We must start by acknowledging that the cause of inequality is not policy driven. It was not brought about by anti-union efforts, or unions, or NAFTA or anything in the tax code. It is simply the slow but inexorable economic changes that have rewarded those with specific skills more handsomely than in the past. Any effort to address income inequality will have to begin with the underlying economic factors. This is a far more difficult challenge than adjusting a policy mistake.
Moreover, income inequality at a single point in time may be less an issue than it seems. While earnings in a given year may be increasingly unequal, earnings over a lifetime are far less so. High-income occupations require much human capital investment, which is costly in both time and money. For example, the average physician's lifetime earnings, minus college debt, will not have equaled that of the average plumber until they are both in their mid-40s. Moreover the physician is likely to have met the definition of poverty for the better part of a decade of adulthood, only to find herself a much maligned “one-percenter” a year or two after completing residency. Indeed, the intellectual father of inequality research, Simon Kuznets, argued that the whole concept of income inequality lost most of its meaning if households saw big income shifts over their lifetimes.
All the focus on potentially meaningless income inequality data leads us to ignore the greater problem of intergenerational inequality. If, as it appears, earnings will be increasingly linked to human capital, and human capital is inherited, either through parenting or genetics, then we have cause for worry. The question might well be, “How do we sustain a free society when, as it may turn out, the parent lottery determines income and class?”