After three decades of widening, the income
gap between the poor and well-off in the US may
have started shrinking in a trend that is likely to be followed here. It’s the
turn of the tertiary-educated to suffer.

Fortune reports the first sign of what might be an important reversal after decades of
the working class share of the cake being squeezed:

Between 2001 and 2004 (the most recent year for which data are
available), incomes of the poorest 20% of families increased while
incomes of the richest 20% fell. Basically, the poorest families’ share
of total incomes grew, and the richest families’ share shrank. Incomes became
just a little less unequal.

As the
Professor used to ask, why is it so? The US has not had the benefit of the
Howard Government’s family allowances welfare payments to distort family income
figures so their numbers are a straight reflection of what’s happening in the
jobs market – and that means the degree you’ve gone into HECS debt for might
not be worth as much as you’d hoped.

The skill premium, the extra value of higher
education, must have declined after three decades of growing. The Fed
researchers didn’t pursue that line of thought, but economists Lawrence Mishel
and Jared Bernstein at the Economic Policy Institute did, and they found
supporting evidence in the new Economic Report of the President, issued within
days of the new Fed survey. It cited Census Bureau data showing that the
premium had indeed fallen sharply between 2000 and 2004. The real annual
earnings of college graduates actually declined 5.2%, while those of
high school graduates, strangely enough, rose 1.6%.

The Professor is still
asking why, which is where the Fortune columnist has to theorise that the globalisation of the labour market
is now coming home to roost at the top of the tree after doing just about all
it can at the bottom:

Perhaps so many lower-skilled jobs have now left
the US – or have been created elsewhere to begin with – that today’s high
school grads are left doing jobs that cannot be easily outsourced – driving
trucks, stocking shelves, building houses, and the like. So their pay is
holding up.

College graduates, by contrast, look more
outsourceable by the day. New studies from the Kauffman Foundation and Duke
University show companies massively shifting high-skilled work – research,
development, engineering, even corporate finance – from the US to low-cost
countries like India and China. That trend sits like an anvil on the pay of
many US
college grads.

As for income inequality, pretty much everyone has
always hated it, and its growth was a certain cue for handwringing and brow
furrowing. Well, it’s not growing anymore. Because our best-educated workers
are earning less, and the incentives for higher education may thus be declining,
the result could be a more uniform – and lower – standard of living.

campaign to Save the Roo by outsourcing Qantas’s worst cost comparative disadvantage – the CEO’s
salary – was partly tongue-in-cheek. Turns out we were just falling in with an
international trend. Keep the blue collar, export the white.

Peter Fray

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