For a lot of people, economic progress is a thing of the past. Don’t believe me, just look at the data below. Over the last forty years, while the amount of income available per person in the United States has more than doubled (as illustrated by the black line, GDP per Capita) the typical household saw almost no increase (as illustrated by the redline).
Note: The figure shows median income for households where the “householder” was 25-54 years old versus GDP per capita. Data for household income come from the Current Population Survey March Supplement (1976-2018) and data on per capita GDP from the St. Louis Federal Reserve FRED II Database.
The reason is pretty simple – all that extra available income has tended to go to those who already made a lot, opening up a canyon between the rich and everybody else. At the same time, the gaps between the incomes of men and women and white and black Americans have been stubbornly persistent. And COVID-19 is not helping any.
While it has become ever more important to climb one’s way to the top of the economic ladder, it remains difficult to make that climb unless one has the advantage of starting near the top already. I am an economist and better at making graphs than expressing my feelings, but it all makes me a bit depressed. The long-run goal of this blog is to show you these depressing facts using hard data, and then help you understand some of their economic origins in the hope of identifying some solutions. In other words, although the topic of this blog is a bit depressing, its goal is hopeful – if you learn about inequality, you can help reduce inequality.
Personally, I became interested in the topic of inequality as a high school student doing a service-learning project, helping out at a summer day care for kids from low-income backgrounds. Basically, I noticed that the kids I was working with were already way behind in their learning, despite being just four years old. This fact was somewhat surprising to me – I grew up in a small town in central Maryland where, prior to this experience, I had not really known many kids outside of my own socioeconomic status. My parents were together and both had good jobs in the public sector, and I mostly hung around with other kids in similar situations. Of course, some kids’ parents were divorced and some had more or less income than my parents, but the differences were small. In this volunteer project, I was visiting what seemed like a different world within our little town. The simplest way to put it was that the people who lived there – and by extension their kids – just had fewer resources available. The playgrounds were not as nice, the buildings not as well kept, the homes smaller, and the kids were typically living with one parent who had to work during the day. Hence, in the summer, they needed a below average baby sitter like me.
Somehow, the fact that these young kids in my own home town were having so much trouble did not jive with my view of the United States as a land of opportunity – after all, if the kids were behind at age 4 how would they fare as adults? If they fared poorly as adults, who could blame them if the problems started when they were just 4 years old? And why were their parents struggling so much in the first place? This got my high school brain thinking about inequality (for the 10 percent of the time it was not thinking about food, girls, and sports). In fact, I was so interested in the topic that when I went to school at St. Mary’s College of Maryland, I decided to major in economics. Because I liked that so much – and honestly because I did not want to get a real job – I just went straight from my undergraduate degree to pursue a PhD in Economics at Boston College. By the time I was done, I could do what I always wanted to, which was teach economics to others.
For a while, I taught classes with scary titles, like Microeconomic Theory and Econometrics. But one day, the Economics Department asked me to teach an elective of my choosing, and my mind shot back to my high school interest in inequality. However, it was harder than I thought to put together a course that really captured all the issues of inequality that I thought were important. Indeed, no single book existed from which I felt I could teach the course, so I started from scratch and made it up as I went along, piecing it together from various textbooks and academic articles. Now, I’ve realized that after I put in all that work towards developing this class, it doesn’t make sense to only make my students suffer through it. So, I figured writing a blog for smart people like you – people who are interested in inequality but may not have the time to sit through an economics class – could help get some of the information from the class to more folks.
In the coming months — with posts each Friday — this blog will try to expose you to some cutting edge theories in economics in a way that I hope is accessible. It will cover exciting concepts like skill-biased technological change, labor market polarization, human capital, statistical discrimination, and assortative mating (which references marriage, not the Discovery Channel). So welcome, and I look forward to having you as a reader.
 OK, this is the first post in this blog and I feel a disclaimer is necessary because while I was “volunteering,” it was a required part of my high school degree – we had to have a set number of hours of service to graduate. To make it even less “voluntary,” my mom was in charge of the county’s volunteer-service program, so it would not be a good look for the family if I did not do my hours. So, now we have established that I am not some saint who went around helping people in high school out of the goodness of my heart. I feel better. We are definitely off on a more honest foot than if I just let that slide.