The U.S. economy hit a historic high in 2018, and today unemployment is at its lowest rate in five decades. Yet wage growth for the vast majority of Americans has stalled, and more people are struggling to afford housing, healthcare, education, and other basics.

“Times are good if you are college educated and working in the right industries in the right locations,” says economist Paul Oyer. “But the last 50 years have been terrible for people with lower skills. Adjusted for inflation, the average earnings of a man who didn’t go to college is lower now than it was 50 years ago. That’s unheard of.”

Oyer, a professor at Stanford Graduate School of Business, teaches a course to MBAs focused on causes and complications of U.S. inequality. The course is co-taught by Lenny Mendonca, MBA ’87, who serves as California Gov. Gavin Newsom’s chief economic and business adviser and oversees the state’s Office of Economic Development.

Here, they discuss what is driving inequality, vet proposed solutions, and speculate what will happen if the trend continues.

Q: This is the first generation of Americans that is expected to fare worse than the prior. What’s driving this trend?

Oyer: A number of factors. Globalization, for one. A really good substitute for a manual laborer in the U.S. is a manual laborer in China or Costa Rica. Another factor is technology. Apple is the canonical example. The company is designing their products here, so the people who work in engineering are more and more valuable, and making more and more money, but the people who, in the old days, might have made computers here — that’s now done in China.

Mendonca: We’ve also had a combination of tax and regulatory policy that has encouraged capital formation and increasing returns to capital, so labor’s share of returns has decreased. The last round of tax policy out of Washington made this worse.

Q: Is this level of inequality historically unprecedented?

Oyer: You had the same thing with the Industrial Revolution that concentrated more and more wealth into the hands of capital. Henry Ford, the Rockefellers, Leland Stanford —

Mendonca: — J. P. Morgan.

Oyer: But the Great Depression took the wind out of the sails of that. Inequality was substantially reduced during the ’30s, ’40s, and ’50s.

Mendonca: A large portion of what reduced inequality was the destruction of wealth during World War II and the fact that the U.S. benefited afterward from being the last standing industrial economy. We had a global environment that was based on American exports. Today, we’re in the midst of a transition to a very different economy. This time, it’s much more global, particularly in labor markets.

Oyer: But as the U.S.’s inequality has grown since the ’70s, inequality has reduced dramatically around the world.

Read the rest of Shana Lynch’s article at Fast Company