The Inequality Conundrum / NYTimes

[Demeter]

http://www.nytimes.com/2007/06/10/magazine/10wwln-lede-t.html

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June 10, 2007
The Way We Live Now
The Inequality Conundrum

By ROGER LOWENSTEIN


In 1976, Richard Freeman wrote a book called “The Overeducated American.” So many Americans had been getting college degrees that the relative wages of white-collar professionals had started to fall. It no longer paid to go to college and, for most of the ’70s, fewer people did. Just so, incomes of the educated began to rise again. People like Freeman, a labor-market economist, waited for the cycle to turn. They expected that with white-collar types riding high again, more people would stay in school, and incomes at the top would level off once more. But they never did. Instead, the rich kept getting richer....

Countries like Sweden are more equal, but to some economists, they are probably too equal. There is a rough trade-off between equality and growth: if you try too hard to make everyone equal, you get fewer entrepreneurs, fewer Silicon Valleys and a lower standard of living. Freeman, who is generally pro-union, says Sweden’s converging pay scales led to unemployment and deficits in the early ’90s, when it belatedly moved to create more incentives. Similarly, Gary Becker, a Nobel-winning economist, recalls visiting factories in Communist China in 1981: the workers were all lazing around. Now China has billionaires and the country is growing like Topsy....

Some redistribution is clearly good for the entire economy — providing public schooling, for instance, so that everyone gets an education. But public education aside, the United States has a pretty high tolerance for inequality. Americans care about “fairness” more than about “equalness.” We boo athletes suspected of taking steroids, but we admire billionaires....

When it comes to raising the bottom in the short term, Washington basically has two choices: it can try to change market outcomes or it can redistribute after the market results are in. The first method is more intrusive. It includes limiting trade, regulating the workweek or restricting access to certain jobs, through mechanisms like licensing. Since the ’70s, the United States has moved away from such market interventions, but Congress seems to be acting on two of them. It just voted to raise the minimum wage, for the first time in 10 years, and it is seeking a compromise to revise the immigration laws.

And what about redistribution after the fact? The United States does less of it than Europe, and less of it than we used to. Even though the United States is richer than Belgium, a poor person in Belgium is better off than one here. On the other hand, the price for being Belgian is steep: Belgium’s median disposable income — what people have left to spend after they pay taxes and collect welfare-type payments — is only 72 percent as high as ours....




Roger Lowenstein is a contributing writer for the magazine.