The growing income gap has become the central issue in American politics.
– “Income Gap is Issue No. 1, Debaters Agree,” Washington Post, December 7, 1995
[C]orporate profits are setting records… [b]ut the real average hourly wage is five percent lower than it was a decade ago.
– Robert Dole
, eventual Republican nominee, New York Times, February 14, 1996
If Americans care about “equal opportunities” and not “equal outcomes,” how did we arrive at a point in the mid-1990s when Republican candidates—including Robert Dole, quoted above, as well as Patrick Buchanan
—were stumping openly about the growing divide in economic fortunes (Ladd and Bowman 1998; Jacoby 1997)? And what happened to the preoccupation with opportunity? In this section, I bring public opinion to bear on these questions. Even though Americans may be more sensitized to issues of inequality now than in the past, both public opinion
data and media coverage
reveal that they were attuned to it in the 1990s as well. As I describe below, a majority of Americans have in fact expressed a desire for less inequality since at least the late 1980s. The preference for a more equitable distribution of income cannot, therefore, be attributed only to recent media and political attention to the topic, as is often assumed.
Proceeding from this baseline, my goal in this section is twofold. In an effort to better understand exactly how the public thinks about inequalities of both outcomes and opportunities, I first provide a brief overview of the best available survey data on attitudes about income inequality
, perceptions of executive and worker pay
and pay gaps
, and beliefs about the role of individual responsibility and structural factors in shaping opportunities to “get ahead” (as the survey questions put it). I also describe the ways in which views about income inequality are interconnected with—rather than counterposed to—views about economic opportunity, as well as the consequences this has for policy preferences. Second, I discuss how, beginning as early as the late 1980s and culminating in the 2012 presidential election, inequality and opportunity became more explicitly interconnected in elite discourses as well, first among journalists and then among politicians. Recalling the second approach introduced above, this has led to a new set of narratives about problems of inequality and opportunity, as well as to a corresponding set of new policy proposals to address such problems.
Before discussing the content of public opinion, however, it is worth saying a few words about the primary source of public opinion data that informs my analyses. The best available information comes from the General Social Survey
. The GSS was devised in the early 1970s to chronicle everything from religious beliefs to family formation practices to priorities for government spending. However, coverage of attitudes concerning inequality and opportunity was thin, and what did exist focused on subjects that were topical at that time, namely poverty and gender and racial inequality (as discussed in the previous section). As a result, the time series of public opinion data reported in this section begins in 1987, when the international counterpart to the GSS, the International Social Survey Program
, introduced its first Social Inequality Module
, which was incorporated into all of the participating country-level surveys. The module was then replicated in 1992, 1996, 2000, 2008, 2010, and 2012. (In 1996, 2008, and 2012, the modules were only partially replicated and only in the U.S.)
It should be underscored that none of the longest running and most respected surveys in the United States or elsewhere have ever contained a detailed battery of relevant questions on a routine basis. This is indicative, I would suggest, of the extent to which these topics constitute a new domain of inquiry, and one that was perhaps so taken for granted that it failed to inspire rigorous investigation until only recently.Footnote 2 In the past decade, however, a number of relevant survey questions have been fielded and I will draw on these in my discussion as well. In particular, wherever possible, I will compare public views to those of economic elites taking part in a representative pilot survey of the top wealth holders in the Chicago area conducted by Benjamin Page and colleagues (the Survey of Economically Successful Americans
, or SESA).Footnote 3 This survey replicated many of the questions on inequality and opportunity found in the GSS.
Public Beliefs About Inequality and Opportunity
To begin with attitudes toward income inequality, Fig. 12.1 plots trends over time in responses to the only three questions about income inequality that have been replicated in each of the survey years mentioned above. The most straightforward of the three questions asks respondents’ feelings as to whether “income differences in America are too large.” This question solicits agreement or strong agreement by a substantial majority of Americans today—roughly two-thirds. Desires for less inequality are also consistently high over time, a trend that supports the claim that I made earlier about the timing and cause of opposition to inequality. American opposition to inequality is not primarily a fleeting consequence of social movement activism or political leadership, as it predates episodes such as the Occupy Wall Street
movement and President Obama’s seizing upon the issue in his 2012 reelection campaign.
Nonetheless, attitudes do shift over time in revealing ways. According to the bottom two lines in Fig. 12.1, a majority of Americans agree or strongly agree with two specific statements about the ill effects of the income gap
. In 2012, between 55 and 65 % of Americans believed that the benefits of inequality are neither widely shared (in response to a question whether “inequality continues to exist because it benefits the rich and powerful”) nor strictly required to create the kinds of incentives that fuel economic growth and prosperity (in response to a question whether “large differences in income are not necessary for prosperity”). These skeptical attitudes toward inequality
exhibit a clear peak in the mid-1990s and again in the most recent survey year of 2012, relative to the base year of 1987 and also relative to a dip in concerns in 2000.Footnote 4 This pattern will help in deciphering how Americans connect perceptions of economic opportunity to perceptions of income inequality, a subject to which I will return at the end of my review of the public opinion data.
Turning to the topic of disparities in pay (rather than income), public opinion polls since at least the 1970s reflect widespread opposition to CEO pay, with well over two-thirds of Americans saying CEOs are overpaid.Footnote 5 Based on data that are of higher quality than polls but more infrequent, Americans are also generally aware of (1) the rise in executive pay, (2) the stagnation of worker pay, and (3) the widening of pay disparities. For instance, the ratio between the median estimate of executive pay and worker pay more than doubles from 13:1 in 2000 to 32:1 in 2010, as shown in Fig. 12.2. Although these ratios significantly understate the dramatic increase in earnings inequality, the median desired ratio is still remarkably low—4:1 in 2000 and 7:1 in 2010—and also dwarfed by the median desired ratio among the top 1 %, which is 50:1. It is therefore unlikely that preferences for less inequality would be substantially altered by a more accurate appraisal of the scale of executive pay, because they are already so low (see McCall and Chin 2013, Table 3, for a more in-depth analysis of this point). Among the general public, knowledge of growing pay inequality is also driven by dramatically higher estimates of executive pay rather than by significantly lower estimates of worker pay. In fact, it is evident to most Americans that worker pay has been largely stagnant for the past couple of decades.
Despite knowledge of rising inequality and desires for a more equitable distribution of both income and earnings, do Americans nevertheless maintain their faith—perhaps blindingly so—in the land of opportunity? On the one hand, as Fig. 12.3 shows, over 90 % of Americans, including the top 1 %, do indeed believe that hard work is essential or very important in getting ahead. This is, predictably, greater than the median among advanced industrial countries, which is nonetheless quite high itself at 73 %. On the other hand, there is a little known countervailing tendency: Americans are generally as or more likely to believe in the role of social factors in getting ahead, such as having well-educated parents, coming from a wealthy family, and knowing the right people. And the American public at large is also at least twice as likely to express these views as the top 1 percenters are. In fact, only 1 percent of the top 1 percenters said that coming from a wealthy family was very important, whereas 31 % of the public did. The American public therefore emerges as significantly more cognizant of social barriers to getting ahead than economic elites do.
Although these particular data also suggest that recognition of barriers to upward mobility is increasing over time (not shown), a few more frequently repeated questions give us greater purchase on this trend. Perhaps the single best question asks whether “people like me and my family have a good chance of improving our standard of living” (see Fig. 12.4). Interestingly, when concerns about inequality are at their highest in the early and mid-1990s, and again in the most recent survey years (see Fig. 12.1), Americans are less likely to agree that their standard of living will improve. For instance, the low points of such agreement are in 1992 and 2012 when 55 % were optimistic about their chances for upward mobility. This is more than 20 percentage points off the high point of optimism in 2000, when 77 % agreed. (Agreement was also high, at 73 %, at the start of our time series in 1987.) Similarly, Gallup began asking a question in 2001 about the degree to which people are satisfied with “the opportunity for a person in this nation to get ahead by working hard.” As shown in Fig. 12.5, they found that satisfaction has been falling ever since this question was launched, from 76 % in 2001 to 53 % in 2012.
The fact that heightened concerns about inequality coincide with greater pessimism about the possibility for upward mobility can be further seen in Fig. 12.6, which helps to illuminate how the various strands of public opinion that we have been discussing fit together.
On the left side, the figure charts the trend in an index of concerns about inequality that includes all three questions in Fig. 12.1 (income differences are too large; inequality continues to exist to benefit the rich and powerful; large income differences are unnecessary for property) scaled from 0 to 1, so that the y-axis indicates the proportionate increase from 1987 in concerns about inequality after controlling for a wide range of factors. When the vertical lines for each year are above the line at 0, it means that concerns are significantly greater than they were in 1987. The red squares show the shift in concerns when not controlling for the trend in concerns about upward mobility from Fig. 12.4; the blue diamonds show the trend when controlling for it.
What we find is that the blue diamonds are almost always below the red squares, indicating that concerns about inequality would not have climbed as much if concerns about upward mobility had not done so. That is because the two trends are correlated: rising concerns about upward mobility help to “explain” rising concerns about inequality. Except for measures of political ideology and partisanship, no other single variable has as large an effect.
And as can be seen with a similar exercise on the right side of chart, the effect of the trend in political orientation is in the opposite direction: concerns about inequality would have risen even more (as shown by the blue triangles above the red squares) had the trend in political orientation not veered in a more conservative direction over this period, inhibiting the rise in concerns about inequality. In other words, concerns about both inequality and opportunity rose substantially over time, in a coordinated fashion, against the tide of the more remarked-upon trend toward political conservatism, which slowed the rise in concerns to only a minor degree relative to the largely unexplained portion of the shifts.
This conclusion is reinforced by an analysis of other trends that fail to coincide with heightened desires for less inequality. Take, for example, two factors often assumed to be associated with rising concerns about inequality: the growing trend in inequality itself and the business cycle. From both Figs. 12.1 and 12.6, we can see that concerns about inequality do not peak during the trough of a business cycle and then taper off; instead, they stabilize or rise during the initial years of recovery from a recession—in the mid-1990s and in 2012. This is the case even though other public opinion data (e.g., from the American National Election Studies) clearly show an upswing in Americans’ assessments of how the national economy is performing during the expansions (and thus Americans are not misrecognizing macroeconomic shifts).Footnote 6 Similarly, concerns about both inequality and opportunities for upward mobility subsided during the boom years of the late 1990s, despite most measures of inequality not falling in lockstep, or even continuing to rise.Footnote 7
Taking these and other considerations into account, I find that the peaks of concern about inequality emerge with perceptions of the negative consequences of inequality—its practical impact on economic opportunity—rather than with perceptions of the level of inequality itself. The fact that perceptions of restricted opportunities endure past the official end of recessions, as is evident in both the early 1990s and late 2000s, suggests that Americans are seeking something more than mere economic growth to alleviate their economic anxieties. During the “jobless” recoveries of late, in which wages have also stagnated, Americans are reacting against patterns of inequitable growth, in which only the top is experiencing gains and the American Dream
of shared prosperity is thrown into question. Put somewhat differently, I am suggesting that if the economy were doing well today for everyone—if all boats were lifted and economic opportunity abounded—concerns about inequality would decline despite what some consider to be stratospheric levels of inequality. In my discussion of media coverage
, political campaigns
, and policy preferences in the next section, I provide additional evidence of this dynamic and further flesh out its details and policy implications.
To sum up, most Americans desire less inequality and have for at least a quarter of a century. Also, by some measures, intolerance of inequality is increasing and is significantly higher today than it was 25 years ago. Regarding matters of opportunity, many Americans recognize that social barriers to opportunity are important, even more so than in similar countries, and much more so than the top 1 percenters do. And, again, by some measures, such perceptions of limited opportunities have increased over the past decade. Lastly, and, most centrally, concerns about restricted opportunities appear to coincide with desires for less inequality. This blending of perceptions of inequalities of opportunity and outcomes recalls the discussion of the middle-ground “equalize outcomes to equalize opportunity” approach at the end of the previous section.
Elite Discourses of Inequality and Opportunity
Although both the content and overall sophistication of public views may be surprising, what is perhaps even more surprising are repeated allusions to the “equalize outcomes to equalize opportunity” approach at several junctures throughout the period of rising inequality by journalists and politicians. In addition to the quotations appearing at the top of this section—pinpointing the central role of inequality in the 1996 presidential election—journalists were linking news about growing economic inequality to the potential eclipse of the American Dream as early as the 1980s. Although these formulations and slogans may not have been as frequent or as well articulated in political platforms as they are today, they nonetheless offer insight into the tacit ways in which Americans, including elites, fuse their practical understandings of opportunity and inequality.
In this section, I first briefly illustrate how this fusion of ideas is depicted in media coverage. For our purposes, the widespread prevalence of this particular framing is less significant than the almost commonsensical appeal of the framing itself across partisan perspectives. Then, for the remainder of the section, I focus on the current political scene, including a discussion of the political and economic strategies for reducing inequality and expanding opportunity that have surfaced in recent political debates and the policy orientation of the public at large.
For close to three decades, editorialists Mortimer Zuckerman
of U.S. News & World Report and Robert Samuelson
of Newsweek have been two of the most stalwart commentators on issues of inequality and opportunity from the liberal and conservative perspectives, respectively. Already in 1988, Zuckerman had written a column in response to a report on inequality released by the Congressional Budget Office
(July 25). Bemoaning the effects of inequality, in which “most of our citizens have not benefitted from recent U.S. prosperity,” Zuckerman related the new developments to the upcoming presidential election, arguing that “the crucial judgment is who can reverse the trends toward inequality and bring more of our people closer to the American dream.” According to Zuckerman, growth was no longer a guarantor of the kinds of economic opportunities Americans had come to expect, and widening inequality was the reason why. Fast-forwarding almost two decades ahead, in a 2006 column titled “Trickle-Up Economics” (October 2), Samuelson similarly castigated the skewed nature of economic growth as “un-American” and a threat to “America’s social compact, which depends on a shared sense of well-being.” As an indication of just how routinely journalists had been covering these issues, Justin Fox
of Time complained in an article written in 2008 that the income gap is “an issue that’s been danced around for too long. It’s time to address it” (May 26).
Thus issue fatigue among journalists had already arrived some six months before Barack Obama’s victory in the presidential election of that year and a full 3½ years before his first major speech on the subject in December 2011—in Osawatamie, Kansas—itself just a few months after the eruption of the Occupy Wall Street movement. The issue had long been percolating in the media as well as in prior electoral campaigns (in the 1990s) by the time it was the focus of a major social movement and then elevated to the highest level of political expression in the words of the president himself.
Despite this, Obama’s emphasis on inequality in the first major domestic policy speech of his 2012 reelection campaign (in Osawatamie), and then again in his 2012 State of the Union address, was not wholeheartedly embraced by independents or pundits and strategists within the wider fold of the Democratic Party. The dispute was nicely encapsulated in an op-ed by the nonpartisan head of the Pew Opinion Research Center
, Andrew Kohut
, who warned that “what the public wants is not a war on the rich but more politics that promote opportunity.” Another analyst argued that “a campaign emphasizing growth and opportunity is more likely to yield a Democratic victory than is a campaign focused on inequality. While the latter will thrill the party’s base, only the former can forge a majority.”Footnote 8 In short, the “equal opportunities” approach was not only very much alive, but it appealed to opinion leaders across the political spectrum, to the center and left as well as to the more predictable right.
Yet, in truth, Obama was careful to embed his comments on inequality within a more expansive rhetoric about the need to repair and rebuild the American Dream. His diagnosis followed in the vein of journalists like Zuckerman and Samuelson, who saw inequality as a barrier to opportunity in the form of shared prosperity and equitable growth. Given the obligation of journalists to have their finger on the pulse of ordinary Americans, this rendering echoed public views, in which heightened concerns about inequality coincided with growing pessimism about the chances for upward mobility (as discussed above). That is, the president’s vision was more consistent with the “equalize outcomes to equalize opportunities” approach, where both inequality and opportunity took center stage, than it was with another approach—an exclusively “equal outcomes” approach—that substituted an emphasis on inequality for one on opportunity, as those reacting against the president’s speeches had claimed. The misinterpretation was understandable, however, in that attention to “equal outcomes” has a venerable history among liberals and still enjoys substantial backing, for example, in frequent calls to increase taxes on the affluent as the centerpiece of an anti-inequality agenda (Piketty 2014).
This brings us to a key question: How do these various approaches translate into policy prescriptions? It is one thing for various publics and leaders to coalesce around the definition of the problem but quite another to find common ground on the solution. After briefly describing the advantages and disadvantages of the policies associated with the more familiar “equal opportunities” and “equal outcomes” approaches, I focus on the policies that have evolved in response to the perspective that, in the public’s mind, I argue, best characterizes our era of rising inequality, that is, the “equalizing outcomes to equalize opportunities” perspective. Although these policies overlap in several respects with those of the other two approaches, they are also venturing into largely uncharted territory.
As should be transparent by now, the key strength of the “equal opportunities” approach is its emphasis on equalizing opportunities, whereas its key weakness is its rejection of any attempt to directly reduce inequalities of outcomes. On the one hand, the prescription of pro-business reforms to accelerate economic growth in conjunction with educational reforms to reward individual responsibility is a winning combination. It reassures the public in its promise to create precisely the kinds of job opportunities required to lift oneself up by the bootstraps to achieve the American Dream of upward mobility, and, in doing so, it harkens back to the Golden Age of postwar prosperity and educational expansion. To the extent that Republicans are more closely identified with this message than Democrats are, they reap the political benefits of an economic opportunity platform (Smith 2007).
On the other hand, in our own post-postwar era, a prescription of economic growth alone does little to correct the skew toward the top in the availability of good employment opportunities. This weakness in the “equal opportunities” approach may become even more salient as household incomes in the middle of the distribution continue their historic slide from peaks at the turn of the twenty-first century. The last business cycle (2000–2007) was the first in which median household income and female earnings both failed to post significant gains (whereas median male earnings stopped growing in the 1970s) (DeNavas-Walt and Proctor 2014). Long the country with the “richest” middle class, the U.S. now lags Canada in median after-tax income levels.Footnote 9
The resulting dynamic could parallel that of the 1960s and 1970s, when anti-discrimination policies were insufficient in reducing inequality in the face of resistance to gender and racial integration by White workers and employers, which then provoked the more proactive approach of “equalizing outcomes to equalize opportunities” (i.e., affirmative action). Indeed, some in the “equal opportunities” camp are afraid that a populist backlash against inequality could usher forth a more drastic leveling of incomes than proactive initiatives. And this has led to a reconsideration of the implicit ban on advocacy of outcomes-based policies, such as raising the minimum wage and the earned income tax credit. To be sure, a resuscitation of the “compassionate conservative” in the present day may entail more attention to equalizing opportunities than equalizing outcomes, but the latter is beginning to be acknowledged in the process.Footnote 10
Although most Democrats endorse an economic growth strategy (there is little reason for anyone not to), and Democratic administrations are in fact more likely to implement policies that deliver middle-income growth, they are more closely identified with the “equal outcomes” than with the “equal opportunities” approach, for the simple reason that they do indeed advocate for more equal outcomes (Bartels 2008; Kelly 2009). As is well known, this approach traditionally focuses on increased taxes on the affluent as the principal method of ameliorating economic hardship and mitigating economic inequality.
On the one hand, the prescription of increased taxes on the wealthy is reassuring to the public in its emphasis on diverting funds from those who do not need them to those who do. On the other hand, there’s a fairly severe transparency problem that handicaps this strategy: exactly how are higher taxes on the rich going to translate into greater educational and job opportunities for the rest of the population? On the basis of what history are Americans to put their trust in taxing the rich as the solution to declining opportunities? While in principle popular support for progressive taxes is often fairly high—above the 50 % mark—such support is fickle in the moment, when it comes to specific pieces of legislation, because the benefits are often not clearly conveyed. As Larry Bartels
has shown, the public will opt for a small tax cut for themselves even if they perceive the well off as receiving an unfair and disproportionate share of the gains from tax-cut legislation, as was the case in 2001 for support of the Bush tax cuts (Bartels 2005; Lupia et al. 2007).
Interestingly, the middle-ground “equalize outcomes to equalize opportunities” approach offers a potential solution to this transparency problem by diverting the emphasis from equalizing outcomes and redirecting it to equalizing opportunities without losing sight of either objective. Again, such a solution was well underway before the Occupy Wall Street movement got off the ground, underscoring its rootedness in local conditions and political orientations. Beginning in the 2000s, for instance, several states passed measures to raise taxes
on high-income households in order to fund popular services, such as education, health care, and public safety. The measures often incorporated an explicit tradeoff between raising taxes—only on the affluent—and funding opportunity-enhancing programs.
In early 2010, to take one example, voters passed a highly contested ballot measure in Oregon by a 54 % majority that, according to the official summary of the measure, would:
Raise taxes on household income at and above $250,000 (and $125,000 for individual filers). Reduce income taxes on unemployment benefits in 2009. Provide funds currently budgeted for education, health care, public safety, other services.
In a similar fashion, the state of California passed Proposition
30 by a 55 % majority in November 2012. The tradeoff was advertised in the very title of the proposition: “Temporary Taxes to Fund Education. Guaranteed Local Public Safety Funding. Initiative Constitutional Amendment.” The temporary nature of the tax hike may be as important as the commitment to funding opportunity-enhancing policies. A similar ballot measure failed in Washington state in part because, it is speculated, the measure left open the possibility that the legislature could vote in the future to increase taxes lower down in the income distribution (Franko et al. 2013). A later and more widely publicized example of an “equalize outcomes to equalize opportunities” approach came with Bill de Blasio’s
successful 2013 mayoral campaign in New York City, the centerpiece of which was a promise to raise income taxes on the wealthy in order to fund universal preschool education.Footnote 11
Although these initiatives sound commonsensical, their novelty should not be underestimated. As far as I am aware, electoral campaigns in recent political history have advocated for progressive taxes (with reticence), and they have advocated for educational reforms (with gusto), but they have not advocated forthrightly for a progressive tax that would be targeted both in terms of who pays it (the affluent) and which programs benefit from it (education). In a more scholarly vein, educational programs have tended to fall outside the purview of conventional welfare state research and the corresponding “equal outcomes” approach, which focus on transfers of income to fund safety net programs.Footnote 12 Nonetheless, education is emerging as a central theme in the everyday politics of redistribution as well as in contemporary research.Footnote 13
Moreover, in some prominent instances, a general call for shoring up educational resources is giving way to a more specific emphasis on creating a more equal educational starting gate for children from diverging socioeconomic backgrounds. Here, politicians are seizing on an academic argument about the negative relationship between income inequality and intergenerational mobility, famously referred to as the Great Gatsby Curve
by President Obama’s former chief of economic advisors, Alan Krueger
(Krueger 2012). In the final section, I will discuss the potential of this strategy further and the scholarly evidence underlying it.
Another emerging prong of the “equalize outcomes to equalize opportunities” approach concerns employment rather than educational opportunities. It too has been missing from the dominant models of income redistribution
because its emphasis is on redistribution in the labor market rather than on redistribution “after the fact” in post-transfer and post-tax income.Footnote 14 Labor market redistribution
simply refers to any action that reduces disparities in pay and earnings in the labor market. Momentum has been building over many years to lift wages at the bottom, for instance, through popular and successful campaigns to raise the minimum wage at the local and state levels, sometimes to a living wage standard. Indeed, in the 2014 midterm elections, one of the most remarked-upon patterns was the simultaneous election of Republican candidates on the one hand and passage of minimum wage increases on the other.Footnote 15 Some other notable developments to augment worker pay and facilitate access to good jobs include fast-food worker strikes and anti-wage-theft, anti-deunionization, anti-Walmart, ban-the-box and paid family leave campaigns; these mostly have occurred at the local and state levels, a theme that characterizes the drive for greater and more equitable spending on education as well (Ingram et al. 2010; Bernhardt 2012; Milkman and Appelbaum 2013).
Finally, in an era of soaring top-end pay and stock market returns, and keeping in mind the public’s desire for radically reduced executive pay, there is the alternative strategy of reducing earnings at the top in the hopes of redistributing the proceeds to the middle and bottom. The most far-reaching examples in recent years come from overseas: the European Union’s 2013 rule to cap banker bonuses at two times salary levels and a binding say-on-executive-pay referendum applying to publicly held companies in Switzerland. The latter was launched in 2008 as a response to excessive executive pay packages at major corporations such as Novartis and was passed by a comfortable margin in 2013. Similar proposals have been floated in Germany and France. Although far weaker and less publicized, the Dodd-Frank Wall Street Reform Act
of 2010 did mandate and finally implement the disclosure of executive pay and executive-to-median pay ratios in publicly held companies. In each of these cases, employers mounted major opposition to the proposed laws and then to the regulatory bodies that oversee their implementation.
Importantly, however, some efforts to curb inequality have emanated from the corporate sector itself. Though still a relatively small-scale movement, a group of entrepreneurs is promoting the establishment of B-Corporations
, which challenge the primacy of shareholder value as the sole responsibility of the corporation and place social as well as profit motives at the heart of their corporate charters. Similarly, the corporate social responsibility movement has been active for decades around issues such as ecological sustainability and equal employment opportunity but is now beginning to organize around the problem of pay inequality. More generally, what is emerging here are various ways to reintroduce “equity norms” directly into an increasingly dominant institution of contemporary society: the corporation (Edmans 2012; King and Pearce 2010). These and other efforts are coalescing around the new concept of “inclusive capitalism” (Freeland 2014a; Summers and Balls 2015).
In sum, although the popular backlash against executive pay may ultimately lead to unintended and counterproductive consequences—such as higher banker base salaries or even executive pay—and may not therefore be ideal from an economist’s perspective, the broader lesson for our purposes is that the political and policy response to rising inequality and declining opportunities has been extended outside the traditional bounds of redistributive politics. The objective in many instances is to intervene in the pay-setting process itself. In this respect, advocates are following in the footsteps of the civil rights movement’s crusade against pay and employment discrimination. The current thrust—to reduce economic inequality as a path to enhanced labor market opportunities—is almost directly analogous to the historic and ongoing fight to reduce racial and gender earnings inequalities as an equal employment opportunity strategy. Both initiatives are forced by circumstances into an “equalize outcomes to equalize opportunities” approach, with an eye trained first and foremost on the prize of equal opportunity.