Income Inequality

Mostly I micro-blog now (Facebook, Google+, and Twitter), but sometimes I need to write something a bit longer.

Lately, income inequality has been a Big Deal, being one of the (many) drivers behind the Occupy movement. It's amazingly polarizing and politicized, and the debate is extremely lacking in relevant information.

The data is conclusive that not only has the gap between rich and poor been widening in the US (let's call that income inequality), but the poor and much of the middle class are less well off (let's call that income erosion). Given the lack of useful information in the news, I did a little digging.

First, here is the big picture:

• Income inequality and erosion began to grow in the US starting in the 1970s and has steadily increased
• The growth in income inequality and erosion has been independent of cyclic upturns and downturns in the economy
• The growth in income inequality and erosion has been independent of which party is in power
• The growth in income erosion extends through much of the middle class (to the 77th percentile of income), though it hits the poor the hardest (In 2003, the 77th percentile household income was around $83,000 a year)
• The upper 23rd income percentile is made up mostly of highly skilled white-collar workers
• The growth in income inequality and erosion is an international phenomenon, impacting 17 of 21 OECD nations, including the US, UK, and Japan.

Some obvious conclusions can be drawn:

• No one political party or administration can be responsible for a 40 year trend
• This isn't a single nation issue, so things like changes to US tax laws likely aren't a major factor
• The unemployment rate has little or nothing to do with the trend
• This isn't just about the 1%

Most of the current rhetoric, however, ignores the big picture.

The why is less sure. The commonly cited factors are:

• Globalization:
• Off-shoring of blue-collar jobs (not just from the US, but from developed countries in general)
• Replacing lost blue-collar jobs with lower paying service sector jobs
• Rising Barriers To Economic Mobility:
• The level of education and training needed to be a "highly skilled" worker is increasing
• Education is getting more expensive

Since globalization isn't likely to go away, it comes down to education, education, education. 

Next time: Why we shouldn't focus our educational system on just producing high test scores. Duh.