The Great Debate

I enjoyed reading Reuters’ textured survey of the nature of inequality in America, and how government shapes it, shrinking the gaps between us through some of its actions and widening them through others. One comes away from the series with an appreciation for the complex blend of factors — federal policy, technology, unevenness of educational opportunity, the evolution of the market — that has helped propel some of us to where we are today, while failing to lift others.

High and rising inequality is more tolerable, of course, if everyone is getting ahead.  And it is less troubling if mobility up and down the ladder is free and easy — in particular if the children of those at the bottom can readily climb upwards, and if the children of those at the top do not remain there as a birthright.  But neither of these conditions inheres strongly in the United States today.  Over the past decade or more, median incomes have been stagnant. And intergenerational mobility in modern America is actually lower than it is in Europe, notwithstanding America’s reputation as the land of opportunity.

The Reuters series touches briefly on the growing bifurcation of family culture in the United States. Increasingly, college graduates marry each other, pool their relatively high incomes, and, in a variety of ways, push their children ahead. Lower-skilled, lower-income Americans lead less secure lives, and — partly as a result — they marry less and less. In a variety of ways, their children fall behind.

This cultural bifurcation bears closer scrutiny. College graduates make up only about a third of the adult population.  Within the other two-thirds, as the sociologist W. Brad Wilcox has noted, single parenthood and other signs of familial disarray are increasing rapidly. In the 1970s, the cultural habits and family structures of high school graduates closely resembled those of college graduates. Today, they more closely resemble those of high school dropouts.

The decline of blue-collar work has been particularly hard on men without a college degree, who have seen their wages and job opportunities shrink steadily. Men with only a high school diploma have seen their earnings, adjusted for inflation, shrink by a quarter since 1969, according to analysis by the economists Michael Greenstone and Adam Looney. Many of these men have dropped out of the workforce altogether: In 1967, 97 percent of prime-age men with only a high school degree were working; in 2010, just 76 percent were. These shifts have surely played a role in the decline of marriage in the working class, and increasingly the middle class — and in the rise of educational and developmental obstacles facing working- and middle-class children.

Mark Twain labeled the late 19th century the Gilded Age – its glittering surface masking the rot within. This term applies today for the same reasons: The rich get richer; most everyone else gets poorer. And the public thinks corruption rules.

New technologies similarly transformed the economy in that era and boosted productivity even as life for many Americans grew worse. Bloated tycoons? Desperate workers? A threatened middle class? Poverty amid the sweeping progress? Check, check, check and check.

But the silver lining of our current Gilded Age redux is that we left this stunning income inequality behind once. We can do it again. Americans eventually escaped the Gilded Age because they also made it a period of reform that ushered in the Progressive Era.

What do we mean by “inequality,” and why exactly is it bad for American democracy? Are we discussing inequality of wages within a given firm or industry? Or inequality in household income — i.e., the difference between the poor and the middle class, or between the rich and everyone else? What about political inequality — is it a cause or an effect of economic inequality?

These are not idle questions, and to contemplate even incomplete answers appears, on the basis of these two books, to reveal a kind of knowledge inequality. Unless you’ve got a PhD in economics or political science and what Princeton University political scientist Martin Gilens calls “a virtual army of research assistants,” there’s not much chance that you’re going to reach airtight answers on your own.

Gilens and James K. Galbraith are among the few experts who’ve been working on the subject for more than a decade. Their conclusions reinforce the fears of those of us who’ve suspected that inequality is a blight on American society. Indeed, the damage to democratic values is not in some distant dystopian future: Gilens states plainly that the relationship between the policy desires of the wealthiest 10 percent of the population and actual federal public policy over recent decades “often corresponded more closely to a plutocracy than to a democracy.”

Retail is considered one of the bright spots in the American economy, one of only six job categories projected to grow nationally through 2018. But a survey released this week makes clear that many of these are jobs in name only, offering poverty-level wages, highly restricted access to benefits, part-time work when full-time is desired, and a workforce so cowed that it routinely accepts working conditions that make work-life balance, or the chance to upgrade skills and move into better-paid work elsewhere, all but impossible.

The survey, conducted by Retail Action Project, a New York City-based workers’ advocacy group, offers frank data from 436 workers in 230 stores across the city’s five boroughs, from the luxury purveyors of Fifth Avenue to discount outlets in the Bronx. With 242,000 retail workers in Manhattan alone, the data – the first ever gathered directly from these workers – offers a telling and sobering look at this important industry.

The report’s highlights:

The median wage in New York is $9.50 an hour, 52 percent lower than the citywide average for all industries. If associates in one of the nation’s costliest cities can’t even earn a living wage, who can? Black and Latino workers surveyed are more likely to be hired part-time and given worse schedules than their coworkers. Based on average wages and hours worked per week, white workers’ income is 12 percent higher than that of their black colleagues. Just over half of workers surveyed earn less than $10 an hour. But more than three-quarters of female Latino workers – 77 percent – fall beneath that threshold. While 54 percent of white workers received a raise or promotion after six months on the job, only 39 percent of black workers and 28 percent of Latino workers did.

The irony of retail work for many of these employees is that they can’t afford to buy much of what they’re selling. When I worked as an associate for 27 months at The North Face, a $30 hat, even with an employee discount, cost more than an hour of my labor.

Listening to a newly populist President Obama or to Mitt Romney, who touts his CEO past at every turn, it is tempting to imagine a 2012 election that unfolds as textbooks imagine, with Republicans speaking for business and Democrats standing up for the little guy. Don’t be fooled. A more accurate reading of the contest features two elite candidates who represent different wings of the 1 Percent – a group increasingly divided over economics and the role of government.

Look closely at Obama’s rhetoric and you see that he’s not channeling Occupy Wall Street as much as a pragmatic tax-and-invest liberalism. Obama speaks for highly educated, affluent Americans who want government to do more, not less, on a number of fronts – like education, infrastructure, scientific research and clean energy. These folks don’t envy Europe; they envy China, which is deploying a muscular statism to compete economically and dominate the future.

Yes, Obama has made some strong statements lately about inequality and raising taxes on rich people. But most of this goes over just fine in Malibu or Manhattan. Many of the rich are ready to pay higher taxes – with polls showing, for instance, that a majority of millionaires support the Buffett Tax. And many agree that inequality has gone too far, seeing the growing wealth divide as a threat to America’s economic dynamism and social cohesion. The things that liberal rich people don’t like – unions, protectionism, and regulation, etc. – Obama doesn’t like much either.

The following is an excerpt from a speech Alan Krueger, chairman of President Obama’s Council of Economic Advisers, gave at the Center for American Progress on Thursday. The full text is available here.

Although I have done much research on inequality, I used to have an aversion to using the term. Indeed, the Wall Street Journal ran an article in the mid-1990s that noted that I prefer to use the term “dispersion.” But the rise in income dispersion – along so many dimensions – has gotten to be so high, that I now think that inequality is a more appropriate term.

President Obama summarized the rise of inequality very succinctly in his Osawatomie, Kansas speech, when he said, “over the last few decades, the rungs on the ladder of opportunity have grown farther and farther apart, and the middle class has shrunk.”

MILWAUKEE -- As Washington and Madison fiddle, this city’s middle class is in slow free fall.

First, the numbers. From 1970 to 2007, the percentage of families in the Milwaukee metropolitan area that were middle class declined from 37 to 24 percent, according to a new analysis by the Southeastern Wisconsin Regional Planning Commission.

(Click on the photo above for a slideshow) During the same period, the proportion of affluent families grew from 22 to 27 percent--while the percentage of poor households swelled from 23 to 31 percent. In short, Milwaukee's middle class families went from a plurality to its smallest minority. 

By David Callahan
The opinions expressed are his own.

Economic inequality – the meta concern of the Wall Street protesters – is not an issue that typically gets much traction in American politics. Anger at the Haves tends to surge when times are tough, only to melt away when former Have Nots are again flush enough to go back to the mall.

A year ago, with the economy improving, it seemed the U.S. was well along in this cycle. The wrath against Wall Street had died down, replaced by a more familiar conservative politics blaming “big government” for America’s ills.

Suddenly, though, the rich are once more under attack, with protesters even marching this week on the swanky Upper East Side digs of JP Morgan Chase chief Jamie Dimon. What happened?