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Causes of Inequality

July 17th, 2012

Dean Baker
guardian.co.uk, Monday 16 July 2012

[There are] a number of different policies that had the effect of redistributing income upward. For example, exposing manufacturing workers to direct competition with low-paid workers in the developing world, while protecting highly educated professionals (e.g. doctors and lawyers), would be expected to lower the wages of both manufacturing workers and the large number of workers who will compete for jobs with displaced manufacturing workers. …
Central banks that target low inflation even at the cost of higher unemployment will also increase inequality…
And when a government adopts a one-sided approach to enforcing labor laws, so that courts intervene to benefit management and weakens unions, it will reduce workers’ bargaining power. This will mean lower pay for ordinary workers and higher corporate profits and pay for those at the top…The huge paychecks of the Wall Street crew have to come from somewhere and our analysis indicates that it came from those below the 90th percentile in the income distribution…If we are serious about reducing inequality, reining in the financial sector must be a big part of the plan. And, a tax on financial speculation would be a great place to start.

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