Tuesday, July 24, 2007

David Brooks' Complicating Facts About Income Inequality

From David Brooks' column in today's New York Times, titled A Reality-Based Economy:

If you’ve paid attention to the presidential campaign, you’ve heard the neopopulist story line. C.E.O.’s are seeing their incomes skyrocket while the middle class gets squeezed. The tides of globalization work against average Americans while most of the benefits go to the top 1 percent.

This story is not entirely wrong, but it is incredibly simple-minded. To believe it, you have to suppress a whole string of complicating facts.

Brooks goes on to enumerate 9 of these complicating facts, as he sees them. I had some doubts about some of his reasoning, but here's the bit that really stopped me:
Sixth, inequality is also rising in part because people up the income scale work longer hours. In 1965, less educated Americans and more educated Americans worked the same number of hours a week. But today, many highly educated people work like dogs while those down the income scale have seen their leisure time increase by a phenomenal 14 hours a week.

It may be true that highly educated people work like dogs, but is it directly increasing their income? Most highly educated people are probably paid on a salaried basis, not by an hourly wage. Their earnings do not necessarily increase with longer hours. Even for those who own small businesses, etc., aren't those longer hours often just a sign of the struggle to merely bake the cake, rather than piling on the icing?
And if lower income people, who are more likely to be paid on an hourly basis, have seen their "leisure time" increase drastically, might that be because they are not being given the full-time hours they might prefer? WalMart is one example of an employer that has been said to deliberately staff their stores with workers who don't get full-time hours so they can avoid giving them benefits.

I'm sure there might be other factors I'm not thinking of... what do you think?


Anonymous said...

Not getting all the hours you may want on a job paid by the hour still yields more "leisure" time. I had my hours cut to just three hours a day at the restaurant I was working at the summer before college. I was supposed to be saving for school, but at minimum wage and after taxes and the expense of commuting 30 miles roundtrip (I lived on a farm) it hardly made sense to work the job.

Anonymous said...

For salaried jobs, working considerably more than 40 hours a week might be considered the price for having the job - and for getting promotions/bonuses. In I-banking they expected access to you 24/7. A classmate with a family opted to make himself less accessible - and regrettably found himself out of a job six months down the line.

phantomdata said...

Hmm... not to be all Wal-Mart defendy; but don't MOST retail establishments game the benefits system in this fashion? My wife used to work at Sears and found herself in this situation, as did two of my friends working at Target.

Also, it might be interesting to convert the average salary wage to an hourly wage, using an average "hours worked", in order to make a more fair comparison. This would help to (possibly) demonstrate that the extra hours worked are actually increasing their pay. If they make $15/hr on an hourly scale but get paid $60,000/yr salary that'd be a lot of "overtime".

Paco, I work as a systems administrator. I know how the whole "on call" thing goes. It sucks, especially when you have a family.

SavingDiva said...

I agree with phantomdata that Wal-Mart is not the only company keeping people below the full time mark. Benefits are expensive, so it would be easier to hire another person to work the additional 10 hours a week at $6/hour, rather than pay benefits at about $500/month.

Anonymous said...

If you compare the percentage increase in pay to the percentage increase in hours worked, this guy's argument does not hold water.

Also, I find it bizarre that he is comparing a metaphor ("work like dogs") to a statistic ("14 hours a week".

Anonymous said...

In a lot of high-paying professions (investment banking, law, medicine, etc.), you have to work insane hours to qualify for the high salary. If you don't put in the hours, you're out of a job. I used to work at a law firm, and lawyers were expected to bill at least 2000 hours a year, which means time actually spent working on client matters and not doing thing like checking e-mail or other administerial tasks, etc. If you were lucky, this translated into 50-60 hours a week to meet the bare minimum required billable hours. My husband used to work at one of the big consulting firms, and he averaged 75 hours a week. In both cases, the salary was good, but the hourly wage - not so much. In any event, my point is that "working like a dog" might not directly increase salary (although it might be reflected in your bonus) - it is a prerequisite for earning for the high salary to begin with.

Josh said...

Brooks is a consistent lightweight who has been proven phenomenally sloppy in checking facts (see: http://www.phillymag.com/articles/booboos_in_paradise)