Productive Companies Include Workers on Their Board

Interview

Since the late 1970s (coinciding with the rise of neoliberalism) wages have stagnated while executive pay keeps rising. This has led to inequality being one of the largest issues facing companies and countries in the 21st century. Accordingly, people sick of neoliberalism have been looking into ways to address inequality and the subsequent economic stagnation. One solution is to have workers sit on the board of their employer. This results in better treatment of the workforce while providing more opportunity for growth in efficiencies within the company.

Research has found that the setup reduces worker turnover, boosts salaries and productivity, and supports income equity. Shareholder returns do suffer slightly, but researchers largely agree that tilting the flow of revenue back toward workers is a good thing.

It stands to reason that the concept holds a great deal of sway over the American public. The gulf between CEO and shareholder earnings and that of employees is often as extreme as 25 to one. Wages for regular workers have held largely stagnant over the last three decades, as executive salaries have ballooned. Bringing actual employees to the table where these decisions are made could serve to flatten the cliff between management and workers.

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Replace GDP with Inclusive Development Index

economic chart

Economic influencers and generally super-rich have occupied Davos, Switzerland this week to discuss how to get wealthier. They also discuss global issues that impact more than just their own wealth. Unsurprisingly interest in climate change and inequality during the Davos meeting increases every year. This year the host of the event, the World Economic Forum (WEF), presented an alternative to the stale measurement of Gross Domestic Product (GDP) to assess how well countries are performing. They call it the inclusive development index which takes into consideration income inequality.

The WEF proposes a measure of its own, dubbed the “inclusive development index.” While it takes into account growth, as measured using GDP per capita, employment, and productivity, it also incorporates several other metrics, including gauges of poverty, life expectancy, public debt, median income, wealth inequality and carbon intensity. The index also considers investments in human capital, the depletion of natural resources, and damage caused by pollution.

This is the second year WEF has published the Inclusive Development Index, and the second time Norway has topped the list for advanced economies, scoring highly on all indicators except wealth inequality. Norway’s high rankings on everything from median income and public debt to pollution, suggest that it will be difficult to fulfill Donald Trump’s desire to entice more Norwegians away from their homeland to the US, which ranked 23rd.

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Lower Murder Rates by Rising Equality

books

The for most part murder rates have been dropping around the world, which in itself is good news, yet we can do better. New research is concluding that inequality rates are a major factor in murders, particularly in the USA. This means that by making the world better be reducing inequality we can also reduce murder rates. Inequality is a big issue for our times and this is even more evidence that we need to do everything in our power to reduce poverty.

The connection is so strong that, according to the World Bank, a simple measure of inequality predicts about half of the variance in murder rates between American states and between countries around the world. When inequality is high and strips large numbers of men of the usual markers of status – like a good job and the ability to support a family – matters of respect and disrespect loom disproportionately.

Inequality predicts homicide rates “better than any other variable”, says Martin Daly, professor emeritus of psychology and neuroscience at McMaster University in Ontario and author of Killing the Competition: Economic Inequality and Homicide.

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Thanks to Delaney!

Take a Moment and Really Think about Unions

2017 has been anything but a successful year for unions. For a multitude of reasons unions have a bad reputation, although it’s thanks to unions that we have labour rights and weekends. Unions are really good at helping individuals deal with institutions that want to exploit their work; and history has proven this time and time again. So why all the hate to unions? It comes from boomers and earlier generations making unions the scapegoat for problems that unions didn’t cause in the first place. Now that inequality is on the rise the trend is reversing.

Vice recently published that unions are cool again and it might have to do with the fact that millennials are facing precarious employment with low wages. Yes, unions are good to fight inequality and we in North America should rethink how we talk about groups of workers uniting against exploitation.

Union members may have a good understanding of those values and the benefits they receive through collective bargaining, but what about those who aren’t in a union?

One piece of good news for unions is the striking disconnect between generations in how they are viewed—a poll in 2015 showed that 57 percent of millennials think of unions positively, versus only 41 percent of baby boomers. Maybe that’s because memories of unions as corrupt are finally fading. Maybe young people are more open to left-wing politics. Or, it could be that, in today’s era of income stagnation and freelance gigs replacing careers with benefits, millennials recognize that they may need to band together in order to secure a piece of the economic pie.

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Using Math to Solve for Inequality

Inequality has been increasing globally for years, and developed nations have seen inequality rise in rates comparable to the start of the great depression. This situation is understandably problematic and worrisome. Accordingly, a lot of thinkers have looked into the problem, most solutions come down to some level of redistribution of wealth. The New England Complex Systems Institute has used a complex math approach to conclude that tax cuts will only make the gap between the rich and poor worse. The solution is, indeed, wealth redistribution.

Bar-Yam and his colleagues’ new research shows that a purely monetary solution to the US economy’s current imbalance is insufficient. Bar-Yam likened this to trying to drive a car by focusing only on the gas and brake pedals, and ignoring the steering wheel. In addition to interest rate regulation, Bar-Yam’s research points to a transfer of wealth to the less wealthy sectors of society as the most effective way to rebalance the consumption and production cycles.

This conclusion is based on response theory, a way of looking at complex systems by changing the environmental conditions to see how the system responds. Bar-Yam and his colleagues analyzed historical data to create models that showed how the US economy responds when the distribution of wealth between the production and consumption cycles are altered. Their models demonstrated that the Trump Administration’s current approach to economic growth—cutting government spending while slashing tax rates for the rich—is misguided.

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