The authors thank Onur Özdemir for research assistance and the two anonymous referees for their comments on an earlier version of this paper. Özgür Orhangazi acknowledges research funding support from a Marie Curie European Reintegration Grant within the 7th European Community Framework Programme (grant no FP7-PEOPLE-2011-CIG: 303981). Mathieu Dufour thanks the Scientific and Technological Research Council of Turkey (TÜBİTAK) for a travel grant through the 2221 Visiting Scientists Fellowship Programme that partly made this joint research possible.
There is a debate regarding the proper measures of productivity and workers’ compensation and thus of the size of the disconnection between the two (for example, Feldstein 2008). Nonetheless, even when factors such as price deflators or inequality are set aside, a sizeable disconnection remains (Pessoa and Van Reenen 2012).
We use the average inflation rate from 2000 to 2007, which was 2.73 percent for the price deflator used on the income series.
‘Options realized’ include salary, bonuses, restricted stock grants, long-term incentive pay-outs, and options exercised, while ‘options granted’ include the same categories, with options granted instead of realized. The measures include the CEOs of the 350 largest firms by sales. The wage measure is the hourly wage of a typical non-supervisory/production worker in the relevant industry. For a more complete discussion of the methodology used by the EPI, see Mishel and Sabadish (2002).
There have also been changes in the wealth inequality (Pfeffer et al. 2013; Wolff 2013). For example, between 2007 and 2011 about one-fourth of families lost more than 75 percent of their wealth and about half lost more than 25 percent of their wealth. According to Pfeffer et al. (2013, p. 650), ‘multivariate longitudinal analyses document that these large relative losses were disproportionally concentrated among lower-income, less educated and minority households.’
Moffitt (2013, p. 143) finds that ‘aggregate per capita expenditures in safety net programs grew significantly, with particular strong growth in the SNAP, EITC, UI, and Medicaid programs.’ However, state and local governments, in many cases, had to make dramatic reductions in their spending as their tax incomes fell. For example, in the case of higher education, Barr and Turner (2013) find that despite federal aid policies becoming more generous, the decline in state budget allocations had a negative effect on colleges and universities in maintaining programming and accommodating student demand.
However, this is not to say that the US government was not subject to similar pressures. Increasing budget deficits, together with the prospective long-term financial problems of Social Security and Medicare programs triggered a debate in the US on the need for fiscal austerity. In Crotty's (2012, p. 79) words, ‘a coalition of the richest and most economically powerful segments of society, conservative politicians who represent their interests and right-wing populist groups like the Tea Party has demanded that deficits be eliminated by severe cuts at all levels of government in spending that either supports the poor and the middle class or funds crucial public investment. It also demands tax cuts for the rich and for business.’
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