Wealth gap opens the gate to unrest

Guest Editorials
(Editor’s note: The following editorial is reprinted from USA Today, where it was first published.)

The impact of America’s growing income inequality can be seen in protests, ranging from Occupy Wall Street in 2011 to the fast-food worker strikes this summer, and in the changing political landscape, where Democratic presidential candidates have won a majority or plurality in four of the past five elections.

Remarkably little concern has been shown in the matter, though the latest data show no letup in the trend. The share of the national income claimed by the top 1 percent is back where it was in the 1920s, according to University of California-Berkeley economist Emmanuel Saez. A majority of all income now goes to just one in 10 people.

If the trend were to continue indefinitely — with nearly all benefits of a growing economy going to a select few and the American Dream dashed for the rest — extreme social tensions would be inevitable. Income inequality in the latter half of the 19th century and early 20th century produced significant labor unrest.

But figuring out what to do won’t be easy. Just as with the Industrial Revolution, today’s disparities appear to come from technological change, which allows companies to make more money with fewer people.

That being the case, the usual solutions offered by liberal economists — taxing the rich, erecting trade barriers, etc. — would be of marginal help at best. Nor would government support programs help a middle class that wants to work and succeed.

Denying that a problem exists, the preferred approach of many conservatives, won’t help much, either.

The best bet is to fight the problem on a number of fronts to try to make progress at the margins while private sector forces, such as the fast-food strikes and the repatriation of manufacturing jobs, gain traction.

One such trend is already strongly in place. Millions of people are seeking more education — which is the leading indicator of future financial success. Enrollment in community colleges, for instance, increased 25 percent in just the first decade of this century.

If more people could be cajoled into the science and engineering fields, where incomes are rising and jobs are going unfilled, the trend would be amplified. They are also the types of jobs that, when filled, create other jobs around them. Robots might be replacing manufacturing jobs, but someone needs to build and maintain the robots.

Also worth trying: putting more pressure on companies to narrow the gap between top executives and average workers. In the 1950s, academic studies estimate, the average CEO of a Standard & Poor’s company made 20 times the income of rank-and-file workers. Today, the ratio has grown to 204-to-1.

The Securities and Exchange Commission has tentatively adopted a rule requiring publicly traded companies to post income ratio of senior managers and the median of workers.

In the end, though, the goal isn’t to bring the top level down or to use government to redistribute money. It is to ensure that through hard work, people can live well and make a better life for their children.

By working around the edges, progress on income inequality can be made. But if past is prologue, workers themselves will probably have to take action — whether political or economic — to reverse the trend.