A national report, issued on Thursday (January 26), shows that the gap between the nation’s top wage earners and lower- and middle-income families is growing over the past two plus decades. This gap began to grow in the 1980s (slowed from 1996-2002) and continues to increase off and on since. Liberals and conservatives view the gap very differently. These difference allow us to think about social and economic policy seriously.
Consider, for point of reference, that the study shows that the richest 20 percent of families had average incomes 6.8 times as large as the poorest 20 percent in the early 2000s, up from 5.4 times in the early 1980s. And the highest incomes in the early 2000s were 2.5 times as large as the middle 20 percent, up from 2 times twenty years ago. Average incomes for the richest people were up 51% overall and only 21.5% for middle income families. Average incomes for the poor rose by 20.5% during the same period!
So, what are we to make of this data? Ah, there’s the problem. Liberal economists see a growing tragedy. Conservatives see it otherwise. The Chicago Tribune understood it starkly and thus the headlines read: “Rich, Poor Income Gap Widens.” Conservative policy analyst Rea Hederman Jr, at the Heritage Foundation, noted that, “Even people at the bottom quintile are better off than they were at the start of the period.” So, is the glass half-empty or half-full?
Well, the answer depends on a host of other questions and on how these all relate to economics and social welfare. Liberal thinkers believe the widening gap between the rich and the poor is bad. Consistent with the class conscious emphasis that such inequities create liberals see this very simply, it is a justice issue. It is, very simply, “Not right." Whatever it takes to adjust things so that “fairness” is brought into the equation again thus becomes the goal for liberal policy makers. Conservatives, on the other hand, favor the free market and the effects such a market creates for all, both rich and poor. They insist that these cycles happen and thus no truly free market system, in other words one that is uncontrolled by the government tinkering with it too much, can or should be adjusted to shrink income gaps. In fact, conservatives argue, the more business succeeds, and the market prospers the wealthiest among us, the better it will be for everyone who wants to benefit from the general prosperity created. The evidence of the recent survey can be read so as to support this very conclusion.
As a Christian I do not believe the resolution to this question is clear cut, at least in every instance. I also do not believe that we have a mandate to narrow the income gap based upon Old Testament prophetic texts, a common mistake made by the Christian left. The church clearly has a mandate to care for its own and to do good for neighbors. But these commandments do not dictate public and economic policy. They do not, in other words, support soft socialism. This is where the confusion comes when we apply biblical texts to modern governments and their economic decisions.
What contributes to income inequality does interest me great deal. Liberals argue that the primary culprit is obvious. The rich benefit from the free market and the poor suffer. But is this simplistic nostrum really true? This recent study suggests a number of contributing factors that ought to be considered in this debate. For example, the biggest contributor to income inequality is the erosion of wages for workers without college degrees, the report stated. But even college educated workers have recently lost ground, partly because of job erosion due to globalization. Other forces driving inequality are periods of relatively high unemployment, the general shift from manufacturing jobs (witness the problems at GM and Ford this week) to service related jobs, the loss of real impact by labor unions and the decline in the importance of the minimum wage. Liberal analysts suggest answers that you would expect—increase the minimum wage, strengthen social support for working families and make unemployment insurance more widely available. The Heritage Foundation, a conservative think tank, suggests that investments in education are the best first step; i.e., get better skills and better education.
Even more important, at least to my mind, is the impact of demographic trends on this income gap, trends that liberals rarely discuss. These trends include the rise of single-parent families and the part this contributes to both poverty and the decrease in disposable income. The issues here, as I noted above, are not simplistic. The solutions are not either. I resist large scale tinkering with the economy precisely because I am convinced it takes away real, and personal, freedom. This creates a far deeper problem for the whole society in the long run as I noted in my positive references to Ronald Reagan last week. I also believe that we fail the poorest among us if we do not have a real national conversation about how to solve the myriad of problems created by the destruction of the family. Family breakdown, both morally and spiritually, will be the undoing of our social fabric. I still believe revival, true Christ-centered revival, is the first step toward such real change. Liberal social theorists see this as “pie in the sky” religiosity but history abounds with evidence that such revival has time and again created huge social and economic change within a society.
The goal is not to shrink the income gap by new governmental interferences in the economy. This tends to be driven by an “economy lite” version of socialism. The goal is to raise every boat by a growing a healthy economy that works for the benefit of all. And we must encourage real charity in every way possible. At the same time we must provide the kind of social network that truly cares for the poor and offers positive help to them that is not demeaning. This is why I prefer the Christian approaches, influenced by both Catholic and Reformed (Kuyperian) social theory, that are offered by serious thinking people like those who teach and write for the Acton Institute.
If you are a Christian economist, or thoughtful businessman, you can start by helping ordinary members of our churches understand how this works and what they can really do about the issue of poverty in America. Fresh calls for governmental solutions are not the only alternative. I do not think they are even the best alternative.
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Education is the single biggest predictor of income. So if we want to deal with poverty or shrink the income disparity then we need to deal with education. Education is not fair among children. But a significant portion of the disparity occurs before children enter Kindergarden. So it is not all of the schools fault. This is a place that the church can help. Good parenting, alternatives to standard day care (leave the kids alone with someone that is not prepared to do anything with them), etc. are a very important part of what we as a church can do. Unfortunately most churches view church schools or day care as a money maker or as a way to isolate their children against the world instead of viewing it as a mission of the church.
When we realize that anyone who makes $25,000 or more a year in the United States is in the top 5% of the world’s wealthiest citizens, this often becomes quite the academic argument. I don’t think we really know what poverty is in America and the problem is really a global one, not one that we ought to think should only be addressed here.
Government regulation itself I think unwittingly mandates this gap. Zoning laws, as merely one example, are probably the least talked about but most effective way of creating this disparity. Posh suburban (and even urban) communities with minimum residential lot sizes of 10k square feet, combined with single-family only dwelling restrictions, prohibit the lower classes from living there. A 2k sq ft lot with a 900 sq ft house might be affordable for the average guy in a nice community, as would a small rental unit in somebody’s back yard, but these freedoms are outlawed. Yet these communities still demand their business and shopping districts. Where will the workers come from? Distant poorer communities, of course, which necessitates heavy commute traffic. Many upscale communities in my area (SF Bay) complain that city workers like police, fire and parks no longer live in their cities. Well, of course not, they can’t afford to. Add to this the purposeful snarling of traffic by cities that are along the commute route, and the problem is only worse. And cities are increasingly becoming their own developers as bureaucrats are creating their own upscale kingdoms.
A developer conducts himself in a cost efficient manner, maximizing profit through house size vs lot size, but with larger lot sizes already mandated by government, he cannot profit from small house building for the average Joe. The resulting high cost of housing squeezes the poorer man outside of the job areas.
The bible admonishes us to help the poor and to associate with the lowly. But how can we when we legislate their very presence away from among us? Just one area in which we could improve.
Perhaps we should make a distinction between “being poor” and “living in poverty.” Poverty is doing without the basic necessities of life like food, water, clothing and shelter. Few in America “live in poverty.” but there are MANY who are poor. Who is defined as poor depends on the economic and cultural standard of the area the person lives in. One can make 25,000.00 a year and be very poor depending on what their base living costs are. 25,000.00 a year goes a lot farther when the rent is 300.00 than it does when it is 800.00
Our family had a total income of 25,000.00 last year. After taxes that 25,000.00 turned into 21,000.00 There were no raises in 2005. Yet city tax went up, cable went up, gasoline went up, natural gas went up, water/sewer went up, electric went up, car insurance went up, medical insurance premium went up, postage went up and those are just the increased costs I can readily think of. As a result I moved closer to the “being poor” line. Poverty? Absolutely not! Poorer than the year before? Absolutely!
I suspect it is hard for us as Americans to wrestle with these issues. We have so “much” that we have difficulty seeing the “reality” in our countries.
Another great essay!
(1) The most critical factor in so-called “income disparity” is age. As Thomas Sowell has so frequently pointed out, almost everybody has lower income, even “poverty” level income when they are young. How much income do college students typically earn? Or even the years immediately after they graduate? Over time people will tend to both increase in their ability to earn income and accumulate wealth. Much, of course not all, “income disparity” is due to this one factor alone. I suspect the factors you suggest would also explain a significant portion of the remaining “income disparity.”
(2) Judging by his comment, “poor” Bruce Gerencser has an automobile, cable TV, gas furnace heating, medical insurance, indoor water and sewage, and electricity. I mention this not to make fun of Mr. Gerencser, or to belittle the difficulties of making due on a small income, but to point out that words like “poor” and “poverty” no longer have the meaning they once had, at least when used in reference to the U.S. economy.
Of course I never claimed to be “poor”. I did say we were moving closer to the “being poor” line.
I took a vow of poverty years ago when I became a Baptist preacher. Many Churches try to keep the minister humble by keeping his pay low. And benefits? Free food at the pot luck. No complaints. We willingly chose this life.
I disagree with Thomas Sowell’s point about income disparity. Perhaps in a white collar environment that would be the case or in the case of someone moving from white collar to blue collar, but here in blue collar Ohio it is not the case. Factory workers are making far less than they used to . Many are at the top of the pay scale and outside of small COLA increases their wages do not increase. In fact, taking inflation into account, they earn far less than they did 20 years ago.
Sowell, of course, is a big “get an education” proponent. If he is speaking to 20 somethings then I agree. What do we do with the 55 year old factory worker who is nearing the end of his work life and who is helplessly watching his real wages and benefits decline? All the education in the world will probably not fix his problem. He is the product of another era, hopelessly out of date. Even if he does go back to school he will be nearing 60 years old when he graduates. Who will hire him?
This is a complex issue. Many facets. When ideed living in changing times.
Thanks for reading
Something is always overlooked in these discussions. We fall prey to the modern mindset that everything can be measured using numbers, statistics, and formulas. GDP and income are but two of the awful examples.
Quality of life means you enjoy more creature comforts and greater conveniences, as well as better health care, improved nutrition, enhanced education, greater safety, etc. We’re all wealthier than our parents and way better off than our grand-parents, many of whom who washed their clothes on washboards and hung them on a line.
Thanks to modern technology, I’m able to work from home. My Dad spent his last years trying to figure out how he could do the same. Today, he could, were he still here.
So I’m not swayed by the income disparity figures.
I suppose we can accept or reject what arguments we please, but Sowell’s point is simply a statistical fact. As Casey Stengel used to say “You can look it up.” And the argument holds true no matter whether we are talking about white collar or blue collar workers, or whether one has a college education or only a high school diploma.
I am not saying that age explains all of income disparity, just that claims made about it usually do not take it into account, and are therefore exaggerated.
The issue of industry workers experiencing the effects of changes in the economy is a real one. I live near Pittsburgh, PA in an area hit hard by the decline of the steel industry, and recently hit by the near bankruptcy of U.S. Airways. I know one airline mechanic with 15 years of experience who was laid off and is now going into a completely unrelated field of work in another area of the country. It is truly a difficult situation.
Your article about the widening of the poverty and wealth gap is very much appreciated. It raises an awareness to the need of the “working poor” especially in affluant community of Lake and DuPage Counties. http://www.love-cc.org is a web site with further information on what the church can do to provide ministry to those in need. I challenge churches everyday to get involved in helping provide assistance to needy families.