2006 July 10 Monday
Gap Widening Between Economic Classes

The wage gap between smarter and more skilled and dumber and less skilled is widening in Washington DC and America.

Wages are rising more than twice as fast for highly paid workers in the Washington area as they are for low-paid workers, an analysis of federal data by The Washington Post shows.

This is happening right where America's leaders live. The consequences of their policies aren't hidden from them. Policies which exacerbate this trend are causing changes in their towns.

Salaries for lower income workers are not keeping up with inflation.

Such innovations help explain why, from 2003 to 2005, the average wage for people in the lowest pay bracket, with salaries around $20,000, rose only 5.4 percent in the Washington region -- not enough to keep up with rising prices. For the jobs that pay around $60,000, salaries rose 12.4 percent, well ahead of the 6.8 percent inflation in that period.

The market faithful want to believe that a rising tide lifts all boats. But some of the boats have leaks.

The top folks are doing very nicely.

In the highest wage bracket, where chief executives, lawyers and other professionals earn six figures, average wages rose 8.5 percent from 2003 to 2005. The increase in their incomes is probably even higher, because employees at that level also often get better benefits, partnership income, stock options or other compensation.

Nationwide, the wage gap is widening more slowly: The average wage for upper-middle-income jobs rose 5.8 percent, and low-wage jobs saw pay increases of 3.4 percent, from 2003 to 2005.

Technology is cutting down the demand for less skilled workers.

In the 1990s boom, Prising said, there was a shortage of low-skilled as well as high-skilled talent, sending wages up across the board.

What changed? Many new technologies and ways of operating -- often aimed at cutting labor costs -- were in their infancy in the late 1990s. Now they are maturing, tamping demand for low-skilled workers.

The article goes on to give examples such as internet ordering replacing more labor intensive phone ordering and a decline in the ratio of bank tellers to bank deposits as ATMs and internet banking cut the need for face-to-face banking. This trend is going to continue and perhaps even accelerate.

The gap based on ability is also widening across national boundaries. In spite of NAFTA and market reforms in Mexico the US economy has been growing faster than the Mexican economy for decades and the growth gap might even be widening. The higher IQ nations should wall themselves off from the lower IQ nations because the gap in per capita GDPs will only get wider in the future. I can't see this trend changing until genetic engineering provides the ability to enhance offspring intelligence. Even then the wealthier nations will embrace such technology more rapidly than the poorer nations. The problem this poses inside wealthier societies is that humans and other primates resent those who make more. A society with a wider IQ range is going to be a society with greater resentment in the lower classes. That's one of the biggest reasons why America's immigration policy is such a disaster. It is building up resentment.

Share |      By Randall Parker at 2006 July 10 11:16 PM  Economics Labor

John S Bolton said at July 11, 2006 1:40 AM:

There are many in academia and government whose only product is the expression of envious resentment. This could explain why they would enthuse over the great increase of their natural constituency or clientele through immigration of those most likely to fall into the envying classes.
Those who go by feelings, are the most likely to interpret unequal shares as rejection.
'You're saying my children should be rejected', is what they would feel.
Scholars and vicious demagogues know and exploit such feelings.
With all the prestige of degrees, and ranks of power, they say 'share and share alike'.
Wealthy businessmen, imagining themselves to be ever so pragmatic and worldly-wise,
ignore this effect relative to mass immigration of the envious.
The faux ideals of power-seekers are more formidable than they suspect.

homeboy said at July 11, 2006 8:58 AM:

Isn't the large numbers of illegal immigrants a large factor driving lower wages for lower skilled workers? Doing the jobs "americans won't do"? Or rather doing them for lower wages?

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