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Wednesday, July 31, 2013

Inequality in the United States

Eduardo Porter writes at The New York Times:
America’s gaping inequality shows up everywhere, beyond the statistics for income. Rich families invest more in their children’s education. Educational opportunities are stacked against the poor and middle class: 60 percent of disadvantaged children go to disadvantaged schools with fewer and lower quality resources, according to a report on educational disparities.
Unsurprisingly, literacy is more lopsided than in most other industrial nations, according to international tests of 15-year-olds carried out by the Organization for Economic Cooperation and Development.
The gap between the top American scorers — at the 90th percentile of the distribution — and those in the middle is about as big as the gap between the average score in the United States and Azerbaijan.
In a globalized, high-tech world in which education has become a central determinant of economic success, it is hardly surprising that the prosperity of American children is more dependent on the prosperity of their parents than that of children in most other advanced countries.
How concerned is the American political system about these gaps? One way to look at it is by the effect of government actions on social outcomes. Take poverty. The United States has the 17th-highest poverty rate in the O.E.C.D., measured as the share of people who make do with less than half the median income, ranking around the middle of the pack.
If the same variable is measured after taking into account the effect of taxes and government spending programs, the American poverty rate jumps to fifth-worst.
At National Review, James Pethokoukis writes:
1. The U.S. economy in the 1950s and 1960s benefited greatly from its temporary postwar position as the world’s dominant industrial producer. That, along with a constrained labor supply from the 1930s baby bust and from war casualties, produced huge income gains for workers. But both factors were fleeting, of course. Our competitors rebuilt their industrial capacity, and all those returning soldiers started families. What’s more, research from economist Alexander Field finds that the basis for much of the productivity boom of those decades was built on technological advances of the 1930s.
2. With their postwar recoveries fully in place, our competitors began to catch up to U.S. levels of wealth — until the 1980s. At the exact moment that Obama and the middle-outers contend the U.S. economy went off track, it began once again to pull away from Europe. French per capita GDP, for instance, went from 64 percent of U.S. per capita GDP in 1960 to 82 percent in 1980. But when America decided to re-embrace market economics, France sniffed at it. France’s per-person wealth is now back down to 73 percent of America’s.
3. Echoing the claims of the middle-outers, Obama said, “The income of the top 1 percent nearly quadrupled from 1979 to 2007, while the typical family’s barely budged.” That’s not right. The economic consensus is that real median market household income — inflation-adjusted income before taxes, government transfers such as Social Security and the Earned Income Tax credit, and health-care benefits — actually rose more like 20 percent over that period. And once you adjust for taxes, transfers, and benefits — median incomes are up 40 percent.