This fallacy is that income or wage inequality results from an increasing "skill" differential. It's your own damn fault you don't make more money. You should have spent more time drilling calculus and less in all-night games of hearts followed by excursions to Dunkin Donuts. If you're worried about outsourcing, you're a weenie; real men are not afraid to compete in the new world economy.
I would label it the Bullshit Human Capital story (BHC). BHC was big in the Clinton Administration and lives on in the Gospels of Sperling (a.k.a. Gene Gene, Neo-Liberal Machine). The Clintons attributed the suffering we must endure from free trade to lack of investment in training and education, and they had the courage to actually devote several teaspoons of resources to look like they were fixing that problem.
In an important departure, Krugman says it's about Power. It's not that more education is not always better than less; of course it is, and more public support for education and training should be welcome. But BHC does not strike at the root of the problem, nor its solution. It's about who makes the rules of the game, including the labor market game. We are not living under meritocracy. Merit is substantially compromised by privilege.
Privilege derives from wealth, race, and gender. It biases decisions in college admissions, employment, housing, political appointments, and credit allocation. It reduces economic efficiency and growth because a biased decision entails waste of real resources.
The resulting elite is what PK calls an oligarchy.
On a related note, Average family income drops 2.3% by Sue Kirchhoff, USA TODAY
From 2001 to 2004, average family income fell 2.3%, to an inflation-adjusted $70,700 from $72,400 in the 1998-2001 period. By contrast, from 1998 to 2001, average income jumped 17.3%. Median income — the midpoint of the income range — rose 1.6% to $43,200.
Fed economists said the figures were "strongly influenced" by a more-than-6% drop in median real wages during the period. Also, investment income was less than in the stock market boom years of the late 1990s. (Related: Full report)
Real net worth — the difference between family assets and liabilities — rose only slightly from 2001 to 2004. Median net worth rose only 1.5% to $93,100 during the period, vs. a 10.3% gain from 1998 to 2001. And liabilities rose faster than assets, due largely to a big rise in mortgage debt.
As we discuss next year's budget, Certified salaries will jump approximately 4.0% as will benefits.
In the free market world people all over CT are losing their jobs, taking massive pay cuts and both losing and paying larger deductables for their benefit packages.
Just something to think about.
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