Home > The Economy > Mind the gap—or else (2 graphs)

Mind the gap—or else (2 graphs)

from David Ruccio


There are lots of different ways of dealing with inequality—specifically, the growing gap between productivity and wages.

One way is to define it away. That’s what the Peterson Institute’s Robert Z. Lawrence attempts to do—first by including the wages of all workers, then by adding in nonwage compensation and using a different measure of prices, and finally by focusing on net output.


Voilà, the gap all but disappears (at least until 2000)!

Or you can argue, as chairman emeritus of Young & Rubicam’s Peter Georgescu does, that the gap is real and something needs to be done about it.

If inequality is not addressed, the income gap will most likely be resolved in one of two ways: by major social unrest or through oppressive taxes, such as the 80 percent tax rate on income over $500,000 suggested by Thomas Piketty, the French economist and author of the best-selling book “Capital in the Twenty-First Century.”

We are creating a caste system from which it’s almost impossible to escape, except for the few with exceptional brains, athletic skills or luck. That’s why I’m scared. We risk losing the capitalist engine that brought us great economic success and our way of life.

Clearly, both Lawrence and Georgescu are afraid of the growing gap between a tiny minority at the top and everyone else. They are worried that it undermines capitalism’s legitimacy, especially the idea of “just deserts.”

But they have two very different ways of responding: one by defining the problem away, the other by trying to convince capitalists to pay workers more and thus to narrow the gap.

And if neither strategy works? Well, as the Campaign for $15 has shown, workers will just to have to take things into their own hands. That’s something neither Lawrence nor Georgescu wants.



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  1. August 12, 2015 at 9:21 pm

    Well I’ve read the paper and I don’t know to laugh or to cry. Of course the last graph must have a fit in Net Output and real product compensation (regarding ALL kind of workers) as it in principle sums up all costs incl. (by excl.) capital costs and all pay outs including wins. Just simple.

  2. August 15, 2015 at 4:07 pm

    Reblogged this on Forwardeconomics.

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