The Rise of Income Disparity

Harold Meyerson of The American Prospect has a great new piece up regarding the shrinkage of the middle class over the last two decades.  His first target is the notion among some that technological advances contributed greatly to the growing disparity between the middle and upper class.  By this logic, it was technology that allowed educated workers to be more productive and thusly more valuable than those who worked more labor intensive jobs.  Meyerson notes the fallacy of this argument:

In the 1980s, economic inequality in America soared. Many mainstream economists at the time laid the blame on technological change, which enabled better educated Americans to benefit from productivity gains while less educated Americans lagged behind. As Thomas Lemieux, an economist at the University of British Columbia, argues in a paper ("The Changing Nature of Wage Inequality") issued by the National Bureau of Economic Research last October, that thesis failed to explain why the same rise in inequality wasn't evident in other advanced economies undergoing analogous technological changes.

The kind of disparity we're seeing in the United States seems predominantly an isolated occurrence.  Moreover, I can think of two words that might explain why these gaps became so much greater starting with the 1980s: Ronald Reagan.  His institution of supply side economics, as well as the off handed approach his government took to industry, added greatly to the inequality crisis.  In the 1990s, under Clinton, the disparity between the middle class and the upper class continued to grow whereas the gap between the lower class and middle class held relatively steady.  This suggests stagnation in the incomes of everyone in comparison to the upper class.  Perhaps the most pessimistic aspect of the article is the perceived gap between elite education and those who attend public universities.

American education is no longer the magic carpet to prosperity. Elite education is. As my friend Wally Knox, the former chairman of the Revenue and Taxation Committee of the California State Assembly has noted, higher education today stratifies us more than it equalizes us. The 50 or so elite colleges and universities have not expanded in size over the past half-century. There's been a huge expansion, though, in the number and size of colleges generally. College graduations almost quadrupled between 1960 and 2003. Again, though, the benefits of college accrue chiefly to the graduates of the better schools. In inflation-adjusted dollars, the paychecks of 60 percent of college graduates are lower today than they were in 1960.

College today is only as good as the brand value of the institution you attend.  Meyerson continues his argument, suggesting solutions to this problem of growing disparity.  He suggests first that the government must fill the gaps in employment benefits, which have dwindled with the decline of unions and the rise of health care costs, and now put more pressure on working families than ever before.  Furthermore, he sees that government should play a role in creating new jobs through public works programs.  He also speaks in favor of unions; those very organizations which provided us with the benefits we're now seeing slowly slip away.  The basic thrust is that the government cannot simply wait for the market to set everything right again.  But before we label Meyerson as some radical Socialist, it is important to view the conclusion to his piece:

Capitalism creates prosperity. Governments create the legal and social environments in which prosperity can be broadly shared. By assuming the responsibility for benefit programs employers no longer offer, investing in strategic industries, offering serious vocational education programs, creating "green jobs" and human-service jobs requiring credentialing and offering commensurate pay, and amending labor law so it unambiguously permits workers to join unions, our government can begin the arduous and utterly necessary work of rebuilding the American middle class and setting the nation's economy on a far sounder footing.

It's not the government's job to exercises tight control over the economy, but as we've seen recently between the Enron scandal, the mortgage crisis, or the earlier savings and loan scandals, private industry has not earned the full and complete trust to operate with absolutely no oversight.  The conservatives may position themselves as the realists and deride the left as idealistic dreamers, but history shows that total faith in the market is unfounded and frequently leads to the kinds of chaos we've seen of late.  There is a place for government involvement in the economy, and there are distinct advantages to maintaining a large middle class.  Capitalism is a wonderful thing, but if it fails to provide some measure of equality within its great wealth, then ultimately it fails to serve its true purpose.

The article is filled with plenty more detail about the weaknesses of our current system and is a must read for anyone interested in how we got to where we now are.

On a side note, our site The Left Anchor is conducting an informal poll between the two top Democratic candidates.  So if you have a preference, just scroll down the page a bit and you will see a box on the left hand side where you can make your support known.

Big Blue

Tags: disparity, Economy, equality, Income, Inequality, meyerson, prospect, Reagan (all tags)



'American education is no longer the magic carpet

to prosperity.'

Someone should tell that to Obama advisor Austan Goolsbee.

by fairleft 2008-02-16 08:50AM | 0 recs
Re: The Rise of Income Disparity

This article is wrong.  Blame the lack of competitiveness of the American worker for the predicament of the middle class.  

It began in the 1970's - before Reagan.  One of the recurring themes of Reagan's 2 terms was his inability to cut the US trade deficit with Japan.  Why?  Because Americans realized imports were superior to domestic goods - especially automobiles.  Reagan tried to appeal to patriotism, and advertisers tried to promote "Buy American."  But people knew better.

The American middle class has failed to prosper because it lacks competitive edge.  US manufacturing has steadily declined since the late 1960's because other countries do it (manufacturing) better and cheaper.  America pioneered developments in computers and their application, and this country still dominates information technology services.  But there are other tech-savvy countries like India that are beginning to compete successfully in this field.

I also disagree with the article's views on college education.  Many students graduate with no creativity and little self discipline.  The latest generation has made less use of the greater opportunities they've been given.  We have more college grads in the workforce, but they're just not made of good stuff.  I know that sounds snobby but it's true.  Don't blame the colleges or the universities - blame the students.  

by fromwembleypark 2008-02-16 09:56AM | 0 recs


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