Rising Inequality since the 1970s

Below are two competing views (Proposition #1 and Proposition #2) on why income inequality has been rising (even among the lower 99%) in the United States since the 1970’s. Proposition #1: “More people are falling behind today because they’re lazy. In the U.S. anyone willing to work can earn a decent living. The income distribution is the same as the effort distribution. People who work hard earn a good living. Lazy people stay poor. The income distribution has been skewing because of a growing culture of dependency. It used to be shameful to accept handouts from the government, but now it’s perfectly acceptable. So more people opt out of the labor force and sit around collecting handouts from the rest of us. Of course their incomes are going to be lower than those in the top tiers.” Proposition #2: “The incomes of the rich and poor have been growing farther apart due to purposeful policy decisions that have favored the rich at the expense of the poor. Starting with Ronald Reagan’s financial deregulation, and continuing with successive Republican attacks on New Deal and Great Society social programs to finance tax cuts for their Wall Street cronies, government policy in this country has systematically channeled the rewards of our immensely productive economy towards the rich and away from the poor. America needs to open the gateway to prosperity for all through fair tax policies, decent minimum wages, better public schools, aid to low-income college students, and a universal health care system.” Here are the questions I want you to address: 1. What is actually driving the observed changes in the income distribution, according to David H. Autor’s analysis? In the first paragraph, summarize Autor’s analysis. What does he identify as the major cause of rising inequality? What are some of the factors Autor identifies as having contributed to an increase in the demand for highly-educated workers and a decrease in the demand for less-educated workers? 2. Which proposition’s policy prescriptions are more consistent with the policies that Autor recommends? The two propositions have very different policy implications. If you believe that income inequality is being driven by laziness and a culture of dependency, and your roommate believes it’s being driven by tax and spending policies that systematically favor the rich, you will disagree about the kinds of policies that might address the problem. While neither of the propositions above is wholly consistent with Autor’s analysis, in your second paragraph, tell me which proposition’s policy prescriptions are more consistent with the policies that Autor recommends. Use specific examples from the article to support your conclusion. (Autor discusses policy prescriptions in the very last paragraph of the article.)

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