David Leonhardt: The Great Recession likely to result in less inequality





... The main reason that recessions tend to increase inequality is that lower-income workers are concentrated in boom-and-bust industries. Agriculture is the classic example. In recent years, construction has become the most important one....

All of these trends will serve to increase inequality. Yet I still think the Great Recession will eventually end up compressing the rungs on the nation’s economic ladder. Why? For the same three fundamental reasons that the Great Depression did.

The first is the stock market crash. Clearly, it has hurt wealthy and upper middle-class families, who own the bulk of stock, more than others. In addition, thousands of high-paying Wall Street jobs — jobs that have helped the share of income flowing to the top 1 percent of earners soar in recent decades — will disappear.

Hard as it may be to believe, the crash will also help a lot of young families. The stocks that they buy in coming years are likely to appreciate far more than they would have if the Dow were still above 14,000. The same is true of future house purchases for the one in three families still renting a home.

The second reason is government policy. The Obama administration plans to raise taxes on the affluent, cut them for everyone else (so long as the government can afford it, that is) and take other steps to reduce inequality. Franklin D. Roosevelt did something similar and it had a huge effect.

Of course, these two factors both boil down to redistribution. One group is benefiting at the expense of another. Yes, many of the people on the losing end of that shift have done quite well in recent years, far better than most Americans. Still, the shift isn’t making the economic pie any bigger. It is simply being divided differently.

Which is why the third factor — education — is the most important of all. It can make the pie larger and divide it more evenly.

That was the legacy of the great surge in school enrollment during the Great Depression. Teenagers who once would have dropped out to do factory work instead stayed in high school, notes Claudia Goldin, an economist who recently wrote a history of education with Mr. Katz.

In the manufacturing-heavy mid-Atlantic states, the high school graduation rate was just above 20 percent in the late 1920s. By 1940, it was almost 60 percent. These graduates then became the skilled workers and teachers who helped build the great post-World War II American economy....



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charley danielson - 3/9/2009

There was a study done that surveyed 118 countries and the economic wealth of all the citizens.

The surveyed showed five classes of people and the percentage in the classes did not change from countries that had lots of freedoms to those that had dictatorships.

What they found was. That the more freedom a country had. The more wealth all individuals had. The poorer countries had less freedoms.

This is over at Von Mises Institute.

Education comes in many forms and ways. Just because a figure shows higher education. Does not mean it contributed to any thing. Even tho I believe education or knowledge is to all advancing societies.

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