Weighing Social Equality vs. Income Inequality The growth of income inequality in America has been trumpeted as a central threat to the country's societal structure. But some economists aren't troubled by the phenomenon. As long as there is economic opportunity and social mobility, they say, it doesn't matter if the rich are pulling way ahead of everyone else.
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Weighing Social Equality vs. Income Inequality

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Weighing Social Equality vs. Income Inequality

Weighing Social Equality vs. Income Inequality

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From NPR News, this is ALL THINGS CONSIDERED. I'm Robert Siegel.


And I'm Michele Norris.

All this week, we've been examining economic inequality in America. Today, we're asking a fundamental question. Is income inequality necessarily bad?

That might seem strange, but NPR's Adam Davidson found that some economists believe income inequality is good, even essential.

ADAM DAVIDON: Here's a question. If there were no war in Iraq, what would be the big political issue right now? Several polls show that the second biggest issue on people's minds is economic inequality. Senator Jim Webb clearly thinks so. This is from his response to the president's State of the Union speech.

Senator JIM WEBB (Democrat, Virginia): It takes the average worker more than a year to make the money that his or her boss makes in one day.

DAVIDSON: Webb then explains that growing inequality means the death of the middle class, the destruction of America's backbone. He's not alone. Here's Congressman Barney Frank from a recent speech.

Representative BARNEY FRANK (Democrat, Massachusetts): There are people, I guess, who don't care about inequality as a moral issue. I do.

DAVIDSON: Democrats hate inequality? No surprise. But recently, it's been Republicans talking about the issue. Just last week, President Bush for the first time in his presidency addressed it.

President GEORGE W. BUSH: The fact is that income inequality is real. It's been rising for more than 25 years.

DAVIDSON: And this week, long-time Republican Ben Bernanke, the chairman of the Federal Reserve, said inequality could pose a threat to the economy's dynamism.

So it looks like inequality will be a big part of the public debate from now until November 2008. But before this issue heats up, it's probably worth listening to a Nobel Prize-winning economist who has thought a lot about inequality and says it's not always a bad thing.

Gary Becker of the University of Chicago.

Mr. GARY BECKER (University of Chicago): I think inequality in earnings has been mainly the good kind. I strongly believe it's been mainly the good kind.

DAVIDSON: How could inequality be anything but bad? Well, good inequality, according to Becker, gives more rewards to people with more education, more skills, more ability to create value in the world.

Mr. BECKER: Because if you're in an environment where knowledge counts for so much, then if you don't have much knowledge, you're going to be a loser.

DAVIDSON: Becker knows the statistics. The rich are getting richer and the poor are falling further behind. But, he says, that's mostly because the better off have more education. And he says that gap is creating the right incentives. Poor people are learning that to get ahead, they need to get more skills. And the more skilled the workforce is, the better the overall society does. And that's good, Becker says, even if some people are left behind.

Mr. BECKER: Well, it's unfair, but I mean, the accident of birth, the accident of the genes we have, the accident of parents we have. It is unfair.

DAVIDSON: But, Becker asks, what can you do about the inequalities of parents and genes?

Mr. BECKER: Unless you think you're going to start switching babies around across families and so on, as Plato recommended. You can't do that.

DAVIDSON: Becker says it's dangerous for the government to force the economy to be more fair. Programs that take money away from the rich to give to the poor, Becker argues, mess with incentives. High school kids may not be as motivated to go to college. Some college kids might decide the cost of a higher degree just isn't worth it. Over time, we could end up with a workforce that's not as highly educated, not as skilled. We might not be as competitive. The economy might not grow as fast.

Now, not all economists agree with Becker. Robert Solow is also a Nobel Prize winner.

Professor ROBERT SOLOW (MIT): I don't think inequality is a great thing. I think the contribution of inequality to civilization and progress is pretty damn small.

DAVIDSON: Solow, a professor emeritus at MIT, says Becker tends to ignore bad inequality, the kind that comes from inherited wealth or racism — or corporate CEOs who aren't held accountable.

Professor SOLOW: There are a lot of sources of inequality, a few of which pay for themselves economically for the society at large, but a lot of them don't at all. They're more or less a blot and aren't doing a lot of good.

DAVIDSON: Solow says that lately, the U.S. has been growing in the bad kind of inequality, the kind that breeds resentment, even despair, among the less well off, a despair that could hurt the overall economy.

So on this question of inequality, Becker and Solow disagree. But they - and almost all economists, left, right or neutral - do agree on one basic point. The best thing for the nation overall and everyone in it is if young people listen to that old public service announcement - stay in school.

Adam Davidson, NPR News.

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