The Occupy Wall Street Movement-Becker

Will the “Occupy” movement develop into a significant political force? I am doubtful: the movement is already losing supporters in most places where it has been active. Cold weather will accelerate the decline. The movement is losing ground not because the issues it raises are unimportant, but rather because the great majority of Americans and those in other countries with Occupy groups do not sympathize with most of the people doing the occupying.

We discussed the unemployment situation in the US last week, and reform of banks in several previous posts, so I concentrate my comments on the inequality issues raised by occupiers. American inequality in the distribution of incomes, and inequality in many other Western nations, has grown a lot since the late 1970s. This growth can be separated into the growth in earnings inequality across education and other skill classes, and the growth in income at the very top of the income distribution. I start with the inequality by skill since that is what most closely affects the vast majority of people.

Many of the Occupy Wall Street participants are college students- it is easy to miss classes at most colleges for a few days and even much longer- and other young persons who had gone to college. They have complained about the ”high” unemployment of college-educated persons, and also about the burden of college loans. Yet the large increase in earnings inequality during past 30 years has mainly taken the form of a growth in the earnings of college graduates and that of others with high levels of skills relative to earnings of high school dropouts, high school graduates, and others with lower skills. Although unemployment grows for all education groups grow during recessions, it has not grown any faster during the Great Recession for college-educated persons than for persons without college, and is still much lower for the college educated. For example, in October of 2011 the unemployment rate for college graduates was under 5% compared to an unemployment rate of almost 14% for high school dropouts.

Nor are the complaints by occupiers about the burden of student loans much better founded for the great majority of graduates. The typical rate of return to a college graduate, especially those with post-graduate degrees, has risen greatly since the late 1970s, certainly high enough to support even sizable student loans with interest payments that are heavily subsidized by the federal government. The real ones with a gripe are high school dropouts who not only have high unemployment rates, but also low real earnings that may have fallen for dropouts during past 30 years, poorer health than others, bad marital prospects, and weak access to home ownership and other consumer luxuries.

The Occupy Movement and everyone else worried about earnings inequality should be emphasizing the need to find ways to encourage more high school dropouts and high school graduates to get the required background and study habits so that they can, and want to, continue on for a college education. A daunting task, but a necessary one in order to respond in an effective way to the anatomy of the large growth in earnings inequality.

The income share of the top 1% in the United States has declined a lot since the onset of the Great Recession, but it is still much higher than it was in the 1970s. Earnings are also an important component of these very high incomes, but these are earnings of top management and executives, including the top earners in banking, and in hedge funds and other managers of money, and including also the top earners in medicine, law, consulting, and some other fields. According to a November 2010 study by Bakija, Cole, and Heim (I am indebted to Steve Kaplan for referring me to this study), more than 60% of the persons in the top 1% of the income distribution in 2005 consisted of (non-finance) executives, managers, and supervisors, medical personnel, lawyers, and non-finance persons doing computing, math, or engineering.

Although, on the whole, I believe that most members of the top 1% provide useful services to society, I share the concern of “occupiers” and Tea Party members about many of the bailouts. The rich bankers and others who took large risks should have taken much larger haircuts. I have also supported from the beginning of the recession higher capital requirements for banks, especially for the large “too big to fail banks” that will be bailed out if they get into financial difficulties. 

Nevertheless, the overall earnings inequality has far greater relevance for the vast majority of occupiers and Tea Party supporters than do the earnings of men and women at the very top of the financial sector. The most effective way for the US to reduce overall inequality that will help the largest number of young persons is by finding ways to bring American high school and college graduation rates up to the levels achieved by the other nations, such as South Korea and some European nations, that have replace the US as worldwide leaders in education achievements.

Comments

[TANSTAAFL]

Excellent post by Becker. No doubt the Occupy Becker-Posner crowd will find fault.

[Jimbino]

"The real ones with a gripe are high school dropouts who not only have high unemployment rates, but also low real earnings that may have fallen for dropouts during past 30 years, poorer health than others, bad marital prospects, and weak access to home ownership and other consumer luxuries."

Not to mention that the gummint taxes their meager income to finance the student loans of the leisure college class.

[Jack]

Becker tries to Polyanna the status quo and all its growing inequities even moreso than does Posner. Yah.. sure the thin stream of "trickle down" has been keeping the college set complacent for quite a while. but! this is different. There IS in addition to the stagnant wages for the "99%" the ugly specter of a cancerously growing fully corrupted financial sector with a gridlocked Congress not yet erecting necessary safeguards and rules to prevent another raid.

It IS good that Becker notes the top 1% having declining incomes as well, but for a different reason; perhaps, as previewed by the millionaires "march on Congress" favoring higher taxation, they're beginning to understand that when the Titanic goes under, it's not long after steerage goes down that they get wet too. Dare we hope for a change from the ME, ME, ME, generation to one of WE?

Surely some, many, perhaps even most of the top 1% provide services, but are the services worth what they glean? Those of the lower tiers provide services as well but have had NO income gains while those of the topmost tiers have gained 300% or more.

.. bring up the educational levels of American students? As great a goal as it is that's a 20 year kick of the can down the road, plus the lag time as ANY of our our leaders turn to making the real changes required. Korea? I was there when their annual income was $500 but they still lived up to a commitment to educate as many as possible and even then had a higher literacy rate than did the US, a statistic I'd imagine still stands.

Does Becker think we MIGHT begin to fund the schools of ALL of our K-12 students equitably and adequately? and pay teachers enough to draw the best minds from other careers paying much more? In education we HAVE models that work, and we know much of what DOES work, the problem is the commitment to scale it up across the nation. More importantly, than Becker, do we or our Reps have any such thing in mind?

As for the movement fading as "Cold weather will accelerate the decline."

Ha! this IS the Facebook generation! Unlike the 60's they/we HAVE the microphone, the "newspapers" and flash events can be arranged at the speed of light. They'll move the coming election in a fashion much as did the Obama supporters, and like moving the dial to end the Vietnam war 40 years ago the leadership and our direction needs to be moved. The "great majority" of Americans never moved anything.

[Kripalu ji Maharaj]

The grievances of the “Occupiers” appear to be three: income inequality, lack of jobs, and the baleful influence of the banking industry.

[APA Citation Machine]

Nice post and thanks for highlighting this important issue.

[MrTurtle]

Where is the evidence that support for Occupy Wall Street is declining? You could at least substantiate your opinions with evidence.

[Daublin]

"The Occupy Movement and everyone else worried about earnings inequality should be emphasizing the need to find ways to encourage more high school dropouts and high school graduates to get the required background and study habits so that they can, and want to, continue on for a college education."

I have the same impression that OWS is about unemployment. As well, I suspect that a cultural movement such as you describe could help.

Why college, though? If someone had trouble in high school, then grinding through a four-year degree is going to be long, grim, and--most problematic--not all that educational. So why encourage college, rather than more direct attempts to improve job prospects? Get a minimum wage job now, and attend a trade school at night.

[Christian Louboutin Outlet]

We have been spending time at the Indiana Dunes with some of our homeschool buddies, and our kids have taken well to to the art of the camp fire, and roasting hot dogs and marshmallows. Above, Marin collecting long, thin sticks that can poke through our treats for the fire. Below, cold, bare grey and brown tree branches. Lots and lots of branches. We are again down to the blue sky for color, when we can see it.

[Jack]

Daublin: Fair point. However, currently we're graduating something like 25% of our youth from college. My guess is that the half that is above 100 IQ points could handle the often less than challenging curriculum of many majors. (From observation, of an admittedly small sample, I'd think some in the 80 IQ range are getting through)

Anyway........ assuming we do need more like a 50% college or similarly hi-tech vocational, we're wasting 25%, not even counting the drag on our society of so many who are clueless about government and history.

IF you'd suggested much stronger vocational educational paths, and the apprentice programs that seem to work well in Germany and perhaps the UK........ I'd be with you. But....... a min wage job???? and trade school at night? My gawd man! At today's min wage the guy is going to be out foraging for food at night or trying to patch some 25 year old Suburu together for another week of transportation.

And a question: If you had the choice of living in a town or state where many of the tradesmen also had a good liberal arts education and one where those fixing your car or building your home had only HS education or less, which would you pick?

[Cheap UGG Boots]

To answer more of your questions, in no particular order:Do I have any explanation for the recent UFO sightings that occurred all over the world recently?Nope

[Jim End]

I do npot know what will happen with "Occupy" movement, but I am happy that it was created, because there is a positive result because of it!

[Nam Nam]

Becker makes the same error that Marybeth Hicks does on her diatribe to the young. They both use the 4-5% unemployment stat for college graduates as evidence to infer that someone coming out of college has just about a 95% chance of employment. This is misleading for a couple reasons:
1. The 4-5% stat applies to college graduates aged 25 to 65.
2. It counts a Phd working 15 hours a week as a Walmart greeter as "employed".

The bitter truth is that the employment prospects for a recent college grad are far more grim, especially full-time employment in their field of study. It is disingenuous, if not deceitful to suggest otherwise.

No wonder young people are perplexed by the suggestion that they should invest 4 years of their life and inccur $40k to $80k of debt when their is little hope of paying it back.

[barbour jacket quilted]

So nice your post, I certainly love this website, come on.

[Timberland Boots Online]

No wonder young people are perplexed by the suggestion that they should invest 4 years of their life and inccur $40k to $80k of debt when their is little hope of paying it back.

[Cheap Moncler Sale]

Indiana Dunes with some of our homeschool buddies, and our kids have taken well to to the art of the camp fire, and roasting hot dogs and marshmallows

[Cheap Moncler Sale]

I'd be with you

[Burberry Outlet Scarves]

The bitter truth is that the employment prospects for a recent college grad are far more grim, especially full-time employment in their field of study. It is disingenuous, if not deceitful to suggest otherwise.As for the movement fading as "Cold weather will accelerate the decline.

[Monster Headphones]

There is in addition to the stagnant wages for the "99%" the ugly specter of a cancerously growing fully corrupted financial sector with a gridlocked Congress not yet erecting necessary safeguards and rules to prevent another raid.

[Cheap Christian Louboutin]

Why college, though? If someone had trouble in high school, then grinding through a four-year degree is going to be long, grim, and--most problematic--not all that educational. So why encourage college, rather than more direct attempts to improve job prospects? Get a minimum wage job now, and attend a trade school at night.

[sociological imagination essay]

Play a wag, not attending work place for Unemployment movement - it makes me laugh.

[neoclassical_libertarian]

Here's Becker's better explanation for income inequality.

http://www.american.com/archive/2007/may-june-magazine-contents/the-upside-of-income-inequality

[Jack]

"This brings us to our punch line. Should an increase in earnings inequality due primarily to higher rates of return on education and other skills be considered a favorable rather than an unfavor­able development? We think so. Higher rates of return on capital are a sign of greater productivity in the economy, and that inference is fully applica­ble to human capital as well as to physical capital."

............ Well, mebbe. However............ what we in the US are seeing is HIGHER rates of poverty, and stagnant wages for most of the work force.

IF GDP is to grow, but wages for those doing the work are to remain flat while soaring H/C costs and energy price gouging eats what little "gains" they may see, ha! it leads too (drum roll?) another tanking of capitalism as was the case in 1928 and an Occupy movement.

Won't work, can't work.

[Christian Louboutin UK]

The bitter truth is that the employment prospects for a recent college grad are far more grim, especially full-time employment in their field of study.

[Cheap Air Max]

All of the sci-fi stories pointed to a shorter work week, more leisure time and industries developing around increased leisure time coupled with the income to enjoy it.

[Air Force One]

We have nothing like that in place or even in mind. Instead those desperate for any kind of job are to work longer hours for less pay and be appreciative for their opportunity.