Commentary

Government Only Helps Wage Disparity

By Will Wilkinson
This article appeared in Marketplace on July 2, 2008.

When we think of rising income inequality, it’s the geek lords of Silicon Valley and the Manhattan hedge fund titans who come first to mind. What’s less often considered is the federal government’s major role in comforting the already comfortable. The politically-connected classes in and around Washington, D.C., have fared rather handsomely over the past few years. Signs of recession you say? Not so much here on K Street.

After the tech bust of 2001, incomes in Silicon Valley and New York City drifted closer to the national average, and inequality between American counties declined. But then with the advent of the Global War on Terror, the District of Columbia and surrounding counties began to enjoy outsized gains in average incomes.

So far, the “military-industrial complex” is the one clear winner in what has been a $1 trillion war. But it’s not only security and defense contractors, and the lobbyists who love them, who’ve been pulling ahead on the taxpayer dime.

According to the U.S. government, compensation for the average federal civilian worker in 2005 stood at over $106,000. That’s double the average for private workers. That’s top 5 percent of the personal income distribution. And average wages for a federal worker rose 5.8 percent that year, compared to a 3.3 wage hike in the private sector.

But who knows? Maybe all these new federal office buildings really are hives of extraordinary productivity. In San Jose, they make software, in Detroit, they make cars, and here in D.C., we make memos about meetings about regulations — very efficiently. Maybe we Washingtonians deserve our good fortune.

Alas, according to a recent Pew Research poll, the federal government’s favorability rating has plummeted to a 10-year low. If taxpayers are getting what we’re paying for, we don’t seem to know it.

But, hey, you just wait until the next guy gets into the White House. He’s really gonna clean this place up.

Media Appearance Will Wilkinson discusses wage disparity on Marketplace (July 2, 2008) [MP3]

Will Wilkinson is a research fellow at the Cato Institute.