The protesters on Wall Street and in other cities have many issues with the economy. One of them is economic inequality between households. N.C. State University economist Mike Walden explains their concern.
“The concern is, if you look at income — what people earn per year, as well as wealth, the value of people’s investments — you see that first of all those are not equal between all households. We certainly know that.
“But secondly we see that over the last three decades, the trend has been those with more income and more wealth have seen those numbers go up even faster than people with less income and less wealth. So, that means that the inequality, if you will, among households and income and wealth has gotten bigger. That’s a fact.
“The question is why, and obviously this is something economists have studied, and we think there are many potential reasons: One, globalization has moved a lot of middle-income paying factory jobs off shore. Education — that is people with college degrees and higher — actually are the ones that the economy values more, and so they’ve gotten the bigger pay increases.
“Something called the superstar effect … is the effect that goes along with people at the top of their game in entertainment or sports or executives or star lawyers who are able to use modern technology and communication to reach a broader audience than ever before. Their income has gone up commensurately.
“And then there’s some evidence … that over the last three decades we’ve actually had a lowering of tax rates in general, and for people at the upper end of the income scale, actually their rates on a percentage basis have gone down more, and they’ve responded by working more and earning more income. So, lots of factors behind this economic and equality.
“Big question is, What do you do about it? Do you tax more? Or perhaps do you encourage people to get more education?”Category: Economic Perspective