On December 4, 1995, Secretary of Labor Robert Reich had a letter in the Washington Times. He wrote, “Except for those who revere ideological preconceptions over the evidence of their own eyes, the growth in inequality and the precariousness of the middle class are stunningly obvious features of the contemporary American landscape.”
Although the secretary’s argument is putatively about numbers, his rebuttal here is to claim ideological distortion on the part of his opponents. That’s an indication that we’re not dealing only with economics and numbers, but with political appetites.
Secretary Reich asserts that those who disagree with him revere ideological preconceptions over the evidence of their own eyes. What should we say, however, about the evidence of our own eyes? Let me report what I see.
I happened to have grown up in a poor family, and I have a habit of watching shoes in very poor areas of cities. We inherited tennis shoes from older siblings or cousins; we were quite happy if they didn’t already have holes. The shoes I observe today in poor areas of American cities are far better than shoes we ever wore. In very poor areas about 95 percent of homes have color TVs.
Again, I notice when I go back to Pennsylvania, especially in the rural areas, which are supposed to be so poor, the shininess of the pickup trucks and the extensive number of gadgets they carry. If these are males whose wages are stagnating, something extraordinary is going on, because they drive vehicles no one poor 30 years ago dreamed of owning. At Penn State games, the tailgate parties are lavish beyond belief; and so are the provisions hunters take with them into the Pennsylvania hills. The evidence of my senses belies what I read in stories about wage stagnation and inequality. More money is being spent somehow.
In brief, appeal to the evidence of one’s own eyes depends on one’s own eyes. If real wages are stagnating, it also helps to recognize that they are among the highest in human history. On the surveys showing international comparisons, it is true that at the lowest levels, the United States does very badly, but at the very highest levels we do better than anybody else. If you look at the median levels, moreover, we seem to be ahead of practically everybody else except the Swiss.
Most analysts are not noticing a tremendous change in our bottom quintile (the lowest 20 percent in income). This quintile is no longer composed of the same sorts of people as 20 or 30 years ago. In the bottom quintile these days, only one out of every five people is working full-time year-round. That isn’t the way it used to be. There used to be a lot of working people, particularly male heads of families, in the bottom quintile. In the bottom quintile today, two-thirds of heads of households are single women. About one-half of these are younger women with children, and about one-half are widows (mostly over 65). Today the bottom quintile is different in its makeup from the other four quintiles. The bottom fifth does not contain many intact married families. It does not contain many full-time workers. A majority of its householders are not working at all, not even part-time.
Remember that in the upper four quintiles more than half the women have gone to work in the last 20 years, and you see the tremendous effect that the rapid entry of women into the work force has had on income inequality. If a postal worker earns $20,000 per year and his spouse also goes to work at $20,000, their combined income is $40,000. If a professor goes to work at $50,000 and his or her spouse goes to work at about the same, their family income is $100,000. The disparity between the income of these two families (postman and professor) has jumped quite significantly. When only the males worked, the gap was $30,000; when both spouses in each family work, the gap between families has grown to $60,000. Any gap is much more significant when you double it.
In other countries, has the same thing happened to their bottom quintile? Do other countries experience the same effect when both husband and wife work? Is that effect on inequality being measured? Does their bottom quintile mostly consist of young female heads of households and widows?
It seems significant that those most passionately insisting that “growing” inequality is a fact, such as Secretary Reich, and insisting that everybody must recognize it as a fact, tend to be on the social democratic side of the political spectrum. They seem to be raising the question because they believe government redistribution is the cure. On the other side, conservatives have been tending to resist the social democratic interpretation of the figures. The conservatives are asking new questions of the data. They are right to do so.