Top Economists Seek Solutions to Inequality
Something remarkable is happening in the economics profession. Top researchers in the field have begun arguing for policies to alleviate growing U.S. income and wealth inequality.
For decades, inequality wasn’t taken very seriously by economists. But that view “has changed dramatically,” said James K. Galbraith of the University of Texas at Austin, who moderated a Zoom panel at the annual meeting of the Allied Social Science Associations last week.
Inequality, Galbraith said, has “become one of the most important questions economists face.”
And COVID-19, argued Nobel laureate Joseph Stiglitz, a panelist, “has brought out very forcefully the nature of the inequalities in our society” and has “exacerbated those inequalities.”
The pandemic’s effects include larger increases in unemployment for low-wage workers, who are disproportionately Black and Latino and often work for small businesses devastated by efforts to suppress the virus. In addition, front-line workers like home health aides and meat-packing workers are being exposed to the virus but don’t always have paid sick time. There are also growing concerns about the longevity gap and about a widening educational gap between students from poor and high-income neighborhoods resulting from online learning.
The economists, having agreed inequality is a problem, identified the myriad forces driving it. They range from the persistent segregation of Black and white neighborhoods to the ability of the wealthy to invest and accumulate more wealth, while wage workers can barely get by. In a cutthroat global economy, the decline of unions has also stripped workers of their ability to bargain with employers for higher wages, they said.
Another panelist, Teresa Ghilarducci, brought attention to the inequality that exists among retirees. This can be seen in the downward mobility many people experience after they retire and can no longer support the standard of living they had while they were working.
To address these complex problems, the economists said a comprehensive policy agenda is needed that includes beefing up Social Security benefits – the great equalizer – for disadvantaged retirees, more taxation of inheritances, educational equality at the preschool through college levels, sturdier social safety nets, and new labor rules that give workers back some of the power they have lost.
Another panelist, Jason Furman, former chair of President Obama’s Council of Economic Advisers, agrees that an array of policies will be required to combat inequality. But he also argued that the two major relief bills Congress passed last year – a total of $2.9 trillion – probably reduce inequality.
The bills beefed up weekly unemployment benefits and began covering gig and other workers who previously couldn’t get these benefits, while giving Americans more cash assistance in the form of government checks – $1,200 per person last spring and $600 in December.
“We did something I think we can be proud of,” Furman said, and showed “that you can, if you want to, break the link between what’s happening in the market economy and the economic plight of workers.”
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