Recent discussions of economic inequality, marked by a lack of clarity and care, have confused the public about the meaning and moral significance of rising income inequality. Income statistics paint a misleading picture of real standards of living and real economic inequality. Several strands of evidence about real standards of living suggest a very different picture of the trends in economic inequality. In any case, the dispersion of incomes at any given time has, at best, a tenuous connection to human welfare or social justice. The pattern of incomes is affected by both morally desirable and undesirable mechanisms. When injustice or wrongdoing increases income inequality, the problem is the original malign cause, not the resulting inequality. Many thinkers mistake national populations for “society” and thereby obscure the real story about the effects of trade and immigration on welfare, equality, and justice. There is little evidence that high levels of income inequality lead down a slippery slope to the destruction of democracy and rule by the rich. The unequal political voice of the poor can be addressed only through policies that actually work to fight poverty and improve education. Income inequality is a dangerous distraction from the real problems: poverty, lack of economic opportunity, and systemic injustice.
To put my cards on the table, I think that inequality, as it interacts with other facts about contemporary American society, is a problem. But, I think that, even more fundamentally, it is an indicator of a much more severe problem. As globalization continues inexorably (in practical terms, this has very little to do with McDonald’s in France, and almost everything to do with the economic rise of Asia), U.S. income inequality is a demonstration that many – probably most – Americans don’t have the capabilities required to maintain anything like their current standard of living in competition with a global labor force. Does Will think this is accurate, and if so, is it a problem?
I think that the main issue with inequality is not the gap between the rich and the poor. It is the gap between the earnings of top business leaders and the salaries of academics and journalists.
And you really don’t want to find yourself suggesting, as I think people sometimes do, that we ought to be monomaniacally focused on the income gap question. After all, consider an African-American woman working as a nurse in North Carolina in the late 1950s relative to a white male executive at North Carolina’s largest bank. There would have been a substantial gap in their incomes. But if you flash forward to today and compare an African-American woman working as a nurse in North Carolina to a top executive at Charlotte-based Bank of America you’ll find a much larger gap.
Thinking about the issue more comprehensively, though, it’s of course clear that the overall gap in social equality between two such people is smaller today than it was in the days when the African-American woman would be explicitly excluded from a wide range of social practices and opportunities open to the banker. I don’t think there’s any reason to believe that the decline of Jim Crow caused income inequality to grow thus forcing us to make an explicit tradeoff, but it’s still worth understanding which aggregate sets of social changes have and haven’t been for the better. What’s more, I have heard credible arguments that the successes of feminism in the late 60s and 1970s did play a role in increasing income inequality. I’m not sure whether or not that’s right, but if it is right you’d still want to say that feminism was an egalitarian force.
But there are shortcomings in the piece. A number of the measures Mr Wilkinson uses to show that recent growth in inequality has not been particularly bad reveal less than that. He cites statistics on equality of happiness from Betsey Stevenson and Justin Wolfers and acknowledges that happiness inequality has grown since the 1990s but doesn’t seem to reflect on whether that might be a looming issue. He cites recent work from Christian Broda and John Romalis on diverging inflation rates across income levels, which suggests that recent Chinese economic growth, which resulted in heavy imports of cheap goods, was very good for low-income consumers. But as I argued last spring, China’s role in the economy is likely shifting from deflationary to inflationary, which may begin to undo these gains; rising prices for energy and food, among other things, will disproportionately affect lower income households.
Mr Wilkinson seems to too easily brush off concerns about economic immobility, which is increasing in America. A recent Pew study on the issue revealed, for instance, that a child from the lowest income quintile who gets a college degree is less likely to wind up in the highest income quintile than a child from the highest income quintile who does not get a degree. Sometimes differences in income are everything.
Nick Schulz at The Enterprise Blog
UPDATE: Ezra Klein
UPDATE #2: Megan McArdle
Wilkinson responds to Manzi
UPDATE #3: Conor Clarke
UPDATE #4: Clint at Why We Worry
UPDATE #5: Jon Chait at TNR
Will Wilkinson asks for questions
Conor Clarke asks one
Wilkinson responds to Clarke and Yglesias
Freddie at The League
UPDATE #6: Lane Kenworthy