In this chapter, he’s discussing the growth of labor income inequality specifically, leaving aside the question of wealth inequality from other factors (capital investments and inheritance, which he tackles later). He starts by pointing out where economic theoretical models often fail- because they ignore policy-making and other social factors when discussing wages and how they grow over times through factors other than supply and demand in the market-place for labor. Institutions have a role to play in why we saw the gap growing in recent years. On 309-10 he discusses minimum wage stagnation in the US, and how that was a political decision. Even greater access to education does not guarantee that wages will keep pace with costs of living for many workers (although he agrees education is critical, even with it’s limited impact see 313 - 14) … The problem is not just an explosion of technology with education racing to keep up (321). Most of the countries he has sources for saw similar technologies (information technologies in this case) emerge around the same time.
He contrasts the US with the French example, which had a much more active and unified labor union movement in the years after the Second World War that continues to exert political pressure on lawmakers. One argument against a state-enforced minimum wage is that it will cause stagnation in the number of jobs available, which Piketty completely rejects as being true (313).
So, the culprit seems to be in part that the executives are setting their own salaries and writing their own mythologies about how their labor is somehow more unique or not as replicable as your average factory worker (331)… I like this particular quote about it “It maybe be excessive to accuse senior executives of having their “hand in the till” but the metaphor is probably more apt than Adam Smith’s metaphor of the market’s “invisible hand.” In practice, the invisible hand does not exists, anymore than “pure and perfect” competition does, and the market is always embodied in specific institutions such as corporate hierarchies and compensation committees.” (332)
I wonder if one way to deal with this might be to have unions or some other kind of employee representative to be on such committees?