Inequality and Values
Looking at race-distinguished Gini inequality in the USThere was recently a big to-do, in case you didn't notice, about Charles Murray's latest book, Coming Apart. Krugman thinks this is all about stagnant or declining real wages and diminishing employment opportunities destabilizing the lower middle class of white America.
He's probably right, as we can see by looking at measures of income inequality by race. Murray's thesis, in brief, is that in the 50s and 60s, even the poorest white Americans shared cultural norms and practices with the wealthy, but that since then, this similarity has broken down, with white America increasingly adrift -- in terms of premarital childbirth, marriage rates, employment security, etc.
What seems to be going on is not that an exogenous decline in "values" triggered the collapse of this part of society, but that the increasing advantage of education, and educated parents, created intergenerational inequality of opportunity, undermining social mobility and eventually the implicit social contract and thus "values" of white Americans.
This is visible in how white inequality, which was traditionally low in the US relative to other ethnic groups, rose during the 70s and 80s with returns on education and the falling value of unskilled labor. The level of inequality thus seems to imply a certain set of social circumstances at the lower end of an income distribution -- rising inequality was the sign of the lower middle class being locked out of the American Dream.
Statistical note: the Census Bureau changed their measures of inequality in 2002, hence the break in the dataset. It doesn't affect our conclusions.