NCPA - National Center for Policy Analysis


June 7, 2007

The rise of economic inequality promises to be a hot issue in the 2008 election, says columnist Robert J. Samuelson.  Until now, most economists have blamed the growing pay gap on skill differences caused by the explosion of computer technologies.  Economists Frank Levy and Peter Temin of the Massachusetts Institute of Technology contend (correctly) that this is too simple; they also blame a shift in social norms and business practices.

Economic inequality is an intellectual quagmire, because its origins and consequences are so murky, says Samuelson.  Contrary to popular belief, for example, it has not prevented most Americans from getting ahead.  Consider families with children.

According to the Congressional Budget Office:

  • From 1991 to 2005 income gains averaged 35 percent for the poorest fifth of these households.
  • They averaged 19 percent for the middle three-fifths and 53 percent for the richest fifth.
  • But their gains have decreased slightly since 2000.

Here's another twist to the discussion: Today's immigration aggravates inequality, because so many new immigrants are poor and unskilled.

In 2008, economic inequality could become a political flash point, because the income gains at the top seem so outsized and gains elsewhere are so choppy.  The very uncertainty means that, even amid great prosperity, Americans feel anxious.  Whether the debate becomes an empty exercise in class warfare or a genuine search for ways to reconcile economic justice and economic growth is an open question, says Samuelson.

Source: Robert J. Samuelson, "The Equality Quagmire," Washington Post, June 6, 2007; and "Changes in the Economic Resources of Low-Income Households with Children," Congressional Budget Office, May 2007.

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