Column: When corporations were a source of greater equality

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A new poll shows that 41 percent of U.S. baby boomers stayed with a single employer for 20 years or more. That is something younger generations are far less likely to say, the Associated Press reported Wednesday. Photo by Getty Images

Photo by Getty Images

Editor’s Note: In today’s economy, it’s hard to see how big corporations promote equality. The average CEO-to-worker pay ratio for the top 350 companies, for example, is 276 to 1. But U.S. corporations of the 20th century did offer prosperity, mobility, security and yes, even equality, argues sociologist Gerald Davis. This is the second in a series of excerpts we are publishing from Davis’s new book, “The Vanishing American Corporation: Navigating the Hazards of a New Economy.” For more on the topic, watch this week’s Making Sen$e report below.

— Kristen Doerer, Making Sen$e Editor


The postwar era of corporate dominance corresponded to a period of remarkable economic growth, social mobility and relative income equality in the United States. GDP, productivity and household income grew at a remarkable rate during this period, which is now widely regarded as a golden era for the American economy. It was not just in the U.S.: the period from 1945 to 1975 is called the “glorious thirty” (“les trente glorieuses”) in France, and both Western Europe and East Asia saw similar periods of growing prosperity. But in the U.S. this era is distinctively associated with the corporate economy.

The postwar era of corporate dominance corresponded to a period of remarkable economic growth, social mobility and relative income equality in the United States.

Corporations grew increasingly large and concentrated in assets and employment. Aolf Berle and Gardiner Means’ forecast in their seminal book, “The Modern Corporation and Private Property,” that 200 corporations would control the economy by 1959 turned out not to be entirely accurate, but they got the direction right. Large corporations grew ever larger during the 30 years after World War II, and by 1973, the 25 largest corporations employed the equivalent of nearly 10 percent of the labor force. The following figure shows employment growth among a handful of American corporations during the period from 1950 to 1973. Not all firms grew like this, but enough did to feed a narrative of endless growth. Some of this was “organic” growth: As the population grew and dispersed to suburbs, demand for telephone service, cars and retail also grew. But many firms grew through relentless acquisitions. Although antitrust concerns limited the ability of firms to grow by acquiring competitors or suppliers, many companies like ITT grew by diversifying into any industry where it saw opportunity.

Employment of selected U.S. corporations in thousands, 1950-1973 (Source: Compustat)

Employment of selected U.S. corporations in thousands, 1950-1973. Source: Compustat

At the same time, income inequality dropped to its lowest recorded level in American history, while upward mobility increased. Statistics on household income show that the late 1960s was when the U.S. reached its lowest recorded level of income inequality. Certainly, the U.S. had not turned into Denmark — or even Canada, for that matter — but incomes were more evenly distributed around 1968 than they ever were before or since.

An entry-level job with a major corporation that had a strong commitment to promotion from within was a ticket to the middle class.

It was also a period of employment opportunity. Growing firms with clear job ladders provided a straightforward path to mobility. An entry-level job with a major corporation that had a strong commitment to promotion from within was a ticket to the middle class. Rewards based on seniority, including the pensions and retiree health insurance that grew out of the Treaty of Detroit, made a corporate career a safe bet.

It seems paradoxical to see large corporations as sources of greater equality. What could be more unequal than a giant corporation, with its pyramid-shaped organization chart and executive washrooms? The whole point of “job ladders” is that corporations are full of hierarchical levels to climb up and endless contests for status. Yet corporations, with their detailed job descriptions, career ladders and seniority systems, also managed to limit and rationalize inequality through their centralized personnel systems. Promotion from within meant that salaries were determined not so much by the outside market but by standardized evaluations for what a job was worth.

READ MORE: Column: The rise and fall of the U.S. corporation

Consider ITT, the poster child conglomerate that grew through a voracious series of acquisitions in every industry you could name: hotels, casinos, auto parts manufacturers, copper mines, insurance companies, trade schools, bakeries and more. When it acquired a new company, it sent in its people to impose ITT’s personnel system, spreading the ITT way to dozens of industries. The personnel management systems that spread during the War became more standardized and covered ever more employees. Shielded from market processes, jobs and compensation systems followed bureaucratic rules that limited just how unequal they could get.

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