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30 Comp. Lab. L. & Pol'y J. 17 (2008-2009)
Finance and Labor: Perspectives on Risk, Inequality, and Democracy

handle is hein.journals/cllpj30 and id is 19 raw text is: FINANCE AND LABOR: PERSPECTIVES ON RISK, INEQUALITY, AND DEMOCRACY Sanford M. Jacobyt We live in an era of financial development. Since 1980, capital markets have expanded around the world; capital shuttles the globe instantaneously. Shareholder concerns drive executive decision making and compensation, while the fluctuations of stock markets are a source of public anxiety. So are the financial scandals that have regularly occurred since 1980: junk bonds in the late 1980s; accounting and stock options in the early 2000s; and debt securitization today. We also live in an era of rising income inequality and employment risk. The gaps between top and bottom incomes and between top and middle incomes have widened since 1980. Greater risk takes various forms, such as wage and employment volatility and the shift from employers to employees of responsibility for occupational pensions. There is an enormous literature on financial development as there is on inequality and risk. But relatively few studies consider the intersection of these phenomena. Standard explanations for rising inequality-skill-biased technological change and trade-explain only 30% of the variation in aggregate inequality. What else matters? We argue here that an omitted factor is financial development.' This study explores the relationship between financial markets and labor markets along three dimensions: contemporary, historical, and comparative. For the world's industrialized nations, we find that financial development waxes and wanes in line with top income I Howard Noble Professor of Management, Public Policy, & History, UCLA. Thanks to J.R. DeShazo, Stanley Engerman, Steve Foresti, Dana Frank, Mark Garmaise, Teresa Ghilarducci, John Logan, James Livingston, Adair Morse, David Montgomery, Paul Osterman, Grace Palladino, Peter Rappoport, Hugh Rockoff, Dani Rodrik, Emmanuel Saez, Richard Sylla, Ryan Utsumi, Fred Whittlesey, Robert Zieger, and various interviewees. The usual disclaimer applies. I am grateful for support from the Price Center at the UCLA Anderson School and from the Institute for Technology, Enterprise, and Competitiveness at Doshisha University. This paper is dedicated to Lloyd Ulman: scholar, teacher, mensch. 1. IMF, WORLD ECONOMIC OUTLOOK: GLOBALIZATION AND INEQUALITY 48 (Washington, D.C. 2007).

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