Reducing Economic Inequality

May 18, 2012
By Sarah Abrams

Controlling education costs, waging a social movement, and lowering corporate taxes to promote job growth were all solutions proposed at a panel on reducing economic inequality in the United States. The session was part the Kennedy School’s day-long 75th anniversary conference.

A major factor in rising inequality is the premium placed on better educated workers, the result, said William Julius Wilson, the Lewis P. and Linda L. Geyser University Professor at Harvard Kennedy School, of a shortage of better-educated workers. The college premium, he said, accounted for approximately 60 percent of the growth in wage inequality between 1973 and 2005.

Wilson cited rising education costs over the last several decades as a key factor for the education disparity. Between the 1950s and 1970s, average tuition at public and private colleges averaged respectively 4 percent and 20 percent of annual median family income. By 2006 it had surged to 10 percent and 45 percent of median family income. Between 1981 and 2006, he said, tuition and fees have more than doubled.

“Unlike in earlier years, “ said Wilson, “increases in college tuition have placed a severe financial strain on the budgets of middle class families.” To make college available to more of the population, said Wilson, government needs to find ways to impose price controls on colleges and universities. Enlarging the pool of educated workers to meet demand, Wilson said, “would reduce the currently high inequality between education and lower educated workers.”

The disparity in income equality will not change, according to Ron Ferguson, senior lecturer in education and public policy at the Harvard Graduate School of Education and Harvard Kennedy School, without fundamental social change.

“We’re not going to fix [economic inequality], unless we have something that is essentially a social movement,” said Ferguson. “A lot of the change that needs to happen is not change that we can mandate through policy. It’s changes in lifestyle. It’s changes in priorities. We’ve got to find ways to push it through the population to saturate communities with images of different ways to using time and relating to one another.” Ferguson identified five key structures that must be involved in helping reverse current trends: parenting, teaching, peer dynamics, the business community, and communities at both the neighborhood and regional levels.

Panelist Nina Easton, senior editor at Fortune magazine and a 2012 Shorenstein Center Fellow, said that helping those “stuck on the lower rung of the income ladder” involves the role and responsibility of corporate America and business. “We have the highest corporate tax rate in the world,” said Easton, explaining why so many American businesses have relocated overseas. “We need to find a way of bringing that capital back home…We can get some of those jobs back.”

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picture of panel

(From L to R) David Ellwood, Harvard Kennedy School dean (moderator); Nina Easton, Washington columnist and senior editor, Fortune.

“We’re not going to fix [economic inequality], unless we have something that is essentially a social movement,” said Ron Ferguson.

picture of panelists

(From L to R) William Julius Wilson, the Lewis P. and Linda L. Geyser University Professor; Ron Ferguson, senior lecturer in education and public policy at the Harvard Graduate School of Education and Harvard Kennedy School.