Ethics@Work: Mayday for low-wage workers

Adva Center report highlights widening inequalities between employers and employees.

Business ethics 88 (photo credit:)
Business ethics 88
(photo credit: )
Growing income inequality is a worldwide concern. After decades of a growing middle class, with much smaller numbers of very wealthy and very poor citizens at the fringes, the last few decades have seen a shrinking middle class. For example, if we look at Central Bureau of Statistics figures on income distribution, we find that the top 30 percent and the bottom 30% of earners are now farther from the median income than they were in the year 2000; the rich are comparatively richer, the poor comparatively poorer. But this phenomenon is not unique to Israel; it is experienced worldwide, and many different explanations and prescriptions have been suggested. The Adva Center, which advocates "Equality and Social Justice in Israel," just published a new, thoroughly researched report on the division of income. At first glance it seems to be just one more addition to the extensive literature documenting this phenomenon. The headline in The Jerusalem Post article announced: "Wage gap soars despite economic boom." But a careful look at the title shows that authors Shlomo Swirsky and Etti Konor-Attias are actually looking at something completely different: "Workers, employers and the national income pie." The report examines the sectoral distribution of income, and documents that the distribution of income between employers and employees is becoming less equal; employers are getting more of the pie. There is no necessary connection between overall inequality in incomes and inequality between any two sectors. To take an example, suppose 50,000 successful Israeli employees decide tomorrow to quit their jobs and start their own businesses. Unfortunately, they don't find instant riches and find that their incomes are on average reduced. Overall income inequality is reduced, as some of the upper class have reduced income. But the distribution of income between employers and employees has become more skewed; the share of employers will rise markedly since there are more of them. Given a particular overall distribution of income, why does Adva care what sector the earners belong to? I couldn't find an answer to this question in the report, but I believe there is a hint in the release of the report in advance of May Day, the international workers' day: Swirsky and Konor-Attias are not concerned about economic gaps but about class ones. I am guessing that the implication is that the change in income distribution reflects and reinforces a change in the relative influence of two identifiable social classes: the workers and the bosses. While theoretically overall inequality and sectoral distribution (between employers and workers) are unrelated, practically speaking they seem to be highly correlated, and a causal relationship is certainly plausible. The further implication is that since the change in income distribution is correlated with a shift in political power, and not due to impersonal market forces, we are not powerless to reverse the decline in workers' fortunes by reversing the decline in their political influence. Whether this is what Adva intended, I don't think this argument can be totally dismissed. It is true that traditional Marxism put a greatly exaggerated emphasis on class struggle and political factors. Worker solidarity may be fulfilling for some, but ultimately, economic growth and income distribution are constrained by market forces that draw resources to their most efficient uses. It is also tempting to belittle political arguments by calling class distinctions artificial. After all, plenty of working-class people are also employers; the guy who owns the felafel stand is called an employer and the senior hi-tech engineer who makes 10 times as much is an employee. However, traditional neo-liberalism errs in the opposite direction. Impersonal economic forces constrain income distribution, but they do not dictate it; political factors will always play a role. And while we can pretend that we are living in a classless society, the pretense stops in sensitive areas like evaluating a school (or a spouse) for your kids. Effective organization, whether in the workplace or in regional or national politics, can do much to promote better compensation and conditions for workers. Israel's low-wage workers cannot reverse the global trend of increasing income inequality. But if they are more vocal and coordinated in defending their interests, in the workplace and in the voting booth, they will be able to make tangible progress in improving their economic situation.