Thursday, September 11, 2014

When will economists & pundits stop telling lie that education will cure inequality of income?

By Marc Jampole

Eduardo Porter of the New York Times is the latest journalist to advocate that the way to narrow the gap between what the wealthiest and everyone else earns is through education.  It’s an absurdly ridiculous argument that depends on us believing that with a college diploma nonunionized burger flippers, garbage haulers, shelf stockers and medical orderlies will be able to command higher salaries.  

In an article titled “Equation is Simple: Education = Income,” Porter uses two sets of statistics to confuse and distract us about why the top 1% have seen their incomes rise precipitously in recent decades, while the incomes at every other economic level have stagnated or deteriorated. 

First Porter quotes some computations of Lawrence Katz, a Harvard economics professor and former chief economist for the U.S. Department of Labor. Katz calculates that if the top 1% were taxed at the rates in effect in 1979, the government could split it up equally and give every family not in the top 1% the grand total of $7,102. Katz and Porter then contrast this $7,102 with the estimated $30,000 a year difference in wealth between what couples with two college graduates make and what families with two high school grads make. 

Porter and Katz think this contrast proves that education will address the growing inequality of income.  The reasoning sounds like something a group of died-in-the-wool right-wing first-year economics majors would cook up at 3:00 in the morning after smoking a few joints. While it’s true that education can turn the daughter of a janitor into a high-priced accountant, it couldn’t possibly qualify everyone for great-paying jobs because there aren’t that many great-paying jobs around today.

These economists who think greater education will push incomes up haven’t been looking at job trends. Most of the jobs lost in the Great Recession have been replaced by lower-paying ones. Those who predict job trends estimate that virtually all of the 20 job titles to gain the most employees over the next decade are low-paying.  It is true that many of the job titles likely to grow the most on a percentage basis are high-paying, but these job titles start with a small base: 20% of 100 engineers is a lot less than 2% of 10,000 cashiers.

If we educate everyone for higher paying jobs, what is likely to happen is that the wages for these jobs will fall, thanks to the law of supply and demand. In other words, what is proposed by Porter, Katz, Claudia Goldin, Robert Reich, economists at Standard & Poor’s and the rest of the army of scholars and pundits who have swallowed the “education ends income inequality” Kool-aid may actually end up creating more inequality.

The only way to foster greater equality of income is to implement laws and regulations that change the distribution of income. The actions are obvious, because they worked to create a more equal society roughly from 1935-1979:
  • Increase the minimum wage
  • Pass laws and regulations that make it easy for workers to unionize
  • Use tax increases on the wealthy to provide services and support to the poor and lower the cost of higher education for the poor and the middle class
  • End privatization of traditional government functions, since privatization generally leads to workers making less and management making more.
  • Pass laws that place high tariffs on imported goods and services produced in countries that do not hew to our wage, safety and environmental regulations.  

The “education ends income inequality” canard is one of many falsehoods routinely perpetrated on the American economy and public by economists and economic writers. The theory that lowering taxes on the wealthy leads to the creation of more jobs has proven to be false. The theory that illegal immigrant workers lower the incomes of other workers has been proven false. The notion that unions get in the way of one-on-one negotiations between workers and employers is an absurdity, as is the idea that people are less likely to look for work the longer their unemployment insurance runs (despite the fact that unemployment compensation is a miniscule portion of their former salary).  Privatization of prisons, the military and schools (through the charter school movement) has proven to be disasters.

That free trade between nations improves the domestic economy is not quite a lie, as shown by a study cited by Harvard’s Dani Rodrik in The Globalization Paradox, his critique of globalization.  Rodrik quantifies both the amount of wealth distributed domestically and the added gain to the U.S. economy if all tariffs were removed on all imported and exported products and services. He finds that the for every additional dollar that would be created in the United States by a totally free global trade regime there would be $50 transferred from the pockets of some groups to the bank accounts of others, primarily from workers losing their jobs to the wealthy who own the means of production, distribution and finance.  In other words, free trade is great—for the wealthy only.

In fact, the one factor that unifies all the distortions and myths believed by most mainstream economists is that acting on each of the myths leads to greater inequality of wealth.  That makes economics as practiced throughout most of the United States more of a propaganda arm of the wealthy than it is a social science. 

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