Enough Work?

Income inequality is certainly the rallying issue for many progressives these days. Paul Krugman goes as far as to call it the one issue, the only important one. “Inequality is, indeed, the defining challenge of our time. Will we do anything to meet that challenge?” he asked last December.

Whether or not that is overstating the issue, the debate over inequality is not going away soon. Solutions are often elusive, largely because the root of income inequality is far from obvious. The free market system in the US has not always had high levels of inequality, after all. It’s a new feature to anyone who lived through the 1950s, for example.

What caused the problem? Perhaps it is the simple law of supply and demand meeting a limit to the paying work available in a developed economy.

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Retiring Inequality

Income inequality is one of the biggest barriers to sustained growth today.  You can’t have a consumer economy without income reasonably well distributed, and such an economy is going to have more sustained, reliable growth.  But as we’ve shown before, income inequality has grown since 1968, threatening long term growth.

Here is another way to look at that rising inequality as part of a long-term trend that defined 1968-2000 – the expansion of the workforce and subsequent collapse of that expansion that will solidify  when the Baby Boom hits retirement.  Economic changes are often demographic at heart, and we are due for some major upheaval that we need to be ready for.

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