"[5] This trend is one of the main causes of the increase in economic inequality in the US since the mid twentieth century. The person who would in 1950 have been the general manager of the x division of Megacorp is now the founder of the x company, and owns significant equity in it."
What economic evidence is there to support this claim about the causes of economic inequality?
That stood out at me as unlikely as well. The hypothesis is essentially that wealth now captured by company founders, which in a previous era would been captured by their employers, explains the majority of the change in inequality. Essentially, that the main reason for increasing income inequality is that people who would've been salaried career engineers in the past are successful founders today. Some evidence in support of that hypothesis would be interesting. For my own part, I would be surprised if shifts in the share of income taken by W2 engineers vs. tech-company founders have even moved the needle on the overall U.S. economy's Gini index.
Their findings are that labor's share of overall income hasn't declined, but that wages/salaries have gotten much more unequal within the sector of employment-based income. Some of the factors they point to are: a greater polarization along skill lines; a decline in high-wage, skilled blue-collar labor; and a rise in the pay and number of high-end salaried jobs such as investment banking and C-level officers.
The whole essay is rife with upper class Panglossian obliviousness. Right before he talks about economic inequality he says "When I graduated from college in 1986, there were essentially two options: get a job or go to grad school". Only 8% of over-25 Americans have a graduate degree today, and that percentage was even lower 27 years ago. From this view of the world, people going to night school to get their Bachelors don't exist, because these people didn't go to the $40k a year college you went to. For most people in the world, someone at 21 with Bachelors in hand deciding on either grad school or a professional career, is already someone who is living the life of Riley.
There's nothing incorrect in his statement, although it does give an idea of the bubble of the world he lives in. Income inequality clearly all is at the level of VCs and founders in his world - even the upper middle class programming minions don't come into consideration. Income inequality connections clearly do not come to mind in the case of, say, the US army marching into Los Angeles in 1992 to restore order among the poor and working poor there. It's a kind of solipsism you can read about in the unofficial minutes of the councils of the Czar's ministers in 1916. The earthquake in class relations coming is not in minor percentage differences between enormously wealthy VC limited partners and upper middle class founders. It's what happens when the world economy comes to a stop like it did in the late 1920s. We got a small preview of it in 2007 and 2008. In the years and decades ahead, financial shenanigans on Wall Street will eventually lead to an economy that will not start up again, no matter how much priming. THEN is when we will start seeing real shifts in the relations of production.
I think this is a great point. That oblivious bubble takes a bite out of otherwise very insightful words.
And I observe this perspective has spread out among the startup community. It always surprises me that people who are so intelligent in many ways can be so narrow in their social and economic context.
What economic evidence is there to support this claim about the causes of economic inequality?