Rising US Inequality: How We Got Here, Where We're Going

Also, how much of this effect is basically the rest of the world playing catch up in terms of economic production?

China and the rest of Asia are magnitudes more competitive compared to 50 years ago. And prior to that US industry was unmatched thanks to the massive effects world war 2 had on the other, western industrialized nations.

Yep. And even the people with college will necessarily compare less favorably with that older cohort over time.

In a world where everyone has a college degree, well, some people with college degrees will have to be the ditch diggers so to speak.

I don't know how you solve that problem? It's just math.

It's like playing an MMORPG-style videogame where the developers keep raising the level cap. The higher the cap, the worse off people who are just starting are (and why in those games developers keep having to provide a "catch up mechanics", like a scroll to rush you to level cap, or making stuff easier to obtain. In the real world that's a lot harder to do though).

Probably made worse by the vastly higher amount of dual income household, so someone with just 1 income is proportionally worse off.

A single unskilled worker vs a couple of high skill workers, competing for supply & demand against each other...yeah, the former's not gonna have fun.

This suggests that everyone going to college is doing well. That isn't the case. There are people who have master's degrees, but are earning $15/hour.

I agree with your point that populations can change over time. Fifty years ago, many people didn't get degrees and made good money. Today, people without degrees (and some with) don't make good money.

So instead of trying to segment in groups (the college educated vs. everyone else), let's just look at everyone. This removes the concern of our shifting populations.

One metric to look at is median income. Adjusted for inflation, it hasn't budged much in decades. In the past 42 years, it's increased about 32 percent.

https://fred.stlouisfed.org/series/MEPAINUSA672N

It's basic supply and demand. Globalization puts high downward pressure on wages because people in Asia can live on far less money than Americans. If you have to raise prices because of higher cost of living then your customers simply buy from somewhere else. Then there are certain degrees with too many graduates which flood the market which results in lower wages. Others have a shortage of graduates which means the companies have to hire from a labor pool where everyone is employed and therefore have to outbid their competitor to hire anyone at all. Add double income households which compete for rivalrous (if I have it, you don't have it) goods like housing and the end result is the US economy.

Income inequality comparisons are full of problems like this. Reflecting your intuition, I’d imagine most people would conceive of increasing income inequality to mean increasing gaps between people in the same station in life across two time periods.

But demographics have changed dramatically since 1970. For example, immigrants make up almost 3x as large a fraction of the population (from 5% to almost 15%) than in 1970. Obviously, if you add a large number of (typically) economically disadvantaged people to the population, income inequality is going to go up, even if there is no change in incomes for everyone else: https://www.migrationpolicy.org/sites/default/files/source_i....

Likewise, peoples’ incomes increase with age. The population overall has grayed significantly. Again, even if wealth inequality wasn’t increasing for people of any given age, changing the age distribution of the population will affect income inequality.

Finally, a larger fraction of the population now comprises historically disadvantaged minorities. While the income gap between races in the US is a huge problem, it’s a different problem than “income inequality” genetically, deserving more targeted solutions. (And even that income gap is hard to analyze, because the ages of people of different races in the US differ quite dramatically). The median age of non-Hispanic whites is 42. The median age of Hispanic people is 28. The median age of African Americans is 33: https://www.pewresearch.org/fact-tank/2016/07/07/biggest-sha...).

Income inequality probably is going up. But I’ve never seen a study that actually holds demographic changes constant so the result reflects peoples’ perception of what income inequality means.

College is just a proxy for IQ. Shoving more people into college isn't going to make them smarter, if they don't have the mental horsepower. Basically you've got two levers, genetics and environment, and practically you can only change the latter by early intervention. Nutrition, enriching environment, and good education.

> -> Lesser immigration would've led to a higher GDP/capita figure for US.

How?

> Employers would be forced to pay higher wages and people would be more easily to retrain for different jobs.

Labor has long been subject to outsourcing as a result of entities trying to reduce costs and increase profits.

Huge assumptions there. And some significant work has gone into investigating the first and found it's the other way round: https://www.oecd-ilibrary.org/docserver/9789264288737-8-en.p...

> We can help Africa and South american countries

It would be a significant improvement if the US stopped "helping" South America. Allende would like a word.

I think that's an un-generous interpretation of the quote.

Yes, I think there is good evidence that if you are in a poverty-stricken family and you don't get very early intervention, that by mid-elementary school it is too late for your average poor kid. The reason being that the rest of your environment of poverty is going to be pretty much pulling against you the rest of your childhood, so intervention while your hopes and goals are not yet formed is your best bet.

And come on, the author wasn't saying if you didn't attend a Caribbean summer program that you're underprivileged. I believe he was just using that to highlight the pretty extreme lengths that middle class and above parents go to provide their children with educational enrichment (including music lessons, sports programs, summer camps, etc.) that put poor kids at a lifelong disadvantage.

For a lot of 8 year olds that is accurate. Imagine not being able to read at 8. If your parents don't intervene you will be handicapped for life. On the other hand if your parents tutor you then it becomes a non-event.

The example they gave is pretty terrible, but yes, a lot has already been determined by age 8 based on parental engagement in their child’s education.

That said, it’s simpler than the example they gave. Some well-established examples:

- Did you read to your child from a young age? Bonus points if you did it in an “interactive” way.

- Did you engage with your children in dialogue using more or less proper speech (i.e., not baby talk). Ideally this is in a wide range of topics and with different types of language (e.g., description, narration, etc.). Ideally with some modeling of good language as well.

- Did/do you review your child’s homework with them? Ideally, did/do you sit with them quite a bit and review study strategies, time management, etc.?

- Do you constantly have new sources of learning available to your kids, and do you encourage them to use them (ideally by engaging with said materials with them)?

- Ideal but optional, do you try to give your children a wide range of experiences. Simple examples are field trips, intro to various sports, intro to various arts, etc.? The article characterizes this with very high end examples, but they can be done cheaply.

The parents who do these things give their children a huge advantage in life.

Some folks on HN may be asking something along the lines of “um, isn’t that what pretty much all parents do?” The answer is largely no.

A common (perhaps close to median) example of poor parental engagement in the education environment:

- Child is never read to... ever. Parent may not be so good at reading.

- Child rarely spoken to, except via commands. Household mentality is that children are meant to be seen and not heard.

- Child largely left alone to keep themselves entertained on their own in a resource-poor environment.

- Child is never helped with homework. Never encouraged to learn for the sake of learning. School is often disparaged, and doing well in school may entail being abused by family members and/or peers.

- Child never leaves their neighborhood, much less their town, state, or country. Much of what is seen on TV that is supposed to be a caricature of modern life is largely or completely unrelatable to the child’s own environment.

- Things like going to anything cultural that is oriented towards children is non-existent. No children’s museum, no children’s theater or orchestra. Sports will be whatever (if anything) is played locally.

These folks have an uphill battle in terms of fighting inequality.

If you want to do something to counter the second example, support Headstart programs financially and politically. These programs have proven results, but somehow find themselves consistently compromised in terms of funding. These programs are low-hanging fruit for easy wins.

Depends on the quality of the education system, it well could be that a gap gathered by 8 will have a huge impact. The system can be quite competitive at 8 (and in some countries, as early as 5 or 6)

My brother is a med student on the south side of Chicago, and he has been tell me about how much of a real shock it is to see how far behind some of the children are even by age 8. This isn't a lack of summer camp. It is illiteracy, completely stunted intellectual development, that is so far behind, it is obvious at the age, the child has 0 chance of competing in the US economy.

If anything, age 8 is an overestimate rather than an underestimate. Nowadays, the preschool years are considered crucially important towards determining lifelong outcomes. It's a good idea to not be poor from age 0 to 2.

I actually had a very similar conversation with my wife last night about our son's future education (wish me luck) where I effectively said the same thing.

To paraphrase my argument: reading, writing and math are too important to be taught at school or rely upon their standardised tests. if I have to wait for a test result from school to tell me my child can't do the thing, I've already failed. And in addition he'll have started on music, some sports, sciences and programming likely before he ever reaches a compulsory classroom.

This idea that teachers, in a group environment, with a standardised curricula can compete with that is just downright dishonest. And the idea that this is meritocratic and that children compete on some level playing field is absurd. You can't teach finance and programming and economics well at school because most current teachers do not understand or cannot implement such into their own lives,and philosophy just isn't taught in general.

By the time you reach cs 101 at university, how is the average child who learnt to type at school and that computing is an iPad with YouTube attached supposed to be realistically competing with the other students who already have 10 to 15 years of experience?

and if you cannot read or do math at 8, on average, what sort of life have you had and how do you compare with children already thriving and building upon what they know?

perhaps we also have a disagreement about where lower/middle skill jobs and wages are also going? you might be assuming "well, he won't thrive in comparison, but he can live a nice normal life at a "insert basic job here", under the assumption basic job will exist or have a good living standard.

By all means, I want a world where learning is available to all and we tell people that they can improve, but I'm not in denial about the stark probabilistic realities a lot of kids face, and I haven't even touched upon anti-intellectual attitudes and active consumerist/marketing/ ideological strategies that are actively trying to stop people learning to be educated or think critically...

It's probably too late by the time the child was born. Those stupid violin lessons or summer programs are not really a sign of competence. They are just a status symbol of rich families that can afford to let their children enroll in private school and an expensive ivy league college.

If you were to ask me then honestly it's only too late when you're 16 years old. At that point you should already know what type of college degree you want and you should have at least some experience in whatever you're going to spend 4-5 years of your life studying. But this has more to do with "finding yourself" than economic opportunity. If all you want to be is a corporate drone with a paycheck then you just need to look at the average salaries and the dropout rate to make sure you don't fail at something you're not passionate about.

Hi, black software engineer from Chicago's West side. From 1st through 4th, I attended a community elementary school where my older sister and I were the only students who could effectively read at all. The entire school was participating in a remedial education program where all the textbooks, 1st through 6th or so, broke words in sentences down by syllable. They barely practiced math, they were so focused on just getting the ability to read to be set in. This created immense ostracization for my sister and I. She graduated after two years whereas I stuck around for another two through fourth. To give you an idea what some of the parents were on, once a bunch of classmates, whom I somehow got grouped into, were held for detention after school in class in third grade because they were ruthlessly making fun of a girl. As we all mandatorily stood with our hands on our heads, I watched as her father walked her MUCH OLDER MALE COUSIN into the class, after school hours, and proceeded to order him to beat each of us up one-by-one for making fun of his daughter. I was second to last for a beating when my third-grade teacher finally returned to the class and stopped this assault. Mind you, my mother worked at the school and this older cousin knew this and knew her as well. I've also seen kids smacked around and chastised _in front of the class_, by their parent, for failing to fight back in a fight (which is kinda important to learn, but that ain't the way to do it).

After years of this someone finally took notice and transferred me to a school in a historically Jewish neighborhood on the north end of the city where I was finally surrounded by children that were my academic peers, on a hour or so bus ride each day early in the morning. My first day of class in my new school was when I discovered there was this thing called cursive writing.

I don't think enough people understand the situation for a growing child in the tougher areas of Chicago, this was just all in the 90s, things are worse now.

I'm not sure what you mean by that last sentence. Are you saying if only the poor were better with money they'd stop being poor?

One aspect I haven’t seen much discussion about is that WWII may have acted as a kind of giant social mixer.

I mean this in the sense that people who might hardly meet each today were thrown together often more or less as equals. At least within the (ok, very limited) bounds of the race and gender norms of the day.

Today a programmer, middle manager or radiographer say can get to middle age without ever really “meeting” a labourer, truck driver or meat packer. I think that has pretty deep implications for labour solidarity.

You are describing roommates/co-ops.

The article tell us: "You had the same thing with the Industrial Revolution that concentrated more and more wealth into the hands of capital. "

So, your identification of causation with the end of the gold standard it's not at all clear.

In a way, inflation can be re-distributive because is good for the debtor and bad for the lender.

Maybe, is time to accept that wealth accumulates, money call money, and the leveler are wars and disasters or some kind of political action. In other words, the system is not stable.

> In other words, inflation is a policy choice to combat sticky wages, which (if you think that's a problem), the solution is to, apparently, screw labor by devaluing their wages from under them.

This is complete misunderstanding of how this works. Inflation does not increase the real return from stock markets. Inflation erodes also capital. Capital must work just to stay still.

Inflation or not, the wages reach equilibrium. You can't improve the aggregate sum of wages by deceasing inflation. If nominal wages are too high the equilibrium is found trough periods of unemployment. Small inflation keeps unemployment and friction in job markets in check.

Small inflation keeps income inequality in check.

https://www.cepweb.org/wp-content/uploads/2014/05/CEP_WP_Inf...

>Inflation and Income Inequality in Developed Economies

>We find a U-shaped link between long-run inflation and income inequality. Low inflation rates are associated with higher income inequality. As inflation goes up, inequality decreases, reaches a minimum with an inflation rate of about 13%, and then starts rising again

Economists have not necessarily been blind to social needs - policy makers and politicians benefiting from a revolving door of oligarchs enabled by various institutions culturally stationed to manipulate a larger population into working under these few for smaller and smaller pieces of power. Milton Friedman made it quite clear that a free market doesn’t provide a social safety net in any way and that a population that doesn’t succeed in the market should need some basic way to survive or we’s face huge social unrest. While America had social security and Medicare early on, we’ve dismantled their efficacy with a toothless, captured government while private sector has gained in power enormously in the form of multinational corporations the Founding Fathers all distrusted (they were no fans of the British East India Company).

I think we’ll have one or two more larger scale revolutions before people around the globe learn that consolidated power of any sort whether it comes from religions, the public masses (populism), government, corporations, or perhaps even science is dangerous.