'Wages and wives' are a big reason the rich are getting richer
Matthew Eisman/Getty
Over the past four decades, the gap between those at the top of the income ladder and everyone else has widened. The "top" here includes, but is not limited to, the top 1%. A larger group, equivalent to the top fifth of the income ladder, have seen their incomes rise faster than the majority of Americans.
The top fifth (quintile) of US households saw a $4 trillion increase in combined pretax income in the years between 1979 and 2013. The combined rise for the bottom 80%, by comparison, was just over $3 trillion. The gap between the bottom fifth and the middle fifth has not widened at all. In fact there has been no increase in inequality among the bottom 80%.
It is not correct to describe the inequality problem as a "growing gap between rich and poor." The problem is a growing gap between "the rich" — if we are willing to accept that label for families with $120,000-plus incomes — and everyone else.
Widening income inequality reflects two trends in particular: increased gaps in earnings and greater labor-market participation for women who are married with children — wages and wives. The trend in earnings has been toward higher wages at the top, largely as a result of increased returns to human capital. While real wage rises have been sickly for those outside the top quintile, even as the economy climbs out of recession, the average salary at the top has grown by 58% since 1979. For sure, this figure includes the top 1%, who are seeing their earnings grow fastest of all. But even for the 19% below them, average wage and salary income grew by a robust 44% over the same period.
Skye Gould / Business Insider
This earnings divide is likely explained by many factors, including the decline of trade unions, a shift from full employment, increased competition as a result of globalization, downward pressure on wages from immigration, and "skills-based technological change." Debates continue to rage among scholars over the relative importance of these different factors, at different points in time, and for different groups. But one thing is uncontested: Skills and qualifications are a big part of the story.
Over the past few decades, the market value of education has risen sharply. The dramatic growth in the earnings premium for college graduates is "a component of rising inequality that is arguably even more consequential" than the rising incomes among the top 1%, according to the labor market economist David Autor.
Women in the workforce
The other factor driving inequality at the top is the revolution in women’s work. In the past few decades, women have entered the workforce in growing numbers, with the fastest rise among mothers. It is true that in recent years the rise have leveled off, but previous trends have made for a sizable increase in the proportion of women in paid work.
Skye Gould / Business Insider
If high-earning women were marrying low-earning men, the effect of increased female labor-force participation on income inequality might be positive. But that’s not happening. Instead, well-educated, well-paid women marry well-educated, well-paid men, a process sociologists have given the stunningly unromantic label of "assortative mating." This means that the growing gaps we see in earnings are magnified in terms of household income. My colleague Gary Burtless estimates that between 10 and 16% of income inequality in the US is caused by the "growing correlation of earned incomes received by husbands and wives."
Brookings
The combination of wage inequality, increased female employment, and assortative mating has therefore driven a sharp and growing income separation of the American upper-middle class.
Why does this matter? Some object to inequality on simple moral grounds (see Jeremy Waldron’s new book, "One Another’s Equals," for a contemporary expression). My fear is that American inequality is starting to replicate itself across generations. In a society and economy where money matters a great deal — in terms of access to housing, education, and healthcare, for instance — an increase in income inequality is likely to lead to an increase in other forms of inequality, too. Upper-middle-class parents are able to invest heavily in the human capital of their children, which in turn increases their chances of remaining at the top of the income ladder — what The Economist labels as "hereditary meritocracy."
The imaginative power of the American Dream stems from its inclusivity, from the idea that it is available to all. Right now that ideal is endangered, in part by the fracture between those of us at the top of the ladder and everyone else. The question is whether we are willing to do anything about it.
Richard V. Reeves is a senior fellow at the Brookings Institution and author of "Dream Hoarders: How the American Upper Middle Class Is Leaving Everyone Else in the Dust, Why That Is a Problem, and What to Do about It."
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