Inequality

1. Krugman talks about how the return to education is greater due now due to technological advancement (requiring more skilled workers to perform jobs), immigration (which tends to increase competition among lower-educated workers, creating an incentive to better one’s education) and increased international trade (as much of what the United States exports is skill-intensive). However, he says that ‘greater returns to education’ alone doesn’t explain the rising inequality gap because many of those who have a similarly high level of education still earn vastly unequal incomes (he quotes the large difference in income increases for CEOs and school teachers, both of which generally earn a master’s degree).
2. Krugman says that CEO wages are decided by compensation experts (who evaluate their performance value), and that these experts are hired by corporate boards, which consist mainly of members selected by the CEOs themselves. Krugman claims that the matter of determining executive pay is inevitably a subjective matter, but ideally it would be based upon company profitability, in which case, the marginal productivity of someone like Charlie Prince or John Thain could never justify the high wages they received.
3. Table 10 is comparing college graduation rates of four groups of students (1. Those whose parents were in the last fourth in regards to socioeconomic status and who also scored in the bottom quartile on a math test 2. Those with parents from the same quartile, but who scored in the top fourth on the test 3. Those who also scored in the top fourth, in addition to having parents in the top quartile, and 4. Those who had parents in the top fourth, but whose test scores were in the bottom quartile). Krugman claims that the importance of socioeconomic status is proven by the fact that group 4’s graduation rate is higher than group 2’s. However, while the numbers lend some evidence to his proposition, the difference shown is only 1 percentage point, which doesn’t seem to prove his point (that equality of opportunity is non-existent in the United States) very strongly.
4. Krugman responds to the objection by claiming that French unemployment is concentrated mainly among the old and the young, and by saying that the fact that the young do not work is not necessarily negative, as it may reflect an increased importance placed on education instead. He then goes on to address the older unemployment issue by attributing it to bad policy, such as too low of a pension benefits eligibility age. Regarding the overall lower productivity of France, he actually states that for those who work, their productivity per hour is actually larger, perhaps due to vacation regulations (which are also helpful for raising ‘life satisfaction’).