Inequality in America

16 09 2010

Slate Magazine has been running a series of articles by Timothy Noah on the growing inequality in the United States. Since the late 1970s, the gap between the rich and the poor in that country has increased dramatically. The share of the national pie controlled by the top few percentiles of the population has grown.

It is also increasingly difficult for Americans to escape from the social class in which they were born–according to the OECD it is much easier for a bright young man from a poor family to get rich in Canada, Australia, or Germany than in the United States, Italy, or the United Kingdom. In the United States, a father’s income is a stronger predictor of his son’s income than in some other countries.

The higher the bar, the lower earnings mobility across generations.

Everyone agrees that inequality has intensified and most people regard growing inequality as a bad thing. We need some inequality to make people work hard, but nobody wants to live in a society in which a hereditary aristocracy of rich people live in gated communities surrounded by slums.

However, the precise reasons for the increase in inequality in the United States are a subject of debate. Noah considers a number of possible explanations: the breakdown of the nuclear family (the favourite explanation of social conservatives), immigration from low wage countries (which drives down the wages of unskilled workers), the technology boom, federal government policy (tax cuts for the rich), the decline of labour unions, globalization and the outsourcing of manufacturing work (no more quality jobs at GM), and the poor quality of public education in the United States.

There has been some research on inequality in Canada, where the distribution of wealth is much more egalitarian than in the United States but less egalitarian than in the Scandinavian countries. See here. The precise reasons for the lower degree of measurable inequality in Canada are, of course, open to debate, but one suspects that the presence of so many high wage jobs for men in the natural resources sector is a factor.

According to a 1998 StatsCan report:

“Conventional wisdom has it that U.S. society is both richer and more unequal than
Canadian society and that the two have become more unequal in recent decades. Moreover,
increasing globalization has raised concerns about a “race to the bottom” – that global
competition in the production of traded goods and services is forcing countries with more
generous social transfers or more egalitarian wage structures to abandon these mechanisms or risk
losing out. This article addresses such conventional wisdom by focusing on a comparison of
income inequality in Canada and the United States over the past two decades. Given the
similarity of the two countries’ societies, as well as their close and growing economic integration,
with the highest level of bilateral trade of any two countries in the world, this comparison
provides an opportunity to assess the possible impact of globalization on the convergence of
income inequality… A number of intriguing results emerge from the analysis. One is that, even though the
U.S. economy appears better off in terms of total output per capita, families (including unattached
individuals) living in the United States are not necessarily better off, in terms of disposable
income, than their Canadian counterparts. Indeed, roughly half of Canadian families had
disposable incomes in 1995 that gave them higher purchasing power than otherwise comparable
U.S. families. The reason is that the very rich in the United States pull up the average income
much more than in Canada, while those at the bottom of the U.S. income spectrum have less
purchasing power than those at the bottom in Canada.”

The excellent articles in Slate are must-read material for anyone interested in social class or anyone who teaches modern North American history.

As a historian, I find the current situation in the United States curious, since 19th century Americans prided themselves on the rough equality  of conditions in their country and its vaunted social mobility. They often contrasted their society with the monarchies of Europe, where there was a vast gulf between the peasantry and their rulers. Americans called their country a nation of “happy mediocrity”: nobody was rich enough to live in a palace like Versailles, but everyone had enough to eat. It now seems that the opposite is the case and that some European countries have become more egalitarian than the United States.



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