Two decades of rising wage and household earnings inequality in the world's wealthiest nations make the guiding question of Lane Kenworthy's book both timely and important: “[M]ust we give up on the vision of a dynamic and productive yet relatively egalitarian form of capitalism?” (p. 1). To answer this question, Kenworthy presents a careful comparative analysis of income inequality in the countries of northwestern Europe, North America, and Australia during the 1980s and 1990s. He shows that there is not necessarily a trade-off between equality and income growth, although there may be a trade-off between equality and some categories of employment growth. Hence, he argues that with an updated, pro-employment version of the welfare state, we need not give into growing disparity in advanced capitalist societies. Whether this will be desired by all and achieved remains to be seen; nevertheless, the book is an important antidote to the “there is no alternative” type of thinking that pervades much contemporary discourse on economic globalization.

After brief and highly readable introductory and methods chapters, Kenworthy presents his findings in five tightly argued empirical chapters. In Chapter 3, he shows that while individual and household earnings inequalities have risen everywhere, in contrast to the United States and the United Kingdom, more egalitarian countries, such as Sweden, Finland, Denmark, and Norway, were able to overcome the negative effects of employment loss through government redistribution. Hence, there is nothing inevitable about rising household income inequality, but what does lower inequality imply for economic growth? In addition to national comparisons, in Chapter 4 the author also presents some results comparing U.S. states, and he finds support for his position that the relationship between inequality and growth is theoretically indeterminate. However, his evidence does suggest that there is a positive relationship between employment creation, especially in private-sector consumer service jobs, and inequality (Chapter 5). In Kenworthy's view, this need only be a problem if posttransfer household incomes remain unequally distributed. The experiences of individual countries indicate that several were able to address this problem (Chapter 6). Success stories are not limited to the Nordic countries or even continental Europe, but also include “anglo” countries such as Australia and Canada (Chapter 7).

Data issues are clearly central to debates about inequality, and one particular challenge facing this analysis is the seemingly unlimited number of explanatory variables compared to the very small number of cases. Income data from the Luxembourg Income Study, the study's primary data source, are applicable for only 15 national cases. To overcome this problem, Kenworthy differentiates most variables (e.g., change in employment or income is compared to change in inequality), and he also employs the neat device of running repeated regressions that use all the possible three-variable combinations of independent variables to explain a given dependent variable. This analytical device is indicative of a broader methodological standard that he applies to the evidence. Indeed, one of Kenworthy's major achievements with this book is that he is not blinded by the data. Sure, he expects statistical significance across his repeated regressions, but then he also demands that his findings conform to theoretical predictions and be consistent to a historically and contextually sensitive narrative. As a result, his findings are presented in an accessible and nuanced way, making this a wonderful model for students writing dissertations in economics, sociology, political science, and public policy. Indeed, Egalitarian Capitalism is appropriate for graduate-level courses in several social science disciplines.

That said, I was less convinced by some of the arguments in the policy-oriented concluding Chapter 8. Kenworthy's policy prescriptions boil down to the need for more employment-friendly policies and special attention to equal opportunity in job access. There is much in his list of policy prescriptions to agree with, such as well-targeted active labor market interventions and other supports designed to address the increasing instability of work, as well as improved public child care, schooling, and health care. While all these policies will reduce the cost of employing, somewhat more problematic is the author's proposal for directly reducing wages to spur employment growth in some contexts. This necessarily implies greater individual earnings inequality, which, he argues, can be solved by earnings subsidies or employment-conditional negative taxes, such as the U.S. Earned Income Tax Credit. But at what point does this pro-employment approach toward reducing inequality reach its limits?

First, lowering the cost of employing through transfer policies could have perverse productivity effects at the micro- or firm level by reducing the incentives to train, innovate, and improve workplace relations, thus lowering economic growth in the long run. Second, relying on the welfare state to fill the egalitarian gap resulting from lower wages arguably leaves something of a political deficit. While this problem is shared by all top-down welfare programs, the “low wages and welfare” strategy may be particularly undesirable if it disarms the very constituency for the package of tax policies, active labor market policies, and other measures that the strategy assumes. Third, it is by no means clear whether, and in what sense, this political choice even exists in most contexts. Although Kenworthy does note the effects of deeply ingrained institutions in some countries, such as “pattern” or corporatist wage setting, he rather too quickly dismisses the ideas of institutional complementarity and coherence. There is no reason to think that what might be tried somewhere in the American federal experiment will fit easily elsewhere. Not that there is anything wrong with trying, and this is Kenworthy's vital contribution.