PUT your social-engineering hats on. The problem to be wrestled with is the new inequality -- the increasing income, wealth, and opportunity gap, not between the rich and the poor but between the rich and the rest of us. Charles Handy, the British social thinker, describes what is emerging as "the 80/20 society," dramatic shorthand for the nascent carve-up of life chances. Census statistics put this development beyond debate -- and here I rely heavily on the research gathered by Frank Levy, an economist at the Massachusetts Institute of Technology, in his important new book, The New Dollars and Dreams. Whereas the median U.S. family income grew by 37 percent from 1949 to 1959 and by 41 percent in the 1960s, it grew by only 6.8 percent over the next two decades, with 97 percent of the increase since 1979 going to the top 20 percent of families. And the concentration of recent prosperity is narrower yet: as late as the 1970s the top one percent held 13 percent of the wealth; in 1995 it held 38.5 percent. Nearer the other end of the income scale, male high school graduates employed in services saw their median earnings fall from $34,000 in 1979 to $26,500 in 1996; those in manufacturing suffered a similar decline, from $37,500 to $29,500. Young and older men with college degrees also lost ground. The only group that saw its real income grow was men thirty-five to forty-four with college degrees. In 1997 the median family income, $43,200, was $400 below what it had been at the start of the decade.
How have American families managed to get by in the era of the new inequality? Sue Shellenbarger has reported in The Wall Street Journal that since 1969, according to the Census Bureau, "Working wives [have] contributed 23 percentage points of the 25% increase in family income, adjusted for inflation."
In the past two years the long nineties expansion has finally reached the "bottom" 80 percent, giving a fillip to average wages, especially to the wages of minorities. A few good quarters are not necessarily evidence of a trend, however, particularly since one can point to signs of a countertrend: for example, that there were more layoffs in 1998 than in any year since 1993, when "downsizing" decimated whole ranks of middle management. The new inequality is unlikely to be reversed by a global market that remorselessly bids most wages down: according to 1994 figures, American garment workers made $7.53 an hour, competing against Bangladeshi workers making twenty-five cents an hour; American steel workers made $13 an hour, competing against Brazilian workers making $1.28. Inequality needs to be reversed not alone for the sake of economic justice, never much of an American cause, but for stability. Unequal incomes, says Alan Greenspan, the chairman of the Federal Reserve Board, are potentially "a major threat to our security." The many cannot be expected to long endure, Lester Thurow has written, a system that works only for the few. The challenge is to democratize prosperity without sacrificing economic dynamism, every bit of which is needed to raise incomes, living standards, and fulfillable hopes.