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Tuesday, May 27, 2014

WSJ: The Greatest Inequality Is Between Those With College Degrees and Those Without

Posted by on Tue, May 27, 2014 at 9:05 AM

This might be the most desperate rightist response ("How Education Drives Inequality Among the 99%") to the central and convincing argument (that growing inequality is a consequence of nothing but the very nature of capitalism) in Thomas Picketty's bestseller Capital in the Twenty-First Century. WSJ:

In [David Autor's] paper, “Skills, Education and the Rise of Earnings Inequality Among the ‘Other 99 Percent’,” comes as something of riposte to French economist Thomas Piketty, whose bestselling “Capital in the 21st Century” has ignited sales and conversation around the world with its historical look at the fortunes of the top 1%.

Mr. Autor estimates that since the early 1980s, the earnings gap between workers with a high school degree and those with a college education has become four times greater than the shift in income during the same period to the very top from the 99%.

Over the past 30 or so years, the earnings gap, the paper claims, between households with and households without college-educated workers grew "from $30,298 to $58,249, or by roughly $28,000." Autor, a Massachusetts Institute of Technology economist, then attempts to put the nail in this sorry coffin with:
During the same period... 99% of households would have gained about $7,000 each, had they realized the amount of income that shifted during that time to the top 1%.

What is this really about?

It's an unrefreshing remix of a stale Schumpeterian argument conservatives have made about the root inequality in the US: It is about skills and education, and not about the rich just getting richer. Meaning, those at the bottom of society would do better (get rich even) if they kept up with the continuous technological revolutions that keep capitalism going strong. They are poor because they do not have the right stuff—the will and commitment to increase their skills, level of education, or to adapt appropriately to new market conditions. In short, poverty is the fault of the individual (the star of neoliberal ideology) and not the structure of capitalist economics. Piketty points to and easily dismisses this argument throughout his book.

Indeed, Piketty spends several pages on and frequently returns to a passage in Balzac's 1819 novel Le père Goriot, where a villain named Vautrin explains to a law student named Rastignac, that the real path to great wealth is not hard work and education but marriage. You must marry into money if you want to make it in this society. Piketty then points out that in the 19th century (which comes to an end in 1914 with World War I), this was very much the truth. Inheritance mattered more than an education, talent, and will.

Now, here is one of Piketty's main arguments in the book: After the disruptions of the great wars in Europe, Vautrin's advice to the law student less and less reflected reality in capitalist societies because a large amount of wealth was redistributed (by a reconfiguration of tax laws and the establishment of a number of social institutions) from those at the very top to those in the middle. However, this redistribution process began to lose steam around the late-70s. And from the 80s to this day, we have seen (according to evidence in tax records) a reversion to a world where Vautrin's advice again holds true. So the moment of social democracy and the rise of the middle class (particularly, white middle class—black Americans where handed "a bad check"—to the use the words of MLK) is appearing like an anomaly, and the state of things in the 19th century to be normal.

The right hates Piketty's book because it is dry and direct. The facts on growing inequality in the US and Europe are presented as they are. As for the paper by the MIT economist? One can only laugh at the argument that the real inequality in our society exists between those who are stuck earning $50,000 and those who are stuck earning $25,000. To get more out of this laugh, let's watch this video of Neil deGrasse Tyson on Bill Gates’ wealth...


I will be discussing Piketty's book on June 10 at Vermillion Gallery. Please join me and other lovers of this great work.
Capital_in_the_Twenty-First_Century__front_cover_.jpg

 

Comments (40) RSS

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1
the greater inequality is those with copyeditors and those without.
Posted by orthographic class war? on May 27, 2014 at 9:33 AM · Report this
2
It's getting to the point where even a college degree isn't going to save you from a lifetime of debt and employment insecurity. A gap doesn't actually mean much of anything if everyone's wages are flat and stagnant, and no one has money to safely build equity. Most of us, college degrees or no, are living hand to mouth based on a high cost of living and wages that don't keep up. The WSJ still acts like we're in the 1950s. Yeah, there's a gap between the college educated and everyone else, but there's a more substantial gap between executives/managers and the rest of us, and few people are doing great.
Posted by Jizzlobber on May 27, 2014 at 9:35 AM · Report this
Charles Mudede 3
@1) sorry dude, fixed almost immediately.
Posted by Charles Mudede on May 27, 2014 at 9:39 AM · Report this
4
Well right, but is that because of whether a specific person is highly educated or not, or the fact that wages have gone down faster for unskilled jobs vs skilled?

Adding the requirement of a college degree to janitorial/retail jobs isn't going to magically put them up in in the $25+ an hour category.
Posted by Foonken2 on May 27, 2014 at 9:45 AM · Report this
5
Have you been following the story about using the wrong numbers ?

http://www.thefiscaltimes.com/Articles/2…
“There is one important caveat," he writes. None of the source data at the basis of Piketty’s work is completely reliable. While this post is clear about what is wrong with Piketty’s charts, it is much less certain about the truth.”

What is clear, as of now, is that Piketty will have to explain in further detail his methods and his math — and that, as always, even the most popular and influential of economic theories is only as good as the data supporting it. When it comes to studying wealth in particular, choosing precisely which data to measure, and how to slice it and dice it, is bound to be messy.

http://www.realclearmarkets.com/articles…
Piketty states, "From 1980 to 1990, under the presidents Ronald Reagan and George H.W. Bush, the federal minimum wage remained stuck at $3.25, which led to a significant decrease in purchasing power when inflation is factored in. It then rose to $5.25 under Bill Clinton in the 1990s and was frozen at that level under George W. Bush before being increased several times by Barack Obama after 2008." (page 309).

Wrong, Professor Piketty. The federal hourly minimum wage rose twice in the presidency of George H.W. Bush, from $3.35 to $3.80 in 1990 and then to $4.25 in 1991, a 27 percent total increase. Then, under President Clinton, it rose to $4.75 in 1996 and $5.15 (not $5.25, as Piketty states) in 1997, a 21 percent total increase.

The next increase in the minimum wage, from $5.15 to $7.25 over three years, a 41 percent increase, was signed into law in 2007 by President George W. Bush. The federal minimum rose to $5.85 in 2007, to $6.55 in 2008, and to $7.25 in 2009. President Obama has not yet signed a minimum wage increase into law, despite beginning his first term with the political advantage of a Democratic Congress.

One might overlook one isolated error as sloppiness to which we are all susceptible. But Professor Piketty's supposed history of changes in the minimum wage is not tarnished by a single error, but by a vast array of systematic errors.
More...
Posted by ChefJoe on May 27, 2014 at 10:13 AM · Report this
6
I need to know more about Sasquatch please
Posted by crumley on May 27, 2014 at 10:13 AM · Report this
7
The most telling point about Prof. Piketty's excellent book is that he barely touched the tip of the giant iceberg: his data derived from income tax returns, not where the major ultra-concentration of wealth is concerned, capital gains.

Also, Piketty didn't even touch (although he explained why in several sentences as to the difficulty in accessing such data) the wealth hidden and sheltered in foundations, trusts, unregistered trusts, offshore finance centers, hedge funds, etc., which involves trillions upon trillions of dollars of wealth!

The best critique of Prof. Piketty's book, in the most thoughful and civilized manner, is to be found here, by Prof. Michael Hudson:

http://michael-hudson.com/2014/04/pikett…

Posted by sgt_doom on May 27, 2014 at 10:19 AM · Report this
8
Listen, @5, chefblow,....

Piketty had to smooth out the data as it was cross-century and different measurements are used over any period of time, especially where centuries are concerned; a normal process in math modelling.

As far as reports in the Fiscal Times, Peter G. Peterson's sham rag, which pushes for anything connected to national and global austerity, one would suggest you use a different, and reliable, source in the future!
Posted by sgt_doom on May 27, 2014 at 10:25 AM · Report this
9
#5: Glad to see you're already parroting the neoliberal/conservative talking points. Picketty is in the process of addressing all the purported errors identified by the Financial Times (people should also be aware that while the economists at the FT are the real deal the publication is pretty well known to champion neoclassical/neoliberal ideology). I'd like to actually wait to see where the exchange between Picketty and the FT goes before signing up for your snide Fox News-ready commentary. It was pretty well inevitable that economists and pseudo-economists on the right (personally I think the whole field is pseudoscience, but that's just me) would have their knives out the second anyone questioned their orthodoxy. So, pore through the data to find the errors to discredit an unpopular idea. And btw, not all economic theories are based on sound data. The entire Austrian school, for example, is pretty much just made up.
Posted by Jizzlobber on May 27, 2014 at 10:27 AM · Report this
10
@8, wow, I'm not advocating for either side but the story I heard this weekend on NPR sounded like some of the data was dubious. Not sure if that extends to the conclusions.

http://hereandnow.wbur.org/2014/05/26/pi…
But over weekend, the Financial Times published an analysis arguing that Piketty’s “estimates of wealth inequality are undercut by a series of problems and errors.”

Piketty has welcomed the open debate, saying that is why put all his data online, but is arguing that any mistakes with data do not change the fundamental conclusion of his work.
Posted by ChefJoe on May 27, 2014 at 10:57 AM · Report this
Supreme Ruler Of The Universe 11

The music stopped and there's 8 chairs and 90 people.

What are you going to do about it?

Posted by Supreme Ruler Of The Universe http://www.you-read-it-here-first.com on May 27, 2014 at 10:59 AM · Report this
JonnoN 12
@5 writes "using the wrong numbers"

@10 writes "I'm not advocating for either side "

riiiiight
Posted by JonnoN http://www.backnine.org/ on May 27, 2014 at 11:02 AM · Report this
JonnoN 13
@11 JBITDMFOTP
Posted by JonnoN http://www.backnine.org/ on May 27, 2014 at 11:03 AM · Report this
Supreme Ruler Of The Universe 14
In addition, Tyson may have caught Gary Gulman's act...In This Economy...

https://www.youtube.com/watch?v=PpyBfz7z…

Posted by Supreme Ruler Of The Universe http://www.you-read-it-here-first.com on May 27, 2014 at 11:17 AM · Report this
15
Well, @10, if you aren't advocating for either side, why do you definitely sound as if your are?

http://www.counterpunch.org/2014/05/27/o…

Again, refer to my first comment, and read the data.
Posted by sgt_doom on May 27, 2014 at 11:20 AM · Report this
16
More excellent pushback on the silly nonsense spewing from Rockefeller lacky, Peter G. Peterson's Fiscal Times and the City of London's Financial Times:

http://www.theguardian.com/commentisfree…

Posted by sgt_doom on May 27, 2014 at 11:23 AM · Report this
17
The Stranger should higher high school dropouts, and pay them as much as Charles.
Posted by If experience and education shouldn't count. on May 27, 2014 at 11:46 AM · Report this
fletc3her 18
That sounds like a straw man argument to me. Who doesn't expect college graduates on average to earn more than non-college graduates? Who doesn't expect skilled laborers to earn more than non-skilled laborers? Who doesn't expect doctors to earn more than fast food workers?

The point of debate is whether the share of income enjoyed by those who work is fair against the share of income enjoyed by those who simply own.
Posted by fletc3her on May 27, 2014 at 12:19 PM · Report this
Supreme Ruler Of The Universe 19
#18

You know why Bill Gates is wealthy? Because he was a Revolutionary. He overturned all of traditional information processing, he destroyed and laid waste to hundreds of companies and jobs. He eviscerated IBM and CA and mainframe companies. He seized their assets and took their workers as conscripts in his geek army. He didn't go around looking at COBOL programmers and Xerox execs, and whine about how a bunch of lazy asses were getting paid and not doing much work. He put them out of business!

Any future transfer must be as sweeping...
Posted by Supreme Ruler Of The Universe http://www.you-read-it-here-first.com on May 27, 2014 at 12:31 PM · Report this
Will in Seattle 20
The music stopped and 1 person has 999,999 chairs and says the other 1,000,000 of us should be satisfied with the 1 chair he doesn't inherit or steal
Posted by Will in Seattle http://www.facebook.com/WillSeattle on May 27, 2014 at 12:44 PM · Report this
TCLballardwallymont 21
The 99% can always amuse themselves by whining about their $120,000+ in student loan debts for a degree that qualifies them to pull my double latte and flip my burgers.
Posted by TCLballardwallymont on May 27, 2014 at 12:53 PM · Report this
Sargon Bighorn 22
China, India, Japan, and many other nations understand the benefits of an education. They send their youth to the West for that. In America we understand the benefits of a fast car and a high credit score. How many languages do you speak? Do you really think Americans are competitive globally let alone domestically? No we're not. We don't have to be WE'RE AMERICANS dammit and we saved their asses from the Nazis and WE'RE the greatest generations and blah blah blah. This has been a problem decades in the making.
Posted by Sargon Bighorn on May 27, 2014 at 1:28 PM · Report this
23
@21, if they knew your opinions, they'd probably poison your lattes and your hamburgers. So perhaps you should stop commenting.
Posted by sarah70 on May 27, 2014 at 1:58 PM · Report this
TCLballardwallymont 24
Nah, I think I'll continue to mock the student debt 'crisis' crowd. I expect someone signing loan documents to look at expected incomes in their chosen field of endeavor. Oh, the inhumanity of expecting people to make choices and live with the outcomes. I should clearly be poisoned for having such an evil outlook. Or perhaps you could put two seconds worth of contemplation into your comments.
Posted by TCLballardwallymont on May 27, 2014 at 2:23 PM · Report this
25
@24: Sure, but still, you keep insulting the people who make your food, they will shit in it. I'm sure you don't keep those opinions on the QT when you're out and about.
Posted by tiktok on May 27, 2014 at 2:32 PM · Report this
26
@13 I think you posted that a bit too soon, because while his comment @11 is stupid and inane, it is items like he wrote @19 that allow us to say with confidence that "JBITDMFOTP"

tl;dr JBITDMFOTP
Posted by Slap A Black Frame Around A Picture, And Text At The Bottom on May 27, 2014 at 2:53 PM · Report this
TCLballardwallymont 27
@25 Anyone who would, or would even advocate, poisoning food is a crazed nutjob.

If a position advocating personal responsibility, and mocking a crisis manufactured to avoid personal responsibility leads someone to become a poisoner they were likely enough going to do something awful anyways.
Posted by TCLballardwallymont on May 27, 2014 at 3:41 PM · Report this
28
24: You must be so happy being a member of the ruling elite, or at least thinking you are.
Posted by Jizzlobber on May 27, 2014 at 3:42 PM · Report this
TCLballardwallymont 29
The 'ruling elite' who expect people to borrow wisely, and live up to their obligations? Yes, I'm extremely happy to be a part of that community, thanks :D

How are you enjoying being a member of the stupid comments made by idiots brigade? That working out well for you?
Posted by TCLballardwallymont on May 27, 2014 at 4:20 PM · Report this
30
@29

People ought to borrow wisely, but shouldn't they lend wisely as well? And if they lend unwisely, shouldn't they pay the price for their poor decisions?

And if we find ourselves in the sort of crisis where sticking to our moral absolutism would destroy the economy, why would we choose to make the borrowers suffer, while rescuing the lenders from their own stupid decisions?
Posted by robotslave on May 27, 2014 at 4:51 PM · Report this
runswithnailclippers 31
Yes, people who have a higher level of education or more likely to make more. But people who come from wealthier families are more likely to afford the education in the first place, and more likely to have good connections upon graduating. I don't see this mentioned in the WSJ summary. Also, since minimum wage hasn't gone up in years, this is going to inflate the disparity more for people in service type jobs who are less likely to have a college education.

So this conclusion that the value of a degree is increasing is bogus as it is the result of a faulty correlation.
Posted by runswithnailclippers on May 27, 2014 at 9:33 PM · Report this
Lissa 32
@29: You know TC, the more you post the more you sound like Seattleblues. Maybe the two of you should get together and swap home improvement tips.
Posted by Lissa on May 28, 2014 at 9:46 AM · Report this
TCLballardwallymont 33
@32 Hey there Lissa. Last time we chatted we made the discovery that the word 'Thug' means 'black person' to you. How are you coming with your racism? You get together with juche yet? I'm sure the two of you have some good racist tips to swap.
Posted by TCLballardwallymont on May 28, 2014 at 10:36 AM · Report this
Lissa 34
Did you go back and read my reply?
And did you see in the following days that SPD affirmed what I had been saying all along? That it is their job to serve and protect the entire city of Seattle? Including the Sourh End?

I'm not sure why you disagree with them.
Posted by Lissa on May 28, 2014 at 12:08 PM · Report this
TCLballardwallymont 35
"Did you go back and read my reply?"

No, I try to limit my interaction with racists. I did read that the SPD had canvassed the appropriate area twice, which obliterated every ill conceived point you tried to make and left the racism and paternalism to stand on it's own "merit".
Posted by TCLballardwallymont on May 28, 2014 at 12:38 PM · Report this
Lissa 36
Sorry, "South" End. :)
Posted by Lissa on May 28, 2014 at 12:41 PM · Report this
37
@18 Bill Gates is rich because he told the most successful LIE in the history of business that didn't involve native Americans:

To IBM: You can't make your hardware work without OUR OS.

That is literally ALL he did.
Posted by Ray Shackleford on May 28, 2014 at 12:50 PM · Report this
Lissa 38
All I ever said was that, no matter how difficult it is the job of SPD to serve and protect the entire city of Seattle.
And they agree with me; that is their job.
That indeed, as you so eloquently put it, they [are] supposed to come door to door after every violent crime in that shitty fucked up ghetto.
You seem to think that they shouldn't.
I was so glad to read that they agreed with me, and well, every one else on that thread.
It is a relief to know, that even if they may some times fall short, that they do realize their duty to all our citizens.
Posted by Lissa on May 28, 2014 at 12:55 PM · Report this
39
If the one percent all send their kids to college, the scions of inherited wealth will all be college graduates even though their education isn't the cause of their money. College grads do out-earn high school grads, but saying that the huge rise of inequality is all about education is relying on a deceptive correlation.
Posted by Always east coaster on May 28, 2014 at 5:11 PM · Report this
sissoucat 40
I have a college degree and I'm still a single mum struggling, with 3 kids, owning nothing but an old car and not enough money in the bank to buy the same one but brand new.

On the good side, the capitalists have long been restrained in my country, so although I'm not earning much, and a lot less than e.g. a plumber without a college degree, my short hours allow me to feed and educate my litter, so that my kittens don't become a danger to society when grown up.

The capitalists would like me to have to work two full-time jobs just to get by, like in the US ; my kids becoming criminals from lack of parental presence don't worry them, they have enough money to pay for their own security.

The difference between me and an US single mom on welfare is : CAPITALISM. Not my college degree.
Posted by sissoucat on May 29, 2014 at 2:56 AM · Report this

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