Income inequality is a phrase that haunts the American punditocracy, if not its political system. Every pundit worth his syndicated column across the ideological gamut has penned an article recognizing income inequality as an ailment in modern America. Although this particular narrative is framed in idiosyncratic terms and blame for income gaps is selectively allocated, its broad contours can easily be summarized. The authors’ main point is as follows: there is no longer one America in this story – rather, there are two. The gap between the “haves” and the “have nots” has always existed, but in this newly bifurcated country it is growing larger and larger.
From here, the bipartisan comity ends. The reasons for this narrative and some possible prescriptions to alleviate or reverse income inequality differ. Some conservative thinkers such as Charles Murray believe that income inequality derives from cultural practices. He notes that Americans who get married and raise their children in a nuclear family are wealthier, have arduous work ethics that lead to a perpetuation of success, and are more likely to send their children to college. One corollary of Murray’s argument is that traditionalist conservative values need to be readopted by lower-class Americans. Conversely, liberal thinkers such as Thomas Friedman see income inequality as a result of a divide in education. Friedman argues that in a “flat world” where jobs, firms, and capital can seamlessly shift across the globe, only those best equipped and most talented can find a job. He and others point to the discrepancy in unemployment numbers (while national unemployment is 7.6 percent, Yalies can take solace that the unemployment rate for college graduates is only 3.9 percent), and call for an increase in spending on public education.
Two political scientists, Paul Pierson of Berkeley and Jacob Hacker of Yale, not only delve into this discourse with a bang, but they argue from the outset of Winner-Take All Politics that the very narrative everyone can agree on is wrong. For Pierson and Hacker, the broad narrative should not be one comparing the “haves” with the “have nots.” As the authors note, such a narrative implies that a reasonably large segment of the American population has benefitted at the expense of the bottom twenty or thirty percent of the population. In reality, when actually studying the economic data, Pierson and Hacker concluded that income inequality in America was the result of a tiny sliver of the population, less than 1%, taking an astounding amount of America’s economic gains since the late 1970s.
“The story is about the have-it-alls versus the rest of the Americans,” said Hacker in an interview with Bill Moyers, when explaining that these “have-it-alls” – those in the top 1 percent of the American population – have acquired 40 percent of the nation’s GDP growth since 1979. In the chart below, the authors demonstrate how even Americans in the wealthiest 20 percent have hardly seen their incomes grow in the last 30 years.
Pierson and Hacker argue that even the seemingly decent gains of the Americans in the 80th-99th percentile (a 55 percent rise in income over the past 27 years) is illusory. In the same interview with Moyers, Hacker said that nearly all of these gains can be attributed “to the simple fact [that] American households are working many more hours today than they were in the late 1970s,” in part “because women are much more likely to work outside the home.”
Pierson added that, if anything, this graph was an “understatement,” because tax data could not accurately show the activity happening within the top 1 percent. “Those in the top-tenth of one percent saw their incomes rise by even more then your average 1 percenter,” said Pierson. The authors claim this astounding concentration of wealth is in direct contrast to what happened in the generation succeeding the Second World War when incomes grew at roughly the same rate for people across every income group.
There are a number of other surprising claims, powerful examples, and original thinking in this book. It is well-written and holds a sonorous voice, but – two years after it was published – it is a voice still too often neglected amidst the cacophony of Washington.
Editors’ Note: read a response to this book review here.