Source: Goos, Manning & Salomons, cited in “Losing Middle America: The Polarization of Jobs in the United States.“
Continuing our discussion of the sources of income disparity in the United States… The chart above shows that the hollowing out of middle class jobs, and concomitant gains in low-skilled, low-paid jobs on the one hand and high-skilled, high-paid jobs on the other, is not unique to the United States. The polarization of occupational pay is evident in every major economy in Europe. (Click on chart for more legible image.)
So, I must confess, the evidence is compelling that the income disparity is largely structural in nature, rooted in the changing nature of work in the knowledge economy. In a previous post (“The Great Divergence“), I played with the idea that the rise of big, overweening government was a major contributor, and it may be on the margins. But when confronted with the evidence above, I have no choice but to backtrack (although I reserve the right to backtrack again if presented evidence that sheds new light).
The great challenge confronting the U.S., I would suggest, is to increase the percentage of the population earning high-paying jobs. In a global economy, that should be not be impossible — all we have to do is ensure that Americans are acquiring the skills required by the knowledge economy. Unfortunately, that is precisely where we are failing. While we have a world-class higher education system (it’s way too expensive, but it is world class), our K-12 schools and popular culture are failing to inculcate the basic skills that would allow 50% to 60% of Americans to get anything out a college experience. Bottom line: there appears to be a glass ceiling on upward social mobility.
The second great challenge is figuring out, given the failure of our educational system (or of half the population to be educated), is what to do about the widening income disparity. Do we transfer more wealth from the rich to the poor? If so, how do we do so in such a way as to avoid enervating the poor and deepening the culture of dependency and entitlement? I don’t have ready answers.
(One last note: The chart above shows why income disparities are widening. But it still does not answer the question in “The Great Divergence” why total compensation (regardless of how it is distributed) is not keeping pace with employee productivity. That issue remains to be explained.)
