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« Paradox of Choice | Main | Denial »

Guard Labor: Why is Inequality Bad?

By Chris | February 4, 2010

Inequality is a hot topic these days. But why is inequality undesirable?  Does it just violate commonly held ideals like fairness and equality. Or, does it do more and actually shrink the economic pie?  Economist Sam Bowles argues the latter. The following article describes Bowles’ beef with inequality. (HT Marginal Revolution).

Bowles offers a key reason why [inequality holds us back]. “Inequality breeds conflict, and conflict breeds wasted resources,” he says.

In short, in a very unequal society, the people at the top have to spend a lot of time and energy keeping the lower classes obedient and productive.

Inequality leads to an excess of what Bowles calls “guard labor.” In a 2007 paper on the subject (working paper here), he and co-author Arjun Jayadev, an assistant professor at the University of Massachusetts, make an astonishing claim: Roughly 1 in 4 Americans is employed to keep fellow citizens in line and protect private wealth from would-be Robin Hoods.

The job descriptions of guard labor range from “imposing work discipline”—think of the corporate IT spies who keep desk jockeys from slacking off online—to enforcing laws, like the officers in the Santa Fe Police Department paddy wagon parked outside of Walmart.

The greater the inequalities in a society, the more guard labor it requires, Bowles finds. This holds true among US states, with relatively unequal states like New Mexico employing a greater share of guard labor than relatively egalitarian states like Wisconsin.

The problem, Bowles argues, is that too much guard labor sustains “illegitimate inequalities,” creating a drag on the economy. All of the people in guard labor jobs could be doing something more productive with their time—perhaps starting their own businesses or helping to reduce the US trade deficit with China.

Guard labor has a nice ring to it (maybe one day I’ll invent my own catchy economics term).  But it’s not very meaningful when you consider its largest component is “Supervisory Labor.” See the breakdown here.  We’d still need supervisors if the economy was completely egalitarian. In fact, we’d probably need more supervisors if financial incentives disappeared.

Bowles and Javadev realize this.  The author of the article profiling Bowles overstates his claims.  In their paper, Bowles and Javadev cover their bases.  They admit that it is impossible to establish a causal relationship between inequality and guard labor.  They also note that much of guard labor is the result of the conflicts of interest that cannot be covered in contracts.  Their proposed solution is hardly revolutionary.  “Policies that result in more fully and clearly defined property rights and attenuated conflicts of interest would reduce the cost of institutional reproduction.” Later, however, they insinuate that inequality is responsible for lots of wasteful guard labor.

And, they are right on one account.  An unequal society will require more guard labor than an equal one.  This is exacerbated by racial and class tensions.  I just disagree with Bowles over how best to fix this problem.  Certainly we should work on improving schools in the inner cities to give more kids a fair shot at life.  We could also try to improve opportunities for young black men who are 7 times more likely than their white counterparts to be incarcerated.

However, I don’t think that the rise in inequality in the last 30 years has contributed to more guard labor.  The recent rise in inequality in the United States has been caused by enormous gains at the top while the real income of the middle class has grown much more slowly. People feel the need to protect their possessions when the people around them become poorer.  Not the other way around.  Millionaires who become hundred millionaires don’t radically increase their “guard” spending.

Thus, we shouldn’t expect progressive taxes on the wealth to have a serious impact on “guard labor”.  Transfers to the poor will only help the problem if they have a permanent effect.  Bowles makes some acute observations, but clouds the issue by including supervisors in the same category as security guards.

Topics: Political Science, Economics, Education |

4 Responses to “Guard Labor: Why is Inequality Bad?”

  1. Elwood Anderson Says:
    February 20th, 2010 at 9:17 am

    I seems to me the most destructive aspect of inequality is that goods and services will be provided for the people who have the money to pay for them. If wealth in concentrated in the hands of a few, most of the effort expended in the society will serve those few. If you want a lot of luxury for a few and soup kitchens the rest steep inequality is a way to achieve it. Anyone for pyramids dedicated to Wall Street investment bankers?

  2. Andrew Says:
    March 3rd, 2010 at 12:28 pm

    Your article raises an interesting point: What aspects (if any) of a society should be made equal on an individual level? Is it fair to enact an inheritance tax to redistribute wealth (I despise) or to provide equal per student education funding (I could support)?

    I think the nature of the inequality dispute has largely has to do with one’s stance on the following: Is a society obligated to provide youth with a quasi-equal playing field? While few would argue that it’s a good idea to reward the lazy and incompetent with wealth redistribution, many more would feel sympathy for the inner city student who is highly motivated, but doesn’t have the environmental or academic support to succeed.

    While inequality will always breed resentment, a system that doesn’t offer the same opportunity to develop one’s self (primarily education, for this argument) will cause much more division and frustration in the long run than a system who gives people a fair shot at using and developing their internal abilities.

    Good to see you writing again!

  3. Andy Says:
    May 17th, 2010 at 3:58 am

    It seems that rewarding “the lazy and incompetent with wealth redistribution” should be considered “collateral damage” by those that feel sympathy for the underpriviledged, motivated inner-city students. Efforts to optimize redistribution only to “deserving” recipients becomes more costly than useful. We will never agree on who deserves our sympathy or who deserves to be equal.

    I think you are underestimating the resentment of those from whom wealth is being distributed. Your comment suggests that all of the resentment lies with the disadvantaged. Separating individuals in need into worthy and unworthy fosters prejudice, which hinders the worthy and unworthy alike from a fair game. The point being, the resentment of the advantaged maintains an unlevel playing field.

  4. Krystal Popovic Says:
    September 11th, 2011 at 7:22 am

    Ideal posting!