Sympathy for the Moderately Wealthy?

Tuesday, December 12, 2006

Sympathy for the Moderately Wealthy?

Perhaps such a feeling is appropriate. In this brief article, the New York Times' David Leonhardt questions whether our assumptions about economic inequality are slightly off kilter.

Although the conventional wisdom is that educational levels (college degrees) are the greatest factor in deciding whose wages climb rapidly and whose wages stagnate, Leonhardt challenges that:
Over the last five years, the average pay of college graduates grew at only a little better rate than inflation. For now, most holders of bachelor’s degrees appear to be on the wrong side of the inequality divide, which suggests that the slice of the American work force on the right side of the divide has become extremely narrow.

Even families at the 90th percentile of the income distribution (now earning about $110,000 a year) have received only a marginally bigger raise over the last decade than those in the middle of the distribution.
What explains this trend?
... nobody has yet come up with a wholly persuasive explanation for what has caused the new inequality. Education is still a big part of the overall picture.

Beyond education, it’s possible that social mores have changed to make huge salaries for chief executives and other top earners more acceptable.

It’s also possible that the new inequality is a natural outgrowth of what Robert Frank, a Cornell professor, has called the “winner-take-all society,” in which globalization and technology have raised the relative value of the very highest paid jobs.

Or it’s possible that the rightward drift of government policy over the last generation — deregulation and falling tax rates, for example — has somehow enabled the rich to gain at everyone else’s expense.

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