While it is heartening that income inequality is receiving increased attention in the press, conservative commentators are once again trying to reframe the debate as a referendum on the social habits of the poor. Last week, Paul Krugman tore into fellow New York Times columnist David Brooks for his contention that income inequality is really two distinct phenomena: “Red Inequality,” which is the wage gap between those with and without college degrees among the bottom 99 percent of wage earners in the Heartland; and “Blue Inequality,” the result of a coastal coalition of “old boys club” types, wielding outsized political influence and enjoying unjustly low tax rates.
According to Brooks, it is a mistake to focus only on Blue Inequality when the “disorganized social fabric of the bottom 50 percent” (Brooks identifies lack of education, divorce, having children out of wedlock, smoking, and obesity) is the real reason for enduring inequality. “Liberal arts majors like to express their disdain for the shallow business and finance majors who make all the money,” Brooks opines. “It is easier to talk about the inequality of stock options than it is to talk about inequalities of family structure, child rearing patterns and educational attainment.”
Krugman counters by pointing out that even the income share of the highest quintile—composed overwhelmingly of college graduates—has barely budged in thirty years, if you discount the bulk of that growth which comes from the top 1 percent. Everyone else, even families in the second highest quintile, have seen their share of income drop.
It is true, as Mr. Brooks claims, that the economic benefits of a college education have risen steadily over the past several decades. But that gap is dwarfed by the outsized gains at the very top of the income spectrum. While overall productivity has soared, average real after-tax income grew by just 18 percent for the bottom 20 percent of households since 1979. The top 1 percent saw their income grow by 275 percent. According to The Century Foundation's Greg Anrig, those gains help explain the growing divide between more- and less-educated workers:
Both the gaps between the wealthiest Americans and everyone else, and between those with and without college educations, are national phenomena that are not dictated by geography as Brooks claims. More importantly, both aspects of rising inequality matter because they are inter-related. It's because almost all of the income gains have been accruing to the top 1 percent that everyone else has experienced stagnant or declining compensation. In the past, when the highest earners weren't running away from everyone else, there was enough income to share across the income spectrum that mitigated gaps among workers with differing educational levels.
Will Wilkinson is naive to ask what point there is to Krugman's concern that the United States is becoming an oligarchy (“How does this help? To what question is this the answer?”). The issue is not whether “Blue” or “Red” inequality is more important, or whether that kind of delineation is even useful. The American people are currently being presented with two distinct visions for the future of the country: one in which the tax burden shifts from the rich to the poor, leading to less funding for social programs; and one in which taxes are raised on the rich to fund those programs that help lift the poor out of poverty and increase social mobility. The first solves neither Blue nor Red inequality; the second tackles both, by redistributing resources to stimulate the broadest social and economic benefits. The relationship between unprecedented growth at the top of the income spectrum and stagnation at the bottom requires a progressive, not regressive, solution.