Research on wage inequality has neglected the role consumers play in shaping the wage structure. This paper considers the consequences of the US economy’s increasing reliance on demand from high-income consumers. Unlike the mass consumers that defined the post-WWII US economy, high-income consumers pay a premium for high-quality and high-status products. These distinctive spending patterns mean that high-income consumers can increase segmentation between up-market and down-market producers and generate inequality among up-market producers. Vertical differentiation between employers serving different consumers thus underlies new types of industrial segmentation and dualism. Using input-output tables to link consumer expenditure and wage surveys, I implement variance function regression to find that industries more dependent on high-income consumers have greater wage inequality. This analysis identifies a new structural source of wage inequality not considered in previous research: the increasingly segmented composition of consumer demand reproduces wage inequality.
Amid the long decline of US unions, research on union wage effects has struggled with selection problems and inadequate theory. I draw on the sociology of labor to argue that unions use non-market sources of power to pressure companies into raising wages. This theory of union power implies a new test of union wage effects: does union activism have an effect on wages that is not reducible to workers’ market position? Two institutional determinants of union activity are used to empirically isolate the wage effect of union activism from labor market conditions: increased union revenue from investment shocks and increased union activity leading up to union officer elections. Instrumental variable analysis of panel data from the Department of Labor shows that a 1 percent increase in union spending increases a proxy for union members’ wages between 0.15 percent and 0.30 percent. These wage effects are larger in years of active collective bargaining, and when unions increase spending in ways that could pressure companies. The results indicate that non-market sources of union power can affect workers’ wages and that even in a period of labor weakness unions still play a role in setting wages for their members.
In the following chapter, I first briefly outline the history of economic inequality. Recent research has used new kinds of evidence—from historical social tables and tax data, to skeleton height measurements and village surveys—to sketch the longue durée of economic inequality. This historical trajectory introduces the broad patterns of economic inequality, which sociological research has attempted to explain. Next, I introduce five classic sociological explanations for the persistence of economic inequality: Marxist, Weberian, Veblenian, Functionalist, and institutionalist. These core sociological explanations emphasize different types of inequality (i.e. between big class groups, or as a rank ordering), and examine different mechanisms through which inequality is perpetuated. Overall, they delineate the main sociological approaches to the study of economic inequality. Finally, I use these sociological explanations to frame and summarize research on rising US earnings inequality, which has been the main empirical site of recent attempts to explain variation in economic inequality. I also briefly consider research on the effects of inequality, again in the context of rising US wage inequality. Throughout these last two sections, I emphasize ways that the five core sociological explanations for inequality have shaped recent empirical research. In doing so, I identify the distinctively sociological contributions to the analysis of economic inequality.
Since the 1970s, reduced antitrust enforcement and corporate restructuring have strengthened the power of large corporate buyers over their suppliers. During the same period, wages for U.S. workers have stagnated. Standard theories of wage determination allow bargaining power to affect wages within firms, but assume that competitive pricing allocates resources between different firms. In contrast, theories of economic segmentation and rent-sharing predict that powerful buyers can demand decreases in suppliers’ wages. Panel data on publicly traded companies show that dependence on large buyers decreases suppliers’ wages and accounts for 10% of the decline in wage growth in nonfinancial firms since the 1970s. These negative wage effects are larger when suppliers rely on one rather than multiple large buyers and as suppliers depend on large buyers for a longer time. Instrumental variables analysis of mergers among buyers confirms that wage decreases result from strengthened buyer power. These findings document how networked production grew in tandem with consolidation among large buyers. The spread of unequal bargaining relations between corporate buyers and their suppliers slowed wage growth for workers.
Recent research on rising wage inequality overlooks the organization of tasks into jobs. This study draws on the sociology of work to predict that reallocating tasks across jobs can increase inequality by (1) dispersing tasks into more low-paid jobs or concentrating them into fewer high-paid jobs (dispersal or intensification) and (2) separating out higher- from lower-paid tasks (distillation). Panel models of the earnings effects of task allocation are fit using linked employer-employee data on employees of U.S. labor unions. Counterfactual analysis indicates that equalizing task allocation would reduce inequality by reducing top-end earnings and raising lower-middle earnings. Variance function regression shows that task allocation affects inequality within organizations, even conditional on changes in the price and composition of tasks. These findings demonstrate that classic concerns in the sociology of work should be brought back into the study of inequality.