Organizations and Economic Inequality

2.1 Organizational Size

This is the most common feature of organizations implicated in economic inequality because it is the one most available to researchers. In general, employees are paid more by larger firms – the firm-size wage premium (Hollister 2004; Kalleberg and van Buren 1996). Larger firms also offer better employee benefits like pensions and health-care plans (which employees of smaller firms are more likely to pay themselves), and better opportunities for promotion and thus pay raises (Kalleberg and van Buren 1996), for several reasons. First, larger firms have more vertical differentiation (Blau and Schoenherr 1971), which creates promotion opportunities and thus opportunities for better pay. Second, larger firms are more likely to be unionized; union presence improves benefits and raises wages for their members, who tend to be lower-paid. Finally, larger firms are more visible and more concerned about bad publicity from disgruntled employees (Cobb and Stevens 2017).

In the U.S. and Europe, market concentration has increased in many sectors, concentrating employment in fewer, larger firms (Affeldt et al. 2021; Grullon, Larkin, and Michaely 2019). Research on the U.S. shows that the firm-size wage premium is greater for lower-paid than higher-paid employees, both at the national (Cobb and Lin 2017) and state levels (Cobb and Stevens 2017). Therefore, the more workers who are employed by large firms, the lower income inequality is at the societal level. Correlational evidence shows that this pattern holds in many countries outside the U.S. (Davis and Cobb 2010). The strength of labor unions and government policies governing collective bargaining can diminish this effect. For instance, in countries with centralized (national or sectoral) collective-bargaining agreements, income inequality is lower than in countries with decentralized (firm-level) agreements (Zwyzen 2023). Requiring centralized collective-bargaining arrangements is likely to reduce the firm-size wage premium by leveling wages for many (but not all) jobs. I have not found any research testing this hypothesis, so this is one possible approach for future research by organizational theorists that can enhance existing work.

Size is not the only characteristic of employing organizations that can influence inequality at the organizational, societal, or global level. Organizational age, geographic location (i.e. geographic spread of operations, local norms, local labor-market concentration), industry (growth rate, employee training requirements), interorganizational networks (including relationships with government organizations), and legal structure (private vs. public ownership, for-profit vs. nonprofit, franchisor ownership) may also play important roles. For example, consider interorganizational networks. The more that employing organizations depend on a few buyers or sellers, the less power they have in buyer-supplier relationships and the lower the profits they can earn (Burt 1983). In turn, lower profits limit what employing organizations can pay workers and what benefits they can offer (Benton and Kim 2022). The result is to increase income inequality between firms (those with more vs. less power in buyer-supplier relationships) and at the societal level. To give another example, increasing societal inequality over the past half-century has fostered greater acceptance of unequal pay among higher-income people (Horowitz, Igielnik, and Kochhar 2020), from whose ranks come the executives and managers who set compensation and benefits policies. Organizations imprint on social conditions at founding (Stinchcombe 1965) and their employment relations retain those imprints (Hannan, Burton, and Baron 1996). Therefore, net of firm size, income inequality may be greater in younger firms than their older competitors because the former received the imprint of greater economic inequality, and acceptance of that, than the latter. If so, countries or regions with more older firms may have less income inequality than those with more younger firms. As these examples show, there is ample room for applying organizational theories to study how employing organizations and their environments shape income inequality at the organizational and societal levels.

2.2 Cultural Shifts

A long line of research shows how organizations respond to cultural shifts in their environments (DiMaggio and Powell 1983; Meyer and Rowan 1977). Two related cultural shifts have increased societal inequality: the rise of the shareholder-value logic (for a review, see Fligstein and Goldstein 2022) and financialization (for a review, see Lin and Neely 2020). The shareholder-value logic conceives of corporations as entities that should be managed to increase share prices, in order to maximize their value for shareholders. This logic disdains actions that consider the interests of other corporate stakeholders – employees, local communities, and society at large – if those interests run counter to shareholders’ own. This logic emerged in the late 1970s and became prominent among U.S. publicly traded corporations in the 1980s (Fligstein and Goldstein 2022).

Adoption of the shareholder-value logic by U.S. publicly traded corporations increased inequality within those corporations. They shifted from offering most workers well-paid, stable, and (fairly) secure full-time jobs with good benefits to offering increasing numbers of workers, especially those with little education and few skills, jobs that are poorly paid, insecure, and part-time or temporary, with little or no control over work schedules, and lacking benefits like health insurance and parental leave (Cobb 2015; Fligstein and Shin 2004; Kalleberg 2018). Widespread adoption of this logic led to waves of downsizing, outsourcing, and “delayering” (Fligstein and Shin 2007; Jung 2015; Lazonick and O’Sullivan 2000). In contrast, the shareholder-value logic benefitted executives, who portrayed themselves as acting in shareholders’ interests and increased their own compensation by awarding stock options (Fligstein and Shin 2004; Goldstein 2012). These processes increased inequality within affected firms and in society at large; in addition, downsizing and outsourcing increased between-firm inequality (Tomaskovic-Devey and Melzer 2020).

The shareholder-value logic has spread to many privately held and nonprofit organizations because MBAs run those types of organizations, and because MBA education has long been infused with tenets of this logic (Jung and Shin 2019). Private-equity firms also “injected” the shareholder-value logic into aerospace companies, automobile suppliers, food-processing firms, and newspapers; clinics, hospitals, and physician practices; and for-profit colleges (Appelbaum and Batt 2014; Batt 2018; Eaton 2022). Private-equity firms purchase corporations, partnerships, and family firms; implement shareholder-value structures and strategies like downsizing and outsourcing; and then sell firms by taking them public. These actions amplify the impact of the shareholder-value logic on societal inequality.

The shareholder-value logic has also spread to firms in Europe and Asia, due in part to coercion from U.S.-based institutional investors (Ahmadjian and Robinson 2001; Almond, Edwards, and Clark 2003; Tomaskovic-Devey and Melzer 2020). There is some evidence that adoption of this logic generated similar job degradation and downsizing as in the U.S., especially for middle- and lower-level employees, thus increasing within-firm and societal inequality in those countries (Tomaskovic-Devey and Melzer 2020). But this topic merits further investigation, as some aspects of continental European and Asian countries’ political economies, such as strong social-welfare policies and educational systems that facilitate retraining displaced or under-employed workers, are likely to attenuate the impact of the shareholder-value logic on societal inequality.

Financialization involves the rise of the finance sector in the economy and increased trading in financial markets; for nonfinancial firms, it also involves increased reliance on earning profits through buying and selling financial instruments like stocks, bonds, and derivatives, as well as charging fees associated with creating financial instruments (Krippner 2005).^[2] Financialization has risen around the world since the late 1970s (Epstein 2005; Karwowski 2022; Krippner 2005, 2012]). And despite regulatory reforms aimed at curbing the activities of financial firms in the wake of the Great Recession, financialization has continued apace (Lin and Neely 2020). Financialization is closely related to the shareholder-value logic, which promotes the use of debt financing to motivate executives, thereby “financializing” nonfinancial firms and increasing the importance of financial firms in the economy (Davis and Kim 2015). Financialization, like the shareholder-value logic, has spread across the globe (Darcillon 2015).

Financialization has increased societal inequality through five mechanisms. First and most simply, financial firms, specifically banks and securities firms, pay higher wages than nonfinancial firms (Godechot 2016; Lin and Neely 2020). This relationship became stronger as investment by nonfinancial firms in financial assets increased the share of national income going to finance workers (Godechot 2016; Lin and Neely 2020). Second, the financialization of both financial and nonfinancial firms, in response to the shareholder-value logic, led to skyrocketing executive compensation through the awarding of stock options (Fligstein and Shin 2004; Goldstein 2012). Third, financialization harms lower- and middle-income workers by laying them off (Jung and Lee 2022; Lin 2016; Tomaskovic-Devey and Melzer 2020) and depressing their wages (Darcillon 2015; Tomaskovic-Devey and Melzer 2020). Wages for most non-financial workers drop because their bargaining power is lower when firms depend more for profits on financial products than on traditional goods and services. Fourth, financialization depresses unions because the workers who are downsized are more likely to be unionized (Kollmeyer and Peters 2019; Tomaskovic-Devey and Melzer 2020). All four mechanisms directly increase societal inequality. The fifth mechanism – shareholder profit distributions – is indirect. The financialization of nonfinancial firms raises their stock prices (Lin 2016), increasing the incomes and wealth of higher-income people, who own the vast majority of corporate shares and mutual funds (Federal Reserve of St. Louis 2024). These effects of financialization are stronger in liberal market economies like the U.S. and the U.K., and in other countries with weak labor power like Denmark and Switzerland, than they are in co-ordinated market economies with strong labor protections like Germany and France (Roberts and Kwon 2017).

2.3 Employment Relations

Managers design jobs, hiring and evaluation procedures, promotion ladders, and compensation schemes. They decide who gets which jobs, how much and how employees get paid, and what benefits at what levels they receive. But employment relations have changed over the past half-century, spurred by the spread of the shareholder-value logic and financialization. Many employers adopted market-based practices like dismantling internal labor markets and hiring externally, downsizing, relying on contingent and temporary workers, and outsourcing labor to lower-income countries (for reviews, see Amis, Mair, and Munir 2020; Bapuji, Ertug, and Shaw 2020; Bidwell et al. 2013). Most empirical work has studied the U.S., but there is evidence that these changes have also occurred in Europe and Japan (Ahmadjian and Robinson 2001; DiPrete et al. 2006; Tomaskovic-Devey and Melzer 2020).

In the U.S., temporary and contract workers in low-skill jobs earn less than regular employees, which increases income inequality within employing organizations (Kalleberg 2011, 2018]). The inequality caused by reliance on these nonstandard jobs is accentuated by the fact that workers in these types of job usually lack health-care and pension benefits. Moreover, rising executive compensation has increased executives’ incomes and wealth, dramatically increasing within-organization economic inequality. Applying social-capital theory (Bourdieu 1980; Coleman 1988) reveals that when CEOs are more socially similar to compensation-committee chairs, in terms of educational background, career histories, board memberships, and club affiliations, CEO compensation is higher (Belliveau, O’Reilly, and Wade 1996). Moreover, as CEO status increases, their compensation increases because CEOs use their status to influence compensation-committee chairs – especially when CEOs have higher status. Moreover, high CEO compensation cascades down to other executives, due to CEOs’ susceptibility to norms of fairness (at least within the executive ranks), which amplifies the impact of rising CEO compensation (Wade et al. 2006).

As these examples suggest, research on employment relations by organizational theorists focuses largely on inequality within organizations. Some scholars have argued that we can aggregate from within-organization to societal inequality (Bidwell et al. 2013). But within- and between-firm variation in employment practices and compensation schemes makes this argument deserving of empirical investigation. Consider two seemingly similar employment practices: reliance on part-time and outsourced workers. Relying more on part-time workers increases both within-organization and societal inequality. But whether or not it increases between-organization inequality depends on how widespread this practice is. To determine how many and which employing organizations replace full-time jobs with part-time jobs, we need theories of organizations.

In contrast, when firms outsource routine, poorly paid work like cleaning, data entry, and customer service to contract firms or temporary agencies, what remains are mostly jobs with good compensation and benefits. Jobs in contract firms or temporary agencies pay less than the jobs they replace; they also offer less security and fewer opportunities for advancement (Davis-Blake and Broschak 2009; Kalleberg 2011). Outsourcing is one reason why, in the U.S. and Europe, high-skilled, well-paid jobs for highly-educated workers are becoming more concentrated within subsets of employing organizations, while low-skilled, poorly-paid jobs for less-educated workers are becoming concentrated in other subsets of organizations (Bagger, Sorensen, and Vejlin 2013; Card, Heining, and Kline 2013; Cobb and Stevens 2017; Wilmers and Aeppli 2021). Consolidation of firm type and job quality decreases within-firm inequality and increases both between-firm and societal inequality. Moreover, when jobs are outsourced to subcontractors in countries with lower wage levels, those jobs tend to be low- or medium-wage. As a result, both within-organization inequality and societal inequality decrease. Whether global (between-country) inequality rises depends on how well outsourced jobs pay relative to the jobs that existed in the subcontractor’s country before outsourcing, and whether these jobs are filled by people who could not find paid employment before (i.e. women).

Other scholars have examined societal inequality using administrative data linking employing organizations and their employees. Such data exist for several European countries and, to a lesser extent, for countries in Asia and North America. Analysis of linked employer-employee data across 14 high-income countries shows that over the past quarter-century, most of the increase in societal-level inequality is due to differences in wage rates between rather than within firms (Tomaskovic-Devey et al. 2020). This suggests that research focusing on inequality within firms is missing a huge piece of the puzzle. While helpful, research using linked employer-employee data is still hampered by the facts that these data contain little or no information on the structures, policies, or practices of employing organization, and that they are not available at a granular level for all countries, even in the Global North. So while such studies can suggest that rising between-firm inequality may be due to the concentration of more educated, higher-paid workers in a particular set of firms or to increased outsourcing and use of temporary or contract workers, they cannot prove their case. In addition, they cannot explain why those mediating processes might have arisen in the first place or how to alter them (but see the organizational-theoretic explanation in Sørensen and Sorenson 2007). To generate better explanations, we have to look at the attributes of employing organizations themselves (norms, structures, practices, and scale of operations) and their environments (organizational demographies, cultures, and logics; interorganizational relationships). Three organizational attributes, firms’ adoption of the shareholder-value logic, financialization, and firm size, have already been the objects of study. But they have mostly been used to explain inequality within organizations, rather than at the societal or global level.

2.4 Job Quality

Jobs vary in terms of how much knowledge, education, and skill they require, all of which help determine compensation and conditions of employment. Over the past several decades, “good” jobs for lower- and middle-income workers – secure full-time jobs paying a living wage and offering generous benefits like pensions and health insurance – have disappeared wholesale, especially but not only in the U.S. (Kalleberg 2011, 2018]). Declines in job quality have been driven by changes in employment relations, the decline of unions, and the rise of the shareholder-value logic and financialization. The result is worse compensation and working conditions for most workers, except those at the top, increasing within-firm inequality.

One notable change in job quality is the rise of “gig work.” Driven by advances in information technologies, the rise of gig work has exacerbated the effects of the shareholder-value logic and financialization. Platforms like DoorDash, Lyft, TaskRabbit, Uber, and Upwork refuse to accept formal employer responsibility, pay living wages, or offer standard benefits like pension plans and healthcare (Griesbach et al. 2019). But the impact of gig work on societal inequality is an empirical question; it is likely to depend on the strength of different countries’ social-welfare and educational systems, as well as their approach to regulating gig work. More directly, it is likely to depend on the characteristics of gig-platform firms – an opening for organizational theorists to study this new phenomenon’s connection to income inequality.

2.5 Concluding Thoughts

The question of when and how business firms increase or decrease societal and global inequality clearly merits further study. One way to nail this down is to leverage available data on organizational attributes, policies, and practices (even though those data may not cover all organizations), link those data to measures of causal factors like shareholder value and financialization (and others I have not discussed here), and apply other theories of organizations to craft deeper explanations of inequality. For instance, outsourcing, downsizing, and mergers may be driven as much by isomorphism as by shareholder value, especially in highly uncertain environments (DiMaggio and Powell 1983). Data on compensation, job characteristics, and workplace practices can be extracted from job-search platforms like Glassdoor, BurningGlass, and Indeed. Although those data may not cover all organizations, they may provide insights into sectors with high fractions of professional and technical employees. Another approach is to adapt survey methods to get nationally representative data on firm structures, policies, and practices: place ads on social-media sites like Facebook to attract workers and induce them to fill out surveys on their firms’ practices, then merge other available data on those firms (Schneider and Harknett 2019). With these data, researchers can apply ideas from many different organizational theories, including organizational culture (Schein 1996), internal organizational demography (Baron and Bielby 1980), institutionalization and legitimacy (Meyer and Rowan 1977), isomorphism and diffusion (DiMaggio and Powell 1983), and institutional logics (Friedland and Alford 1991), yielding novel explanations.

3.1 Taxation and Spending

Government tax policies can decrease or increase economic inequality, depending on whether taxes are progressive (burdening higher-income people most) or regressive (burdening lower-income people most). Government spending can also decrease or increase economic inequality, depending on who receives government largesse and how much they receive. Here I focus on some of the more subtle, but still powerful, ways that governments affect inequality through taxation and spending.

In the U.S., there is a “hidden welfare state” (Howard 1997) based on tax expenditures (reductions in tax revenue through tax deductions and exemptions). Tax-related benefits explicitly intended to relieve the suffering of the poor, such as tax refunds like the Earned Income Credit for lower-income people, are dwarfed by tax-related benefits for higher-income people, such as income-tax deductions for home-mortgage interest and property taxes. These benefits redistribute wealth toward higher-income people because they are far more likely to own homes. The evidence is stark: in 2022, households in the top quintile for earnings received 76.5 % of tax-deduction credits for home-mortgage interest, compared to 0.1 % for the bottom quintile, while households in the top quintile received 47.4 % of tax-deduction credits for property taxes, compared to 0.2 % for the bottom quintile (Urban Institute 2024). A third tax policy that primarily benefits higher-income people is the income-tax exemption for employer-sponsored pension plans. In 2022, households in the top quintile received 59.8 % of tax-deduction credits for pension plans, compared to 0.4 % for those in the bottom quintile (Urban Institute 2024).

Another subtle way tax policies contribute to inequality is through policy “drift” (Hacker and Pierson 2010). For example, consider the general partners of U.S. private-equity firms and hedge funds, whose earnings are labeled “carried interest” and taxed at the capital-gains rate (currently up to 23.8 %) rather than the much higher income-tax rate (currently up to 37 %) (Fleischer 2008). This benefit for people with extremely high incomes (a typical general partner in these firms earns over $2 million per year) is inscribed in government policies written in the early twentieth century that covered oil- and gas-exploration projects by treating the gains and losses of investors and explorers alike. Lobbying has prevented these outdated policies from being revised, despite extensive criticism (Mernit 2016).

Tax revenues and expenditures can be affected indirectly through budgeting processes that increase or reduce spending for tax authorities. For example, the U.S. Internal Revenue Service (IRS) has faced decades of funding cuts (Center on Budget and Policy Priorities 2018; IRS 2021), which have forced workforce reductions (especially in enforcement staff), reduced employee training, and delayed upgrades to information-technology systems. One consequence is fewer audits and therefore increased tax avoidance, especially for top income earners (Johnston 2003) and business corporations (Nessa et al. 2016), whose owners are predominately higher-income individuals. Thus IRS budget cuts indirectly increase societal inequality.

3.2 Beyond Taxation: Military Benefits

Many government agencies and policies beyond those directly involved in taxation also affect inequality. One prominent example involves the military. Consider the GI Bill, which gave U.S. veterans access to excellent unemployment benefits, funding for vocational training and higher education, and low-interest loans to buy homes, farms, and businesses. Almost 60 % of veterans received $20 weekly “readjustment allowances” for up to a year while they searched for work, coupled with job counseling and placement services (Altschuler and Blumin 2009).^[3] By 1947, veterans constituted almost half of the college population – a sharp contrast to the elites who attended college before the GI Bill (Mettler 2005). Veterans from lower-income families benefited most from the GI Bill’s access to higher education. Perhaps even more important was access to vocational training; one-third of veterans took advantage of this, three-quarters of whom would not otherwise have been able to afford it (Altschuler and Blumin 2009; Mettler 2005). Loan guarantees for starting small businesses and purchasing farms were used by very few veterans, but many used loan guarantees for home mortgages (Altschuler and Blumin 2009). Through access to unemployment insurance, higher education, job training, and bank loans, the GI Bill gave veterans a leg up on the social-mobility ladder, thereby helping to dramatically reduce economic inequality at the societal level.

Yet the GI Bill was not universally beneficial. Although the original bill was written to be race-neutral, in practice it was designed to accommodate racism (Katznelson 2005). Veterans’ benefits were managed by local bureaucrats and businesspeople, who denied black veterans admission to colleges and universities, job-training programs, and business, farm, and home loans (Agbai 2022; Katznelson 2005). It is not surprising, then, that back veterans received substantially less support from the GI Bill than their white counterparts. This was compounded by the effects of racially unequal primary and secondary educational systems, which produced black veterans who were less prepared than their white counterparts to attend college, less likely to attend college, and more likely to attend vocational training programs (Mettler 2005; Wilson 1994). Vocational training certainly improved black veterans’ socioeconomic status, but not as much as college education would have.

Although the provisions of the GI Bill ended in 1956, it was succeeded by a series of similar bills that were less influenced by racial discrimination. Today, U.S. military members and veterans can purchase homes with favorable interest rates through the Veterans Administration (VA), which eliminates the need for large down-payments. After the draft was abolished in 1973, the fraction of enlistees from poorer families increased substantially. Enlistment provided these men and women with opportunities to earn stable incomes with generous education, tax, and health benefits; to develop new skills; and to forge social networks that could help drive upward mobility after discharge (Greenberg et al. 2022). However, the effects of later GI Bills depend on whether enlistees served in war zones; if they did, they were more likely to be psychologically traumatized and less likely to move up the economic ladder (Prigerson, Maciejewski, and Rosenheck 2002; Savoca and Rosenheck 2000; but see Vogt et al. 2004).

3.3 Beyond Taxation: Government Policies That Affect Workers and Businesses

In the U.S., a host of federal and state policies affect workers and the organizations they work for. Political scientists have found that collectively, changes in these policies or “drift” in their effects have worsened economic inequality in the U.S. over the past half century (Hacker and Pierson 2010; Mishel and Bevins 2021). The most powerful factors have been:

1. monetary policies focused more on keeping inflation in check than reducing unemployment, which benefit those with net assets (richer people) over those with net liabilities (poorer people),

2. judicial decisions eroding collective bargaining and supporting anti-union policies,

3. policies facilitating globalization and offshoring many jobs to lower-income countries, and

4. weakening labor standards like declining minimum-wage levels (due in large part to lack of inflation adjustments), actively reduced overtime protections, and enfeebled workplace safety standards.

While political scientists have demonstrated these effects of government policies on societal inequality, organizational theorists could deepen this line of inquiry by applying theories of organizational structure, dynamics, and environments. Doing so would generate new insights into how the goals, structures, everyday operations, and cultures of government bureaus, and their relations with business organizations, affect inequality. For example, resource-dependence theory (Pfeffer and Salancik 1978) can help explain weakening labor standards. The argument is simple: The costs of running for office have increased dramatically. Politicians have responded by raising more money from businesspeople – wealthy ones, who tend to lean conservative on economic issues (Gilens 2009; Page, Bartels, and Seawright 2013). Dependence on political donations from wealthy businesspeople makes elected officials more likely to vote in favor of business-friendly laws (Page, Bartels, and Seawright 2013).

Another source of resource dependence between business and government that shapes societal inequality concerns the careers of politicians and bureaucrats, who often pass through a “revolving door” between government and industry (Etzion and Davis 2008; Hillman and Hitt 1999). This interchange, which happens in many countries around the world, including Japan (Johnson 1974) and France (Eymeri-Douzans 2012), creates cozy relationships that favor business interests over worker interests. Much work on this topic focuses on the consequences of business-government ties for firms, rather than for society at large. So there is ample room to use resource-dependence theory to explain how the revolving door support weakens labor standards, thus increasing societal inequality.

Institutional theory (Meyer and Rowan 1977) can also be used to explain how government organizations shape societal inequality. Most prominently, institutional theory has been harnessed to explain why courts judging compliance with affirmative-action and equal-opportunity (AA/EEO) laws have come to approve of corporate-designed policies, practices, and structures (Edelman 2016) that are often largely symbolic. The mere existence of things like personnel manuals, diversity-training programs, and formal grievance procedures often fails to dispel long-standing patterns of discrimination against women and ethno-racial minorities (Dobbin and Kalev 2021), but they have come to be accepted by the courts as compliant with AA/EEO law (Edelman 2016), “inoculating” firms from punishment. The end result is persistent – even increased – inequality within employing organizations that are subject to AA and EEO regulations. Organizational theorists could build on this work to demonstrate the impact on societal-level economic inequality. For instance, the large firms that are subject to AA and EEO regulations tend to be role models for other firms because they are more visible and perceived as successful (Haveman 1993), so acceptance of symbolic compliance with AA and EEO regulations may spill over to firms not covered by those rules, thereby increasing societal inequality.

3.4 Concluding Thoughts

My discussion covered only a limited number of ways that government organizations affect society. It focused mostly on the U.S., whose political-economic system is different along multiple dimensions from that of many other countries (Hall and Soskice 2001; Whitley 2007; Witt et al. 2018). For example, the effects of government on inequality are likely to be very different in co-ordinated market economies like Germany because they have industrial-relations systems (workers’ councils) that institutionalize the power of labor and educational systems (strong vocational (re)training institutions) that help displaced workers regain their footing after layoffs. But even within co-ordinated market economies, the strength of labor’s voice in policy-making varies both across countries and over time, depending on economic, political, and cultural factors. In particular, the strength of leftist political parties, which is positively associated with the strength of tax and welfare policies that reduce societal inequality (Bradley et al. 2003; Brady and Leicht 2008), has varied over time. So I urge scholars studying other countries to apply organizational theory to explain the impact of government organizations, including political parties, on societal inequality.

4.1 Concluding Thoughts

Increased profits through increased efficiency and organizational learning and through upgrading of products can reduce global inequality. But whether these organizational learning and upgrading pathways to higher profits are open to firms in lower-income countries depends on the bargaining power of firms in higher-income countries. And whether the increased profits accrued through organizational learning and upgrading translate to higher incomes for workers depends on the strength of lower-income countries’ labor rights. Both pathways also depend on the degree to which the multiparty international agreements that govern global production chains are explicitly designed to reduce inequality of opportunity (for firms in lower-income countries) and income inequality (for workers).