Most economists - particularly those allied with Wall Street and the administration - would answer 'yes' to that question. And, if you look at the numbers by themselves you'd have to agree. However, Frank Levy and Peter Temin of MIT, argue that, although technology, educational levels and globalization are very important, you have to consider the economic institutions which are prevalent at a particular time. They do so in their paper, "Inequality and Institutions in 20th Century America".
That inequality has been rising in this country cannot be disputed. Nor can the fact that there was less inequality in the period 1950 - 1980. Between 1980 and 2005 non-farm productivity, the engine of economic growth, rose 67.4%; compensation of full-time workers rose 19%. Similarly, the top 1% of taxpayers increased their share of gross personal income from 8.2% in 1980 to 17.4% in 2005.
From 1947 to 1973, median family income and productivity moved in concert; both doubled in that time period. Why? Levy and Temin argue because the unions were really powerful, taxes were progressive, there was a reasonable minimum wage and institutions - including the government - tried to influence the market rather than give it the virtually unrestrained freedom it has today.
This paper seems to be a hot topic in the world of economics today. Will it be read by Paulson and company?
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