Gap in economic gains drives Americans apart Talent, income segregate wealthy from mainstream

October 10, 1991|By Alexa Bel | Alexa Bel,Investors Daily

It sounds like a capitalist's dream come true. More and more of us are making the big time. More Americans are going to college than ever before, and more are moving into professional and managerial ranks.

As a result, more Americans are getting rich: At the end of the Korean War, fewer than one family in a thousand could boast an income of $100,000 or more, using 1988 constant dollars. By 1988, almost four families in a hundred had incomes that high.

But not everyone is applauding.

The very forces that are driving many incomes up -- primarily an increasingly complex environment that places a high value on thinking skills relative to routine labor -- are holding back real wages for the majority of Americans, whose incomes have failed to keep pace with top earners.

To a diverse group of thinkers -- including Charles Murray on the right and Robert Reich on the left -- this pattern of economic divergence is reason for grave concern.

What happens, they ask, when as many as 10 percent to 20 percent of Americans have the wealth to bypass America's public institutions?

What are the ramifications when the brightest and most productive Americans no longer share a sense of destiny with the bulk of their co-citizenry?

The result, some fear, is an increasing segregation of Americans by income and talent. Mr. Murray, a Bradley Fellow at the American Enterprise Institute in Washington, envisions an even scarier scenario -- an emerging caste system in which the rich retreat into self-contained communities that shelter them from the problems of the majority.

Already, he said, wealthy Americans are retreating into "gated communities with private roads and security forces. And if they're not literally gated, they are far enough away that they are just like gated communities."

Of course, not everyone agrees with this scenario.

While few dispute that the gap between rich and poor has widened in recent years, there is considerable debate about what that means.

Some economists point out that the bulge of young baby boomers entering the work force in the late 1970s and an immigrant wave in the 1980s have temporarily distorted income figures.

Others note that the very favorable environment for capital investments in the same decade may have acted as a temporary boost to high-income Americans.

Many of those who fear that incomes will continue to diverge base their concern on the rapidly rising premium placed on higher education.

In 1978, a college-educated male over age 25 earned 27 percent more than his high-school-educated counterpart, according to the U.S. Department of Education.

By 1989, that premium had risen to 40 percent. The comparison between college graduates and high school dropouts is even more striking, having jumped from a 47 percent differential in 1978 to 75 percent in 1988.

The premium is also rising for post-graduate education. In 1978, males with postgraduate degrees earned 13 percent more than those with bachelor's degrees. By 1988, their advantage had risen to 21 percent.

This trend plays a key role in the theories of liberal political economist and Harvard Professor Robert Reich. In his book "The Work of Nations," he writes about the rise of symbolic analysts, an elite class of managers, professionals and top educators whose incomes are on an upward trajectory.

Symbolic analysts include the engineers, consultants, managers, lawyers, marketers, doctors, brokers, writers and others who make their living by solving problems and manipulating symbols.

Bright outlook

Their stock in trade is cognitive ability -- thinking skills -- usually honed by four years or more of post-secondary education. At most, symbolic analyst positions account for 20 percent of U.S. jobs (up from 8 percent in the 1950s, by Mr. Reich's count).

For these people, the future looks rosy.

"If you are well-educated in America and have the skills to identify and solve new problems, the global market is expanding for your services," Mr. Reich said. "And because the supply of people like you is nowhere near keeping up with the demand, your compensation is increasing steadily."

The remainder of the work force is divided mostly among routine production service jobs and in-person service jobs according to Mr. Reich.

Routine production workers are the foot soldiers of mass production -- those who perform simple, repetitive work, and the line supervisors who oversee them.

In-person service workers also perform repetitive work but must perform it on a person to person basis.

Sample jobs from this vast category include waitresses, taxi drivers, child-care workers and secretaries.

While the earning power of symbolic analysts is growing, real wages for routine production workers and in-person service workers are sinking.

"As manufacturing jobs move off-shore, large numbers of Americans have no options but to seek employment in the service industries," Mr. Reich notes. "These jobs tend to hobble along near the minimum wage."

Increasing Gap

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