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Anything but. . .

from David Ruccio

You have to give credit to mainstream economists: they’ll do anything to avoid talking about class.

Take the current discussion about inequality. Right now, eyes are clearly focused on two major trends: the share of national income going to the top 1 percent (and therefore the gap between them and the other 99 percent) and the share of profits and wages in national income (and therefore the growing gap between capital and labor). The issues are on the agenda, the data are easily accessible, and the charts are dramatic.

Here’s what the share going to the top 1 percent looks like (from the World Top Incomes Database):


And here are the profit and wage shares (from FRED, the Economic Research unit of the St. Louis Fed, where blue represents the profit share and red the wage share):


Clear enough?

But, of course, once you look at inequality through the lens of those two data series, you have to talk about class: about how capital is gaining at the expense of labor, and about how top income earners are getting their share of the surplus created by labor. (There is, of course, a lot more work that needs to be done, in terms of both the data and an analysis of the data but at least it’s a start.)

Mainstream economists, as it turns out, want us to look elsewhere—not at class but at the effects of marriage patterns. That’s how we get such nonsense as “Marry Your Like: Assortative Mating and Income Inequality,” an NBER working paper by Jeremy Greenwood et al.

Has there been an increase in positive assortative mating? Does assortative mating contribute to household income inequality? Data from the United States Census Bureau suggests there has been a rise in assortative mating. Additionally, assortative mating affects household income inequality. In particular, if matching in 2005 between husbands and wives had been random, instead of the pattern observed in the data, then the Gini coefficient would have fallen from the observed 0.43 to 0.34, so that income inequality would be smaller. Thus, assortative mating is important for income inequality. The high level of married female labor-force participation in 2005 is important for this result.

Fortunately, Kevin Drum has showed how silly and misleading their analysis is. At best, assortative marriage patterns might tell us something about changes in the distribution of income between, say, the the middle fifth and the next quintile up. But that’s it.

Even progressive economists can get distracted in this discussion—as for example when Larry Mishel discusses the “tight link” between the minimum wage and inequality. While, yes, a declining real minimum wage can increase the 50-10 wage gap (the difference between the median and the 10th percentile earner) but that’s not the real source of income inequality in the United States. It does tell us something about inequality among wage-earners—and that can undermine labor as a whole, by lowering the floor and thus leaving all wage-earners in a more desperate position. But, again, that’s it.

Better it seems to me to focus our attention on the real sources of inequality in the United States. And that means we have to face the class questions straight on. Anything else is merely a distraction.

  1. Marko
    January 29, 2014 at 8:33 am

    Yep , it’s infuriating. The playbook seems to be the same one they use on climate change – throw anything and everything against the wall and hope something sticks , and never , ever , admit what they all know is the truth. To admit the truth on inequality , they’d have to say that it was mainly the work of The Gipper and Maggie , and that wouldn’t do , would it ?

    One other thing that bugs me is the failure to include capital gains when discussing top 1% share. It adds a significant amount to total income share — nowadays ~3-4% in the U.S. data and 2% or so for the U.K. , and that’s not counting the gains accruing to funds hidden away in tax havens :


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