April 29, 2012

Reagan Revolution: Redistributing Wealth Since 1980

By Glenn
Topics:
conservatism
Deregulation
krugman
LIberalism
Ronald Reagan

When the Reagan Revolution started dismantling the New Deal, it prioritized laws and regulations designed to protect workers and their income. Human history teachers that it’s easy to make a few people wealthy. It’s much harder to build a middle class society. Liberals did just that after WWII. Now the Middle Class is being crushed by the Reagan Revolution and money is flowing freely to the few again. Welcome to the new 18th century.

A key to understanding this growth of income inequality—and the disappointing increases in workers’ wages and compensation and middle-class incomes—is understanding the divergence of pay and productivity. Productivity growth has risen substantially over the last few decades but the hourly compensation of the typical worker has seen much more modest growth, especially in the last 10 years or so. The gap between productivity and the compensation growth for the typical worker has been larger in the “lost decade” since the early 2000s than at any point in the post-World War II period. In contrast, productivity and the compensation of the typical worker grew in tandem over the early postwar period until the 1970s.

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