It is well known that earnings inequality has been rising in the US and many other countries over the last forty years. What is less well known, is that the great rise in contemporary earnings inequalities is propelled to a large extent by between-workplace wage polarization, whereby some organizations accumulate large resource bases while others fight over the crumbs.
These processes have been described as being propelled by “macro” forces: the financialization of production encouraging externalization, physical and social technologies of surveillance that enable between firm control of production, skill-biased technological change, and market fundamentalism in public policy that permit unfettered firm practices.
However, macro trends are always products of a set of meso-level organizational decisions. It was not disembodied “technology” or “markets” that generated the growth in inequality, but social movements promoting the interests of shareholders over other stakeholders, neoliberal policy orientations in the state, and union-busting consultants that drove these shifts.
Although organizations are central in the processes driving growing earnings inequalities, sociology and economics have largely focused on theories developed to explain individual-level or macro inequalities divorced from organizational contexts. Our new book, Relational Inequalities: An Organizational Approach, explains the rise of earnings inequalities, and other forms of inequality, through an explicitly organizational and relational lens.
When writing this book we had a simple goal – to displace human capital and status attainment theories from the sociological toolbox and install a flexible meso-level theory with ample room for agency and structure. We use ideas from intersectional and critical race theory, classical Marxian and Weberian processes, and contemporary organizational and economic sociology to offer a fundamental social theory about the generic processes that generate inequalities in rewards, resources, and respect.
Here is the breathless version of the heaps of qualitative, quantitative and historical evidence we marshal and the intricate relational theoretical arguments in the book:
Resources, like money, jobs and dignity, are generated in organizations. Actors make claims on those resources. Some people are denied access to organizational resources through processes of social closure. Others appropriate resources based on their ability to exploit weaker actors in interactional and exchange relationships. Actors are more or less powerful in these claims-making processes. Relational power tends to be associated with categorical distinctions such as class, occupation, gender, education, citizenship, race, and the like. Institutions and organizational fields influence, but do not determine, action and opportunities. Rather, actors use cultural and other tools to devise local strategies of action. The powerful tend to win, but not always.
Thus, the great rise in the earnings of the top 1% is propelled by the people who sit on the top of powerful organizations. But it is not merit or markets or technology leading to giant wage gains, as they claim. Instead, it is their relational power in the subset of organizations that have captured vast resources through their control over markets and strategies to externalize risk.
Promoting Declining Inequality
Relational inequality theorizing leads to a series of global goals for challenging inequalities: moving from tribalism to universalism, from hierarchy to citizenship rights, and from markets to dignity. At the center of all three goals are the leveling of categorical distinctions and their associated status and power differentials, and making human dignity the central normative framework through which organizational decisions should be made and policy goals identified.
The relational inequality framework points toward an old scientific truth with profound normative implications: all production is fundamentally relational. It is always socially embedded in the economic relationships within and between firms, not a function of individuals or even firms.
Therefore, there is no scientific boundary at which we can determine who produces or has rights to organizational resources. There are only normative boundaries as to whom we admit within the moral circle of organizational stake-holders and the outsiders we can exploit, exclude, or ignore.
We argue that to enhance universal human dignity we must pursue organizational designs that expand this moral circle.
Expanding this moral circle requires the rejection of the moral valuation of categorical distinctions within organizations such as class, gender, and race. Whether or not workplaces exaggerate or mute categorical distinctions are choices in organizational design. To reduce exploitation, exclusion, and power imbalances requires goals of flatter organizational designs, lower earnings inequalities within organizations, and reduced task segregation between categorically distinct groups. We believe that such goals, when achieved, would also go a long way toward reducing the routine disrespect in interaction associated with categorical distinctions in workplaces.
Creating organizations designed around dignity requires a rejection of market fundamentalism. This notion that markets are the morally as well as economically superior solution to all production and coordination problems has not only justified exploitation of labor, customers, and suppliers in the name of shareholder value, but it has also largely reframed what matters in how we organize economies and organizations.
Rather than maximizing economic growth or private economic returns, our goal should be to create normative expectations and institutional pressures to encourage transactions built on the dignity of every human being. The role of the state, firms, and other organizations should be to promote human well-being and dignity, not shareholders, markets, meritocracy or economic growth.
One plausible solution to market fundamentalism is to weaken the legal and normative boundaries between organizations, enabling actors involved in the process of producing goods and services in one organization to claim the resources that flow out of that firm. Redistribution through taxation on super incomes of both individuals and firms is one recipe.
Or we could shift the legal definition of the firm to include the boundaries of control over production including many more actors – subcontractors, temporary labor suppliers, franchisees, up-stream commodity suppliers. A McDonald franchise would be part of McDonald’s, a sole supplier to Walmart located in Thailand would be part of Walmart, and the entire IT industry would be subsidiaries of Microsoft, Apple, and Google. Thus, we could begin to imagine legitimate claims on the surplus generated by joint production across what are now distinct legal entities.
If these are the goals, in a practical political sense we see two basic avenues to moving toward realizing these goals.
The first is to focus state policy on reshaping the institutional landscape in which organizations operate; replacing tribalism with universalism and market logics with dignity logics. Much progressive politics already focuses on the state and with these goals, but less often centered on targeting organizations specifically.
But, the most effective egalitarian social movements have targeted organizations – firms, schools, churches, sociology departments – in their quest for dignity. The dominant policy recipe of nudging or coercing individuals to make different choices is profoundly mistaken. Legal interventions that move equal opportunity disputes out of firms and into courts are just as flawed. Policies must target the organizations that both generate the opportunities and distribute them.
The second avenue is to directly intervene in organizations, redesigning them in such a way as to replace tribalism with universalism, hierarchy with citizenship and market myths with goals of enhancing human dignity. In this approach, we infect the organizational eco-system with egalitarian organizations until they fully replace the hierarchical, tribalistic, and economistic organizations we have now.
Donald Tomaskovic-Devey and Dustin Avent-Holt. Relational Inequalities: An Organizational Approach. Oxford University Press. 2019. (for 30% off use discount code ASFLYQ6).