THE BLOG
06/11/2012 04:14 pm ET Updated Aug 11, 2012

The Misleading Debate Over Income Inequality

Income inequality used to be an obscure topic reserved for sleepy academic conferences. Today, it's a dinner-table topic that everybody seems to have an opinion about.

It's obvious why: For a lot of people, it's getting harder to get ahead, even if they feel they're working hard and doing the right things. The data on income inequality suggests an explanation. Since the late 1970s, the gap between top earners and everybody else has been widening. The rich really are getting richer, while the middle class stagnates and others fall further behind.

The problem with the whole focus on income inequality, however, is that the solutions to the perceived problem are policy actions that would need to be undertaken in Washington, or a reversal of powerful trends such as globalizations that may be within nobody's power to effect. The message to ordinary people is that they're captive to the whims of politicians or other factors they can do nothing about. That's misleading. The reality is that many people have more power than they realize to improve their own fortunes.

In his new book The Great Divergence, for example, journalist Timothy Noah explains how a growing gap between skilled workers with good educations and less-skilled workers who never went beyond high school is related to the rise in income inequality. Another factor he cites is the decline of labor unions, which represented nearly 40 percent of the workforce in the 1950s but represent just 12 percent today.

Joe Nocera of the New York Times endorses Noah's view on unions, while citing research showing that the decline in union representation is responsible for about 20 percent of the rise in income inequality.

To solve the problem, Noah would like to see a revival of the labor movement, along with new policies that make health care and education more affordable and reduce the outsized bite they take out of middle-class paychecks. President Obama and many Democrats want to address the problem through higher taxes on the wealthy, with the added revenue used to keep middle-class entitlement programs like Medicare and Social Security solvent and subsidies such as the mortgage-interest and employer-paid health care deductions intact.

There's merit to those ideas, but if you're one of the millions of people whose income has been falling into disequlibrium, there's not a thing you can do to revive the labor movement, address the cost of education and health care or change tax policy. Sure, you can devote your energy to causes and vote for politicians who support those things, but waiting for action from Washington is an excruciating exercise in futility. Anybody counting on Washington to solve their problems surely falls among the 59 percent of Americans who feel the nation is on the wrong track.

What's missing from the whole debate is a call for Americans to become more self-reliant, and solve their own problems. This isn't a liberal or conservative view, it's a pragmatic view, because regardless of what politicians say, the government in the future is going to do less for citizens, and ask more from them. That's simple math: From Washington to nearly every state capital, the government is running out of money. Raising taxes is necessary, but it's not popular, which means that cutbacks are coming too, no matter what.

In my own book, Rebounders: How Winners Pivot From Setback To Success, I deliberately steered clear of political arguments and policy prescriptions because those things don't allow people to help themselves. Instead, I focused on resilience: the ability to cope with adversity and even harness it to become better and stronger. Just about everybody can improve their resilience and learn to bounce back from setbacks faster and wiser. This type of grit provides an important edge in a tough economy, especially when government support and other safety nets are breaking down.

One practical application is improving your career and workplace skills, something that everybody ought to be doing in an era of breathtaking technological change. Some people are doing this, through additional schooling, extracurricular job training or informal effort, but too many others simply complain about opportunity passing them by or their government benefits running out, without doing enough to chase opportunity.

We should all be stress-testing ourselves: How would we fare under adverse scenarios, such as another recession or a full-blown American debt crisis? Do we have enough money in the bank? Is our company or our industry in decline? What if tax rates go up by 10 or 20 percent, as some experts say is necessary? How will it hit me if the government has to cut subsidies and benefits? Who else in my family could be hurt and what might I have to do to support them?

If the candidates running for office this year were telling voters the truth, the message would be: You're on your own. Maybe, someday, there will be a set of policies that makes incomes more equal and gets the nation back on sound footing. But that could take years and might never happen.

What Americans really need is a set of their own policies for climbing the income ladder and adjusting when things don't work out. An American renaissance is possible, but it's very unlikely to come from Washington. It will only happen if ordinary Americans vow to make themselves tougher and more relevant, and use every setback as motivation to strive for the 1 percent. If government helps, consider it a bonus.

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