It is amazing how the "1 percent" epithet, a reference to the top 1 percent of earners, has caught on in the United States and elsewhere in the developed world. In the United States, this 1 percent includes all those with a 2006 household income of at least $386,000. In the popular narrative, it's thickly populated with unscrupulous corporate titans, greedy bankers, and insider-trading hedge-fund managers. Reading some progressive economists, it might seem that the answer to all of America's problems is to tax the 1 percent more and redistribute the proceeds to everyone else.

Underlying this narrative is the view that this income is ill-gotten, made possible by Bush-era tax cuts, the broken corporate-governance system, and the conflict-of-interest-ridden financial system. The 1 percent are not people who have earned money the hard way by making real things, so there is no harm in taking it away from them.

This caricature is based on some truth. For instance, corporations, especially in the financial sector, reward too many executives richly despite mediocre performance.

But apart from tarring too many with the same brush, there is something deeply troubling about this narrative's reductionism. It ignores, for example, the fact that many of the truly rich are entrepreneurs; sports stars and entertainers; and professionals such as doctors, lawyers, consultants, and even some of our favorite progressive economists. In other words, the rich today are more likely to be working than idle.

But what might be the most important overlooked fact is that the rise in income inequality is not just at the very top, though it is most pronounced there. Academic studies suggest that the top tenth of income distribution in America and elsewhere is also moving farther away from the median.

This is an inconvenient fact for the progressive economist. "We are the 90 percent" sounds less dramatic than "We are the 99 percent." And for some of the protesters, it may not even be true.

Education gap

Perhaps most problematic, though, is that something other than plutocrat-friendly policies is largely responsible for the growing inequality. That is education and skills.

True, not every degree is a passport to a job. Freshly minted degree holders, especially from lower-quality programs, are finding it hard to get a job nowadays, because they are competing with experienced workers who are also jobless. Nevertheless, unemployment among those with degrees is one-third the rate among those without a high school diploma.

Close examination suggests that the single biggest difference between those in the top tenth of the income distribution and those below the median is that the former have a degree or two, while the latter typically do not. Technological change and global competition have made it impossible for American workers to get good jobs without strong skills. As Harvard professors Claudia Golden and Larry Katz put it, in the race between technology and education, education is falling behind.

No quick fixes

To acknowledge that the broken educational system is responsible for much of the growing inequality that ordinary people experience would, however, detract from the populist agenda of rallying the masses against the rich. It has the inconvenient implication that the poor have a role in pulling themselves out of the morass. There are no quick fixes for education; every president since Gerald Ford has called for educational reforms, with little effect. In contrast, blaming the undeserving 1 percent offers a redistributive policy agenda with immediate effects.

The United States has tried quick fixes before. Income inequality grew rapidly in the last decade, but consumption inequality did not. The reason: easy credit, especially subprime mortgages, which helped those without means keep up with the Joneses. The ending, as everyone knows, was not happy. The less well-off became even worse off as they lost their jobs and homes.

The United States needs to improve the quality of its workforce by developing skills relevant to the jobs its firms are creating. Several steps can be taken toward these goals, including improving community attitudes toward education, reforming schools, tying the curriculum in community colleges and vocational institutions more closely to the needs of local firms, making higher education more affordable, and finding effective ways to retrain unemployed workers.

None of this is easy or likely to produce results quickly, and some of it may require more resources. While eliminating inefficient spending, especially inefficient tax subsidies, can generate some of these funds, more tax revenues may be needed. The rich can certainly afford to pay more, but if governments increase taxes on the wealthy, they should do it with the aim of improving opportunities for all, not as a punitive measure to rectify an imagined wrong.

Raghuram Rajan is a professor of finance at the University of Chicago's Booth School of Business. This was distributed by Project Syndicate.