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Tuesday, December 6, 2011

Moneybox: Why Has Inequality Been Growing?

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Moneybox
Why Has Inequality Been Growing?
How technology and winner-take-all markets have made the rich so much richer.
By Robert H. Frank
Posted Tuesday, Dec 06, 2011, at 12:16 PM ET

The first part of this series described how growing income disparities have made it more expensive for middle-income families to achieve many basic goals, such as sending their children to a decent school. Today's installment discusses the forces that have caused income disparities to grow in recent decades. This essay is adapted from Robert H. Frank's recently published book, The Darwin Economy.

Effective remedies for growing income disparities require a clear understanding of the forces that have caused them. In their recent book, Winner-Take-All Politics, Jacob Hacker and Paul Pierson have argued that explosive salary growth at the top has been fueled by a more lax regulatory environment purchased with campaign contributions. That's a spot-on description of what happened in the financial services industry, which is of course the principal target of the OWS movement.

But it's an unsatisfactory account of why inequality has been rising in other occupations. The same pattern of income growth we've seen for the population as a whole has been replicated for virtually every subgroup that's been studied. It holds for dentists, real-estate agents, authors, attorneys, newspaper columnists, musicians, and plastic surgeons. It holds for electrical engineers and English majors. And in none of those instances has it been primarily the result of regulatory favors.

To be sure, executives sometimes pack their boards with cronies who reward them with exorbitant salaries and bonuses. But such abuses are no worse now than they've always been. On the contrary, improved ...

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