“It’s called the American dream – because you have to be asleep to believe it” – George Carlin
The level of inequality in the United States is primarily dictated by public policy. That is the conclusion drawn and substantiated by Paul Pierson and Jacob Hacker in ‘Winner Take All Politics: How Washington Made the Rich Richer—and Turned Its Back on the Middle Class’.
The authors frame inequality as a mystery. They set out to debunk the myths of how inequality occurs, how the fabled 1% obtained and maintained their explosion of income at the top and why a college degree does not guarantee you the keys to the kingdom of the top percentile.
There is a strong common theme in reverting to what happened since the 1970’s – an economic turning point where business moved into Washington and started framing the game in their image.
A poignant quote from chapter three that frames the direction of the American economy is from a French thinker, Charles de Montesquieu. He is quoted to say that “to men of overgrown estates, everything which does not contribute to advance their power and honor is considered by them as an injury.” (p.72).
With this in mind, we explore some of the ways in which inequality has been able to take hold in the American economic pie.
Here are some of the mysteries the authors tried to solve in their book.
The education gap?
Winner Takes All Politics takes on a very common belief attributed to the cause of economic inequality which is the gap in education between high school graduates and college graduates.
Winner Take All addresses this issue by referring to an established theory named ‘Skill-Biased Technological Change’. Said to be “by far the dominant explanation for American inequality trends” (p.34).
The theory categorises education and advanced work to be much higher in value and therefore reflect a much higher wage. This higher wage becomes bigger as supply grows slower than demand and as a result, inequality in income.
It is contentious to challenge this paradigm. Standard and Poor’s (2014) claim that “increasing educational attainment is an effective way to bring income inequality back to healthy levels” (para. 9), the idea of ‘healthy levels’ is not defined.
In a statement that contradicts this claim, Wells (2006) suggests that educational expansion mostly benefits the middle and upper classes, claiming “the wealthy may reap a disproportionate benefit of education, and ultimately income.” (p.20)
But Pierson and Hacker, playing with fire, challenge the idea.
They argue that while the college educated are better off, that is “not because they experienced massive economic gains. Rather, they merely managed to avoid the devastatingly slow growth at the bottom.” (p.35)
They back this up by explaining the massive discrepancy between income growth in the top 20% and the top 1%. Assuming that this top 20% are mostly college graduates (with 29% of Americans with degrees) even then, the top 20% average income has raised “one-fourth as quickly as the top 1%”. (p.35)
And, despite the massive gulf of inequality between groups, the explanation for the growth of the top 20%? Increased household work hours (p.38). A very dire assessment for college graduates outside the upper-upper classes.
To qualify the point, there are indeed some college graduates in the 1%. That is not the argument here. The argument here is that a college degree does not come close to assuring your position in the top 1%. This is called ‘within-group inequality’ and “within-group inequality accounts for a major part of the rise in inequality since the 1970s” (p.36).
Explanation for within group inequality can be attributed to the ability to perform high level ‘abstract tasks’ but this does not convince the authors.
They go on to explain that SBTC and within-group inequality is not closely mirrored by other industrial nations, but do not provide compelling evidence to show why the…