Equality of Opportunity
Parental income and university access, United States, 2014
Thomas Piketty (1971):
In 2014, the rate of access to higher education (percentage of individuals age 19–21 enrolled in a college, university, or other institution of higher education) was barely 30 percent for children of the poorest 10 percent in the United States and 90 percent for the richest 10 percent.
(Figure I.8, Capital and Ideology, 2020)
Robert Putnam (1941):
The class gap in college completion, which was already substantial 30 to 40 years ago, has steadily expanded. …
Kids from low-income backgrounds … are working more or less diligently to improve their prospects in life, but no matter how talented and hardworking they are, at best they are improving their play at checkers, while upper-class kids are widening their lead at three-dimensional chess. …
As the twenty-first century opened, a family’s socioeconomic status had become even more important than test scores in predicting which eighth graders would graduate from college. …
[Academically] high-scoring poor kids are now slightly less likely (29%) to get a college degree than low-scoring rich kids (30%).
(Our Kids: The American Dream in Crisis, 2015, emphasis added)
The fall of the bottom 50 percent share of total income in the United States, 1960–2015
Thomas Piketty (1971):
The share of the bottom 50 percent of the income distribution fell from about 20 percent of total income in the United States in the 1970s to 12–13 percent in the 2010s.
During the same period, the top centile share rose from 11 percent to 20–21 percent.
(Figure 11.5, Capital and Ideology, 2020)
Low and high incomes in the United States, 1960–2015
Thomas Piketty (1971):
It is now well known that the explosion of inequality in the United States since 1980 was due to an unprecedented increase in very high incomes, especially the famous '1 percent'. …
In 1970, the average income of the poorest 50 percent was $15,200 per year per adult, and that of the richest 1 percent was $403,000, for a ratio of 1 to 26.
In 2015, the average income of the poorest 50 percent was $16,200 and that of the richest 1 percent was $1,305,000, for a ratio of 1 to 81.
All amounts are in 2015 dollars. …
[One] of the main consequences of the extremely high marginal rates (70–90 percent) on top incomes between 1930 and 1980, especially in the United States and United Kingdom, was to put an end to the most extravagant executive pay.
By contrast, the sharp reduction of top tax rates in the 1980s strongly contributed to the skyrocketing of executive pay.
Indeed, if one looks at the evolution of executive pay in listed companies in all the developed countries since 1980, one finds that variations in tax rates explain much of the variation in executive pay — much more than other factors such as sector of activity, firm size, or performance. …
In the 1950s and 1960s, the top executives of major British and American firms had little interest in fighting for huge raises … because 80–90 percent of any raise would have gone directly to the government.
In the 1980s, however, the nature of the game changed completely.
The evidence suggests that executives began to devote considerable effort to persuading others that enormous raises were warranted, which was not always difficult to do, since it is hard to measure how much any individual executive contributes to the firm’s success.
What is more, compensation committees were often constituted in a rather incestuous fashion.
This also explains why it is so difficult to find any statistically significant correlation between executive pay and firm performance (or productivity). …
In the 1950s and 1960s, the United States had by far the highest minimum wage in the world.
In 1968–1970 the federal minimum wage was more than $10 an hour in today’s dollars.
Since 1980, however, the failure to raise the minimum wage regularly gradually eroded its value in real terms: in 2019 it was only $7.20, representing a 30 percent decline in purchasing power over half a century — remarkable for a country at peace and growing economically. …
Many works have shown that the drop in the minimum wage in the United States contributed strongly to the declining position of low-wage workers since the 1980s in a general climate of decreased worker bargaining power.
(Figure 11.7, Capital and Ideology, 2020)
Adam Smith (1723 – 90)
What are the common wages of labour, depends everywhere upon the contract usually made between [masters and workers], whose interests are by no means the same.
The workmen desire to get as much, the masters to give as little, as possible.
The former are disposed to combine in order to raise, the latter in order to lower, the wages of labour.
It is not, however, difficult to foresee which of the two parties must, upon all ordinary occasions, have the advantage in the dispute, and force the other into a compliance with their terms.
The masters, being fewer in number, can combine much more easily: and the law, besides, authorises, or at least does not prohibit, their combinations, while it prohibits those of the workmen.
We have no acts of parliament against combining to lower the price of work, but many against combining to raise it.
In all such disputes, the masters can hold out much longer.
A landlord, a farmer, a master manufacturer, or merchant, though they did not employ a single workman, could generally live a year or two upon the stocks, which they have already acquired.
Many workmen could not subsist a week, few could subsist a month, and scarce any a year, without employment. …
Masters are always and everywhere in a sort of tacit, but constant and uniform, combination, not to raise the wages of labour above their actual rate. …
Masters, too, sometimes enter into particular combinations to sink the wages of labour even below this rate.
These are always conducted with the utmost silence and secrecy till the moment of execution …
(The Wealth of Nations, 1776)
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