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Paul Krugman - Income Inequality and the Middle Class

Complete video at: http://fora.tv/2007/10/30/Paul_Krugman_Future_of_the_Middle_Class Nobel Prize-winning economist and New York Times Op-Ed columnist Paul Krugman discusses the history of the American "middle class," and argues that growing income inequality may threaten its existence. ----- Paul Krugman discusses "Losing Our Way in the New Century: The Future of the Middle Class?" Krugman brings a sharp political, social and economic analysis of what happened to the middle class of the 20th century and where America's social policy is headed in the future. Krugman is the most widely read economist of our time and was named Columnist of the Year by Editor and Publisher magazine. - The Commonwealth Club Paul Krugman joined The New York Times in 1999 as a columnist on the Op-Ed Page and continues as professor of Economics and International Affairs at Princeton University. Mr. Krugman received his B.A. from Yale University in 1974 and his Ph.D. from MIT in 1977. He has taught at Yale, MIT and Stanford. At MIT he became the Ford International Professor of Economics. Mr. Krugman is the author or editor of 20 books and more than 200 papers in professional journals and edited volumes. His professional reputation rests largely on work in international trade and finance; he is one of the founders of the "new trade theory," a major rethinking of the theory of international trade. Mr. Krugman's current academic research is focused on economic and currency crises. At the same time, Mr. Krugman has written extensively for a broader public audience. Some of his recent articles on economic issues, originally published in Foreign Affairs, Harvard Business Review, Scientific American and other journals, are reprinted in Pop Internationalism and The Accidental Theorist.

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SHRINKING MIDDLE CLASS Gap between rich and poor creates fears of social problems; ABOUT THE SERIES This series was developed over several months by Rick Romell and Geeta Sharma-Jensen of the Journal Sentinel staff. They interviewed more than 70 people, from economists to business executives to workers who have struggled and in some cases, prospered in the changing economy. Sharma-Jensen visited facilities and interviewed workers in India, where U.S. companies, including many from Wisconsin, have opened Asian operations. The reporters analyzed data from the U.S. Census Bureau, the Bureau of Labor Statistics, university studies and other sources, including ongoing research that has not yet been published. They sifted through a good share of the large and still-growing body of literature on income distribution in the United States, including books, research summaries in academic journals and conflicting articles in the popular press.; SERIES AT A GLANCE Sunday The economy is undergoing fundamental changes, creating big gains for some, flat wage growth for many, and leaving fewer holding the middle ground. Monday Why is the middle class shrinking? It may have as much to do with social trends such as the rise in single-parent families as the global economy or other commonly cited reasons. Tuesday Insecurity over jobs and pay is likely to continue for many years. Wednesday Both liberals and conservatives say better skills training will enable U.S. workers to maintain middle-class wages, but who will pay the trillion-dollar bill?; TODAY'S KEY POINTS The U.S. economy is becoming less egalitarian, creating big gains for some, flat wages for many, leaving fewer holding the middle ground. Inequality has "gone right back to `Great Gatsby' levels" of the 1920s, says one observer. In the early '70s, pay of chief executives at big companies was 40 times that of the average worker; by '94, the ratio was 180 to 1. A new study by the Center on Wisconsin Strategy has found that while thousands of jobs have been created here, many are low-paying. By 1993, 35% of Wisconsin's workers weren't earning enough to keep a family of four above the poverty level. Wages and income distribution could be central themes in the 1996 presidential campaign. "It will hinge on this and, quite honestly, the debate currently has a disturbing, class-warfare tone," says one conservative analyst. In a society where few people believe they can reach their dreams, "the dominant metaphor . . . becomes secession," says one researcher. While the bottom 80% of American families have captured a smaller share of total income, the upper fifth have claimed a growing slice of the pie. To make the top fifth, a family needs an annual income of $70,000 (or $63,000 if you include households of unrelated people). While many might consider that a "modest" income, it eludes 8 of 10 American families. Although real wages appear to have stalled, consumer spending continues to rise Americans own more conveniences and spend more on recreation than ever. In Wisconsin, a larger number of families actually have moved up from the middle of the income spectrum than have fallen into poverty. Series: Middle Class Lost: America pulling apart; first of four parts
THE INCOME GAP RIDDLE Analysts find no easy explanations; TODAY'S KEY POINTS U.S. business productivity rose more than 90% between 1950 and 1973 and so did middle-class income. In the same length of time since '73, productivity has grown by less than a third, and most income gains have gone to the well-off. Demographic and social changes figure importantly in who wins and loses in today's economy. The increase in families headed by a single woman has bolstered the low end of the income scale. The high end, meanwhile, has grown in part because the wives of well-paid men are increasingly likely to work, and to be paid well themselves. Some of the growth in wage inequality stems from temporary not permanent changes in earnings. But the biggest increases in earnings volatility have occurred among less-educated, lower-income workers those least equipped to ride out an economic storm. Individuals increasingly bear the risks of economic ups and downs that formerly were borne by corporations. While many believe economic globalization has sent U.S. jobs to low-wage nations, it may be a small factor in the widening gap between haves and have-nots. Pay inequality has risen in industries largely immune to international competition, and the vast majority of U.S. trade is with nations whose wage scales mirror our own. Computers and other technological changes have made higher-skilled workers increasingly valuable. In the late '70s, male college graduates averaged a third more pay than their high school counterparts. By 1990, the difference was 60%. One study found that workers who use computers make 10% to 15% more than those who don't. Yet the computer revolution hasn't provided much boost to U.S. productivity a continuing puzzle. Series: Middle Class Lost: America Pulling Apart \ Second of four parts
Weighing big government and income inequality
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