Stephen Rose on Inequality, Plus Random Thoughts

While reading Matt Yglesias and Ezra Klein gently disagree about inequality, I was reminded of an excellent pamphlet by labor economist Stephen Rose, Social Stratification in the United States. I have the most recent edition, published in 2007, but the project began in the late 1970s as an educational effort — it includes an elaborate graph that is meant to give a textured look at class hierarchies in America.

Rose is perhaps best known for writing “The Trouble with Class-Interest Populism,” a thoughtful critique of a strain of center-left thinking that emphasizes class antagonism over broad-based growth. But Rose is far from a conservative — he is deeply concerned about rising inequality, and that comes across in Social Stratification. Yet in fewer than fifty pages, he offers a nuanced portrait that notes the gains American workers have made over the past several decades while emphasizing signs of stress. Almost every page contains a strikingly intelligent insight and an overlooked fact. This is an indispensable resource for students and citizens alike. I sound like an advertisement, I realize, but it’s true all the same.

One thing I’d like to note: when thinking about inequality, it is important to keep in mind the changing composition of households (how many adults? how many children?), to keep in mind where workers are in the life-cycle (prime-age workers or workers who are starting out?). When making international comparisons, it is worth looking at pre-tax and after-tax inequality, to get a sense of whether labor-market institutions are doing the work of mitigating inequality or tax-and-transfer policies. Also, as Thomas Lemieux has argued, an increase in experience and education tends to lead to more wage dispersion. The United States used to have a big lead on other affluent market democracies in rates of college completion. That is no longer the case. But because we’ve had that lead for so long, it stand to reason that other countries will grow more unequal as they experience the same increase in experience and education levels.

My own view is that we need to revamp the American social model to deal with an economic environment in which firms have more leverage and less-skilled workers have less. This doesn’t mean importing a European social model that is under strain as European societies go through a transition we’ve already been through. To be sure, there are several European social models — there is a (pretty good) Nordic approach to labor markets and transfers, yet Norway and Sweden have very different policies regarding child-care. And we can certainly learn from European insights, particularly on matters relating to work-life balance. A quick statistic, via Rose:

The national poverty rate has hovered around 11 to 13 percent over the last decade, but only 2.2 percent were persistently poor (that is, lived in poverty for at least eight out of the last ten years). Conversely, although 20 percent of American children live in poverty this year, it is estimated that 45 percent of white children and 85 percent of black children will experience poverty while growing up. [Emphasis added.]

As long as that is true, we clearly need to improve the quality — the dependability, the reliability — of public institutions that serve the poor and near-poor. This is why I think the important questions don’t relate to the size of government — if you include tax subsidies, the U.S. is already where Western Europe is — we just skew our benefits to the middle-class, and we finance them via progressive taxes rather than via flatter, broad-based consumption taxes. The important questions relate to the quality and efficacy of government.

That’s why I’m so pleased that Jim Manzi is thinking about how to sharply improve the quality of our schools. Middle-class public schools in the United States are as good as public schools anywhere in the world, including Finland and Korea and Japan. The trouble is that schools serving black and Latino children don’t have the industrial organization to do their particularly difficult jobs well. Then there is healthcare. More to come.