Expanding Inequality

In a series of articles in Slate this fall, Timothy Noah traced the growth of income inequality in America and identified several contributing factors: the decline of organized labor, the poor quality of K-12 education, and various government policies among others.  He reviewed the arguments of economists and policy analysts, and he considered – and rejected — claims that economic inequality doesn’t matter.  As British scholars Richard Wilkinson and Kate Pickett argue, economic inequality is bad for all of society, not just those who are struggling to survive on the bottom.  Nicholas D. Kristof summarized their argument in his column in yesterday’s New York Times:  “inequality undermines social trust and community life, corroding societies as a whole.”

Inequality matters, in other words, and not only on moral grounds.  The productive functioning of our society, for everyone, rich and poor, depends on reducing the level of economic inequality.  But given recent trends in employment, education, and public policy, the income gap won’t decrease anytime soon.  In fact, it’s likely to get worse.  Here’s why.

First, as Jack Metzgar and I have both noted here in previous blogs, the working-class jobs of the present and future are, increasingly, low-wage service-sector jobs.  Moreover, according to the Bureau of Labor Statistics, we’re going to see more and more of those kinds of jobs.  Combine the growth of such jobs with the decline of the labor movement – the social institution that has, historically, contributed most to higher wages and better benefits for all workers, not just union members – and it’s easy to see how these emerging employment patterns will contribute to more inequality, not less.  Simply put, workers will earn less and have limited social or legal resources with which to advocate for better wages and benefits, much less better working conditions or fair treatment in the workplace.

As a society, we don’t seem worried about this emerging trend.  Perhaps we accept low wages because we believe that they make goods and services more affordable, or because we buy the claim that paying higher wages would cripple businesses.  We forget, though, that these advantages, to both consumers and employers, come at a cost in taxes. A California study found that Walmart workers cost the state $86 million a year in public assistance.   But the Ohio Legislature recently defeated a bill that would identify companies whose employees rely on public assistance, and supporters were accused of being anti-business.

We may also accept low wages because we believe that those who work in low-paying jobs deserve what they get. America is supposed to be the land of opportunity, and we believe that anyone who tries hard enough should be able to get a good job.  After all, if you had been smart or hard-working enough, you’d have gone to college, which would give you access to a better-paying job, right?

While it’s true that getting a college degree correlates with higher lifetime earnings, and earning a degree does help individuals get ahead, economic inequality is a systemic problem, one that can’t be solved by increasing higher education alone. If most of the job growth over the next few decades is in low-wage jobs that don’t require higher education, then education won’t reduce economic inequality.

Education can even contribute to inequality.  The poor quality of K-12 education available to most poor and working-class students helps perpetuate inequality in this country. Too many schools simply don’t do a good enough job preparing these students for either employment or further education, much less to participate well in civic society or advocate for their interests.

Many working-class people who do seek college degrees or further training encounter two key problems: they get sucked into for-profit schools that leave them in debt, often without yielding good employment, or they enter the public higher education system, which is battling budget cuts and overcrowding.

For many working-class and poor students, the best educational option is community college, which offers training for the workplace at an affordable cost and helps prepare students to go on to four-year degrees.  If these schools could accommodate all of those students, they might improve their economic chances – though, again, that wouldn’t solve the underlying problem of too many jobs that pay too little. But community colleges across the country are facing budget cuts and having to turn away motivated students.

Which brings us to the next reason why economic inequality will grow over the next decades: government policies that provide less support for the poor and working class, including cuts to higher education.  According to a recent report in the Washington Post, community colleges in California alone have had to turn away 140,000 students because of budget cuts.  Even when space is available, cuts in state funding often yield tuition increases, making higher education less affordable for those who need it most.

Of course, this reflects economic trends: state budgets are in trouble.  That’s partially due to the struggling economy, and they’re losing federal support as the stimulus ends.  But they are also taking in less revenue because of tax cuts.  According to the Center on Budget and Policy Priorities, 46 states have cut taxes in recent years.  Taxpayers have pushed for lower taxes, and politicians tout them as a way of stimulating the economy by making states more “business friendly,” garnering votes along the way.  Never mind that it doesn’t work, according to economists Iris J. Lav and Robert Tannenwald.  It’s also a sleight of hand trick: we may pay less taxes as workers and citizens, but we make up the difference in what we pay for college tuition, as well fees on various state services (such as drivers’ licenses and car registrations).

And as Noah points out, income inequality has grown more during Republican administrations than during Democratic ones.  Why?  Because conservative policies favor the wealthy.   Noah notes, for example, that the real tax rate for the wealthiest Americans declined from 42.9% under Carter to just 4.3% under George W. Bush.  Republicans claim that putting more wealth at the disposal of business owners will generate more jobs and income increases for the rest of us, but in fact, most people’s incomes increase more slowly when Republicans run things than when Democrats are in charge.  Not surprisingly, the only people whose incomes increase at a faster rate under Republicans are those in the top 20% of income brackets.

Which suggests a final reason why we should expect more inequality in coming years:  the Republicans regained power in the November election – not full control, but enough to push through continuing tax cuts for the wealthy.  In several states, newly-elected Republican governors have pledged to “go after” public employees, hoping to reduce costs by laying off thousands of workers and cutting the wages and benefits of many others.  I doubt that most of those who voted for Republican candidates in November did so because they wanted to see economic inequality increase, but that seems to be where we’re headed.

Sherry Linkon, Center for Working-Class Studies