[Vision2020] The 1 Percent Are Only Half the Problem

[Art Deco]

 [image: Opinionator - A Gathering of Opinion From Around the
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  May 18, 2013, 12:04 pm The 1 Percent Are Only Half the Problem By TIMOTHY
NOAH <http://opinionator.blogs.nytimes.com/author/timothy-noah/>

Most recent discussion about economic inequality in the United States has
focused on the top 1 percent of the nation’s income distribution, a group
whose incomes average $1
million<http://topincomes.g-mond.parisschoolofeconomics.eu/>(with a
bottom threshold of about
$367,000 <http://topincomes.g-mond.parisschoolofeconomics.eu/>). “We are
the 99 percent,” declared the Occupy protesters, unexpectedly popularizing
research findings <http://tinyurl.com/2xjvbc> by two economists, Thomas
Piketty and Emmanuel Saez, that had previously drawn attention mainly from
academics. But the gap between the 1 percent and the 99 percent is only
half the story.

Granted, it’s an important half. Since 1979, the one-percenters have
doubled<http://topincomes.g-mond.parisschoolofeconomics.eu/>their
share of the nation’s collective income from about 10 percent to
about 20 percent. And between 2009, when the Great Recession ended, and
2011, the one-percenters saw their average income rise by 11
percent<http://elsa.berkeley.edu/%CB%9Csaez/saez-UStopincomes-2011.pdf>even
as the 99-percenters saw theirs fall
slightly <http://elsa.berkeley.edu/%CB%9Csaez/saez-UStopincomes-2011.pdf>.
Some recovery!

This dismal litany invites the conclusion that if we would just put a tight
enough choke chain on the 1 percent, then we’d solve the problem of income
inequality. But alas, that isn’t true, because it wouldn’t address the
other half of the story: the rise of the educated class.

Since 1979 the income gap between people with college or graduate degrees
and people whose education ended in high school has grown. Broadly
speaking, this is a gap between working-class families in the middle 20
percent (with incomes roughly between $39,000 and $62,000) and
affluent-to-rich families (say, the top 10 percent, with incomes exceeding
$111,000). This skills-based gap is the inequality most Americans see in
their everyday lives.

Conservatives don’t typically like to talk about income inequality. It
stirs up uncomfortable questions about economic fairness. (That’s why as a
candidate Mitt Romney told a TV interviewer that inequality was best
discussed in “quiet
rooms<http://nymag.com/daily/intelligencer/2012/01/romney-quiet-rooms.html>.”)
On those rare occasions when conservatives do bring it up, it’s the
skills-based gap that usually draws their attention, because it offers an
opportunity to criticize our government-run system of public education and
especially teachers’ unions.

Liberals resist talking about the skills-based gap because they don’t want
to tell the working classes that they’re losing ground because they didn’t
study hard enough. Liberals prefer to focus on the 1 percent-based gap.
Conceiving of inequality as something caused by the very richest people has
obvious political appeal, especially since (by definition) nearly all of us
belong to the 99 percent. There’s also a pleasing simplicity to the causes
of the growing gap between the 1 and the 99. There are only two, and both
are familiar liberal targets: the rise of a deregulated financial sector
and the erosion of accountability in compensating top executives outside
finance. (The cohort most reflective of these trends is actually the top
0.1 percent<http://web.williams.edu/Economics/wp/BakijaColeHeimJobsIncomeGrowthTopEarners.pdf>,
who make $1.6 million
<http://topincomes.g-mond.parisschoolofeconomics.eu/>or more, but
let’s not quibble.)

Both halves of the inequality story should command our attention, because
both represent a dramatic reversal of economic trends that prevailed in the
United States for most of the 20th century. From the 1930s through the
1970s the 1 percent saw its share of national income
decline<http://topincomes.g-mond.parisschoolofeconomics.eu/>,
while the “college premium” either fell or followed no clear up-or-down
pattern over time.

At least some of the tools to restore these more egalitarian trends
shouldn’t be divisive ideologically. Liberals and conservatives both
recognize the benefits of preschool education, which President Obama has
proposed making universally available. I’ve never met an affluent
4-year-old who wasn’t enrolled in preschool, but nationwide about one-third
of kids that age aren’t.

Another reform both conservatives and liberals have supported — though
at different
times<http://www.newrepublic.com/article/112496/rising-cost-college-why-barack-obama-cant-lower-your-tuition>—
is withholding federal aid from colleges and universities that can’t
control tuition increases. Mr. Obama proposed it in his last two State of
the Union addresses; House Speaker John A. Boehner was a sponsor of a bill
to do the same in 2003.

THERE is also more bipartisan support than you might suppose for
restricting some of the Wall Street excesses that enrich the 1 percent. The
impetus to do so isn’t inequality so much as fear that an out-of-control
banking sector will once again create economic crisis and compel Congress
to bail out the big banks. Congressional Republicans have been blocking
proper implementation of the Dodd-Frank financial reforms, but a growing
chorus<http://www.newrepublic.com/article/112609/conservative-plan-break-banks>of
conservative voices, including the columnist George F. Will, the
former
Utah governor Jon M. Huntsman Jr. and Richard W. Fisher, president of the
Federal Reserve Bank of Dallas, favor breaking up the big banks. Senators
David Vitter, Republican of Louisiana, and Sherrod Brown, Democrat of Ohio,
have sponsored a
bill<http://dealbook.nytimes.com/2013/05/01/in-brown-vitter-bill-a-banking-overhaul-with-possible-teeth/>to
require<http://wap.nytimes.com/2013/04/24/opinion/make-wall-street-choose-go-small-or-go-home.html>the
largest banks to hold more capital reserves, or become smaller.

One reason the left plays down the growing skills-based gap is that it
accepts at face value the conservative claim that educational failure is
its root cause. But the decline of labor unions is just as important. At
one time union membership was highly
effective<http://www.epi.org/publication/ib342-unions-inequality-faltering-middle-class/>at
reducing or eliminating the wage gap between college and high school
graduates. That’s much less true today. Only about 7 percent of the
private-sector labor force is covered by union contracts, about the same
proportion as before the New Deal. Six decades ago it was nearly 40 percent.

The decline of labor unions is what connects the skills-based gap to the 1
percent-based gap. Although conservatives often insist that the 1 percent’s
*richesse* doesn’t come out of the pockets of the 99 percent, that
assertion ignores the fact that labor’s share of gross domestic product is
shrinking while capital’s share is growing. Since 1979, except for a brief
period during the tech boom of the late 1990s, labor’s share of corporate
income has fallen. Pension funds have blurred somewhat the venerable
distinction between capital and labor. But that’s easy to exaggerate, since
only about one-sixth of all households own stocks whose value exceeds
$7,000. According to the left-leaning Economic Policy Institute, the G.D.P.
shift from labor to capital explains fully
one-third<http://www.epi.org/blog/fiscal-implications-rising-capital-share-income>of
the 1 percent’s run-up in its share of national income. It couldn’t
have
happened if private-sector unionism had remained strong.

Reviving labor unions is, sadly, anathema to the right; even many
mainstream liberals resist the idea. But if economic growth depends on
rewarding effort, we should all worry that the middle classes aren’t
getting pay increases commensurate with the wealth they create for their
bosses. Bosses aren’t going to fix this problem. That’s the job of unions,
and finding ways to rebuild them is liberalism’s most challenging task. A
bipartisan effort to revive the labor movement is hardly likely, but
halting inequality’s growth will depend, at the very least, on liberals and
conservatives better understanding each other’s definition of where the
problem lies.

*Timothy Noah is the author of “The Great Divergence: America’s Growing
Inequality Crisis And What We Can Do About It.”*


-- 
Art Deco (Wayne A. Fox)
art.deco.studios at gmail.com
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