57 of 65 people found the following review helpful
4.0 out of 5 stars the book starts a discussion; doesn't end it
As for what it sets out to do -- describe, in well-researched detail, the economic mess that America is in -- it succeeds. We've heard the talking points, and we've seen some details, in bits and pieces, in columns like those of Paul Krugman and Robert Reich. Here, at least, is a resource for anyone who wants to understand, and discuss, the problem in coherent terms...
Published on April 9, 2012 by Robert D. Harmon
34 of 43 people found the following review helpful
3.0 out of 5 stars A Decent Read
I'll say first off that I'm more a righty bend than a lefty, but if you'll forgive the cliche, "Labels are for soup cans, man." Income disparity, while not in itself wrong, at a certain rate becomes unfair and oppressive if you're "left" and destabilizing risk to prosperity if you're "right". Both sides want a similar result. The differences are how you go about it...
Published on March 19, 2012 by Veil_Lord
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57 of 65 people found the following review helpful
4.0 out of 5 stars the book starts a discussion; doesn't end it,
This review is from: The Great Divergence: America's Growing Inequality Crisis and What We Can Do about It (Hardcover)
As for what it sets out to do -- describe, in well-researched detail, the economic mess that America is in -- it succeeds. We've heard the talking points, and we've seen some details, in bits and pieces, in columns like those of Paul Krugman and Robert Reich. Here, at least, is a resource for anyone who wants to understand, and discuss, the problem in coherent terms.
The picture Mr. Noah describes is alarming enough, in his telling. Inequality in wealth has revived since its low point in Eisenhower's time, certainly inequality took off in Reagan's. Inequality in _income_ is even more unequal, and more alarming, as he shows. Demographic data -- shifts in family and ethnicity -- is one factor, but just one. The cost of a college education rises rapidly, is debt-ridden rapidly, at a time when it's the new minimum for skilled labor and a middle-class existence. Jobs going offshore is part of it, but not all. Government tax reform since Reagan was part of it, but shifts in government regulation and social policy, much more so. The fall in labor-union power and membership, and the rise in the uppermost weathy, is part of it, but Europe had the same global-market shocks but much less union decline and less visible-wealth rise.
In this light, the "why it matters" chapter may seem just a series of rebuttals to the conventional wisdom, and I can see how it might have disappointed other reviewers. Reading this chapter, the reader needs to remember all the material that went before. Yes, we understand: inequality is not good; income disparity does matter -- a lot -- and creates, yes, unhappiness; the quality of life is not improving even though productivity has; and deny it as you will, inequality is on the rise. He should have stated this in this summary perhaps with more emphasis, because the final "what to do" chapter is radical. Tax the rich; increase the gov't payroll; issue more H-1B permits for foreign skills; universalize preschool and contain college costs; bring back financial regulation; encourage labor unions; and (perhaps too flippantly stated) elect Democratic presidents. (Although I should note that Obama just signed (4/2012) new legislation -- his "JOBS" act -- loosening investment regulations even further).
Still, it's handy to have this book and its data. The national discussion has been way too simplistic and this at least groups the complexities in well-sorted ways.
Strongly recommend this book -- but let it help you draw your own conclusions.
48 of 55 people found the following review helpful
4.0 out of 5 stars Preaching to the Choir but Doing It Well,
This review is from: The Great Divergence: America's Growing Inequality Crisis and What We Can Do about It (Hardcover)
Timothy Noah's book The Great Divergence is interesting and well-written, an easy read, for the most part, and loaded with information from a broad and varied range of sources. As Noah acknowledges, there is nothing really new in the book, and folks who have an abiding interest in income inequality, its causes and consequences, will find themselves in familiar territory. However, for a reader who has not been pretty thoroughly immersed in this literature for the last decade or so, there is just too much information to assimilate in a brief period. The Great Divergence runs just under two hundred pages, but much of the material presented is statistical in nature, and though it's not hard to understand, there is just too much to remember, even in a general way, unless the reader takes the time to absorb it.
As one might imagine from the title, Noah's work will not appeal to all readers. It seems quite clear that its approval rating will be pretty high among those who lean a bit to what passes for the left in this day and age, but the same evaluation will be abysmally low among those on the right. There was a time, say thirty or forty years ago, when forecasts such as this were not so easily made. After all, the Republican Richard Nixon was President when the Occupational Safety and Health Administration and the Environmental Protection Agency were created, and Nixon was the last President to impose broad-based wage and price controls. Whatever the value of these endeavors, today they would be anathema to just about any Republican and to most Blue-Dog Democrats, inviting characterization as manifestations of up-dated Stalinism. The polarization of political life in the U.S. makes it easy to anticipate how readers from broad-gauged political categories will respond to Noah's discussion, leaving him preaching to the choir. Inadequate incomes and uncertainty as to the future are primary sources of the acrimonious ideological divisions among us, and both serve the interests of those at the very top of the income distribution
While Noah takes pains to be factually accurate, he, as with any author, gets to select which facts are pertinent, just as he was the one who decided that earnings inequality is an issue that merits being treated at length. Nevertheless, he gives fairly compelling evidence of citing and consulting social scientists on both the left and the right. Yes, he's much more likely to agree with interpretations provided by by the liberal economist Paul Krugman than the conservative economist Finis Welch, but he seems determined not to misrepresent the views of anyone. If he relies too heavily on Krugman, this may be simply because left-of-center economists are far less numerous than conservative ones, a set of circumstances that is tied to the prevailing neo-classical and monetarist orthodoxy.
While I find myself in general agreement with Noah's point of view, he makes what I take to be some pretty serious errors in judgment with regard to the nature and location of the great divergence. Income inequality among the lower eighty percent of the population is troublesome, in my view, only because there are so many people in this range who have incomes so meager as to make bare survival problematic and a commonsensically decent way of living impossible. Even those whom Noah identifies as occupying the very middle of the middle class are just squeaking by, especially if they have children. That damaging set of circumstances is exacerbated, moreover, by the fact that family incomes in this group are more or less adequate only because most families have two or more bread-winners, and many still barely manage. Rick Santorum may really believe that women put their kids in day care and go to work in search of occupational fulfillment, but it's really due to economic necessity. In short, The Great Divergence is not located in the lower four quintiles of the income distribution. Most of these folks are getting pretty thoroughly ripped off. The Great Divergence that matters occurs at the highest income levels
Noah's recourse to education, the college educated as compared to those with lesser attainments, is similarly misleading. Today, education of any sort and any level is a gamble. There are no long-term -- maybe not even any medium term -- guarantees with regard to choice of major or kind of training. Until I retired in May of 2010, I taught for twenty-three years at a mid-sized state university. Graduates, including folks with graduate degrees, were often unable to find anything better than low-wage, no-benefits grunt work when they left school. Nationally, payoffs for investments in higher education are routinely over-estimated. Yes, it's better to have a degree than not have one, but payoffs in terms of purchasing power have been declining for at least three decades. At the highest income levels, moreover, education is not even tenuously related to the pernicious enormity of pecuniary attainments, the wealth of the controlling elite.
If we construe income inequality as a problem, it's one that does not have an educational solution. Noah's uncritical acknowledgment of the Reagan Administration's trashing of public education in A Nation at Risk, blaming it for every imaginable social problem, including declining real incomes for most of us, is disappointing.
On the other hand, the author's observation that workers' incomes are no longer tied to productivity is right on the mark. The same is true of his judgment that institutional and cultural changes have left us defenseless against the encroachment of a Banana Republic-style unwillingness and inability to take concerted collective action against the devaluation of our workforce. The Reaganesque rugged individualism that has left us without a sense of national community has had politically devastating effects, reducing our electorate to powerlessness when faced with ever-more meager opportunities. The Great Divergence, properly construed, has put the very wealthy in a position of economic and political control over the rest of us. More and more, they decide what jobs are created and destroyed, what wage rates prevail, what constitutes the material rudiments of an acceptable life style, and their big-bucks buying power has given them ever-greater control of the political life of the nation. One consequence of this is that income attainment has become at least as heritable from generation to generation as physical attributes such as height! Truly astonishing, and to the author's credit that he gives this finding its due.
This book is not for everyone, but it is an honest and informed journalistic effort to explain the causes and consequences of income inequality. In that sense, in spite of occasional missteps, the author has succeeded admirably. As with most critically evaluative treatments of important aspects of American society, however, the author's remedies do not inspire hope: they are either substantively misguided or politically near-impossible. Readers might do well to skip the last chapter, though I'm sure Noah did his best with it. When solutions to social problems are not known, it does not reflect adversely on an author if he fails to find any.
34 of 43 people found the following review helpful
3.0 out of 5 stars A Decent Read,
This review is from: The Great Divergence: America's Growing Inequality Crisis and What We Can Do about It (Hardcover)
I'll say first off that I'm more a righty bend than a lefty, but if you'll forgive the cliche, "Labels are for soup cans, man." Income disparity, while not in itself wrong, at a certain rate becomes unfair and oppressive if you're "left" and destabilizing risk to prosperity if you're "right". Both sides want a similar result. The differences are how you go about it. The topic of the book isn't right or left.
The overall tone is more from the left side of things, the author I take to be fairly liberal, however as I mentioned in my opening that's no reason to dismiss him. If you're more conservative, then you may be irked by a few things here and there, but you'll also be presented with some liberal dirty laundry that isn't widely talked about nowadays, such as Progressives involvement in eugenics. To anybody who can't take having your side needled a little bit, skip this book and go read some boring dogma.
The book is only a couple hundred pages and a pretty easy read. It's not a bunch of dry statistics to wade through. I may be a geek for this kind of thing, but I found it as interesting as an average mystery novel. However there were some problems. I will note that I'm reading a pre-release copy, so it's a possibility that some of my issues with it below were addressed.
There were a lot of bits I agreed with at least in principle. For example, I found myself agreeing with much of the union (mostly Detroit) chapter information; for example, the theory presented makes perfect sense to have the workers share in the productivity increase and keeping prices in synch so the company doesn't just raise costs and perpetuate an inflation spiral. How realistic it is to maintain that on a global economy, I'm honestly not sure.
However, about halfway through that chapter it gets a little weird. The author didn't bring up any issue with guaranteed pensions, which introduce a set liability regardless of the company's future profits/productivity, and pushed "real" pay for union autoworkers to (depending on your source) around $73 per hour, factoring in all benefits. It also overlooks the impacts of infamous agreements where employers paid people to not work in exchange for allowing in more automation. While he makes a good argument that the unions provided a good balance as profits rose, at the same time he ignores how they tied the hands of the big auto makers when harder times hit. I felt only one side was well represented in the chapter. I found Mr. Noah's lack of balance on this here and later in the book to somewhat ding his credibility when discussing his potential solutions. For a better explanation of UAW labor, check out American Icon: Alan Mulally and the Fight to Save Ford Motor Company; it's an all around great book.
A minor note, but I was also perplexed as to his presentation of "card check" vs "secret-ballot" voting. He brings up that card voting allows for intimidation by local union bosses, which makes sense because you know who's dissenting. However, he then says that the secret voting opens up the opportunity for employers to intimidate workers, without explaining why a secret vote would favor management over labor for intimidation. It's possibly a completely valid point he just made badly, but the lack of an argument left me confused and unsatisfied on that point.
He kind of lost me getting into solutions. The importing of more skilled labor to reduce the wages of native skilled labor seemed more of a universal misery than raising up the lower incomes. The bit on price controls on colleges has some merit in theory, though price controls tend to cause a lot of other issues that he doesn't address. Others like soaking the rich work to a point, but now more than any time in history the super rich can just up and leave. Another issue, as some states are finding out, if you base your taxation mostly on the top percentile, when they have a bad year on the stock market your whole budget can be thrown a curve ball and the poor ultimately will suffer a loss of services.
I can't think of much else to note. Basically, I liked the first half with all the information, but it didn't lead me to the same conclusions as Mr. Noah reached. I don't think this book will change anybody's mind. Still a decent read though.
17 of 21 people found the following review helpful
4.0 out of 5 stars Extremely topical, to say the least...,
Timothy Noah is a journalist by trade; he had produced a solid book largely documenting the economic reality of "the rich getting richer," and the poor becoming more the inverse, which has indisputably occurred in America over the last 30 years. In the introduction Noah states that the title to this book was first utilized by Nobel Prize winner, and NY Times columnist Paul Krugman, in his 2007 book The Conscience of a Liberal. Noah's book is replete with sufficient numbers, graphs, and references to other economic works to prove that the rich have become much richer, at the relative expense of virtually everyone else. The last "Gilded Age" ended with the Great Depression of the `30's. Afterwards, for almost 50 years, incomes of Americans tended to converge, a phenomenon that Noah calls the "Great Compression." Starting at the beginning of the `80's, incomes commenced their divergence, and have again attained the extremes of the `20's Gilded Age.
Why have the vast majority of Americans tolerated the trend whereby so much wealth is concentrated in the hands of so few? Of course, not all have, as witnessed by the "Occupy Wall Street" protests. But Noah postulates, and I would concur, that at least one reason is the enduring myth of upward mobility. Like the billboards that we have here in Albuquerque, touting the latest winner at a casino, it is as though we all have the chance to win - as indeed we do!- but that masks, and is its own diversion from the central reality that most players in a casino lose, just as most Americans are losing in the wealth game to the very few. Noah devotes one chapter to debunking the upward mobility myth. One's own wealth (or lack of it!) in America is highly correlated to one's parent's wealth, far more so than virtually all the countries of "Old Europe."
How has the Great Divergence come to be? The author covers the "usual suspects" as he calls them, in several chapters, which constitute about half the book. These include immigration, both legal and illegal, "offshoring" work, both in manufacturing and service industries, social trends such as the increase in single parent households, and the increase cost of higher education. There is an entire chapter on "unequal government," as indeed it is. Noah repeats Warren Buffet's observation that he pays less, in terms of a percentage of income, than anyone else who works for him. And there was the stunning alacrity with which the Fed bailed out, in full, the many "villains" of the 2008 financial meltdown, the financial firms, by "expanding the Fed's balance sheet," by buying up "toxic" assets, while the victims were left to "tighten their belts." I found the author's chapter on the "Treaty of Detroit" most informative: how, after World War II, labor and management developed a workable consensus on sharing the wealth. Alas, that "treaty" is in the "dustbin of history."
In the penultimate chapter Noah refutes the various ideas flogged by the well-funded right-wing "think tanks" that promote the idea(s) that the Great Divergence doesn't matter, or is "inevitable," or can't be changed, or, most outrageously, is actually a good thing! The author concludes with what we can do to reverse the Divergence. Some of the ideas have gained increasing acceptance, particularly since they have worked before, such as "soaking the rich" (i.e., increase the tax rate on the extremely wealthy to at least the rate it was during the `90's), public works projects as we had in the `30's, with the workers on governmental payrolls, and reregulating Wall Street. Some ideas seemed marginal, at best, such as universalizing preschool, and a couple seemed outright crazy, such as importing more skilled labor (!) as though there was a shortage, and imposing price controls on college tuition.
Noah's documentation and analysis of the increasing concentration of wealth in the hands of the very few is timely and accurate. I was somewhat disappointed that some issues were omitted or glossed over, as well as in terms of his proposals for remediation. For example, how very effective the "think tanks" and media outlets (read: Fox News) that are owned, or funded by the very rich, have been in convincing so many whose pockets have been picked that this is the "natural state of affairs," if not, "the best of all possible worlds." Noah could have drawn upon, and expanded the themes in Frank's What's the Matter with Kansas?: How Conservatives Won the Heart of America. Noah celebrates public parks, a point that strongly resonates with me. However, should he not also have been addressing some fundamental philosophical issues, which certainly the ancient Greeks wrestled with, like: What is the ultimate ratio between extreme wealth and extreme poverty that should be viewed as acceptable in a society? Isn't that at least as valid a concern as the age at which a young adult can grant sexual consent? His book is a five and a half star topic, with a 4-star execution.
12 of 15 people found the following review helpful
3.0 out of 5 stars Great History- Questionable Perspective,
Verified Purchase(What's this?)
I found Noah's "The Great Divergence" an interesting read. I really appreciated the care that Noah took to capture the history around the events in the 20th century, and I certainly valued that perspective; this was the strength of the book.
Where the book broke down for me was the perspective through which Noah viewed those events. There were many times where Noah seemed to be building up to make a great point only to fall flat having missed the opportunity to provide insight within the historical context. His perspective on the history and its meaning to Noah was based on his perspective, incorrectly I believe, that:
* The US economy is a zero sum game. In other words, Noah assumes that the US economy is a fixed pie and government's role is to ensure everyone gets a fair slice. Noah's perspective ignores the need to grow that pie within the context of a global economy.
* US Government's role is to ensure some "proper" distribution of results. Noah did weave a couple of items into his narrative about creating equal opportunity to access, like his suggestion at the end regarding college funding, but the majority of the message was focused on the need for more activist government action in terms of supporting union membership, greater legislation, protectionism, and higher taxes on the wealthy.
* Inequality of result is inherently unfair. Noah does a good job providing evidence that there are unequal economic results for some groups of Americans, and he concludes that it must be based on unequal access to opportunity. Noah doesn't properly consider that sub-cultural factors might be at play between groups.
There was one section of the book where Noah discusses economic growth based on the political administration running the executive branch. I was surprised that given Noah's excellent research in other areas, that he drew fairly absurd conclusions here but noted that he couldn't explain why they were so. If he had dug just a little deeper, as I did, looking at the philosophies prevalent in upper and lower chambers of Congress (House and Senate) in conjunction with those of the executive branch (President), the answers emerge clearly. All I can conclude is that the answer didn't fit Noah's narrative for the book and thus he chose not to print them.
Overall, I'm glad I read the book as it did a nice job covering the relevant economic related historical events that played out in the last 100 years. But just like two people watching the same events and coming up with completely different versions of what really happened and why, Noah appears to have interpreted these events through the window of his own biases.
Noah's conclusions aside, the book is worth reading for its historical context even if the conservative, small government, entrepreneurial-minded readers will surely cringe at times.
3 of 3 people found the following review helpful
4.0 out of 5 stars Not Going to Change Anyone's Mind,
But if you're interested in the origins of the current degree of wealth disparity in the United States, this book gives a fairly clear and easy to follow description of what has happened. Timothy Noah lays out all of the big changes that started, really in the 70s, but in earnest with Ronald Reagan: preventing workers from pooling their bargaining power, lowering the estate tax, lowering the top income tax bracket and implementing other supply-side economic and monetary policies, trading more with less developed countries, being lax with enforcement of anti-trust and monopoly laws, failing to contain spiraling education costs. In other words, it was not just that the very wealthy somehow got much smarter or more valuable to the world. In fact, the statutory and policy changes that have been implemented have been profoundly anti-meritocratic, favoring old money over innovation, inheritance over earning, and a leisure class whose money does all the work, over the actual work force that, well, actually works for a living and, more and more frequently, can't actually live on what they make at work.
The book is not going to make Noah any new friends among fans of the Austrians, people who think a country's finances should work just like those of a family or a business, or people who think their common sense is as good a source of economic theory as any set of statistics or historical data. His research is solid and provides a great theoretical and data-based companion to some of the best social justice books of the last two decades, but if the words "social justice" set your teeth on edge, this book is definitely not for you. If your bent is the Austrian school and you want book that takes a more dispassionate look at economic theory, particularly free market theory versus regulated capitalism, I suggest that you read The Predator State: How Conservatives Abandoned the Free Market and Why Liberals Should Too instead.
The reason I did not give this book five stars is that, while Noah acknowledges the deleterious effect hyper-partisanship has had on our economy, some of the points he attempts to make sound - as he freely acknowledges - glibly partisan. The dangers of that approach are not merely that he alienates a large number of people who find themselves in danger of falling out of the middle class but who consider themselves conservative, but also that such advice as "elect democratic presidents" may be a bit outdated, given that our current democratic president ran with Keynesian demand-side economists at his side and then replaced them with the worst monetary and supply-side offenders from the previous republican administration. Other aspects of the "What to Do" section of the book likewise seem designed to provoke knee-jerk reactions rather than build consensus.
At the end, Noah laments the incivility and calls for us to do better, for us to step away from information sources that serve only to confirm our worldview. This book confirmed my worldview. I wish it had done a little more to embrace readers who were trying to do what Noah asks.
7 of 9 people found the following review helpful
5.0 out of 5 stars One of the best books dealing with the US inequality,
Mr. Noah's presents, in a relative short book written in a journalist style, a very comprehensive and well researched review of the causes of the inequality gap that has been growing in the U.S. for the last 30 years. My only complaint regarding style is that the author uses (at least in the uncorrected proof we received for review) the years belonging to the 2000s and most of numbers are written in text instead of numeral format, which really interrupts the flow of the reading.
The book borrowed its title from the term the "The Great Divergence" coined by Paul Krugman in his 2007 book The Conscience of a Liberal and is based on Mr. Noah's series of articles written for Slate magazine. I think the book really achieved its goal to synthesize the best research and expert work, mainly by economists, regarding the reasons behind the growing inequality gap that began to take place circa 1980, and most important, to deliver this information in a language accessible to the laymen. Mr. Noah presents a very comprehensive review of all the possible causes, covering all points of view and controversies, and he carefully debugs several myths that are recurrent in today's political debate. Even though he structured this body of academic work in a very systematic way and in simple terms, at some points the discussion becomes difficult to grasp, so be patient, as economist's findings are always full of assumptions and what ifs.
The book closes with a chapter with proposed solutions to reduce income inequality. Here Mr. Noah is bold. He discusses the benefits of popular recipes such as more regulation on Wall Street and imposing price controls on colleges and universities. But he goes beyond, and proposes more controversial solutions such as restoring higher taxes to the rich, importing more skilled workers (yes, to reduce income of "privileged" native-born elite of skilled workers), and electing Democratic presidents (no kidding, he presents historical evidence that the inequality gap shrinks when democrats are in power).
In my opinion this is one of the best books of the 2011-12 crop dealing with America's growing inequality, and particularly is notable for Mr. Noah's effort to present a neutral point of view. As excellent complementary readings to this book I recommend Jeffrey Sachs' The Price of Civilization: Reawakening American Virtue and Prosperity and Charles Murray's Coming Apart: The State of White America, 1960-2010 (just do not pay too much attention to Mr. Murray's conclusions, which are completely divorced from the solid evidence he presented in the rest of the book).
5 of 6 people found the following review helpful
5.0 out of 5 stars Bridging the gap between scholarly economics and popular writing while embracing complexity,
As a professor who works in an another field, I was really pleased to read this book as an example of successful popularization of academic work. Noah successfully walks the line between getting bogged down in methodological and statistical arguments on one hand, and oversimplifying and dumbing down his sources on the other. Growing inequality has many causes, and Noah's approach breaks these down, drawing on many studies that have evaluated the contribution of diverse factors (immigration, technological change, deindustrialization and offshoring, etc.) to produce a well-documented and nuanced account. He's not afraid to point out disagreements among economists on the causes (and to point the reader to their papers), but also presents a strong case overall based on the preponderance of evidence. Highly recommended.
2 of 2 people found the following review helpful
5.0 out of 5 stars Romney - "This stuff shoud only be talked about in quiet rooms",
This review is from: The Great Divergence: America's Growing Inequality Crisis and What We Can Do about It (Paperback)
Around 1932, the economic inequality of the United States gradually decreased and stabilized in 1970 where the income share of the top 1% was about 9% of the nation's income. Then in and after 1979, the inequality increased until today the top 1%'s share is 24% of the nation's income. The period of greatest equality is the the Great Compression and the period of greatest inequality is the Great Divergence. Harvard professors, Goldin and Katz, have come to the conclusion that 60% of the income inequality is related to the amount of education one is able to obtain. Noah, the author, explores trade with developing countries, stating that it has exploded, and after much discussion suggests that approximately 12% of the income inequality is related to this trade as the wealthy decide where to send jobs and the middle-class are the ones who lose the jobs. In the last thirty years, the wealthy have learned that through 24hour/7day lobbyists, with just $3 billion a year of lobby money they can obtain favorable laws to increase their wealth by hundreds of billions of dollars. One great victory of the wealthy through the law is the destruction of the unions by means of the Taft-Hartley Law, which made it easy for employers to eliminate unions, but it also meant that there was one less group fighting for the middle-class on election-day.
8 of 11 people found the following review helpful
5.0 out of 5 stars Excellent Material -,
Reading 'The Great Divergence' was boring first, and I thought about putting it aside. I'm very glad I didn't. Author Noah's book contains numerous details and insights that I otherwise would have missed.
The share of national income going to the richest 1% actually fell from about 11% in 1965 to 9% in 1975 and stayed there for the next three years. Then from 1980 to 2005, 80% of the total increase in Americans' income went to the top 1%.
Why do Americans tolerate this? The most likely reason per Noah is our belief in upward mobility. But only 6% of those born in the bottom fifth ever make it to the top fifth. Noah goes on and discusses various potential explanations such as increased automation, declining union power, off-shoring and outsourcing, illegal immigration, etc.
Washington D.C. labor lawyer Chuck Gilligan has estimated that construction pays undocumenteds $13/hour in the D.C. area to avoid paying natives and legals $30/hour. Makes sense - adding some 12-million low-skilled, but readily trained, illegals has to have had a significant negative impact on construction, hospitality, landscaping, and factory work incomes. Similarly, automation (eg. calculators, computers, computer-linked cash registers, factory robots and computerized machinery) also has decreased demand for a number of medium-skilled occupations. But the biggest factor by far has to be sending millions of jobs to low-wage nations. Noah estimates trade with low-wage nations is responsible for 12-13% of the 'Great Divergence' in incomes.
The Stolper-Samuelson theorem (1941) predicts U.S. wages would fall because of trade with cheap labor nations such as China. Later economists have had problems documenting this impact partly because most U.S. trade, until recently, was with relatively high-wage nations such as those in Europe. Others simply could not get past David Ricardo's assertion that all nations would benefit from increased trade. (However, Ricardo's observation was made in the very early 19800s, absent potential trading partners with an enormous supply of low-cost workers.) Many displaced American workers were highly paid individuals using expensive automation - replaced by low-paid unskilled manual workers in Asia.
Corporate profits, however, have not suffered from off-shoring/outsourcing. The Personal Computing Industry Center at U.C. Irvine has calculated that in 2006 making/selling iPods employed 41,170 worldwide, 13,920 (about one-third) of them in the U.S. Yet, nearly 75% of the $1 billion in iPod sales stayed in the U.S. Analysis of 2010 total labor costs for the iPhone found that labor constituted only 5.3% of its sales price, and 7% for the iPad. Apple's profits for the two products were 59% and 30%, respectively.
Former Fed Vice-Chairman Alan Blinder predicts that about 25% of service jobs are vulnerable to off-shoring. Already we've seen thousands of jobs lost in computer programming, finance, call centers, and even legal research and reading x-rays. Doctors, however, will probably be an exception - they've managed to sharply limit the number of x-rays read by U.S. trained physicians in other nations as well as the number of foreign-trained doctors entering the country.
Since 1979 the top 10% increased their share of national income from 34% to 48%, the top 5% from 23% to 37%, the top 1% from 10% to 21%, the top 0.1% from 3% to 10%, and the top 0.01% from 1.4% to 5%. The richer you were, the faster your slice grew. Tax records for 2005 showed that 43% of the top 0.1% were executives at non-financial firms, and 18% were financial-sector executives, law 7%, medicine 6%, and real estate 4%. The 2010 median compensation for CEOs at corporations with at least $19.8 billion in revenues was $11 million, per the WSJ. American CEOs typically are paid 2-3X their European counterparts. It wasn't always this way - when union leaders were powerful they kept an inhibiting eye on CEO pay.
Back in 1979 the financial sector was only 11% of the top 0.1%, and other CEOs were at 48%. Since then a greater emphasis on trading (vs. banking), shifting from partnerships to corporations (more funds, less personal liability), and deregulation have brought its increase to 18%.
Since 1978 productivity in the non-farm business sector is up 86%, but real compensation per hour (including benefits) is up just 37%, per Alan Blinder. Per Gini index data the combined effect of federal taxes and federal benefits had reduced inequality by 23% in 1978, but only 17% in 2007. Noah's prescriptions include raising tax rates on upper incomes (now lower than at any time since 1931), importing more skilled labor, placing price controls on colleges/universities, increased regulation on Wall Street, and universal preschool.
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The Great Divergence: America's Growing Inequality Crisis and What We Can Do about It by Timothy Noah