Dean Baker says that he has no trouble seeing mechanisms by which changing government policy has widened the distribution of income in the past generation:
Beat the Press: Income Inequality: Missing Mechanisms: There has been a raging blog debate, following in the wake of some recent Paul Krugman columns, as to whether the rise in income inequality is due to policy or the natural workings of the economy. While Krugman indicated that he believed the policy view (promising details later), many of the economists weighing in have said that they don't see any policy mechanism(s) that could explain the rise in inequality.
Perhaps I have different eyes (or maybe I don't have sufficient training in economics), but I see the mechanisms almost everywhere. There is a nice example in the news today. A judge ruled that Northwest's flight attendants can't go on strike to oppose the wage cuts that the airline is unilaterally imposing following in the wake of its bankruptcy.
In other words, a U.S. judge is telling workers that they will go to jail if they refuse to work for the wages that Northwest wants to pay them. (I know, I'm skipping some steps here.) Judges don't have to threaten workers with jail for refusing to agree to employers' demands. This is a policy decision.
For those who find the labor-management framework difficult to understand, imagine that Northwest purchased flight attendant services from the Flight Attendant Services Corporation (FASC), which is a corporation wholly owned by the workers it employs. Suppose that FASC tells Northwest that it will not provide services for the lower fee it is now offering. Would any judge threaten FASC with jail if it didn't agree to offer its services on Northwest's terms?
There are many other examples of rulings that have gone against labor in the last quarter century. For practical purposes, it is now legal to fire workers for organizing a union (the penalties are a joke). This is not the whole policy story; I have much more in my book, The Conservative Nanny State. It's short and free (and the summary is even shorter), so you have no excuse not to read it, unless you want to remain as ignorant as an NPR reporter your whole life.
I agree with Dean: this is a bad decision. Judge Marrero is letting Northwest forum shop. That the bankruptcy judge--who knows the case and the issues--refused to issue an injunction is as close as we get in this world to certainty that the injunction should not have been issued. This is a judge who is not doing his job properly.
But in a big country this is a (relatively) little decision. My sense (and it is just a guess) is that declining unionization and union power might account for perhaps a fifth of the widening in income inequality; that reductions in the value of the minimum wage might account for a tenth; and that legal changes that have shifted the balance of power within the corporation toward CEOs might account for another tenth. I have a hard time finding other policy changes that have a big impact--and only a portion of declining unionization and union power is due to changes in government policy since the 1970s.
Northwest Walkout Is Blocked - New York Times: By JOSEPH B. TREASTER and JEFF BAILEY: A federal judge temporarily blocked a potential strike by flight attendants at Northwest Airlines yesterday and urged the company and its workers to resume contract talks.... The ruling, issued by Judge Victor Marrero of United States District Court in New York, was not permanent but it was a big victory for Northwest management. The airline was facing the prospect of random work stoppages across its international network that could have begun as early as 10:01 p.m. Eastern time last night in an effort by flight attendants to disrupt Northwest operations without calling an across-the-board strike.
Judge Marrero, ruling on a motion by Northwest to enjoin the flight attendants from striking, issued an injunction so that he could further study the legal issues involved. He did not indicate how he might eventually rule....
After a bankruptcy judge declined to enjoin a strike, Northwest, which is based in Eagan, Minn., appealed to the United States District Court in Manhattan, where Judge Marrero sits.