Suddenly
the whole world is talking about income inequality. But, as this debate
goes on, it is beginning to look as though the thing is being
misconceived. The income inequality debate is confusing matters more
than clarifying them, and it is leading us off in unhelpful directions.
In the first place, to frame the issue as income inequality is to lump together different issues that are not especially related. What we call “inequality” is caused by two different constellations of problems.
At
the top end, there is the growing wealth of the top 5 percent of
workers. This is linked to things like perverse compensation schemes on
Wall Street, assortative mating (highly educated people are more likely
to marry each other and pass down their advantages to their children)
and the superstar effect (in an Internet economy, a few superstars in
each industry can reap global gains while the average performers
cannot).
At
the bottom end, there is a growing class of people stuck on the
margins, generation after generation. This is caused by high dropout
rates, the disappearance of low-skill jobs, breakdown in family
structures and so on.
If
you have a primitive zero-sum mentality then you assume growing
affluence for the rich must somehow be causing the immobility of the
poor, but, in reality, the two sets of problems are different, and it
does no good to lump them together and call them “inequality.”
Second, it leads to ineffective policy responses.
If you think the problem is “income inequality,” then the natural
response is to increase incomes at the bottom, by raising the minimum
wage.
But
raising the minimum wage may not be an effective way to help those
least well-off. Joseph J. Sabia of San Diego State University and
Richard V. Burkhauser of Cornell
looked at the effects of increases in the minimum wage
between 2003 and 2007. Consistent with some other studies, they find no
evidence that such raises had any effect on the poverty rates.
That’s
because raises in the minimum wage are not targeted at the right
people. Only 11 percent of the workers affected by such an increase come
from poor households. Nearly two-thirds of such workers are the second
or third earners living in households at twice the poverty line or
above.
The
primary problem for the poor is not that they are getting paid too
little for the hours they work. It is that they are not working full
time or at all. Raising the minimum wage is popular politics; it is not
effective policy.
Third, the
income inequality frame contributes to our tendency to simplify complex
cultural, social, behavioral and economic problems into strictly
economic problems.
There
is a very strong correlation between single motherhood and low social
mobility. There is a very strong correlation between high school dropout
rates and low mobility. There is a strong correlation between the
fraying of social fabric and low economic mobility. There is a strong
correlation between de-industrialization and low social mobility. It is
also true that many men, especially young men, are engaging in behaviors
that damage their long-term earning prospects; much more than
comparable women.
Low
income is the outcome of these interrelated problems, but it is not the
problem. To say it is the problem is to confuse cause and effect. To
say it is the problem is to give yourself a pass from exploring the
complex and morally fraught social and cultural roots of the problem. It
is to give yourself permission to ignore the parts that are
uncomfortable to talk about but that are really the inescapable core of
the thing.
Fourth, the income inequality frame needlessly polarizes the debate.
There is a growing consensus that government should be doing more to
help increase social mobility for the less affluent. Even conservative
Republicans are signing on to this. The income inequality language
introduces a class conflict element to this discussion.
Democrats
often see low wages as both a human capital problem and a problem
caused by unequal economic power. Republicans are more likely to see
them just as a human capital problem. If we’re going to pass bipartisan
legislation, we’re going to have to start with the human capital piece,
where there is some agreement, not the class conflict piece, where there
is none.
Some
on the left have always tried to introduce a more class-conscious style
of politics. These efforts never pan out. America has always done
better, liberals have always done better, when we are all focused on
opportunity and mobility, not inequality, on individual and family
aspiration, not class-consciousness.
If
we’re going to mobilize a policy revolution, we should focus on the
real concrete issues: bad schools, no jobs for young men, broken
families, neighborhoods without mediating institutions. We should not be
focusing on a secondary issue and a statistical byproduct.
A version of this op-ed appears in print on January 17, 2014, on page A25 of the New York edition with the headline: The Inequality Problem.
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