Inequality, Mobility, and the Election Department of Economics Mark R. Killingsworth Department of Economics Rutgers University October 15, 2012

What’s happening? During 1980’s-2000’s, wage gaps got considerably wider… between top and bottom of the income distribution between different education groups (college/hs, etc.), experience groups, and age groups within demographic and skill groups (e.g., persons with same age-sex-education-occupation-industry) Upward mobility has slowed down, reinforcing inequality strong correlation between earnings of fathers and earnings of their kids Big social changes (Charles Murray, Coming Apart: The State of White America) over 50% of births to women under 30 now occur outside marriage between 1990-2009, % of births outside marriage has risen for every racial group (e.g., for women > HS, < BA: 49% => 68% for blacks; 38% => 60% for whites)

Immigration (especially of unskilled workers) Why did it happen? supply of skilled workers rose (relative to unskilled workers) , but demand for skilled workers (relative to unskilled workers) increased by much more Immigration (especially of unskilled workers) international trade shifts/changes (imports tend to be made by unskilled, exports by skilled workers; industries hit hard by imports tend to be highly concentrated, unionized, and high-wage) technological change raises demand for skilled, reduces demand for unskilled decline in unions decline in “real” minimum wage (…but what is cause, and what is effect?)

What to do about it? – Some possibilities more and better programs for education, retraining and apprenticeship (vouchers? cheaper student loans?) change entitlements (welf are, etc.) expand Earned Income Tax Credit Infrastructure programs