Want to understand today’s inaction in solving economic problems? Read The State of Working America

Everybody knows the most pressing economic problem facing the United States today is joblessness. And many also know that this problem is economically solvable, yet not being solved largely because of political gridlock.

But, some might still find it hard to believe that policymakers could really be so indifferent to the economic struggles of most American families. This is where The State of Working America—released yesterday—comes in handy. Think of it as the Rosetta Stone of American economic policymaking over the past generation. Or just a book and accompanying website with lots and lots of charts and tables. Either way.

The two important points that come through loud and clear from its tracking of trends in income, wages, jobs, wealth and poverty are:

  • The primary barrier to low– and middle-income families seeing decent rates of economic growth over most of the last generation was the simple fact that a very narrow slice at the very top claimed a vastly disproportionate share of the fruits of economic growth
  • This sharp rise in inequality was not just a sad accident. Instead, the fingerprints of intentional policy decisions are all over it, with the unifying theme being that since the late 1970s economic policy has too often tried to tilt the playing field to make sure income was redistributed upwards. And this policy shift worked—that’s exactly where the income flowed.

And no, the policies that led to the rise in inequality did not lead to more rapid overall growth that benefited low– and middle-income Americans. In fact, overall growth rates declined significantly over most of the same period.

There’s obviously bad news in this story that we have a generation of policy-induced inequality to fight against. But there’s good news too: Policy matters, and if this policy can be put back into the service of boosting the incomes of low– and middle-income families, we’ll get different outcomes. Take one piece of good news highlighted in The State of Working America: The social insurance programs (Social Security, Medicare, and Medicaid) have been the largest contributor to growth in living standards for middle-income families since the late 1970s. In other words, policies enacted to actually alleviate the economic troubles of typical American families are working very well. We need more policy changes like this (and, in a couple of years, the boost to family incomes stemming from the provisions of the Affordable Care Act (i.e., health reform) should be visible and most welcome).

So, check out the website and read at least the overview chapter. It will explain a lot, and maybe even make you want to demand much better from our country’s economic managers.


  • thesafesurfer

    The Organization for Economic Co-operation and
    Development that looked at income growth
    for the top 10% and the bottom 10%, between the mid-1980s and the late 2000s.

    The 8 countries with the most pronounced income
    inequality in that quarter century,

    Country Top 10% Bottom 10%
    Gap

    Sweden 2.4%
    0.4% 2.0%

    Britain 2.5%
    0.9% 1.6%

    Germany 1.6%
    0.1% 1.5%

    New Zealand 2.5% 1.1%
    1.4%

    USA 1.5%
    0.1% 1.4%

    Norway 2.7%
    1.4% 1.3%

    Finland 2.5%
    1.2% 1.3%

    Holland 1.6%
    0.5% 1.1%

    And there were four countries where income got much
    more equal:

    Portugal 1.1%
    3.6% (2.5%)

    Greece 1.8%
    3.4% (1.6%)

    Spain 2.5%
    3.9% (1.4%)

    Ireland 2.5%
    3.9% (1.4%)

    I would be interested in Mr. Biviens reaction to this study because I don’t think anyone wants to imitate the economic results of the bottom four countries that achieved the most equality of income that he is championing.