What Nobody's Telling American Workers

What Nobody's Telling American Workers

The simmering debate over income inequality got a jolt of energy recently with the publication of Edward Conard's book Unintended Consequences: Why Everything You've Been Told About the Economy Is Wrong. Conard is a former partner of Mitt Romney's at Bain Capital, so his book can be interpreted (rightly or wrongly) as the Bain View of the Universe.

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Romney's critics have been gleefully attacking Conard's book and its elitist, trickle-down view of the economyâ€"which plays right into President Obama's call for more fairness and higher taxes on the wealthy. But this predictable argument over the diverging living standards for rich and poorâ€"with liberals insisting that the rich have gotten too rich and conservatives arguing that more spending by the rich would make everybody better offâ€"basically misses the point. In fact, it does a disservice to hard-working people who need pragmatic guidance on how to plan for their financial future.

Conard mounts an unapologetic defense of the 1 percent and the economic activity they generate, arguing that spending and investment by the wealthy is the main thing that keeps the economy humming and creates jobs. The New York Times Magazine summarized his argument this way: "If we had a little more [income inequality], then everyone, particularly the 99 percent, would be better off."

That type of reasoning drives liberals bananas, and they do have data on their side. Since about 1980, for example, incomes for top earners have risen sharply, while they've risen much more slowly for everybody else. Over the last decade, the median income has been stagnant, producing a bulging gap between the rich and everybody else.

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The big question is what to do about it, and here's where the policy wonks arguing about income inequality break ties with real Americans. Experts on both sides typically call for new policies in Washington to fix whatever they feel is wrong with unequal incomes. But policy changes won't solve most of the problems ordinary people face, and even if they did, it would take years.

Relying on solutions from Washington, in fact, may be the very thing that generates dangerous unintended consequences. If you think politicians will help you get ahead then you'll be less likely to take action on your own to make yourself better off.

What politicians and policymakers really ought to be telling struggling Americans is this: You're on your own. The government is running out of money and is borderline dysfunctional besides. Instead of new policies that will make the economy more fair, we need more self-sufficient workers who aren't looking to government for answers.

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The trick is figuring out what ordinary people can do to make themselves better off. To do that, it helps to understand the real problem, which isn't income inequality in itself. It's a decline in economic mobility, which means it's getting harder for people to boost their earnings, move up the socioeconomic ladder, and improve their living standards.

The economy is changing rapidly, and it's not completely clear why it's gotten so much harder to get ahead. But there are certainly clues. Education has a lot to do with it: There are very limited opportunities these days for people who don't have a college degree, or whose training is outdated. Technology is another factor. People whose careers are tied to the digital revolution enjoy the good fortune of working in a burgeoning field, while many others work in shrinking fields being decimated by new technology. Workers able to ride the wave of globalization, at companies that do business around the world, have an edge others don't.

Attitude is another factor. Too many American workers rely on somebody else for their livelihood, without the grit that it takes to adapt and recover when something goes wrong. This is the natural byproduct of a long era of prosperity in which living standards rose for nearly everybody, just because the economy was booming. It didn't take extraordinary fortitude to get ahead. Often, all you had to do was show up.

Things are different now, and the bar for success is higher. Instead of arguing over the abstract causes of income inequality or hoping for miracles from Washington, national leaders ought to be sending this message to America's workers: Get smarter. Work harder. Go where the opportunity is. Prosperity isn't going to trickle down from the wealthy, or arrive in the form of a government check. The only person looking out for you is you.

Rick Newman is the author of Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.