income & race

[James Devine <jdevine@xxxxxxxxxxxxxxx>]

Awhile back, Doug Henwood posted the following: >Median incomes of black
households have risen from 58.2% of white ones in 1992 to 63.2% in 1996,
the highest on record. The black poverty rate is also the lowest on
record....  the real income of every quintile of the black income
distribution had real gains between 1989 and 1996, while only the top white
quintile rose (and the bottom four fell). Can anyone explain what's going
on?<

Pen-l has already discussed this, and a lot that was said seemed valid.
Rather than sift though all of that, here's an alternative take on this
issue: is it possible that the low unemployment rates of recent years have
not been a total illusion? Even though the behavior of _inflation_ would
tell us that a 5% unemployment rate now is different from a 5 percent
unemployment rate 20 years ago, labor markets' behavior in many ways are
the same as it was back then. However, the structural differences should
also be noted.

First the similarities: it is quite typical for a business cycle upturn to
help black incomes -- and remember that 1992 was a recession year, with the
official U rate = 7.5%. The U rate equalled 5.3 percent in 1989, which is
higher than current 4.7 percent (for October, 1997). The low unemployment
rates have also been sustained for a few years, which helps blacks, even
the less-skilled ones, break into jobs and earn more regular incomes.
(Similar things happened during US wars, from WW2 to Korea to Vietnam.)

This, along with the incareration rate, might explain falling black poverty
rates and Doug's assertion that "the real income of every quintile of the
black income distribution had real gains between 1989 and 1996, while only
the top white quintile rose..." Most of the quintiles of the black income
distribution correspond to the low end of the white income distribution.

It's at the lowest level of the income distribution where "market forces"
play a bigger role, with employers largely small and competitive and unions
almost non-existent or worthless. This is often termed the "secondary labor
market." Because market forces play a bigger role in this labor-market
segment,
incomes are more likely to rise with falling unemployment.

The first statistic that Doug mentions is for _relative_ incomes. Blacks
can rise relative to whites not only due to their own success but due to
declines in white incomes; a similar thing helps explain the convergence of
male and female incomes during the same period.

I think that one reason why the white male incomes have been stagnant or
falling is the shrinkage of the "primary" labor markets -- the relatively
privileged sector -- which white males dominated during the 1950s, 1960s, &
1970s. The "subordinate primary" labor markets with blue-collar jobs (often
unionized or union-competing) allowing "middle class life-styles" were
under severe attack in the 1980s and that attack continues in a muted form
today. On the other hand, the "independent primary" jobs of the "white
collar middle class" -- bureaucratic line and staff jobs in large corporate
hierarchies -- has been under severe attack in the 1990s in the wave of
"downsizing."  The third part of the "primary sector" is the craft segment
(e.g., construction unions) -- which is suffering from chronic decline
(since the beginning of modern capitalism).

Most of the primary jobs -- i.e., those in the subordinate and independent
primary segments but not the craft segment -- are in what's often called
the "core" of large corporations with relative market power. Many of these
companies have lost their market power (price-setting power) and their
ability to pass the cost of relatively expensive labor onto consumers. This
helps explain the moderation of inflationary tendencies, along with the
attacks on any and all unions. They also lost their ability to plan ahead,
to offer job security to workers in exchange for loyalty to the company.
This helps explain the shrinkage of the primary segments.

I used to think that this might be summarized by the word "globalization."
I'm now leaning toward seeing this process of one in which "the Universal
Market" is emerging (to use Harry Braverman's phrase). Capitalism is making
workers more and more into a bunch of interchangeable parts that are traded
on the market.

What do people think?



in pen-l solidarity,

Jim Devine   jdevine@xxxxxxxxxxxxxxx
http://clawww.lmu.edu/1997F/ECON/jdevine.html
"Segui il tuo corso, e lascia dir le genti." (Go your own way
and let people talk.) -- K. Marx, paraphrasing Dante A.