A Different Take on an Old Problem

A new take on a popular theory...

David Brooks, columnist for the New York Times, recently wrote an article discussing inequality in America.  This has been a popular topic throughout the past several years with the economy being as shoddy as it has been, and even more so since the Occupy movements began earlier this fall.  In his article, which you can read in its entirety here, Brooks agrees with many that inequality really is a serious problem facing the United States. What caught my eye was Brooks’ argument that it was not the divide between the 1% and the 99% that is championed by the Occupy movement, which he calls “Blue Inequality”.  Rather, it is a different kind of inequality – Red Inequality – that was at the heart of the America’s problems.   I’ll attempt to summarize below:

“Blue Inequality”

First and foremost, it is important to note where “Blue Inequality” exists:  major cities.  Think New York City, Los Angeles, Boston, San Francisco, Seattle, Dallas, Houston and the District of Columbia. In these places, it’s not uncommon to see the top 1 percent of earners accelerating upward, accumulating more income and wealth.  Brooks then cites some research on who these top 1 percenters are. 

According to this research, “roughly 31 percent started or manage non-financial businesses. About 16 percent are doctors, 14 percent are in finance, 8 percent are lawyers, 5 percent are engineers and about 2 percent are in sports, entertainment or the media.”

Brooks believes that this type of inequality is real, not imagined.   If you live in or around these big cities, you see stores and entire neighborhoods catering to the top 1 percent. You see a shift in social norms. Up until 1970 or so, a chief executive would have been embarrassed to take home more than $20 million. But now there is no shame, and top compensation zooms upward. 

Also, you can see the “superstar effect”. Within each profession, the top performers are now paid much better than the merely good or average performers. 

If you live in these big cities, you see people similar to yourself, who may have gone to the same college, who are earning much more while benefiting from low tax rates, wielding disproportionate political power, gaining in prestige and contributing seemingly little to the social good. That is the experience of Blue Inequality.

"Red Inequality"

Red Inequality is experienced in small towns like the notorious Scranton (not just from The Office, mind you!), Des Moines, and Naperville. In these places, the crucial inequality is not between the top 1 percent and the bottom 99 percent. It’s between those with a college degree and those without. Over the past several decades, the economic benefits of education have steadily risen.  Let the numbers speak:

In 1979, the average college graduate made 38 percent more than the average high school graduate, according to the Fed chairman, Ben Bernanke. Now the average college graduate makes more than 75 percent more. 

Moreover, college graduates have become good at passing down advantages to their children. If you are born with parents who are college graduates, your odds of getting through college are excellent. If you are born to high school grads, your odds are terrible.  This speaks to a lack of social mobility, a hallmark of the “American Dream”.

In fact, the income differentials understate the chasm between college and high school grads. In the 1970s, high school and college grads had very similar family structures. Today, college grads are much more likely to get married, they are much less likely to get divorced and they are much, much less likely to have a child out of wedlock. 

Today, college grads are much less likely to smoke than high school grads, they are less likely to be obese, they are more likely to be active in their communities, they have much more social trust, they speak many more words to their children at home. 

Brooks believes that Red Inequality is much more important than Blue Inequality.   He claims that though Blue Inequality is a problem, it’s not as big of a problem as:

• The tens of millions of Americans who have dropped out of high school or college…
• The 40 percent of children who are born out of wedlock…
• The nation’s stagnant human capital…
• The nation’s stagnant social mobility and the disorganized social fabric for the bottom 50 percent…

I essentially agree with all of Brooks’ points.  However, I feel as though I need to add one more: Both Blue Inequality and Red Inequality stem from the same causes.  Focusing on the Blue Inequality in the face of Red Inequality may not be the most accurate stance to take.  Hopefully though, it will spur the necessary policy and moral changes that will begin to fix and propel America into the 21^st century.  

-------

The Takeaway: Whether your red or blue, we're not as different as we think.