One thing I noticed while reading this article is how many of my friends are now working 2 jobs to BARELY make ends meet. Recently in my town, they (the Republicans and the Chamber of COmmerce) wanted to show us that our thoughts that the average income is going down was hogwash. So they showed us that that the average Siouxlander (Sioux City, Iowa) was making like $70,000 a year. We knew they were using outliers and playing with the numbers to get that number especially when it is known that the majority of us make no more than $20.000 a year. Anyway, being how I am a Political Scinece major and lower middle class, I have a front row seat in this play called “the melting middle class.”
Polity Press | Book | July 28, 2005
Inequality In The New Knowledge Economy
Book Chapter
By Robert D. Atkinson
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Editor’s Note: The following book chapter is excerpted from The New Egalitarianism, Antony Giddens and Patrick Diamond editors, Polity Press, London, July 2005. The complete chapter is available in Adobe PDF format, only. (Requires Adobe Acrobat Reader.)
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An imbalance between rich and poor is the oldest and most fatal ailment of all republics.
— Plutarch
While the New Economy has brought renewed growth and dynamism, it has also brought a disturbing increase in economic inequality. Compared to the prior war mass production economy that provided a comparatively egalitarian labour market in which there was robust growth, widely shared, today the US, and a number of other advanced economies, enjoy growth, unevenly shared. Where tens of millions of poor and working families, even ones without much education, were propelled into the ranks of the middle class in the old economy, today we are creating relatively few middle class jobs. Where President John Kennedy could confidently proclaim, ‘A rising tide lifts all boats’, today a rising tide lifts the yachts much higher than the dinghies. Where a confident welfare state ‘leaned into the wind’ of the remaining income inequality with tax, spending and regulatory policies, today’s conservative policies make existing inequalities worse.
Such growing income inequality has not been confined to the United States, although the US enjoys the dubious distinction of having the highest income inequality among developed nations. As that old economy exhausted itself in the 1980s and early 1990s, most OECD nations experienced a marked increase in income and wealth inequality as protections for workers at the bottom eroded in some nations, as technical change led to both an increased demand for higher skilled jobs and reduced demand for middle skilled jobs, and as robust competition in product and labour markets destroyed old egalitarian practices and expectations. On top of this, fiscal pressures and a growing mistrust of government led many nations to significantly trim the welfare state.
Within the United States, these trends, combined with a systematic set of plutocratic tax and spending policies from the Bush administration, have the potential to take America back to the kind of bifurcated society experienced before the New Deal. The stakes are not small. In his book The Post-capitalist Society business management guru Peter Drucker warned that ‘there is a danger that the post-capitalist society will become a class society unless service workers attain both income and dignity.’ Indeed, the US economy is evolving in the direction in which there are two classes, a prosperous class of knowledge workers and a struggling class of service workers.
While there is considerable agreement among economists over what has happened, there is much less consensus over why inequality has worsened, whether it is a problem and what, if anything, governments should do to address it. Many on the right see growing inequities as actually a spur to growth. Many on the left blame the New Economy’s dynamism and competition and pursue a Don Quixote-like effort to resurrect the old economy.
If we are to develop a third way on income inequality it will have to be based in the recognition that the New Economy has brought about fundamental new realities that can’t be ignored or reversed. It will require new kinds of pro-competition, pro-innovation policies that foster both greater growth and egalitarianism. But it will also require embracing policies such as more progressive taxation, a higher minimum wage, better skills training efforts, and labour law rules that level the playing field for workers engaging in collective bargaining. In short, we need an agenda that takes both growth and progressiveness seriously.
