I need a Trumpcation, by which I definitely do not mean a weekend in Mar-a-Lago, but a break from the chaos wrought by the administration.
To be clear, I’m not getting out of the vigilant oversight business, especially regarding attempts to sabotage the Affordable Care Act or pass big, wasteful, regressive tax cuts. But it’s also important to play offense, or at least describe what that would look like.
There are different ways to play offense in political economy, two of which are the inside and outside game. Ben Spielberg and I have a piece in the American Prospect on the outside game, an ambitious program calling for Medicare for All and a guaranteed job. On the inside, I’m testifying this week before the Joint Economic Committee at a hearing on ideas to improve economic opportunity in America. I’ll summarize my testimony here after the hearing, but for now, let me set the table with a discussion about what I think we’re talking about when we talk about opportunity and present some indicators intended to underscore the nature of the problem. I’ll follow this up with a robust set of policy ideas intended to take down these barriers. And, getting back to defense, I’ll include ways in which conservatives’ current agenda is far more likely to bolster than to remove opportunity barriers.
There is no fixed definition of economic opportunity, but to my mind it corresponds to the realization of personal potential. If a child faces an inadequate school system, or a toxic environment, it will be much harder for her to realize her intellectual and, later, economic potential. If a parent lives in a community with an insufficient quantity of jobs, or jobs that pay wages that are too low to support a family, or jobs for which she lacks the necessary skills, both she and her family arguably face opportunity shortfalls. Such barriers can meaningfully be extended beyond schooling and jobs to housing, nutrition, health care and even infrastructure.
For example, consider the fact that due to toxic infrastructure — lead leaching into water pipes — children in parts of our country will suffer brain impairments (though, importantly, such damage need not be permanent). This is a clear example of an opportunity barrier constructed by a public policy failure, one that should be unacceptable in an economy as wealthy as our own.
This framing of the problem suggests that a clear role for policy in the opportunity space is to take down the barriers that get between people and the realization of their economic potential. But how steep and extensive are the barriers to opportunity in today’s America? Here’s a list of some of the indicators, along with the variables with which they’re associated.
Labor market barriers associated income, race and education: Federal Reserve Chair Janet Yellen recently noted that unemployment rates “averaged 13 percent in low- and moderate income communities from 2011 through 2015, compared with 7.3 percent in higher-income communities.” Yellen also noted that in majority-minority areas, the jobless rate was 14.3 percent, 2011-15. The share of 25- to 54-year-old workers in these areas was nearly 9 percentage points lower than in non-majority-minority communities. Racial disparities exist in unemployment rates even controlling for education. Among whites with terminal high school degrees, unemployment was about 5 percent in 2015. For blacks, it was twice that level. Blacks with at least bachelor’s degrees have unemployment rates of 4.1 percent compared with 2.4 percent for whites with at least bachelor’s degrees.
Labor market barriers associated with rural areas: My own work has documented periods of slack labor markets over much of the past few decades, and their negative impact on the earnings and income growth of low- and moderate-income working families. More recently, there has been analysis of different trends in employment in rural, or non-metro, labor market indicators, and those from metro areas.
The figure below shows employment growth in rural and metro areas, with both indexed to 100 in 2008 Q1. While employment levels fell about the same amount in percentage terms in both areas over the deep recession, 2007-09, metro employment has recovered much more quickly, as the gap at the end of the figure reveals. By the middle of 2016, rural employment was still well below its pre-recession peak. Labor force participation trends reveal a similar gap (while population growth has stagnated in rural areas, the labor force has declined).
Mobility barriers associated with regional economic segregation. In recent decades, families with children have experienced increased income segregation across place, driven by rising income inequality and by wealthier parents segregating themselves into areas with higher-performing schools. Researcher Ann Owens connects this development to diminished future opportunities for children: “Rising income inequality provided high-income households more resources, and parents used these resources to purchase housing in particular neighborhoods, with residential decisions structured, in part, by school district boundaries. Overall, results indicate that children face greater and increasing stratification in neighborhood contexts than do all residents, and this has implications for growing inequalities in their future outcomes.”
Education barriers associated with income: Close to 100 percent of children of parents with higher incomes/education pursued higher education, and 60 percent earned a bachelor’s degree. Among children of parents with lower incomes/education, 72 percent pursued higher education and only 14 percent completed a BA. The figure below shows that the likelihood of a child from a wealthy family will attend an Ivy League or similarly elite school is 50 times that of a child from a low-income family.
Mobility barriers associated with income, inequality and inadequate investments in children. While higher educational attainment is clearly associated with higher earnings, it is also the case that children who grow up in affluent households but do not graduate from college are 2.5 times as likely to have high incomes in adulthood as children who grow up poor but do graduate from college (see next figure). Recent research by Raj Chetty and others finds correlations between higher inequality and lower mobility. Chetty finds that as inequality has increased over time, one metric of mobility — the likelihood that adult children outearn their parents — has fallen, and that rising inequality explains 70 percent of the increase. One reason this relationship might exist is because when less GDP growth flows to lower-income families, their abilities to overcome mobility barriers — to move to opportunity, to invest in their children’s future, to avoid the negative externalities of difficult neighborhoods — is diminished.
In fact, growing inequality is associated with less investment in children. In the early 1970s, high-income families spent four times what low-income families spent on “enrichment goods” for their kids (tutoring, books, trips, art supplies); in the mid-2000s, they spent seven times as much. Other Organization for Economic Cooperation and Development countries spend five times what we spend on young children, often through prekindergarten education, despite solid research showing the benefit-cost ratio of such spending to be more than 8 to 1.
Employment and opportunity barriers associated with the criminal justice system. The National Employment Law Project reports that 70 million people in the country have a conviction or arrest history that can show up on a routine background check for employment. NELP also points out that more employers are conducting background checks wherein these records are likely to show up. Research reported by myself and Ben Spielberg show extensive employment and earnings disadvantages for those with criminal records, with serious negative spillovers to the families of those who face incarceration. The opportunity/mobility costs of having a criminal record is high: Men with criminal records are twice as likely to remain in the bottom-fifth of the income scale relative to men without records. The fact that these problems disproportionately affect racial minorities is partially a function of institutionalized racism associated with the criminal justice system, so the barrier of discrimination is germane here, as well.
Those are at least some of the barriers blocking opportunity today. How to wield public policy to reduce them is the subject of my testimony and while I’m sure the anticipation is killing you, you’ll just have to wait for my next installment.