Friday, November 04, 2011

Inequality, Opportunity and the "1%" Metaphor

David Brooks presents one of his trademark "two types of people" columns, in which he attempts to distinguish between the urban super-rich (the beneficiaries of "what you might call Blue Inequality") and the economic differences in the rest of the country between those with a college degree and those without ("what you might call Red Inequality"). I've heard of the "Royal we", I guess this is Brooks' counterpart. Of "Blue inequality", Brooks tells us,
Roughly 31 percent started or manage nonfinancial businesses. About 16 percent are doctors, 14 percent are in finance, 8 percent are lawyers, 5 percent are engineers and about 2 percent are in sports, entertainment or the media.
I guess that's Brooks' way of trying to argue that anger at the 1% is misplaced - it's not doctors, engineers or entertainers who blew up the economy or who profited from the bailouts. It's not even the lawyers. Brooks, I believe, is being deliberately obtuse here, focusing on wages and not wealth, and also in treating the "1%" figure as literal instead of as a metaphor. (As Paul Krugman has noted, to avoid a metaphor the better number to use would be "the top 0.1 percent — the richest thousandth of Americans, who saw their real incomes rise more than 400 percent over the period from 1979 to 2005.")

Brooks, using broad, unsupported stereotypes, complains that people are focusing on the wrong problems. Why do we focus on what Brooks calls "Blue inequaltiy"?
That’s because the protesters and media people who cover them tend to live in or near the big cities, where the top 1 percent is so evident. That’s because the liberal arts majors like to express their disdain for the shallow business and finance majors who make all the money. That’s because it is easier to talk about the inequality of stock options than it is to talk about inequalities of family structure, child rearing patterns and educational attainment. That’s because many people are wedded to the notion that our problems are caused by an oppressive privileged class that perpetually keeps its boot stomped on the neck of the common man.
It's fair to note that in attempting to define "Red inequality" Brooks is largely describing a category of people who don't fall into either the literal or metaphorical 1% - Brooks recognizes the metaphor when he cries, "Look over there at the real problem, Red inequality", but if he is going to insist that the 1% is to be taken literally the reason people focus on what he calls "Blue inequality" is because that's where you're going to find most of the members of that literal 1%. I guess we're calling them "blue" because the nation's largest cities tend to vote for Democrats, never mind that the elite he's talking about are more apt to range, on a political color chart, from purple to bright red.

I see the references to "the 1%" as being more metaphorical. Over the past thirty years of middle class stagnation, 1% of the population has fared very well. And although the overlap is imperfect, when the financial elite came close to crashing the world economy, landing us in a protracted recession and 'jobless recovery', they were rewarded with hundreds of billions of dollars in bail-out funds, courtesy of the rest of us, that allowed them to maintain their sensational salaries and bonuses, and in some cases to enjoy record earnings and bonuses even over the course of this recession. Brooks elides the early Tea Party from history, perhaps because he has a short memory, perhaps because he doesn't want to acknowledge how easily they were coopted by corporate America, and perhaps because they don't fit his hollow man attack on "liberal arts majors like to express their disdain for the shallow business and finance majors who make all the money", but he should take another look - the Tea Party movement got its start as a reaction to TARP. Brooks' "Red inequality" is a different story.

Brooks doesn't appear to read his fellow Times columnists, but a few days ago Tom Friedman wrote a column that does a much better job of identifying what the "1%" metaphor is about: People want justice, and increasingly see the system as rigged:
Our financial industry has grown so large and rich it has corrupted our real institutions through political donations. As Senator Richard Durbin, an Illinois Democrat, bluntly said in a 2009 radio interview, despite having caused this crisis, these same financial firms “are still the most powerful lobby on Capitol Hill. And they, frankly, own the place.”

Our Congress today is a forum for legalized bribery. One consumer group using information from calculates that the financial services industry, including real estate, spent $2.3 billion on federal campaign contributions from 1990 to 2010, which was more than the health care, energy, defense, agriculture and transportation industries combined. Why are there 61 members on the House Committee on Financial Services? So many congressmen want to be in a position to sell votes to Wall Street.
In terms of "Red inequality" Brooks makes a valid point, but on the whole he misses the forest for the trees.
Over the past several decades, the economic benefits of education have steadily risen. In 1979, the average college graduate made 38 percent more than the average high school graduate, according to the Fed chairman, Ben Bernanke. Now the average college graduate makes more than 75 percent more.

Moreover, college graduates have become good at passing down advantages to their children. If you are born with parents who are college graduates, your odds of getting through college are excellent. If you are born to high school grads, your odds are terrible.

In fact, the income differentials understate the chasm between college and high school grads. In the 1970s, high school and college grads had very similar family structures. Today, college grads are much more likely to get married, they are much less likely to get divorced and they are much, much less likely to have a child out of wedlock.
I can sympathize with the idea that our nation would be better off if more people succeeded academically, but we're not going to educate our way back to equality. But that would require us to accept any number of conceits: That everybody is college material, that getting a college degree confers an automatic benefit in the job market regardless of school or major, and that a virtually unlimited number of well-paying job opportunities are waiting to be taken by new college graduates. As Paul Krugman puts it,
Workers with college degrees have indeed, on average, done better than workers without, and the gap has generally widened over time. But highly educated Americans have by no means been immune to income stagnation and growing economic insecurity. Wage gains for most college-educated workers have been unimpressive (and nonexistent since 2000), while even the well-educated can no longer count on getting jobs with good benefits. In particular, these days workers with a college degree but no further degrees are less likely to get workplace health coverage than workers with only a high school degree were in 1979.

So who is getting the big gains? A very small, wealthy minority.
The social problems that Brooks associates with "Red inequality" are real, and the problem is growing:
In the 1970s, high school and college grads had very similar family structures. Today, college grads are much more likely to get married, they are much less likely to get divorced and they are much, much less likely to have a child out of wedlock.
In other words, by Brooks' own statistics, high school grads used to fare much better despite not having degrees, so it stands to reason that the changes have nothing to do with college. The biggest differences are that high school graduates can no longer expect to earn a middle class income, and that many have had a difficult time transitioning into a new economy in which they have to accept low-paying, low-prestige jobs in the service industries. For a lot of these people, a college degree would mean delaying entry into the job market, incurring tens of thousands of dollars in debt, then having to accept low-paying, low-prestige jobs in the service industries - that is to say, the same thing, but worse.

I truly wish the solution to our nation's problems were, "Make sure everybody graduates from high school prepared to go to college, then have everybody get a college degree." As difficult as that would be to accomplish, I suspect it would be easier than finding actual, working solutions. Perhaps that's why we have the college fixation - it's easier to offer up a combination of denial and wishful thinking than to come up with even a partial solution with "real world" application.

1 comment:

  1. "If your ultimate goal is to reduce inequality, then you should be furious at the doctors, bankers and C.E.O.’s."

    David Brooks is a hack.