JUS494 Week one

 Crystina Riffel

August 31, 2008

JUS494

week one

 

 

This week’s discussion covered topics of income inequality. It has been argued that skilled and unskilled labor, international competition (globalization), location, and the increased use of technology are contributing factors to income equality.  The drop in unions is also another contributing factor.

 Since the 1970s, the U.S. experienced large inequality rates.  It has the most unequal income and wage distributions of any high-income nation.  Some scholars say technology is a huge factor in the growing gap between the rich and poor.  Technological change favors more skilled workers, replaces tasks by the unskilled and increases the demand for skills (Acemoglu, 2003). 

Another major economic development of the past 30 years is the increased globalization of production, and greater trade between the United States and less developed nations.  In Daron Acemoglu’s article, Technology and Inequality, it is suggested that globalization and increased trade might be responsible for the rise in U.S. inequality.  Trade and globalization induce further skill-biased technological change (Acemoglu, 2003). 

A factor besides technological change is the change in social norms pertaining to inequality and fairness.  In recent years, it has become much more acceptable for CEOs to be paid much higher than production workers.  Increases in inequality might affect labor market institutions and political preferences about redistribution.  It may also make it harder for unions to survive.  Labor market institutions may have a large role in reducing inequality.  They will do so by encouraging technical change to be less skill-biased.