One familiar excuse for inequality is to argue that the problem is not that the people at the top are making too much money. Rather, the "problem is declining or stagnant wages for those Americans who are not thriving in the 21st-century economy," as Kevin Williamson argues today over at National Review online.
You know the rest of the argument: That legions of under-educated, under-skilled workers just can't cut it in a competitive economy and taking Bill Gates down a few notches isn't going to rescue them from their fate. Instead of redistribution, people like Williamson argue that we need to fix dysfunctional public schools, cut taxes to spur more economic growth, reduce distorting government intervention in the market, and deal with the moral failings that hold Americans back, such as weak family structures, welfare dependency, poor work habits, substance abuse, and so on.
To grapple properly with this argument, a thought experiment is helpful: Let's say we wake up tomorrow and every American adult is the product of an intact family, great schools, has excellent work habits, never gets high or drinks, and looks for opportunity in an economy with low taxes and little regulation. Would all that revive the American Dream?
No, it wouldn't, and here's why: Because the owners of capital would still have the upper hand over the great majority of Americans who only have the value of their labor. Capital can now have many jobs done anywhere in the world or, increasingly, by machines. You could be the hardest working accountant in America -- only to lose your job to an accountant in New Delhi who costs a fourth as much. You could be a phenomenally dedicated young lawyer -- only to find that your firm doesn't need you anymore because new software allows computers to analyze thousands of documents and do the "discovery" work that used to be done by armies of associates. And -- as millions of manufacturing workers have found over the past few decades -- you could be a skilled blue collar worker and a paragon of work, family, and faith, only to find that none of those virtues matter much anymore when you're competing against two billion new workers in a post-communist world.
What's more, the ability of many jobs to be automated or outsourced means there is more competition for those jobs that can't be outsourced. When the factory closes, everybody is left vying for jobs in sectors like retail, restaurants, and healthcare, and that drives down wages. Even when labor markets do tighten, the wages in these sectors don't tend to go up all that much.
In short, the personal traits that used to translate reliably into success -- education, skills, a strong work ethic -- no longer guarantee anything when individual workers have so little leverage. Meanwhile, the returns from being an owner of capital have soared astronomically. Walmart is a perfect case study: Most Walmart workers don't make decent money, but the Walton family has a fortune of over $100 billion thanks to all the trends I've just described, as well as a host of public policy decisions -- like low taxes -- that have further enhanced their wealth.
The basic economic puzzle of our time is how to create an adequate number of good paying jobs to drive forward the American Dream. Neither the left nor right have sure fire solutions to this puzzle. But what progressives have are two approaches that can make a big difference: a) empowering unions to turn poorly paying jobs into better paying jobs by forcing capital to share its profits; or b) using fiscal and social policy to redistribute wealth downward.
Unless conservatives have a plausible formula for creating lots of good middle class jobs amid current conditions, these progressive solutions will become ever more appealing.