The Organisation for Economic Co-operation and Development released its biannual Economic Survey of the United States this week. The report itself will make for good summertime reading on the beach, but it's mention of income inequality makes it especially exciting.

Policies and global trends that have made the economy more open, flexible and dynamic — thereby boosting productivity and overall prosperity — may have increased inequality. If unaddressed, concerns about inequality have the potential for eroding support for such policies.

Recognizing the trend in rising inequality is the first step to solving the problem. However, the report manages to indicate that rising inequality is not good, but only insofar as rising inequality will undermine support for the very policies that have created it. Rather than attempt to draw attention to skyrocketing CEO pay and the de-unionization of the workforce (two substantial factors of growing income inequality), the report tells pleasing stories about the "skill premium."

To a considerable extent, the rise in inequality reflects an increase in returns to investing in skills (Council of Economic Advisers, 2006). In the United States wages of workers with more years of formal education have increased much more than those of workers with fewer years of formal education. For instance, over the last quarter century, the hourly earnings of college-educated workers have grown by more than a fifth, while those of high school drop-outs have actually declined somewhat.

If you read that carefully, you will see that workers with "more years of formal education" have seen their wages grow by 20 percent over the past 25 years. In other words, a college degree gets you less than 1 percent income growth per year.

One percent is chump change compared to what those in the 99.9th percentile saw - a 181 percent increase over the same time, or more than 7 percent per year. For those in the 99.99th percentile, they saw a massive 437 percent increase (17 percent annual increases). Somehow I don't think easy street begins with a college degree, but I can see where CEOs and the economic power elite might get nervous if we quit blaming the victim and started looking at compensation structure of firms to begin solving the inequality crisis.

The Joint Committee on Taxation's 10-year score of the $4.8 billion "Small Business and Work Opportunity Tax Act," adopted by Congress yesterday as part of the $120 billion war spending supplemental bill (now awaiting the president's signature) is: here.

It's taking a while for Congress and the President to work out their differences over the war funding bill. This wait isn't harming the troops, but it is costing people money.

That's because there's a minimum wage raise attached to the war funding bill. It raises it from $5.15 to $5.85 60 days after enactment, and then to $6.15 a year after enactment, and $7.25 after two years.

If the minimum wage bill had been enacted when the House passed it in January, a minimum wage worker who worked 40 hours a week would have made $280 more this year (by my rough calculations). If it had been enacted when the Senate passed it, the same worker would have made $168 more. And if it had been enacted when the House and Senate finally agreed to the same tax package to attach to the minimum wage bill, the worker would have $84 more.

All that might not sound like a whole lot of money, but it's the marginal dollar that can make the difference between wonder or whole wheat bread on a sandwich, or between vegetables or no vegtables for dinner, or between drinking soda or orange juice, if you're working minimum wage.

My calculations here aren't meant to be exact, but the point is that this debate is costing people serious money that won't be recovered. It'd be nice if somebody figured out a way for that not to happen.

Responding to the new CAP anti-poverty plan, the folks at Inclusionist.org have started up an interesting debate on how to talk about, think about, and address poverty. This post should get you caught up.

Call me a kool-aid drinker, but I'm taken in by the Inclusionist people. I like the way they think, perhaps more so than the way they name things. I mean, the term "inclusion" just sounds too social, when we're really talking about pocketbook, security, and opportunity issues. Their work's cut out for them on that front, if they ever want the term and their definition of it to become mainstream.

Responding to the subprime lending market meltdown, Charles Schumer (D-NY) is proposing legislation that would give $300 million to community groups that can help troubled borrowers restructure their mortgage debt. And not only would Shcumer's bill change some mortgage lending regulations, it asks for mortgage lenders to kick in $600 million of their funds. Of course mortgage lenders, as spoken for by Mortgage Bankers Association Chairman John M. Robbins, are having none of this.

The legislative remedies that Senator Schumer presents today will have the unfortunate effect of limiting choice and restricting mortgage credit to the neediest borrowers, thereby hurting those people it is ostensibly designed to help.

Indeed. The neediest people should have access to credit. But, when lenders use deceptive practices to entice borrowers into loans that they eventually won't be able to afford (see e.g., "teaser rate"), the "neediest people" are really only getting temporary access to credit. And now, a whole lot of people are feeling the pinch as the terms of their exotic loans become untenable. Lenders should recognize their responsibility in this mess and pitch in and help.

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