Income Distribution, Bargaining Power, and Structural Change in Developed Economies

Abstract

This article discusses trends in employment and income distribution in developed economies over the past two decades. Business strategy in the neoliberal era, focused on outsourcing and the relocation of production facilities both domestically and abroad, was partly a response to new technologies, but it was also a response to new opportunities opened up by political developments, such as the collapse of the Soviet Union. In the eyes of capital, these transformations rendered unnecessary several key institutions of postwar capitalism, including not only labor laws and low unemployment levels but also large factories and vertical production systems.

These changes have made it easier for corporations to segment the workforce into well-paid employees with benefits and low-wage workers with few substantive connections to their employers. The impact of such segmentation on working class cohesion has been a major triumph for capital in the neoliberal era.

The result has been an expansion of precarious employment in services without social protection or job mobility. A high incidence of working poor, always a structural feature of underdeveloped countries, has become a standard feature of industrialized economies as well.

Keywords:

• inequality
• unemployment
• income distribution
• bargaining power

JEL Classification Codes:

• D33
• J21
• J30
• J51
• J60

Notes

1 By this time, business’s fear of socialism had subsided. The decline of socialism’s prestige within the European Left, a turning point for the triumph of Neoliberalism, intensified with the disappearance of the Soviet Union.

2 Such as employment growth and the average duration of unemployment for out-of-work laborers.

3 Life expectancy, it is worth recalling, declined in the United States in all three years between 2015 and 2017, largely due to an increase in what have become known as “deaths of despair.”

Additional information

Notes on contributors

Carlos Aguiar de Medeiros

Carlos Aguiar de Medeiros is a Full Professor at the Instituto de Economia, Universidade Federal do Rio de Janeiro in Brazil. Nicholas Trebat is a professor at the Instituto de Economia, Universidade Federal do Rio de Janeiro in Brazil.

Nicholas Trebat

Carlos Aguiar de Medeiros is a Full Professor at the Instituto de Economia, Universidade Federal do Rio de Janeiro in Brazil. Nicholas Trebat is a professor at the Instituto de Economia, Universidade Federal do Rio de Janeiro in Brazil.