicle… Same quality and model… which would you take? This is even related to our job problem…

  • Josh Crutcher June 27, 2014, 3:00 am

    If we raised taxes and said they would be in place for the next 4 years, that would be good for business and for jobs…

  • Tim Crutcher June 27, 2014, 3:02 am

    Larry, I apologize . I had assumed you deducted your home mortgage interest . If we apply the same rules, that is a subsidy. The government gave you a tax break if

  • Josh Crutcher June 27, 2014, 3:06 am

    There is too much uncertainty in this administration… We have raised taxes and forced businesses to purchase healthcare; we have raised the cost of living for individuals… The writing is on the wall and I would the same thing. If I had a large organization to manage through a recession, with increasing costs – uncertainty (risk) is HIGH! Companies went lean quickly. Now you have lean companies that are timid because they are still being threatened from different angles…

    Any consistency would be helpful…

  • Tim Crutcher June 27, 2014, 3:07 am

    The home mortgage deduction and deductions for “Green” improvements are subsidies. The government is rewarding you for doing what they think is best.

  • Gayle McDanal Norton June 27, 2014, 3:09 am

    I buy my car very differently. I go in knowing what car I want, the value of my car, the cost of their car, and what I will trade for. Take it or leave it. I am never desperate when I buy a car. I am willing to pay a fair price, but won’t get gouged playing those games. :) i also buy a high end car and drive the hell out of it. I don’t like consumerism and waste.

  • Gayle McDanal Norton June 27, 2014, 3:10 am

    We also get deductions for children, education, 401Ks, health products and care, and numerous other things.

  • Josh Crutcher June 27, 2014, 3:11 am

    That’s how you should buy a car!

  • Gayle McDanal Norton June 27, 2014, 3:14 am

    Josh, it isn’t just this administration that is uncertain. Bush was certain, but he had two wars unpaid and a stock market crash. It did nothing for business. Even businesses are starting to raise wages on their own because they don’t have consumers.

  • Josh Crutcher June 27, 2014, 3:15 am

    But you cannot argue if I me and my partners stand to earn and additional 6% and we choose to take our business elsewhere…

  • Gayle McDanal Norton June 27, 2014, 3:15 am

    We don’t get a home mortgage deduction either, Larry. We don’t have enough interest.

  • Josh Crutcher June 27, 2014, 3:16 am

    That’s a good thing!

  • Gayle McDanal Norton June 27, 2014, 3:16 am

    Sure I can if they are doing it on the backs of workers and are already earning a fair profit.

  • Tim Crutcher June 27, 2014, 3:19 am

    Gayle you are correct. I’m just saying that these are subsidies and are about controlling behavior. The government is saying spend your money the way we think is best, and we will give you a tax break.

  • Gayle McDanal Norton June 27, 2014, 3:20 am

    Josh, I have been the executive director of more than one 501(c)(3).

  • Josh Crutcher June 27, 2014, 3:21 am

    It’s both sides doing this… and there is absolutely nothing wrong with profit. It’s why we go to work.

    And workers can take their skills and do something else if its unfair. They have a choice… I told Larry if they go to $15 an hour, I will be applying for those same jobs and working on nights and weekends too!

  • Gayle McDanal Norton June 27, 2014, 3:23 am

    To me a subsidy and a tax break are not the same, but yes, the government believes owning a house is good for building wealth. This is a relatively recent advent, post WWII.

  • Josh Crutcher June 27, 2014, 3:25 am

    There are many things I find interesting reflecting on our discussions…

  • Josh Crutcher June 27, 2014, 3:27 am

    Did you know businesses essentially invented employee health insurance and now the gov’t is the “Robin Hood” requiring them to do so?

  • Josh Crutcher June 27, 2014, 3:27 am

    find that ironic…

  • Tim Crutcher June 27, 2014, 3:28 am

    Is buying a Prius , and taking the deduction a subsidy? Is it an effort to control behavior?

  • Gayle McDanal Norton June 27, 2014, 3:28 am

    Workers could choose to go elsewhere if jobs were more plentiful; however jobs aren’t and most people stay put if they have a decent job. I always keep in mind that the sole purpose of a corporation is to make a profit, which is good, but corporations should be reasonable in their expectations. I also go back to the amounts being paid to CEOs and upper management while workers wages are stagnant. .

  • Gayle McDanal Norton June 27, 2014, 3:31 am

    I am not saying government does not try to sway behavior when they believe it benefits society, but no one forces you to buy a Prius.

  • Tim Crutcher June 27, 2014, 3:41 am

    We are not forced to buy the Prius, but we are rewarded for it. My point is that we do not have a capitalist market or freedom to make decisions absent of government influence/control.

  • Josh Crutcher June 27, 2014, 3:44 am

    I perceive bringing CEO compensation into the argument as unfruitful. We are speaking of so few Americans. And most do not make 7 figures… We are talking about as many people that could fit in a small high school gymnasium…

    And real wages are not stagnant… they are growing even though at a crawling pace. But could this possibly be a “wage correction”? We complain about wages and work. Detroit’s demise has much to do with wage overvaluation. Georgetown, KY and Spring Hill, TN’s rise can be attributed to that demise.

    Where guys in Detroit were fulfilling obligations and were eligible to retire before 50 with pension at wages of $50/hr+, there were guys in Georgetown, KY that would love to earn $18/hr. I would think that’s a great deal…

  • Tim Crutcher June 27, 2014, 3:51 am

    I don’t understand the scrutiny of CEO pay. Why is there not the same outrage when the hourly employee buys a concert ticket, movie ticket , or sporting event ticket? In each of these examples they are supporting people making man

  • Tabitha S. Metcalf June 27, 2014, 3:51 am

    The publicly traded company I work for realized that they had a brain drain last fall. They had high turn over as their best people took the great training they received and left for higher paying jobs. They rolled out across the board raises. They didn’t do it to be altruistic… But because it would be more profitable.

  • Tim Crutcher June 27, 2014, 3:53 am

    sorry, continue last post. Supporting people making much more tan CEO’s. What do these people “

  • Gayle McDanal Norton June 27, 2014, 12:05 pm
  • Drew June 30, 2014, 3:36 pm

    Why would we expect a for profit company to exist for any other reason than to make a profit?

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