Political factors, not economics, drive inequality in US

New York, Oct 27: Political decisions taken at the highest level, not economics, are to blame for rising inequality in the US, sociologists suggest.

Political factors, along with increases in college-educated adults, provided the best explanations for the rise in income inequality in the US between 1978 and 2011, said the study published in the American Journal of Sociology.

But even higher education levels became less important after the 1980s, lead author of the study David Jacobs, Professor at The Ohio State University, pointed out.

The study found that presidential administrations that were sympathetic to employers but unfavourable to labour drove up levels of income inequality.

"Political decisions, especially at the presidential level, help determine the rewards that Americans get from the economy," Jacobs explained.

The study suggests that researchers need to look beyond economic causes in trying to explain the growth of income inequality in the US.

"You can't explain income inequality without looking at political factors," Jacobs said.

The study used a variety of sources to analyse political and economic factors that could be tied to inequality at the state level for each of the 33 years in the study. 

"The gap between the top earners and the rest of Americans has really been growing and our study was able to capture that change," Jacobs said.

The study found that the presidential administration in power was far and away the biggest political factor linked to economic inequality in each year of the study.

The importance of the presidential administration remained even after the researchers took into account more than 20 other possible explanatory variables, such as stock market values, poverty levels, the number of people employed in finance careers, and the number of people employed in rural occupations. 

Many of these factors, among others controlled for in this study, have been cited by economists in the past as possible causes of growing inequality, Jacobs said.

After all these and other factors are held constant, the Ronald Reagan administration's policies led to an 18 per cent increase in inequality, the study found.

The Reagan administration made tax codes more favorable to the affluent, deregulated many industries including finance, weakened unions and reduced spending on programmes for the poor.

"I believe it was a lot of policies that each contributed a little bit to growing inequality, and when you added them all up the results were large," Jacobs said.

Other than the presidential administration, the remaining parts of government had little or no effect on inequality, the study showed.