Steven Pearlstein: The Cost of Rising Income Inequality
[Steven Pearlstein is the business columnist for the WaPo.]
Although much of the Republicans'"Pledge to America" is given over to a discussion of economic issues, there is one topic that is never mentioned: the dramatic rise in income inequality....
It wasn't always that way. From World War II until 1976, considered by many as the "golden years" for the U.S. economy, the top 10 percent of the population took home less than a third of the income generated by the private economy. But since then, according to Saez and Piketty, virtually all of the benefits of economic growth have gone to households that, in today's terms, earn more than $110,000 a year....
In trying to figuring out who or what is responsible for rising inequality, there are lots of suspects. Globalization is certainly one, in the form of increased flows of people, goods and capital across borders. So is technological change, which has skewed the demand for labor in favor of workers with higher education without a corresponding increase in the supply of such workers. There are a number of other culprits that come under the heading of what economists call "institutional" changes - the decline of unions, industry deregulation and the increased power of financial markets over corporate behavior. Over time, more industries have developed the kind of superstar pay structures that were long associated with Hollywood and professional sports....
The biggest problem with runaway inequality, however, is that it undermines the unity of purpose necessary for any firm, or any nation, to thrive. People don't work hard, take risks and make sacrifices if they think the rewards will all flow to others. Conservative Republicans use this argument all the time in trying to justify lower tax rates for wealthy earners and investors, but they chose to ignore it when it comes to the incomes of everyone else....
Read entire article at WaPo
Although much of the Republicans'"Pledge to America" is given over to a discussion of economic issues, there is one topic that is never mentioned: the dramatic rise in income inequality....
It wasn't always that way. From World War II until 1976, considered by many as the "golden years" for the U.S. economy, the top 10 percent of the population took home less than a third of the income generated by the private economy. But since then, according to Saez and Piketty, virtually all of the benefits of economic growth have gone to households that, in today's terms, earn more than $110,000 a year....
In trying to figuring out who or what is responsible for rising inequality, there are lots of suspects. Globalization is certainly one, in the form of increased flows of people, goods and capital across borders. So is technological change, which has skewed the demand for labor in favor of workers with higher education without a corresponding increase in the supply of such workers. There are a number of other culprits that come under the heading of what economists call "institutional" changes - the decline of unions, industry deregulation and the increased power of financial markets over corporate behavior. Over time, more industries have developed the kind of superstar pay structures that were long associated with Hollywood and professional sports....
The biggest problem with runaway inequality, however, is that it undermines the unity of purpose necessary for any firm, or any nation, to thrive. People don't work hard, take risks and make sacrifices if they think the rewards will all flow to others. Conservative Republicans use this argument all the time in trying to justify lower tax rates for wealthy earners and investors, but they chose to ignore it when it comes to the incomes of everyone else....