According to Wolff, the wealth of the richest 1 percent of U.S. households climbed from 20 percent of all stocks, bonds, savings accounts, home equity and other private assets in the mid-1970s to 35.7 percent in 1989 (chart). “The “haves’ have more now than at any time since 1929,” concludes Wolff. But isn’t there considerable overstatement here? Wolff admits that his calculation ignores the average American’s equity in her or his pension plan, as well as her or his share in future social-security payments. Add in these vast pools of wealth, and the share of the richest 1 percent drops to just 21 percent of all assets.
Absolutely, and it’s increasing. In 1969 the top 20 percent of American households received 7.5 times the income of the bottom fifth. By 1992 the richer households had 11 times the income of the poor. By contrast, the rich-to-poor ratio in Canada and Britain was about 7 to 1 in 1992; in Germany, it was just 5.5 to 1-half the U.S. “inequality rate.”
Certainly 15 years of GOP budget cutbacks have opened the gap a little. But even liberals like Wolff and Labor Secretary Robert Reich agree that the major cause is a revolution in labor markets. Technology and automation have displaced manual labor. Low-skilled assembly work has moved to Mexico and Asia. In the United States and other developed countries, college and techni@-school graduates are paid handsomely; laborers are not. Among 30-year-old men, for instance, college graduates in the late 1970s earned 20 percent more than men who graduated from high school. Now the gap is around 50 percent. Even within the ranks of college grads, inequalities of income are rising. Those with technical training are increasingly more richly rewarded than people without such background.
Reich and Bill Clinton want to boost the minimum wage and make vast new investments in education and training. More government spending would probably help. But it wouldn’t by itself change certain social dynamics-mainly the number of high-school dropouts and single-parent families-that are major factors in reducing worker earnings. One recent study showed that less than a third of young adults in the lowest quarter of all families make it beyond high school.
Most Americans would feel happier if the poor were doing better. So would the poor. But equality is not more important than economic growth. Europe achieves greater equality because it taxes and spends more for social programs, sets higher minimum wages and exercises more control over employment conditions and other benefits. But these have made it so expensive for business to hire workers that only 9 million new jobs have been created since 1980; European unemployment, less than 3 percent in 1970, now averages 11 percent. By contrast, the United States (which once grew more slowly than Europe) has only half Europe’s unemployment. U.S. economic growth has outpaced Europe’s for the past 15 years and has created 26 million new jobs. Indeed, a recent European study shows that the poorest Americans still enjoy higher living standards than the poor in Europe-even the poor in social-welfare states like Germany or Sweden. A rising tide still lifts all ships, even if the yachts get lifted more than the rowboats.
