Is Income Inequality A Problem In The U.S.?

According to the latest Census figures, the wealthiest Americans saw huge jumps in their income, while the rest had their incomes go down. For a deeper understanding of the wealth gap, Steve Inskeep talks to Tyler Cowen, an economist at George Mason University, and Matthew Yglesias, who writes about economics for the website Slate.com.

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STEVE INSKEEP, HOST:

The debate in Congress is over how to help the overall economy, but there is an underlying issue highlighted by the Occupy Wall Street protests. It's the question of the gap between rich and poor - income inequality.

To sort out what that really means, we brought in two observers with different perspectives: Matthew Yglesias, who writes on economics for Slate; and Tyler Cowen, an economist at George Mason University.

I want to begin with a really simple question: Is income inequality in this country actually a problem? Tyler Cowen, you can start.

TYLER COWEN: It is a problem, but I don't frame it in terms of inequality. I think mobility is the problem. The problem is not that someone else has more, but that someone is not moving up the ladder. And if you look at why the United States has, in some ways, lower-than-average mobility, it's because people whose parents went to good schools tend to go to good schools themselves. People whose parents did not go to good schools tend to not go to good schools. So the key is to fix education.

INSKEEP: You have already touched on something that I think will surprise some people, because we would like to think of ourselves as being the most upwardly mobile of all societies. And you're saying that's actually not the case, Tyler Cowen.

COWEN: Mobility in the United States has not declined as much as people sometimes claim. But there is a problem when it comes to K-through-12 education.

INSKEEP: OK. So you define the problem not as income inequality - some people being a lot richer than others - but the fact that over the course of generations, not everybody has the same opportunity to move up. Matthew Yglesias, how about you? Is it a problem?

MATTHEW YGLESIAS: Well, I think inequality is a symptom of several severe problems that we have. If we hadn't seen median wages and incomes stagnating, if we hadn't seen incomes for the poorest Americans stagnating, and if we hadn't seen a financial system that seems to be out of control, you know, that gives people concern. I'm not sure that making the distribution more equal, per se, is the solution, but it's that if you had a more broadly shared prosperity, you know, that's a much better situation for everyone.

INSKEEP: Well, broadly shared prosperity sounds good, in principle. Can you get it through practical government policies, or is there something about trying to make society more equal that actually drags it, slows it down?

YGLESIAS: We have a lot of things that we could do that would be very conducive to growth. You know, for the poorest, I think the example historically shows that you sometimes just need to tax people more and give them more money, and give them more social services. At the median level, you know, we have a problem of educational mobility.

We also have problems with geographical mobility. It's very difficult to afford a house in a lot of the places where the best opportunities are. And at the same time, if you have a better governed financial system, that will presumably mean lower earnings for some of the people at the top but also fewer crises, fewer periods of unemployment and falling incomes.

INSKEEP: Is government responsible for the problems you've just laid out?

YGLESIAS: Government is deeply involved in the health care and education systems. It's very deeply involved in the housing sector. It's very deeply involved in finance. So changing government policies, you know, has to be part of the solution to any of those things.

I wanted to underscore the point on health care. I mean, one of the most disturbing forms of inequality that we've seen is a really growing divergence in life expectancy for people at the higher end, and people at the lower end. And that obviously isn't just a question of money. It's a question of access to the health-care system, and of access to healthy living.

COWEN: Some of the inequality problem really is about some people not having enough discipline and conscientiousness. Let's take Matt's example of the growing gap in life expectancy between rich poor. That's almost entirely driven by obesity and diabetes. It's a behavioral problem; it's not an access to health-care problem. But it's how people eat; it's that people don't exercise enough. And that really will be solved at the individual level.

INSKEEP: Matthew Yglesias.

YGLESIAS: Well, you know, I think there are always questions, questions of values. But that's one reason why some of these phenomena of income stagnation, and so forth, are so troubling; that we've created a society in which, I think, it isn't clear to people that hard work and discipline really does pay off - unless you're maybe a person of extraordinary talent. I mean, it's still clear that if you are the smartest computer programmer in the world, that America is a place full of opportunities for you to make great products, to make a great living.

But I think what a lot of people are missing is the sense that if you stay in school, you graduate, you show up to work every morning, that you will benefit from rising wages - that instead, we're seeing, you know, a huge spike in unemployment, which is out of the hands of most of the people that have been victimized. We've seen decade after decade of wages staying flat. And I do think that that tends to erode certain kinds of values, and certain sense of solidarity and commitment to the system in a way that creates extra problems.

INSKEEP: Matthew Yglesias, Tyler Cowen, thanks very much, both of you.

COWEN: Thank you.

YGLESIAS: Thank you.

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INSKEEP: Yglesias is at Slate; Cowen, at George Mason University. We hear from them as many people are commenting on a little irony of wealth of America. We've learned the names of the winners of a Powerball lottery jackpot - $254 million. The winners were three investment asset managers in the upscale city of Greenwich, Connecticut.

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INSKEEP: This is NPR News.

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