Brooks on Inequality

In today's NY Times, David Brooks has a great column on inequality. He gives my Harvard colleague Larry Katz some well-deserved attention:

Lawrence Katz, formerly of the Clinton administration, now of Harvard, puts it this way: Across many nations, the market increasingly rewards people with high social and customer-service skills.

A contractor who can work with customers, design kitchens and organize jobs may earn five times as much as one of his workers who has identical cabinetry skills. An office worker who is creative, charismatic and really good in fast-changing interactive settings now gets paid much more than a disciplined middle manager who excels at routine tasks.

Katz describes a polarized economy. Wages are rising in the bottom quartile for workers who provide personal services. The middle is lagging. The real rewards are going to the top 10 percent, especially to those relative few who have the skills to transform organizations from the top.

In other words, the market isn't broken; the meritocracy is working almost too well. It's rewarding people based on individual talents. Higher education pays off because it provides technical knowledge and because it screens out people who are not organized, self-motivated and socially adept. But even among people with identical education levels, inequality is widening as the economy favors certain abilities.

FYI, here is the relevant Katz study.