THE SILVER BULLET SYNDROME….Jared Bernstein, reacting to a David Brooks column in which he channels the conventional conservative wisdom about increasing income inequality (it’s not happening, and if it is happening it doesn’t matter because sales of plasma TVs are up), makes a general comment about news reporting and analysis on this kind of thing:
As is too often the case, journalists who can?t find a factor that explains 51% of the phenomenon in question dismiss everything. Brooks argues that declining unionization is not a ?driving force? because it only explains 10-20 percent of the rise in inequality. But that?s as big as any other force that economists have measured.
Roughly speaking, the decline in the real value of the minimum wage explains about that much (more for female wage inequality). And globalization is generally cited as accounting for around this share of the increase as well. I?m not aware of any inequality analysis that dismisses these changes because they are not ?driving forces? (i.e., they individually account for less than half the growth).
Call it the Silver Bullet Syndrome. Unfortunately, as much as we’d like it to be otherwise, the world is a complex place. If you want to know why middle class wages have stagnated over the past 30 years, while business executives have been taking home pay packets that would make Boss Tweed blush, you’re just not going to find it in a single explanation. It’s partly unionization, it’s partly monetary policy, it’s partly the minimum wage, it’s partly globalization, it’s partly increasing returns to education, and it’s partly a dozen other things as well.
Brooks wants to find a single explanation that fits his worldview, so he chooses to focus on increasing returns to skills. This is despite the fact that the vast majority of the increase in inequality has been due to skyrocketing compensation in the top 1%. Does Brooks really believe that corporate executives have more “social and customer-service skills” than their counterparts did 30 years ago?
I don’t think he does. But it serves his purpose to pretend otherwise, since he doesn’t like government intervention in the economy and this is an explanation that government policy can do little about.
But is it a true explanation? It seems unlikely. Increasing returns to skills are a part of the picture, but that’s been true ever since WWII, yet middle-income stagnation began only in the mid-70s. What’s more, it’s been true throughout the world, yet middle-income stagnation has hit the U.S. far harder than other developed countries. Why? Because there’s more to it. Unfortunately, part of that “more” includes things that the government can influence, and that’s inconvenient for the conservative worldview.
If you don’t care about stagnant middle-income wages, you’ll do what Brooks does: dismiss it. But if you do care, there really are things we can do about it. There’s no single magic bullet, there’s probably no way to solve 100% of the problem, and there’s no way to fix things immediately. But if we can find half a dozen things that solve 50% of the problem over the next decade, that sure seems worthwhile to me.