By Frank Levy
In the late 20th century, American policymakers embraced free-market economics, with three results: dramatic improvements in unemployment, inflation and the budget deficits; a modest pick-up in the growth of average wages; and a higher level of income inequality. Using income distribution as a mirror of economic life, this book argues that equalizing steps to re-empower workers are required if U.S. economic progress is to continue.
- Earnings, wages and salaries now make up only 80 percent of census-reported income, compared to 90 percent in 1949. More than 10 percent of income comes from government payments alone: Social Security, Medicare and Medicaid, unemployment insurance and poverty-relief programs like welfare and food stamps.
- After a two-decade hiatus, productivity growth in the late 1990s returned to the rapid rates seen after World War II. The corresponding growth in incomes was less equally shared, however, in part because "skill bias" drove up earnings for the college-educated at the expense of dropouts and unskilled laborers.
- The service sector now accounts for more than 77 percent of all employment hours. Because of deregulation, globalzation and technology change, power has shifted from workers to employers, generating growing competition for good jobs -- those that involve well-paid, clean, steady work in pleasant surroundings.
- Changing patterns of living arrangements are redefining households, accounting for about 40 percent of the increase in "household income" inequality since 1969. "Female-headed family," for example, usually means a low-income family. But the class structure now is largely along educational lines.
The quality
of "equalizing institutions" - schools, welfare systems, health
insurance, retirement plans, other government programs - must increase
to return power to workers if growing U.S. economic disparities are
to be overcome. The goal is to expand individual choice while maintaining
a safety net. Econoomic progress can thrive only within a structure
of fair treatment.
---
Frank
Levy (flevy@MIT.EDU)
is Daniel Rose Professor of Urban Economics at the Massachusetts Institute
of Technology. He has written extensively on both U.S. living standards
and the problems of school reform. His next book, The New Division of
Labor: How Computers are Creating the Next Job Market (with Richard
J. Murnane) will be published in spring 2004 by the Russell Sage Foundation/Princeton
University Press.
