Wednesday, November 02, 2011

David Brooks on the Wrong Inequality

IMHO, Brooks makes too light of the connection between the 1% and their taking so much of the pie, and the deplorable conditions of those on the bottom end of the scale, but his point is worth pondering. Even if we get (or force) the top 1% and the other fat cats to share more of their unjust share of the wealth, how will those at the bottom benefit if we do not provide education and other opportunities? Have we fallen so far that, even if we reduce inequality, the bottom 20% or 50% will not know how to reap the benefits? - Rick

We live in a polarizing society, so perhaps it’s inevitable that our experience of inequality should be polarized, too.

In the first place, there is what you might call Blue Inequality. This is the kind experienced in New York City, Los Angeles, Boston, San Francisco, Seattle, Dallas, Houston and the District of Columbia. In these places, you see the top 1 percent of earners zooming upward, amassing more income and wealth. The economists Jon Bakija, Adam Cole and Bradley Heim have done the most authoritative research on who these top 1 percenters are.

Roughly 31 percent started or manage nonfinancial businesses. About 16 percent are doctors, 14 percent are in finance, 8 percent are lawyers, 5 percent are engineers and about 2 percent are in sports, entertainment or the media.

If you live in or around these big cities, you see stores and entire neighborhoods catering to the top 1 percent. You see a shift in social norms. Up until 1970 or so, a chief executive would have been embarrassed to take home more than $20 million. But now there is no shame, and top compensation zooms upward.

You also see the superstar effect that economists have noticed in the income data. Within each profession, the top performers are now paid much better than the merely good or average performers.

If you live in these big cities, you see people similar to yourself, who may have gone to the same college, who are earning much more while benefiting from low tax rates, wielding disproportionate political power, gaining in prestige and contributing seemingly little to the social good. That is the experience of Blue Inequality.

Then there is what you might call Red Inequality. This is the kind experienced in Scranton, Des Moines, Naperville, Macon, Fresno, and almost everywhere else. In these places, the crucial inequality is not between the top 1 percent and the bottom 99 percent. It’s between those with a college degree and those without. Over the past several decades, the economic benefits of education have steadily risen. In 1979, the average college graduate made 38 percent more than the average high school graduate, according to the Fed chairman, Ben Bernanke. Now the average college graduate makes more than 75 percent more.

Moreover, college graduates have become good at passing down advantages to their children. If you are born with parents who are college graduates, your odds of getting through college are excellent. If you are born to high school grads, your odds are terrible.

In fact, the income differentials understate the chasm between college and high school grads. In the 1970s, high school and college grads had very similar family structures. Today, college grads are much more likely to get married, they are much less likely to get divorced and they are much, much less likely to have a child out of wedlock.

Today, college grads are much less likely to smoke than high school grads, they are less likely to be obese, they are more likely to be active in their communities, they have much more social trust, they speak many more words to their children at home.

Some research suggests that college grads have much bigger friendship networks than high school grads. The social divide is even starker than the income divide.

These two forms of inequality exist in modern America. They are related but different. Over the past few months, attention has shifted almost exclusively to Blue Inequality.

That’s because the protesters and media people who cover them tend to live in or near the big cities, where the top 1 percent is so evident. That’s because the liberal arts majors like to express their disdain for the shallow business and finance majors who make all the money. That’s because it is easier to talk about the inequality of stock options than it is to talk about inequalities of family structure, child rearing patterns and educational attainment. That’s because many people are wedded to the notion that our problems are caused by an oppressive privileged class that perpetually keeps its boot stomped on the neck of the common man.

But the fact is that Red Inequality is much more important. The zooming wealth of the top 1 percent is a problem, but it’s not nearly as big a problem as the tens of millions of Americans who have dropped out of high school or college. It’s not nearly as big a problem as the 40 percent of children who are born out of wedlock. It’s not nearly as big a problem as the nation’s stagnant human capital, its stagnant social mobility and the disorganized social fabric for the bottom 50 percent.

If your ultimate goal is to reduce inequality, then you should be furious at the doctors, bankers and C.E.O.’s. If your goal is to expand opportunity, then you have a much bigger and different agenda.

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