Inequality Rises in the U.S.

This report (click her) ran a while back on NPR's Morning Edition. (For the numbers the report was based on click here.) The bounty going to the top 1% of Americans has pushed past that of even the 1990s. What was offered as an explanation was the simplistic notion that the demand for services of highly skilled labor was rising faster than the economy overall was growing. However with even a basic background in economic theory it should be apparent that higher returns in a competitive market invites entry. (In point of fact, one definition of competitive market is that free and easy entry into a market is possible) All else equal, as suppliers exit the market with lower returns and enter the market with higher returns the value of the former should rise and the latter should fall. Persistent inequality is a sign of failure of the market system rather than the price to be paid for all the very real benefits markets provide. Skills mean in essence education and so the issue of persistent inequality begs the question of why access to quality education is so inequitably distributed. To focus on the competition that unskilled labor faces from technological change or from abroad diverts our attention from this much more awkward question. The poor cannot afford to live in areas where the property tax base is high enough to support good public schools. It is even less likely that the poor can afford to send their children to private schools. And most importantly, despite whatever unrealized potential a given student might ultimately have, the poor cannot hope to leverage this potential into the sorts of loans that would fund that child's education and lift that child and her family out of poverty. Given the imperfections that exist in credit markets this is out of the question. Add to these financial constraints families at the top end of the income distribution have accumulated many advantages over the years . These advantages include the skills required to negotiate the educational system to our childrens' advantage and you have a fairly complete explanation of why inequality is so persistent in America. (See Annette Lareau's Unequal Childhoods or her earlier book Home Advantage) It is important to note that despite the very real problem that persistent inequality presents, the IRS numbers overstate the degree of inequality. Many students and other young adults from middle class and wealthier families file returns. The adjusted gross income of a graduate student with a tuition fee waiver and a monthly salary for working as a teaching assistant or research assistant or, more importantly, the college student who works part time as kitchen help or as janitor will be pitifully small. However, their poverty is only temporary and not very real. As they go to school or work part time and try to find some direction in their lives they live comfortably and securely.