Income Inequality
Income inequality in the United States remained
relatively stable for a period
of nearly forty years. Beginning in the
1970’s, however, this period of
stability ended, as the first signs of
widening income inequality became
apparent. Over the course of the 1970’s and
1980’s, an increasingly clear
trend toward greater income inequality emerged.
By the end of the 1980’s, the
top 20 percent of workers were receiving the
largest share of income ever
recorded by government figures, and the bottom
three fifths were receiving the
lowest shares ever recorded. This trend has
continued into the 1990’s and
currently shows no signs of decline. When the
indicators of growing inequality
were first observed in the 1970’s, some
researchers argued that the effects
were merely temporary artifacts of
short-term labor market disturbances. By the
end of the 1980’s, however, a
long-term trend towards increasing inequality
had clearly emerged, pointing
instead to inflexible changes in the occupational
structure itself. The new
occupational structure appeared to be one with an
increase of well-paid
technical, scientific, and professional jobs at the top, a"sliding" middle
class, and a growing poorly-paid service and retail jobs at
the bottom.
Several important labor-force changes appeared to be contributing to
the
shifting occupational structure. As occupational reconstructing and
growing
income inequality became increasingly evident, a heated debated as to
the causes
and magnitude of these changes arose. Two dominant bodies of
thought emerged
around the issue: the "job-skill mismatch" thesis and the
"polarization"
thesis. Mismatch theorists argue that there is an increasing
distance between
the high skill requirements of post-industrial jobs and the
inadequate training
and mediocre qualifications of workers. They see the
post-industrial economy
leaving behind unskilled workers, especially women
and minorities. For the
mismatch theorist, the trend toward greater
inequality is temporary and will
dissipate once the supply of workers
acquires the skills demanded by a
post-industrial economy. And they predict
that the overall distribution of
workers will experience and upgrading in
their wages over the long run.
Polarization theorists, on the other hand,
believe that the rise in inequality
is permanent, a result of the shift to a
service-based economy. This vision of
the post-industrial economy is
characteristically polarized. The problem
according to these theorists, is
the type of jobs being generated in the new
economy, not worker attributes.
Because they believe the causes are structural
and permanent, polarization
theorists would deny the efficacy of public policies
designed to educate and
train unskilled workers. They predict a long-term
continuation of the trend
towards increasing income inequality. Studies show
that the long run increase
in income inequality is also related to changes in
the Nation’s labor market
and its household composition. The wage distribution
has become considerable
more unequal with more highly skilled, trained, and
educated workers at the
top experiencing real wage gains and those at the bottom
real wage losses.
One factor is the shift in employment from those
goods-producing industries
that have disproportionately provided high-wage
opportunities for low-skilled
workers, towards services that disproportionately
employ college graduates,
and towards low-wage sectors such as retail trade. But
within industry shifts
in labor demand away from less-educated workers are
perhaps a more important
explanation of eroding wages than the shift out of
manufacturing. Also cited
as putting downward pressure on the wages of
less-educated workers are
intensifying global competition and immigration, the
decline of the
proportion of workers belonging to unions, the decline in the
real value of
the minimum wage, the increasing need for computer skills, and the
increasing
use of temporary workers. At the same time, long-run changes in
living
arrangements have taken place that tends to provoke differences in
household
incomes. For example, divorces and separations, births out of wedlock,
and
the increasing age at first marriage have led to a shift away
from
married-couple households and toward single-parent and non-family
households,
which typically have lower incomes. Also, the increasing tendency
over the
period for men with higher-than-average earnings to marry women
with
higher-than-average earnings has contributed to widening gap between
high-income
and low-income
households.