The Moral Roots of Income Inequality

Inequality is not simply a matter of numbers and economics. Thomas Edsall explores at the moral and cultural roots of income inequality last week in the New York Times. His essay takes as its basis a recent speech by Alan B. Krueger, President Obama’s Chairman of the Council of Economic Advisers, entitled “Fairness as an Economic Force.” Here is one excerpt from Krueger’s speech:

In considering reasons for the growing wage gap between the top and everyone else, economists have tended to shy away from considerations of fairness and instead focus on market forces, mainly technological change and globalization. But given the compelling evidence that considerations of fairness matter for wage setting, I would argue that we need to devote more attention to the erosion of the norms, institutions and practices that maintain fairness in the job market. We also need to focus on the policies that can lead to more widely shared – and stronger – economic growth. It is natural to expect that market forces such as globalization would weaken norms and institutions that support fairness in wage setting. Yet I would argue that the erosion of the institutions and practices that support fairness has gone beyond market forces.

While globalization, outsourcing, and the rise of robots certainly are part of the reduction of wages and the hollowing out of the middle class, they do not tell the whole story.

At a time when real wages are stagnant, CEO pay is skyrocketing, income at the highest levels of society is increasing disproportionately, and corporate profits as a share of Gross Domestic Product have reached record levels.

Importantly, Edsall notes that conservatives and liberals both have focused a light on this disintegration of the moral fabric of our society, though they often do so in very different ways. He begins his essay with a discussion of Charles Murray and David Brooks, each of whom argue that the economic and political problems we face have their roots in “disintegrating moral norms.”

While Krueger’s analysis is very different from Charles Murray’s or from David Brooks', all three share an interest in what they see as disintegrating moral norms. And there is something else that binds them: the trends that Murray, Brooks and Krueger deplore continue with unrelenting force. From Murray’s perspective, social decay and irresponsible behavior have spread into the broad working and lower middle class.

Liberals and conservatives often reject alliances on moral questions, and their analyses of the moral decay are meaningfully different. And yet, Edsall does well to bring them together and to remind us that radical inequality and political paralysis may have cultural and moral valences that transcend political affiliation.  His essay on “Our Broken Social Contract” is your weekend read.

You might also look at Alan Krueger’s speech, “Fairness as an Economic Force.” originally given at Oberlin College. I have written about Murray’s book Coming Apart, here and here.

-RB