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ECONOMY

Income Equality: A Search for Consequences

MARCH 25, 2014
Eduardo Porter

ECONOMIC SCENE

There are not many social scientists in the United States who have studied
the United States’ widening income gap longer than Christopher S. Jencks.
But about a month ago, Mr. Jencks, a renowned professor of social
policy at Harvard, abandoned his 10-year-old project of writing a book
about the consequences of inequality on the nation’s health and
opportunity, on its politics and crime. Why?
“I came to see a book with six or seven chapters that all said the same
thing: It’s hard to tell,” he told me.
As the income gap in the United States has exploded over the last
three decades, blowing past the previous record set in the Roaring
Twenties, scholars in fields from sociology and economics to psychology
and epidemiology have tried to answer what turns out to be a difficult
question: “So what?”
“The most common moral arguments for and against inequality rest
on claims about its consequences,” Professor Jencks wrote more than a
decade ago. “If these claims cannot be supported with evidence, skeptics
will find the moral arguments unconvincing. If the claims about
consequences are actually wrong, the moral arguments are also wrong.”
For all the brain power thrown at the problem since then, however,

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specific evidence about inequality’s effects has been hard to find. Mr.
Jencks said he could already picture the book’s reviews, “Professor Doesn’t
Know What He Is Talking About.”
This conclusion might appear at odds with the seeming avalanche of
new evidence about the deleterious effects of inequality. In “The Price of
Inequality,” the Nobel laureate Joseph E. Stiglitz argues that “we are
paying a high price for the inequality that is increasingly scarring our
economy.” He says that rising inequality is putting a brake on growth and
promoting economic instability.
When he was President Obama’s chief economic adviser, Alan B.
Krueger, a Princeton economist, popularized what came to be known as
the “Great Gatsby Curve,” which showed that in countries with wider
income gaps the children of poor parents were more likely to grow up to be
poor adults.
The British epidemiologists Kate E. Pickett and Richard G. Wilkinson
have made probably the boldest arguments. In “The Spirit Level: Why
More Equal Societies Almost Always Do Better,” they say that severe
inequality undermines social bonds and dashes the health of millions. It
contributes to mental illness. It increases obesity and teenage pregnancy.
It fosters crime. It lowers life expectancy. These ills don’t affect just the
poor. They affect everybody.
Professor Pickett and Professor Wilkinson rest their findings on
research that suggests that feelings of dominance and submission, which
are enhanced by widening inequality, have a deep impact on our
psychology and our social relations. They increase social distance, intensify
mistrust and competition for status, and feed feelings of humiliation and
status anxiety.
“Problems related to social status get worse when you increase the
differences in social status,” Mr. Wilkinson told me.
What’s more, Mr. Wilkinson argues, inequality does a great job of
making sense of the United States. “You must explain why a country like
the United States does so badly on so many fronts and countries in

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Scandinavia do well on all these things,” he said. “On drug abuse and
imprisonment and obesity and everything else. It’s very hard to find
something else that could explain it.”
But does the data really back this up? One problem with these
analyses is that they are based on correlations between levels of inequality
and variables like life expectancy or the odds of poor children climbing the
income ladder. But such correlations can’t prove inequality causes other
social ills. They can’t disentangle inequality from the myriad things
pushing American society this way and that.
Life expectancy in the United States might lag that of other countries
because the United States still does not have universal health care.
Scandinavia may enjoy higher upward mobility than the United States
because governments in Sweden, Denmark and other Scandinavian
countries invest a lot in early childhood education and the United States
does not.
Lane Kenworthy, a sociologist at the University of Arizona, is all too
aware of these limitations. He was to be Mr. Jencks’s co-author on the
book about inequality’s consequences. Now he is going it alone, hoping to
publish “Should We Worry About Inequality?” next year.
“People that worry about inequality for normative reasons have been
very quick to jump on plausible hypothesis and a little bit of evidence to
make sweeping conclusions about its consequences,” Professor Kenworthy
told me.
To avoid misleading correlations and better isolate inequality’s
impact, Mr. Kenworthy studied its evolution over time, comparing how
changes in income concentration across the world’s industrialized nations
related to changes in a whole set of social and economic outcomes, from
growth and employment to health and educational attainment.
He came up mostly empty-handed: “My tests suggest it seems to be a
small player in the overall story.”
Professor Stiglitz notes that the United States grew faster during the
decades of low inequality immediately after World War II than it did after

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inequality started rising in the 1980s. But Mr. Kenworthy finds no

meaningful impact of inequality on growth one way or the other. “Income
inequality isn’t the only thing that differed between these two periods,” he
said.
Similarly, Mr. Kenworthy found no significant relationship between
increasing inequality and life expectancy, infant mortality or college
graduation rates, among others. Even when some patterns do mesh —
teenage pregnancy rates fell a little more slowly in countries where the
share of income going to the top 1 percent grew fastest — the relationship
is weak. If you take the United States and Britain off the list, the
relationship disappears.
So why worry about income inequality? For several reasons.
The case against vast inequality is grounded in economic theory. It
posits, quite reasonably, that making an extra $10,000 will improve the
well-being of a middle-class family more than losing $10,000 will reduce
the well-being of a billionaire. Provided it does not substantially reduce
economic growth, this alone can support the case for redistribution.
And while the effect of widening inequality may be exaggerated by
some research, there is decent evidence that it leads to other inequities —
in health and education, for instance. Given that much inequality is
inherited, this strikes many of us as fundamentally unfair.
Mr. Kenworthy does find that inequality has insidious effects, just not
as many. He finds compelling evidence that the growing concentration of
income at the very peak of success has slowed income growth for people in
the middle.
“This is the United States’ biggest problem,” Professor Kenworthy
said. “Wages at the bottom have suffered 40 years of stagnation. I don’t
see any reason for that to change.”
Others aren’t so sure. “Most economists don’t feel there’s a logical
mechanism that really is persuasive” linking the rise of the 1 percent and
the stagnation of incomes for the rest, Professor Jencks said.
Still, the most solid case to be made for adopting policies to resist the

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continued widening of the income gap may not depend on unassailable

evidence of harm. It may rely, instead, on simple caution.
One of the plausible consequences of rising inequality is that it allows
the 1 percent to take control of the political system, purchasing the power
needed to maintain the status quo. If that is the case — and there is plenty
of suggestive evidence of this — the widening of the income gap would
prove irreversible.
Mr. Jencks describes the state of the debate between friends and foes
of inequality in these terms: “Can I prove that anything is terrible because
of rising inequality? Not by the kind of standards I would require. But can
they prove I shouldn’t worry? They can’t do that either.”
That, alone, is enough to spur action. “Something that looks bad is
coming at you,” he said. “Saying that we shouldn’t do anything about it
until we know for sure would be a bad response.”
This is what he wants to write a book about now.
A version of this article appears in print on March 26, 2014, on page B1 of the New York edition
with the headline: A Search for Answers on Income Inequality.

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