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George Washington on horseback in snow at Valley Forge. (Library of Congress/Library of Congress)
George Washington on horseback in snow at Valley Forge. (Library of Congress/Library of Congress)

Economy Lab Roundup: Founding fathers’ solution to inequality Add to ...

George Washington’s cure for income inequality: Profit sharing

One of the big frustrations about income inequality is that when corporate profits grow, they aren’t shared equally – typical employee sees very little from it, while the people at the top, and big investors, reap most of the rewards. Executive compensation keeps growing way out of proportion to average salaries, and labour’s share of the economy’s total wealth is shrinking. One solution? Give average workers direct ownership in the company and its profits.

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As the Economist magazine reports, a new book called The Citizen’s Share: Putting Ownership Back into Democracy advocates government tax incentives to encourage companies to introduce profit-sharing and stock-ownership programs for their employees, or expand the programs they already have. And before you go screaming “communism!”, the book’s authors (Rutgers University’s Joseph Blasi and Douglas Kruse and Harvard’s Richard Freeman) note that U.S. founding fathers George Washington, Thomas Jefferson and John Adams all believed in labour having an ownership stake in the land. (Washington even gave a tax break to the New England cod fishery in exchange for giving profit-sharing to crew members.) The authors argue that increased ownership and share in profits may be the key to reviving the American middle class.

Robots didn’t steal your money: Study

More on income inequality – there are plenty of places to point fingers, but don’t point at the poor robots.

A paper from the Economic Policy Institute, a U.S. think tank focused on the economic issues of low- and middle-income workers, disputes the theory that technology advances have fuelled income gaps because increasingly technical job-skill requirements have outpaced advances in education to meet them. The logic is that higher skill needs have elevated the demand, and wages, for the most skilled, while leaving the less-skilled behind.

But the report’s authors argue that this theory doesn’t explain U.S. wage patterns for much of the past two decades, when the gaps between low- and middle-income earners was stable and the premium for university-educated workers decelerated, despite an era of rapid technology changes. They conclude that there’s little evidence that computers and robotics are a key culprit in income gaps.

Statscan’s business survey shows stronger jobs trend

Flying a bit under the radar this week (as it often does) was Statistics Canada’s monthly Survey of Employment, Payrolls and Hours (or SEPH, as it’s known in the economic stats biz). The survey gauges Canada’s employment levels using a combination of responses from employers and actual Revenue Canada payroll-deduction data – unlike the better-known monthly Labour Force Survey (LFS), which relies solely on a poll of households. It is considered by many to be a more reliable source of employment trends in the country. And the SEPH is, indeed, telling a different story than the LFS – and a generally brighter one at that.

Yes, the SEPH showed a decline of 30,200 jobs in September, a far cry from the 11,900-job gain ion the LFS for September. (Since then, the LFS, which is considerably more timely than the SEPH, has produced a gain of another 13,200 jobs in October; the next LFS, for November, will come out Dec. 8.) But the downturn came after two huge months for SEPH employment gains, totalling 137,000. By contrast, the LFS showed net job gains of only 19,800 over those two prior months.

National Bank Financial senior economist Matthieu Arseneau wrote in a research note this week that the SEPH’s average monthly job creation for the year to date is 15,000, well above the LFS’s 9,000.

Name ‘Americanization’ gives immigrants a leg up

What has historically been a good way for immigrants to North America to make a better life for themselves and their families? Well, hard work, certainly. Entrepreneurialism, absolutely. But having a Western-sounding name helps, too.

The Freakonomics website points us to a study published by the IZA Institute for the Study of Labor, in Germany, on the labour-market outcomes of immigrants who “Americanized” their names. The researchers found that in the first half of the 20th century, immigrants who adopted a typical American-sounding first name (such as John or William) were more likely to advance in their companies and receive better wage improvements than those who stuck with their old-world first names. Since the middle of the century, it has been more economically beneficial for immigrants to adopt a last name that’s more typically American.

“At a broader level, our results highlight the existence of a trade-off between maintaining individual identity and enhancing labour market success, suggesting that cultural assimilation was instrumental to economic assimilation,” the authors concluded.

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