Graduation is upon us. Many of my students are graduating with higher student loan debt than they would have imagined and limited job prospects. A few weeks back when I discussed future plans with several graduating seniors, there was a sense of dismay and a sense that the odds were against them given the poor economy and, more importantly, the trends in inequality.
The good news (which I guess could also be bad news, depending on the depth of your commitment to equality) is that the degrees they are earning may well contribute to inequality. A new paper by MIT’s David H. Autor turns attention to inequality among “the other 99 percent.” We have heard quite a bit about the growing concentration of wealth in the top 1 percent. As Autor notes:
Between 1979 and 2012, the share of all household income accruing to the top percentile of U.S. households rose from 10.0% to 22.5% To get a sense of how much money that is, consider the conceptual experiment of redistributing the gains of the top 1% between 1979 and 2012 to the bottom 99% of households. How much would this redistribution raise household incomes of the bottom 99%? The answer is $7107 per household—a substantial gain, equal to 14% of the income of the median U.S. household in 2012.
But what if we look at the “other 99 percent?” Here we have a story of the wage premium associated with higher education. And these gains simply dwarf the above-mentioned figures.
consider the earnings gap between a college-educated two-earner husband-wife family and a high school–educated two-earner husband-wife family, which rose by $27,951 between 1979 and 2012 (from $30,298 to $58,249). This increase in the earnings gap between the typical college-educated and high school–educated household earnings levels is four times as large as the redistribution that has notionally occurred from the bottom 99% to the top 1% of households. What this simple calculation suggests is that the growth of skill differentials among the “other 99 percent” is arguably even more consequential than the rise of the 1% for the welfare of most citizens.
Obviously there is a difference between cognitive ability and credentialing. My students who have majored in the “department of fashionable studies” will likely not make as great a contribution to inequality as might have been the case with a different major.
Bottom line: the paper is interesting throughout, engaging some important issues such as intergenerational mobility and the policy implications.
For additional coverage of the paper, see Jim Tankersley, Wonkblog. An interview with Autor can be found here.
2 thoughts on “The Other 99 Percent”
The Financial Times takes Mr. Piketty’s arguments apart – even accusing him of manipulating the data. http://blogs.ft.com/money-supply/2014/05/23/data-problems-with-capital-in-the-21st-century/?
My question is always how much inequality are we willing to tolerate and how, exactly, do we engineer the result we want?
Its amazing what the Left tries to do in trying to drive a square peg called socialism into a round peg called capitalism. The Left always fails leaving the nations where they have tried to gain “equality” bankrupt,in debt and usually with a stack of corpses. Now comes the latest “darling” of the Left Mr.Picketty. From what I have read of his assumptions and presumptions about markets,and how they work,his theories leave a lot to be desired. No,I have not read all his works but what I have read and what criticisms I have garnered from economists who have gone over his work leads me to the conclusion that Mr.Picketty is a class warrior personified. And like all class warriors of the Left he plays the “zero sum” game like a grand master. In the end its always the same argument. Your a failure because someone else is a success and the only way to have “social justice” and “economic democracy” is to get control of the heavy hand of the state and force the “exploiters” to “give back to the community” the wealth that they have stolen. Except Mr.Picketty is bolder then most Leftists. He wants to use some kind of global governance to watch over the world’s 7 billion inhabitants to make sure that we all “pay our fair share.” And if in the eyes of this governance we don’t go along with this collectivist mindset? Then what? Why the answer,as always,is the Gulags. But this time its a world wide Gulag.