Tags: Robert Samuelson | productivity | middle class | economy

WaPo's Samuelson: Weak Productivity Hurts Middle Class a Lot More Than Income Inequality

By    |   Tuesday, 24 February 2015 08:30 AM


Many financial commentators posit that that income inequality is the main factor holding down the middle class. But that's not the case, says Washington Post columnist Robert Samuelson.

"We have this not from some right-wing think tank but from President Obama's top economists," he writes.

"The bigger culprit, they show, is the slow growth of productivity — that messy process by which the economy improves efficiency and living standards. Greater inequality is a distant second in assaulting middle-class incomes."

Productivity, which measures output per hour worked, fell 1.8 percent annualized in the fourth quarter.

A report from the White House Council of Economic Advisers assumed productivity sustained its rapid growth rate of the 1950s and 1960s, that income inequality didn't rise and that labor-force participation didn't fall.

The scenario produced middle class income of $100,000 after inflation, double its actual level.

Faster productivity growth accounts for about $30,000 of the difference, less income inequality only $9,000 and higher labor-force participation $3,000. Synergy among the three trends makes up the remaining $8,000.

Meanwhile, former Treasury Secretary Larry Summers, says a key point to remember in addressing income inequality is that the goal is to help those who aren't well off, not to hurt the wealthy.

"Unless one regards envy as a virtue, the primary reason for concern about inequality is that lower- and middle-income workers have too little, not that the rich have too much," the Harvard professor writes in the Financial Times.

"So in judging policies relating to inequality, the criterion should be what their impact will be on the middle class and the poor."

On that score, we need to provide better healthcare and education to the non-wealthy, Summers argues. A Brookings Institution study shows that life expectancy has increased more for the wealthy than for the middle class, and more for the middle class than the poor, he writes.

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Many financial commentators posit that that income inequality is the main factor holding down the middle class. But that's not the case, says Washington Post columnist Robert Samuelson.
Robert Samuelson, productivity, middle class, economy
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2015-30-24
Tuesday, 24 February 2015 08:30 AM
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