{"id":23673,"date":"2015-01-14T14:54:32","date_gmt":"2015-01-14T13:54:32","guid":{"rendered":"http:\/\/www.w-t-w.org\/en\/?p=23673"},"modified":"2015-01-14T14:54:32","modified_gmt":"2015-01-14T13:54:32","slug":"pikettys-ripples-and-waves","status":"publish","type":"post","link":"https:\/\/www.w-t-w.org\/en\/pikettys-ripples-and-waves\/","title":{"rendered":"Piketty’s Ripples and Waves?"},"content":{"rendered":"

Jusstin Fox writes:\u00a0 CEO of Aetna Life Insurance\u00a0 Mark T. Bertolini asked executives at his company to read Thomas Piketty\u2019s “Capital in the 21st Century.” Then he announced that the company will raise the wages of its lowest-paid workers to at least $16 an hour and cut their health-care bills<\/p>\n

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One way to look at this is as a reaction to the improving economy —\u00a0and a sign that serious upward wage pressure may finally start showing up in employment statistics.\u00a0 Aetna\u2019s business is becoming more dependent on selling coverage to individuals, meaning customer service has to improve. But there\u2019s also that Piketty thing:<\/p>\n

It\u2019s not just about paying people, it\u2019s about the whole social compact. Why can\u2019t private industry step forward and make the innovative decisions on how to do this?<\/p><\/blockquote>\n

Yeah, why can\u2019t it? The standard answer for quite a while now has been that in a competitive global economy, companies can\u2019t afford to pay workers more than they\u2019re worth.<\/p>\n

Earlier economists such as Adam Smith and David Ricardo depicted the setting of wages as a social decision as much as an economic one. Ricardo believed that the income distribution depended on the \u201chabits and customs of the people.\u201d<\/p>\n

Most likely it\u2019s a mix. Productivity plays an undeniable role, but so do those habits and customs, which can change. The minimum wage research of the past few years indicates ndicate that there\u2019s at least some room on the margin for using non-market means to push incomes upward.<\/p>\n

Then there\u2019s the matter of whether higher wages themselves do economic good. Henry Ford\u2019s 1914 announcement that he was going to double the wages of his assembly line workers is an oft-cited case study. The story goes that he did this so his employees could afford to buy the cars they were making.<\/p>\n

Mainstream economists were never entirely comfortable with this reasoning, but some came up with another justification for what Ford did: the \u201cefficiency wage.\u201d As Daniel Raff and Larry Summers this:
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These theories have in common that over some range a firm can increase its profits by raising the wage it pays its workers to some level above the market-clearing one. A variety of mechanisms, turning on the role wage increases might play in eliciting effort, reducing turnover, attracting better workers, and in improving morale, have been suggested to explain why profits might be an increasing function of wages.<\/p><\/blockquote>\n

The financial crisis and subsequent Great Recession have changed the tone of the discussion somewhat. As CEOs of major corporations go, Bertolini is a little different. He does yoga and believes in alternative medicine. He was the first straight board member of the National Gay and Lesbian Chamber of Commerce. He says things like, \u201cI have enough narcotics in my cabinet at home to put families through college.\u201d Just because he\u2019s going in this direction doesn\u2019t mean his CEO peers will\u00a0follow. Still, it is out of steps like these that big societal shifts are made.<\/p>\n

\"Piketty's<\/a><\/p>\n<\/div>\n<\/article>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Jusstin Fox writes:\u00a0 CEO of Aetna Life Insurance\u00a0 Mark T. Bertolini asked executives at his company to read Thomas Piketty\u2019s “Capital in the 21st Century.” Then he announced that the company will raise the wages of its lowest-paid workers to … Continue reading →<\/span><\/a><\/p>\n","protected":false},"author":22,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"footnotes":""},"categories":[13,71],"tags":[],"class_list":["post-23673","post","type-post","status-publish","format-standard","hentry","category-finance","category-inequality"],"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t