Sunday, April 29, 2012

Mike Bloomberg: It's "education inequality," not "income inequality" (Really?)

Mike Bloomberg is a brilliantly successful businessman, who tends not to dither making decisions. As mayor, such certainties have served him both well and poorly.

Indeed, he is a man so suffused with confidence that he could say, as he did April 26 at the Barclays Center press conference, that the arena was built for hockey, even though exactly the opposite is true. Or, choosing not to know--or find out--how many full-time equivalent jobs would be provided by the 2000 arena jobs promised, he got testy, rather than answer a reasonable question.

Bloomberg on inequality

And Bloomberg could offer a theory about inequality in this country, one that certainly would become controversial should he follow the entreaties of columnist Thomas Friedman and reconsider running for president as an independent.

"Will the people without a great skill-set have jobs that are high-paying?" Bloomberg soliloquized at the press conference, responding to questions about low-wage jobs. "Probably not. In this country, we talk about an income inequality. It is not an income inequality. It is an education inequality. And the example you should look at is: why does it take a two-breadwinner family today to be middle class, where 40-50 years ago, it was a one-breadwinner family that could do exactly that."

"And the reason is all in education," Bloomberg continued. "If you look, other countries are starting to have great schools, great universities, great public schools. And they are becoming much more productive at a much greater rate than we are doing in America. We stopped improving our productivity 20-30 years ago, and the education system started going downhill, and certainly not growing and improving as fast as the rest of the world. And that's really what you see out there, and it's a great challenge, and the answer is to go back to the basics, education, and in the meantime getting people the experience they need, and working."

Hold on. Doesn't the United States have the best universities in the world? Isn't the issue a little more complicated? Hasn't productivity been doing pretty well? Maybe the issue, as economist Dean Baker points out, is the distribution of the gains from productivity growth.

Another take

Let's look at a 7/19/10 Baker  analysis in The Nation (as well as other commentary by Baker):
This brings us to the question of why we got the housing bubble in the first place, which goes directly to the issue of inequality. In the three decades after World War II, there were no notable bubbles in the economy. Productivity growth translated into wage growth, which in turn led to more consumption. The increased demand led to more investment, productivity growth and wage growth.
This virtuous circle was broken by Reagan-era policies intended to weaken the power of ordinary workers. Wages no longer kept pace with productivity growth, eliminating the automatic link between productivity growth and demand growth. This led to excess capacity in the economy, which was filled in the 1990s with demand generated by the stock bubble and in the 2000s with demand generated by the housing bubble.
If the institutional changes of the Reagan era had not weakened workers' bargaining power, these bubbles would not have been possible. Demand would have kept pace with output capacity. The Fed would not have felt the need to lower interest rates to sustain demand. 
Because the increase in inequality was policy-related, Baker suggests some reforms:
  • "Restoring some discipline to CEO pay"
  • "A small tax on financial speculation"
  • Use trade and immigration policy to subject "highly paid professionals (doctors, lawyers, dentists, etc.)," rather than lower-level workers, to competition
  • Strengthen unions
The solution seems to be a little more complex than that proposed so assuredly by Bloomberg.

1 comment:

  1. Mayor Bloomingdales is wrong. Education fills the demands of the marketplace -- it does not create them. Example: the space program put engineering on the map. College graduates will not bring exported industries back to America. That requires the kind of tax policies that Bloomingdales would oppose. Notice that the financial industry - which contributes nothing to the average American - manages to find all of the educated workers that it needs. If we rebuilt America - see - there would be a demand for skilled workers. If we flip burgers, there won't be such a demand, no matter how well-educated they are.