If, as Rick Perlstein says, "there's no such thing as a conservative think tank," there are some pretty accomplished conservative bamboozlement organs. At the top of that dubious heap is the American Enterprise Institute, under whose auspices we find the latest embarassing attempt by right-wing intellectuals to pretend that inequality isn't a serious problem in America. You almost have to stand in awe of an institution devoted to churning out arguments about "The Upside of Income Inequality."
Politicians and many others in the United States have recently grown concerned that earnings inequality has increased among Americans. But as the example of China—or India, for that matter—illustrates, the rise in inequality does not occur in a vacuum. In the case of China and India, the rise in inequality came along with an acceleration of economic growth that raised the standard of living for both the rich and the poor. In the United States, the rise in inequality accompanied a rise in the payoff to education and other skills. We believe that the rise in returns on investments in human capital is beneficial and desirable, and policies designed to deal with inequality must take account of its cause.Convincing! And well beside the point. Again, Becker and Murphy never discuss how education-related income differences compare to income patterns in the wider American economy. Allow me to provide some context:
In 1980, an American with a college degree earned about 30 percent more than an American who stopped education at high school. But, in recent years, a person with a college education earned roughly 70 percent more. Meanwhile, the premium for having a graduate degree increased from roughly 50 percent in 1980 to well over 100 percent today. The labor market is placing a greater emphasis on education, dispensing rapidly rising rewards to those who stay in school the longest.
The richest 1% of wealth holders had 125 times the wealth of the typical household in 1962; by 2004 they had 190 times as much or $14.8 million in wealth for the upper 1% compared to just $82,000 for the household in the middle fifth of wealth.Becker and Murphy's paean to the benefits of education is all very nice, but it has nothing to do with the real scandal of inequality in America, which is that the explosive income growth of recent decades has taken place among the richest one percent of Americans. Differences in education have very little to do with the fact that the US is now experiencing income disparities worse than at any time since the 1920s:
Income inequality grew significantly in 2005, with the top 1 percent of Americans -- those with incomes that year of more than $348,000 -- receiving their largest share of national income since 1928, analysis of newly released tax data shows.And then of course there's Jacob Hacker's argument that education itself is an increasingly risky investment for Americans:
The top 10 percent, roughly those earning more than $100,000, also reached a level of income share not seen since before the Depression [...]
The new data also shows that the top 300,000 Americans collectively enjoyed almost as much income as the bottom 150 million Americans. Per person, the top group received 440 times as much as the average person in the bottom half earned, nearly doubling the gap from 1980.
[P]erhaps more than half of the rise in economic inequality in the United States involves the growing divergence of workers with the same level of education. In other words, people with the same number of years of schooling have much more disparate economic experiences than they used to -- and that means that investing in education, wise as it may be, is also increasingly risky.Hacker points out that even as education has become vastly more expensive -- the average debt burden for college graduates is now $20,000, and for grad students it's twice that -- "advanced skills nonetheless provide no sure guarantee of economic stability"; people who make specific investments in particular skills or industries are especially vulnerable.