Between 1947 and 1970, every income group in America experienced economic advancement. As James K. Galbraith reminds us in Created Unequal, the 1950s and ’60s were unique because government policies—social as well as economic—provided a firm foundation for the gains experienced by families across the board. Lower-wage workers benefited from a wide range of protections, including steady increases in the minimum wage, and the government made full employment a high priority. There was also a strong union movement that ensured higher wages and more nonwage benefits for ordinary workers.
But by the ’80s, the trends for lower-wage workers had been reversed. Families in the higher income groups—the top 20 percent—continued to enjoy steady income gains, adjusted for inflation, while families in the lower income brackets experienced stagnating or declining incomes. The labor movement began its downward spiral; macroeconomic policy was no longer geared to tight labor markets; and monetary policy, focused on lowering inflation above all else, became dominant. As part of the “Reagan experiment,” the tax structure became more regressive and Social Security taxes increased; also, when George W. Bush took office, tax cuts were passed that distinctly favored the wealthy at the expense of ordinary families. Finally, Congressional resistance to raising the minimum wage further threatened the economic security of disadvantaged families.
The growing American disparity became a hotly debated issue in academic circles, and concerns about rising inequality generated numerous research studies. Economists focused mainly on the causes of income inequality, while many sociologists and political scientists examined the related factors of social inequality, such as the increasingly limited access to affluent neighborhoods and elite colleges and universities. Before the emergence of Occupy Wall Street last year, Americans remained largely ignorant of these trends. But OWS, which morphed into Occupy as the protests spread to other cities across the country, had one important effect: it raised public awareness of the growing economic inequality in the United States. As a result, research by social scientists on the subject, which had been largely ignored in public debates, has figured prominently in op-eds and news articles about the recession.
Giving this public attention, the publication of Timothy Noah’s The Great Divergence and Charles Murray’s Coming Apart could not be more timely. Unlike the growing mountains of academic research being filtered through the press, these two well-written and engaging books are clearly meant for a general readership (Noah’s book originated as a series of articles in Slate). But that is all they have in common, because their analyses of the growing economic and social disparities in America are strikingly different.
Although scholars of inequality will find little that’s new in The Great Divergence, it is nonetheless a very impressive and important book. Fully aware of the public’s belated—but growing—interest in the rising inequality, Noah thinks the problem has to be fully understood before it can be adequately addressed. Accordingly, he has attempted “to synthesize the best [social science research] for nonexperts who would like to know, at long last, what’s been happening to the economy, especially in the United States.”
Noah documents the drastic changes between the Great Compression (the period of growing income equality between 1932 and 1979) and the Great Divergence (the period of increasing income inequality after 1979). He shows that the level of inequality in the United States is not only more extreme than in other advanced industrialized democracies, but has also increased at a much faster rate. This trend, he points out, is not linked to the usual factors, such as black/white income disparity, the unequal treatment of women or the influx of immigrants. Although African-Americans have certainly felt the adverse effects of the Great Divergence, black/white income disparity hasn’t been a factor in its emergence, as both the black middle class and the white middle class have fallen behind. Nor has the unequal treatment of women been a factor, since the male/female wage gap has actually shrunk by nearly half during the past several decades. As for immigration, the most dramatic difference between the Great Compression and the Great Divergence is the pronounced and widening income gap between the rich and the middle class, not between the rich and the poor. And immigration’s impact on the income of middle-class Americans—as distinct from its impact on the income of high school dropouts—has been minimal.