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<span class="" title="2013-05-18T12:04:40+00:00">May 18, 2013, <span>12:04 pm</span></span>
<h3 class="">The 1 Percent Are Only Half the Problem</h3>
<address class="">By <a href="http://opinionator.blogs.nytimes.com/author/timothy-noah/" class="" title="See all posts by TIMOTHY NOAH">TIMOTHY NOAH</a></address>
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<p>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 <a href="http://topincomes.g-mond.parisschoolofeconomics.eu/">average $1 million</a> (with a bottom threshold of <a href="http://topincomes.g-mond.parisschoolofeconomics.eu/">about $367,000</a>). “We are the 99 percent,” declared the Occupy protesters, unexpectedly popularizing research <a href="http://tinyurl.com/2xjvbc">findings</a>
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.</p><p>Granted, it’s an important half. Since 1979, the one-percenters have <a href="http://topincomes.g-mond.parisschoolofeconomics.eu/">doubled</a>
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 <a href="http://elsa.berkeley.edu/%CB%9Csaez/saez-UStopincomes-2011.pdf">rise by 11 percent</a> even as the 99-percenters saw theirs <a href="http://elsa.berkeley.edu/%CB%9Csaez/saez-UStopincomes-2011.pdf">fall slightly</a>. Some recovery!</p>
<p>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.</p><p>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.</p><p>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 “<a href="http://nymag.com/daily/intelligencer/2012/01/romney-quiet-rooms.html">quiet rooms</a>.”)
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.</p><p>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 <a href="http://web.williams.edu/Economics/wp/BakijaColeHeimJobsIncomeGrowthTopEarners.pdf">the top 0.1 percent</a>, who make <a href="http://topincomes.g-mond.parisschoolofeconomics.eu/">$1.6 million</a> or more, but let’s not quibble.)</p>
<p>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 <a href="http://topincomes.g-mond.parisschoolofeconomics.eu/">saw its share of national income decline</a>, while the “college premium” either fell or followed no clear up-or-down pattern over time.</p>
<p>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.</p><p>Another reform both conservatives and liberals have supported — though at <a href="http://www.newrepublic.com/article/112496/rising-cost-college-why-barack-obama-cant-lower-your-tuition">different times</a>
— 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.</p><p>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 <a href="http://www.newrepublic.com/article/112609/conservative-plan-break-banks">growing chorus</a>
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 <a href="http://dealbook.nytimes.com/2013/05/01/in-brown-vitter-bill-a-banking-overhaul-with-possible-teeth/"> sponsored a bill</a> to <a href="http://wap.nytimes.com/2013/04/24/opinion/make-wall-street-choose-go-small-or-go-home.html">require</a> the largest banks to hold more capital reserves, or become smaller.</p>
<p>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 <a href="http://www.epi.org/publication/ib342-unions-inequality-faltering-middle-class/">highly effective</a>
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.</p><p>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 <em>richesse</em> 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 <a href="http://www.epi.org/blog/fiscal-implications-rising-capital-share-income">fully one-third</a>
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.</p><p>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.</p><p><em>Timothy Noah is the author of “The Great Divergence: America’s Growing Inequality Crisis And What We Can Do About It.”</em></p></div>
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