What's Behind America's 'Great Divergence'
Thirty years ago, CEOs of America's largest businesses earned an estimated 42 times as much as their average employee. These days, that number has jumped to more than 200 times as much, by many counts. Since the economic crisis of 2008, there has been much more focus on income inequality, not just from economists and social scientists, but also from politicians and from protesters who occupied Wall Street.
While there's no argument about what happened, there's plenty of debate about why and what — if anything — should be done to correct it. In a new book, The Great Divergence: America's Growing Inequality Crisis and What We Can Do About It, journalist Timothy Noah traces the causes of the growth in inequality and prescribes some solutions that may or may not prove politically palatable.
Income inequality is corrosive, Noah tells NPR's Neal Conan. "The affluent and the middle class really constitute two separate cultures now that are deeply alienated from one another," says Noah. "Even conservatives have started to recognize this."
Noah talks with Conan about the various factors that have affected inequality in the U.S.
"It's been unfair to workers around the world, and different countries have had different ways of dealing with it. Many of them have been much more successful [than the U.S.] at protecting the interests of their workers. I'm not a very protectionist guy. But, you know, Dean Baker, an economist, makes a very interesting argument about this, because part of the issue is trade, part of the issue is off-shoring jobs. And, really, the big issue going forward is going to be off-shoring jobs.
"And the economist Alan Blinder has estimated that, in the future, as offshoring becomes less about manufacturing and more about the service sector, you are going to see other countries taking offshoring jobs for highly skilled labor. And he thinks, actually, that slightly more highly skilled labor than medium skilled labor will be offshored.
"And what Dean Baker has said was, gee, do you think all of these sanctimonious, affluent people who like to lecture about the virtues of free trade, what are they going to say when a radiologist in Bangalore wants to take the job of somebody who's working as a radiologist in Kansas City?
"We're talking about a constituency that's much more politically powerful. Will the same consensus be preserved for free trade when the ox that's being gored is that of the affluent? It's an interesting question."
"Throughout the 20th century, you saw technology become much more sophisticated. And as technology became more sophisticated, you needed a better and better educated workforce. The technological change at the beginning of the 20th century was, in fact, much more dramatic than the technological change at the end of the century.
"The advent of electricity, of airplanes, of motion pictures, of telephones — that was all happening at about the same time in the United States. At the end of the century, the economy just had to deal with computers — also a very big change, but not as big.
"Now what happened to the 20th century was that as the technological demand on the typical worker rose and rose and rose, requiring more and more skills, the production of skilled workers by our K-12 education system increased. The number of high school graduates increased and increased and increased until the 1970s, when it leveled off. It actually dipped a little bit and then leveled off.
"Now the technological demands continued to increase, but, suddenly, the United States was not producing enough skilled labor to fulfill the demand, and that bit off the price of skilled labor. So that ... was a big driver of income inequality."
"Immigration has not actually been a major factor. It has been a small factor in income inequality. It's been a much smaller factor than most of us would expect.
"George Borjas, who's a pretty conservative, pretty anti-immigration economist at Harvard, has estimated that, really, the only group that has been affected in a meaningful way by immigration is high school dropouts. Otherwise, the rest of the population has been largely unaffected by immigration.
"Another interesting point about immigration, is that in the last couple of years, we've seen a falloff in net immigration from Mexico. And there's a new report out, in fact, from Pew about this. ... It may have a lot to do with the recession, but we've had recession over the last 20 years, and it never happened before. It may be because the economy in Mexico is becoming much stronger. So this may be a problem that's in the process of going away."
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