A Weblog of Centrist Voices in American Politics
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A Weblog of Centrist Voices in American Politics | |
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July 25, 2005A View of AmericaBy now you'll now I'm a great fan of the Economist. I particularly love their focused reviews of selected countries and topics. Well in the July 16th issue they focus on Americans. Pardon my enthusiasm but I think this is must reading for Americans. There so much good stuff in this series of articles. The one area that has gotten some media play (i.e. NPR) is the widening gap between the richest and poorest Americans. But in the past quarter-century, the rich have been doing dramatically better than the less well off. Since 1979, median family incomes have risen by 18% but the incomes of the top 1% have gone up by 200%. In 1970, according to the Census Bureau, the bottom fifth received 5.4% of America's total national income and the richest fifth got 40.9%. Twenty-five years later, the share of the bottom fifth had fallen to 4.4% but that of the top fifth had risen to 46.5%.But here's where the Economist is so good, they flesh in that change with some interesting data: Perhaps Americans think the rich deserve their success. They certainly work more than they used to. In the 1970s, the top 10% worked fewer hours than the bottom 10%; now the reverse is true. Back in 1929, 70% of the income of the extremely rich (the top 0.01%) came from capital (dividends, rent and interest). Now, 80% comes from wages and stock options, which is earned income of a sort.or Moreover—and this was the most surprising thing about the study—despite America's more flexible labour markets, social mobility there is no longer greater than in supposedly class-ridden Europe, and if anything it seems to be declining.AND (for me) the kicker Over the past 25 years, globalisation has increased rewards for intellectual skills, pushing up the value of a degree. The income gap between college graduates and those without university degrees doubled between 1979 and 1997. This has gone hand in hand with changes in the nature of work. It used to be possible to start at the bottom of a big firm and work your way up. But America's corporate giants have got rid of their old hierarchies. Lifetime employment is at an end, and managers hop from job to job. That makes a degree essential. In the 1930s and 1940s, only half of all American chief executives had a college degree. Now almost all of them do, and 70% also have a higher degree, such as an MBA. People with a university degree are now more likely to move up an income bracket than those without. This is a big change since the 1970s, when income rises were distributed equally across all educational levels. America is becoming a stratified society based on education: a meritocracy.AND It is the possibility that, as Isabel Sawhill of the Brookings Institution argues, your chances of a good education, good job and good prospects—in other words, of moving upwards—are partly determined by family behaviour. On this view, the rich really are different, and not just because they have more money; moreover, these differences are becoming embedded in the structure of the family itself. Class stratification, in other words, is more than a matter of income or inherited wealth. College graduates tend to marry college graduates. Both go out to work, so in the households of the most educated the returns to a university education are doubled.... "Get a good education and you'll go far" Growing up I heard that often (as I'm sure many of you did). We didn't expect it to have these unintended consequences. There's just so much good stuff in this review of America. And you can read it ALL on online. Posted by c3 at July 25, 2005 12:35 AMComments
We can deplore the rise in income inequality, but the fact is that it's an inescapable artifact of economic success, a free society, the evolution of technology, and a rapidly changing world economy. I would suggest that income mobility is more important than income equality. But there will still be some barriers there. Meritocracy will produce stratification, even across generations. Where do we establish the societal safety net, and how do we pay for it without chasing our top asset producers out of the tax base? That's the big question. Capital (both human and financial) is increasingly mobile. Posted by: Tully at July 25, 2005 11:59 AMI wonder how much income inequality is affected by the lax enforcment of the fiduciary responsibilties of large fund managers who sit (or vote for) corporate boards at large public corporations. I'm as capitalist as the next guy but I think compensation among upper level executives has completely run amok. It's one thing where you have a private corporation where an executives own money is at risk and they can earn great rewards if thier performance allows the company to reap profits. Public corporations are a different egg (IMO). There the money at risk is provided by thousands, possibly even millions of small share-holders. Yet it's distribution is controled by a small number of individuals who sit on the corporate boards (usualy controled by managers of large market funds) who very often have an uncomfortably close personal relationship with the individuals they hire as executives for these corporations..... executives who are paid astronomic rates, very often for performance that is WORSE then could be expected by pulling some-one at random out of a car wash or a McDonalds cashiering job and making them CEO. I've always fealt that what is going on in many corporate board rooms in setting executive salary is pretty much an abdication of fiduciary responsibilty and borders on de-frauding share-holders. This is one area where I think agressive government enforcment or at least agressive litigation through class action suits representing small shareholders really is called for. I'm NOT in favor of addressing income inequality through taxation.....but I do think alot could be done by simply insuring that the interests of small investors is being faithfully representated by the people responsible for agrigating those funds. Posted by: cengel at July 25, 2005 12:56 PMVery well stated cengel. Posted by: todd at July 25, 2005 01:51 PMI wonder how much income inequality is affected by the lax enforcment of the fiduciary responsibilties of large fund managers who sit (or vote for) corporate boards at large public corporations. While I sympathize with the sentiment the article doesn't clearly address that but it does appear that the highest quintile is working harder for the top incomes than before. Posted by: c3 at July 25, 2005 05:14 PMForgot the blockquotes I wonder how much income inequality is affected by the lax enforcment of the fiduciary responsibilties of large fund managers who sit (or vote for) corporate boards at large public corporations.While I sympathize with the sentiment the article doesn't clearly address that but it does appear that the highest quintile is working harder for the top incomes than before. Posted by: c3 at July 25, 2005 05:15 PM In a country with so much opportunity, why do some groups suffer from a lack of income mobility? Why is poverty perpetuated through generations? The collapse of the nuclear family in the inner cities may have something to do with it. Nothing correlates with an entrenched underclass, as much as fatherless babies. Single mothers are far more likely to be poor, and are far more likely to pass on that poverty to their children. Single mothers are less able to shape their children’s character and ability in ways that lead to upward mobility. Children of single mothers are far more likely to be associated with delinquency, joblessness, school failure, and crime. Over 60% of black children today are born to single mothers. In Halem Ghettos it is more like 80%. "We cannot renew our country when, within a decade, more than half of our children will be born into families where there is no marriage.” -- Bill Clinton's State of the Union Address, 1994Posted by: Susan at July 25, 2005 08:19 PM |
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