New research shows that the reality of today’s wage gap is more complicated than the figure often bandied about in Washington—“80 cents to a man’s dollar.” In fact, the gap might actually be much worse, yet much simpler to fix, than we assume.
Digitalization and Disruption: The Rise of Digital Media
While local industry leaders in lm, television and music are still major contributors to the Los Angeles Basin economy, the region’s motion picture and sound recording pro le is evolving beyond traditional movie and television production. Digitization is disrupting almost every aspect of the media and entertainment industry . . . altering nancing and capitalization strategies, and greatly affecting business models, forecasts and industrywide trends . . . a concentrated and specialized digital media industry has emerged, swiftly scaling and changing the entertainment industry in the Los Angeles Basin by blending digitized content and new distribution technologies.
This fast-growing digital media and entertainment industry is characterized by a diverse array of technology and content rms
and includes sectors as assorted as digital advertising, web gaming, interactive media, augmented reality, virtual reality and animation. This blended digital media and entertainment ecosystem combines the creative product with data to drive adoption and respond to shifts in consumer behavior. . .
In the Los Angeles Basin, homegrown digital content rms are ascending as dominant players in digital media, such as Snap Inc., Fullscreen (which was acquired by AT&T and the Chernin Group), Makers Studios (which was acquired by the Walt Disney Company), and AwesomenessTV (which was bought by Dreamworks). Digital content rms are expanding into more traditional forms of entertainment, such as lm and television. Prominent Silicon Valley, Seattle and New York rms such as YouTube, Vice and Buzzfeed
are enlarging their footprint in the region as they shift from being content distributors to content creators. Not only are these new rms competing with traditional content creators, but, in some instances, they are supplanting them in market share and cultural prominence.
Key Findings and Strategies for Reversing Our Shrinking Middle Class
LA County is thriving, but many middle-income jobs have left our region, and have been replaced with lower wage jobs. Real incomes are dropping and housing costs are spiraling. If unchecked, these trends will reduce standards of living for all of us, and put the American Dream out of reach for hundreds of thousands of our neighbors in LA County.
What strategies and actions will enable more Angelenos to live the American Dream of a middle-class lifestyle? Can our Low to Moderate Income (LMI) communities advance, if we better connect our underutilized labor to the innovative industries that drive the regional economy? Experts will discuss the roles of public policy, industry growth, education and the changing skills required by the jobs of the future, as we develop answers.
LAEDC’s Economic Forecast will also provide a valuable look ahead at projections for the national, state and local economy, with insights you can use to inform your decisions.
If these researchers are onto something—namely, that industry concentration dictates wage shares and wage levels—it could have important implications for how we think about antitrust enforcement and other labor policies (such as minimum wage, unionization, and state-based occupational licensing.
Wages are falling when expressed as a percentage of national income. The share of national income captured by labor (“labor share”) has declined sharply since the early 2000s, falling from 66 percent in 2000 to 58 percent in 2017 according to the Federal Reserve Bank of St. Louis. The decline in the labor share over the past 30 years reflects the gap between labor productivity (which has continued to grow) and compensation (which has stagnated).
The relevant economic questions are: What is causing wage growth to be so anemic? And what can be done from a policy perspective to accelerate it?
To say that there is lack of economic support [for the claim that immigrants have caused falling wages] is an understatement. The economic literature reveals that immigration does not reduce wages for native-born workers. Ottaviano and Peri (2012) and Borjas (2014) find that foreign-born workers (that is, earlier immigrants) bore the brunt of the wage impact from immigration, with native-born workers actually experiencing a slight increase in wages owing to immigration.
What is a plausible alternative for stagnating wage growth? Several recent studies have focused on the role of industry concentration. The working theory is that as firms gain control in product markets, the opportunities for job mobility within a given industry are restricted, which permits these firms to exercise buying (or “monopsony”) power in the labor markets.
MIT economist David Autor finds that concentration of sales of the largest firms in an industry (and of employment) has risen from 1982 to 2012 in each of the six major sectors covered by the U.S. economic census. —each percentage point rise in an industry’s concentration index (as measured by the share of shares accruing to the 20 largest firms) predicts a 0.4 percentage point fall in its labor share. In an effort to determine the causes of industry concentration, the authors further find that the fall in labor share is mainly due to a reallocation of labor toward larger and more productive (“superstar”) firms with “lower (and declining) labor shares, rather than due to declining labor shares within most firms.” Why their workers aren’t sharing the productivity gains of these “superstar” firms is an open question that deserves further research.
“The State of Working America, 12th Edition” finds that policy-driven inequality has undercut low- and middle-income workers for past three decades.
Low- and middle-income workers and their families would have had far better income growth over the past 30 years if economic policies had not directed the fruits of economic growth to the highest-income Americans, a new Economic Policy Institute book, “The State of Working America, 12th Edition” finds. For example, had there been no growth in income disparities since 1979, annual income for a middle-income household would have been $88,875 in 2007, $18,897 higher than the $69,978 it actually was. The median household lost wealth between 1983 and 2010 and had just $57,000 in net worth in 2010, rather than the $119,000 it would have had if wealth had grown equally across all households over this period.
“The State of Working America, 12th Edition” explains that economic policies, including policymakers’ actions and failures to act, have undercut the ability of workers to benefit from economic growth in the United States. Its primary findings include:
America’s vast middle class has suffered a “lost decade” and faces the threat of another.
Income and wage inequality have risen sharply over the last 30 years.
Rising inequality is the major cause of wage stagnation for workers and of the failure of low- and middle-income families to appropriately benefit from growth. . . . more
. . . . the massive problem of conventional higher-education institutions that largely operate at a 19th-century pace trying to keep up with the fast-changing demands of 21st-century employers — and an example of how tech companies and some businesses in other industries, impatient with the speed of change, are taking matters into their own hands by designing courses themselves.
. . . . “industry would be very satisfied if higher education was taking care of it . . . I don’t think there’s a desire to get into this space, other than that it’s not.” . . . . While 96 percent of chief academic officers at higher-education institutions say they’re effectively preparing students for work, only 11 percent of business leaders strongly agree, the polling company Gallup found.
. . . . 1.8 million new tech jobs will be created between 2014 and 2024, many of them requiring people with data and computer-science credentials. Retiring baby boomers will leave countless additional positions open. But colleges and universities are turning out only about 28,000 computer-science graduates with bachelor’s and master’s degrees per year, based on the most recent figures from 2015, according to the consulting firm Deloitte.
. . . . ‘We need people with X, Y and Z skills and [colleges are] not providing that.’