Edward Elgar, 2004, 424 pp, hardback, 1 84376 193 9, £75 Order this book
Average per capita income has risen faster in the USA than in other industrialized countries, but whether American citizens’ ‘quality of life’ or ‘well-being’ has increased is another matter. This book assesses established measures of well-being, proposes new ones, compares the options, and examines empirical data in relation to proposed indicators.
In the introduction, Amartya Sen’s and Monroe Lerner’s definitions of well-being in terms of the individual’s ability to function well in individually- and socially-determined roles is outlined, and income is related to these definitions as one of the resources required for high-level functioning. In chapter 1 Wolff shows that in the USA the poorest have become relatively poorer since 1973 and that household debt is growing. In contrast, chapter 2 shows that inequality of consumption expenditure has not increased during the same period. In chapter 3 Jencks, Meyer and Single show that if a different price index is employed, and if per capita income rather than household income is measured (because average household size has decreased), then families with children have not seen their resource positions worsen. Chapter 4 pursues the debate as to which price index should be used.
Chapters 5 and 6 offer comparisons between the USA and other industrialized nations and reveal the relatively greater inequalities experienced by Americans. Only in the UK is the gap in real incomes between low-income and middle- and high-income groups greater than it is in the USA.
Chapter 7 studies asset ownership amongst different racial groups in he USA and discovers significant inequalities; and chapter 8 finds that in Chile, because incomes are generally too low to allow significant levels of saving, increasing human capital amongst poorer sections of society has little effect on wealth distribution.
The final chapters study additional factors related to well-being: stature, time use, worker rights, and the quality of the environment.
An important conclusion of Edward Wolff’s chapter on recent trends in living standards in the USA is that sluggish growth in labour earnings hasn’t been affected by substantial progress in educational attainment: “Despite incredible success in reducing disparities of schooling within the American population, the inequality of income has not only failed to decline but has actually risen sharply over the last three decades. These results show a growing disconnection between earnings and schooling” (p.22).
The reason for slow growth in labour earnings is a national income shift from labour to capital: one of the reasons for growth in income amongst the rich. So education alone is not the answer, and ‘education, education, education’ isn’t either.
Wolff recommends increasing the minimum wage, extending the Earned Income Tax Credit, redistributing income through the tax and benefits system, and re-empowering labour. But the problem with the Earned Income Tax Credit is that it is withdrawn as earned income rises, so to extend it would extend the poverty trap. What is surely required is a redesign of the tax and income support system (p.23) in the direction of universality so that it reduces the poverty trap and enables higher earned income to result in higher net income.