This study summarizes the evidence on the increase in inequality in earnings and incomes in the United States in the 1980s and 1990s and documents that the new inequality is due largely to the falling real earnings of lower paid workers. Statistics show that the widening of U.S. earnings and income distribution and the impoverishment of low paid Americans is not the artifact of some political debate but a real development in the U.S. economy. The author argues that the new inequality will have deleterious effects not only on Americans in the lower rungs of the income distribution but on the rest of society as well. He discusses some possible private and public sector policy responses to raise the economic well-being of the low paid but cautions that policies to ameliorate, if not reverse, the rise in inequality are likely to be expensive and possibly socially divisive.
At this stage of knowledge, no one can truly say what will or will not work or what the costs will be. However, Dr. Freeman stresses that three things can be done now: first, recognize that a serious inequality problem exists; second, assess the consequences for inequality of current policies and potential changes in policy; and third, explore ways to resolve the divergence of earnings problem. The study was commissioned by the Committee on New American Realities of the National Policy Association.
