Conservatives have launched a War on Envy. This week, Arthur Brooks, president of the American Enterprise Institute lamented “a national shift toward envy” which, he said, would be “toxic for American culture.” Venture capitalist Tom Perkins recently made the same point in much more inflammatory terms: He equated those who criticize rising inequality with Nazis persecuting Jews, a salvo attack that quickly drew censure from those now running KPCB, the VC powerhouse that he once led.
Both conservatives and progressives agree on basic facts: The percentage of Americans who see this country as a land of opportunity, in which hard work leads reliably to material reward, is falling rapidly. This shift brings envy, resentment, cynicism and despair. And these negative emotions undermine our social structure and bring unhappiness.
But that’s where the agreement ends. Conservatives insist the problem is one of perception. They think that if the media would just stop talking about inequality things would get better. They say that if our leaders (read: President Obama) would simply offer up “an optimistic vision in which anyone can earn his or her success,” the envy would dissipate and everything would be just fine.
That is not going to work.
It won’t work because the sense that the dream is slipping away, the sense of diminished mobility, of a system that’s increasingly rigged, is not a fantasy that can be dispelled with clever rhetoric. It is the everyday, lived experience of millions of Americans. The only consequence of elites refusing to discuss it will be to confirm that those elites are indeed out of touch with ordinary Americans and their problems. That aloofness is reflected in the appallingly low approval ratings of the current Congress.
Brooks and other influential conservatives fail to acknowledge that the envy they lament, and the loss of opportunity that fuels it, results directly from the policies they have championed over the years. Consider higher education, which is acknowledged by both liberals and conservatives as the single most powerful force for economic mobility. Conservatives have succeeded in slashing taxes at all levels of government, and these cuts have gutted state funding of higher education.
Tuitions have spiked as a result. The soaring cost has put college out of reach for many middle-class families and nearly all of the poor and near poor. In 1971 an American family at the median income level had to pay 13 percent of its annual income to send each child to a public four-year university. That’s tough but it’s doable, with considerable sacrifice, savings, loans, a part time job and so on. Now the cost has more than doubled to 29 percent of income. This puts college out of reach for many, and leads to students graduating with staggering debt burdens. To put it mildly, this much debt does not encourage entrepreneurship.
That’s not the only way that conservative policies have limited upward mobility and destroyed confidence in the American Dream. Conservatives have long championed corporate tax policies that accelerate the harsher aspects of globalization, outsourcing and offshoring. As a result, American workers in many industries have seen their wages stagnate even as productivity has gone up, profits have soared and those who hold stock and options have done exceedingly well. Hard work now means breaking even for most Americans, rather than pulling ahead.
Here’s another example: Conservatives have championed individual tax structures that reduce the share of taxes born by the richest and increase the share born by the rest. Tax law changes such as the reduction in top tax brackets, lowering of capital gains rates and elimination of estate taxes confirm many Americans’ suspicion that the deck is indeed stacked against them.
I built and enjoyed a successful career in business before becoming an advocate for a sustainable economy. One of the things I learned in my career was to look for the true root cause of problems and not waste time attacking symptoms. Another thing I learned was that if what you’re doing isn’t working, stop doing it and try something else.
We are not going to bring optimism back to ordinary Americans by belittling those who discuss the real state of our economy. Waging war on envy won’t make people more confident in their job prospects and more entrepreneurial in their careers. Not if the reality of our tax, trade, labor and other policies is to strip away the rewards of working Americans and concentrate more and more wealth at the top.
It’s good that both left and right want to make the American dream credible again for more people. It’s good that both sides see loss of optimism as a problem. But diminished opportunity won’t be solved by refusing to talk honestly about its causes, and envy won’t be eliminated by more of the policies that kindled it in the first place. The success of the American economy and the American political system depends on people having the genuine conviction, based on the reality of their day-to-day experience, that hard work brings upward mobility.
By: David Brodwin, U. S. News and World Report, March 6, 2014
Almost every culture has some variation on the saying, “rags to rags in three generations.” Whether it’s “clogs to clogs” or “rice paddy to rice paddy,” the message is essentially the same: Starting with nothing, the first generation builds a successful enterprise, which its profligate offspring then manage poorly, so that by the time the grandchildren take over, little value remains.
Much of society’s wealth is created by new enterprises, so the apparent implication of this folk wisdom is that economic inequality should be self-limiting. And for most of the early history of industrial society, it was.
But no longer. Inequality in the United States has been increasing sharply for more than four decades and shows no signs of retreat. In varying degrees, it’s been the same pattern in other countries.
The economy has been changing, and new forces are causing inequality to feed on itself.
One is that the higher incomes of top earners have been shifting consumer demand in favor of goods whose value stems from the talents of other top earners. Because the wealthy have just about every possession anyone might need, they tend to spend their extra income in pursuit of something special. And, often, what makes goods special today is that they’re produced by people or organizations whose talents can’t be duplicated easily.
Wealthy people don’t choose just any architects, artists, lawyers, plastic surgeons, heart specialists or cosmetic dentists. They seek out the best, and the most expensive, practitioners in each category. The information revolution has greatly increased their ability to find those practitioners and transact with them. So as the rich get richer, the talented people they patronize get richer, too. Their spending, in turn, increases the incomes of other elite practitioners, and so on.
More recently, rising inequality has had much impact on the political process. Greater income and wealth in the hands of top earners gives them greater access to legislators. And it confers more ability to influence public opinion through contributions to research organizations and political action committees. The results have included long-term reductions in income and estate taxes, as well as relaxed business regulation. Those changes, in turn, have caused further concentrations of income and wealth at the top, creating even more political influence.
By enabling the best performers in almost every arena to extend their reach, technology has also been a major driver of income inequality. The best athletes and musicians once entertained hundreds, sometimes thousands of people at one time, but they can now serve audiences of hundreds of millions. In other fields, it was once enough to be the best producer in a relatively small region. But because of falling transportation costs and trade barriers in the information economy, many fields are now dominated by only a handful of the best suppliers worldwide.
Income concentration has changed spending patterns in other ways that widen the income gap. The wealthy have been spending more on gifts, clothing, housing, celebrations and other things simply because they have more money. Their extra spending has shifted the frames of reference that shape demand by others just below them, so these less wealthy people have been spending more, and so on, all the way down the income ladder. But because incomes below the top have been stagnant, the resulting expenditure cascades have made it harder for middle- and low-income families to make ends meet. Despite taking on huge amounts of debt, they’ve been unable to keep pace with community standards. Interest payments impoverish them while enriching their wealthy creditors.
But perhaps the most important new feedback loop shows up in higher education. Tighter budgets in middle-class families make it harder for them to afford the special tutors and other environmental advantages that help more affluent students win admission to elite universities. Financial aid helps alleviate these problems, but the children of affluent families graduate debt-free and move quickly into top-paying jobs, while the children of other families face lesser job prospects and heavy loads of student debt. All too often, the less affluent experience the miracle of compound interest in reverse.
More than anything else, what’s transformed the “rags to rags in three generations” story is the reduced importance of inherited wealth relative to other forms of inherited advantage. Monetary bequests are far more easily squandered than early childhood advantage and elite educational credentials. As Americans, we once pointed with pride to our country’s high level of economic and social mobility, but we’ve now become one of the world’s most rigidly stratified industrial democracies.
Given the grave threats to the social order that extreme inequality has posed in other countries, it’s easy to see why the growing income gap is poised to become the signature political issue of 2014. Low- and middle-income Americans don’t appear to be on the threshold of revolt. But the middle-class squeeze continues to tighten, and it would be imprudent to consider ourselves immune. So if growing inequality has become a self-reinforcing process, we’ll want to think more creatively about public policies that might contain it.
In the meantime, the proportion of our citizens who never make it out of rags will continue to grow.
By: Robert H. Frank, Economics Professor, The Johnson Graduate School of Management at Cornell University; The New York Times, January 11, 2014
For most of American history, parents could expect that their children would, on average, be much better educated than they were. But that is no longer true. This development has serious consequences for the economy.
The epochal achievements of American economic growth have gone hand in hand with rising educational attainment, as the economists Claudia Goldin and Lawrence F. Katz have shown. From 1891 to 2007, real economic output per person grew at an average rate of 2 percent per year — enough to double every 35 years. The average American was twice as well off in 2007 as in 1972, four times as well off as in 1937, and eight times as well off as in 1902. It’s no coincidence that for eight decades, from 1890 to 1970, educational attainment grew swiftly. But since 1990, that improvement has slowed to a crawl.
Companies pay better-educated people higher wages because they are more productive. The premium that employers pay to a college graduate compared with that to a high school graduate has soared since 1970, because of higher demand for technical and communication skills at the top of the scale and a collapse in demand for unskilled and semiskilled workers at the bottom.
As the current recovery continues at a snail’s pace, concerns about America’s future growth potential are warranted. Growth in annual average economic output per capita has slowed from the century-long average of 2 percent, to 1.3 percent over the past 25 years, to a mere 0.7 percent over the past decade. As of this summer, per-person output was still lower than it was in late 2007. The gains in income since the 2007-9 Great Recession have flowed overwhelmingly to those at the top, as has been widely noted. Real median family income was lower last year than in 1998.
There are numerous causes of the less-than-satisfying economic growth in America: the retirement of the baby boomers, the withdrawal of working-age men from the labor force, the relentless rise in the inequality of the income distribution and, as I have written about elsewhere, a slowdown in technological innovation.
Education deserves particular focus because its effects are so long-lasting. Every high school dropout becomes a worker who likely won’t earn much more than minimum wage, at best, for the rest of his or her life. And the problems in our educational system pervade all levels.
The surge in high school graduation rates — from less than 10 percent of youth in 1900 to 80 percent by 1970 — was a central driver of 20th-century economic growth. But the percentage of 18-year-olds receiving bona fide high school diplomas fell to 74 percent in 2000, according to the University of Chicago economist James J. Heckman. He found that the holders of G.E.D.’s performed no better economically than high school dropouts and that the rising share of young people who are in prison rather than in school plays a small but important role in the drop in graduation rates.
Then there is the poor quality of our schools. The Program for International Student Assessment tests have consistently rated American high schoolers as middling at best in reading, math and science skills, compared with their peers in other advanced economies.
At the college level, longstanding problems of quality are joined with the issues of affordability. For most of the postwar period, the G.I. Bill, public and land-grant universities and junior colleges made a low-cost education more accessible in the United States than anywhere in the world. But after leading the world in college completion, America has dropped to 16th. The percentage of 25- to 29-year-olds who hold a four-year bachelor’s degree has inched up in the past 15 years, to 33.5 percent, but that is still lower than in many other nations.
The cost of a university education has risen faster than the rate of inflation for decades. Between 2008 and 2012 state financing for higher education declined by 28 percent. Presidents of Ivy League and other elite schools point to the lavish subsidies they give low- and middle-income students, but this leaves behind the vast majority of American college students who are not lucky or smart enough to attend them.
While a four-year college degree still pays off, about one-quarter of recent college graduates are currently unemployed or underemployed. Meanwhile, total student debt now exceeds $1 trillion.
Heavily indebted students face two kinds of risks. One is that they fall short of their income potential, through some combination of unemployment and inability to find a job in their chosen fields. Research has shown that on average a college student taking on $100,000 in student debt will still come out ahead by age 34. But that break-even age goes up if future income falls short of the average.
There is also completion risk. A student who takes out half as much debt but drops out after two years never breaks even because wages of college dropouts are little better than those of high school graduates. These risks are acute for high-achieving students from low-income families: Caroline M. Hoxby, a Stanford economist, found that they often don’t apply to elite colleges and wind up at subpar ones, deeply in debt.
Two-year community colleges enroll 42 percent of American undergraduates. The Center on International Education Benchmarking reports that only 13 percent of students in two-year colleges graduate in two years; that figure rises to a still-dismal 28 percent after four years. These students are often working while taking classes and are often poorly prepared for college and required to take remedial courses.
Federal programs like No Child Left Behind and Race to the Top have gone too far in using test scores to evaluate teachers. Many children are culturally disadvantaged, even if one or both parents have jobs, have no books at home, do not read to them, and park them in front of a TV set or a video game in lieu of active in-home learning. Compared with other nations where students learn several languages and have math homework in elementary school, the American system expects too little. Parental expectations also matter: homework should be emphasized more, and sports less.
Poor academic achievement has long been a problem for African-Americans and Hispanics, but now the achievement divide has extended further. Isabel V. Sawhill, an economist at the Brookings Institution, has argued that “family breakdown is now biracial.” Among lower-income whites, the proportion of children living with both parents has plummeted over the past half-century, as Charles Murray has noted.
Are there solutions? The appeal of American education as a destination for the world’s best and brightest suggests the most obvious policy solution. Shortly before his death, Steve Jobs told President Obama that a green card conferring permanent residency status should be automatically granted to any foreign student with a degree in engineering, a field in which skills are in short supply..
Richard J. Murnane, an educational economist at Harvard, has found evidence that high school and college completion rates have begun to rise again, although part of this may be a result of weak labor markets that induce students to stay in school rather than face unemployment. Other research has shown that high-discipline, “no-excuses” charter schools, like those run by the Knowledge Is Power Program and the Harlem Children’s Zone, have erased racial achievement gaps. This model suggests that a complete departure from the traditional public school model, rather than pouring in more money per se, is needed.
Early childhood education is needed to counteract the negative consequences of growing up in disadvantaged households, especially for children who grow up with only one parent. Only one in four American 4-year-olds participate in preschool education programs, but that’s already too late. In a remarkable program, Reach Out and Read, 12,000 doctors, nurses and other providers have volunteered to include instruction on the importance of in-home reading to low-income mothers during pediatric checkups.
Even in today’s lackluster labor market, employers still complain that they cannot find workers with the needed skills to operate complex modern computer-driven machinery. Lacking in the American system is a well-organized funnel between community colleges and potential blue-collar employers, as in the renowned apprenticeship system in Germany.
How we pay for education shows, in the end, how much we value it. In Canada, each province manages and finances education at the elementary, secondary and college levels, thus avoiding the inequality inherent in America’s system of local property-tax financing for public schools. Tuition at the University of Toronto was a mere $5,695 for Canadian arts and science undergraduates last year, compared with $37,576 at Harvard. It should not be surprising that the Canadian college completion rate is about 15 percentage points above the American rate. As daunting as the problems are, we can overcome them. Our economic growth is at stake.
By: Robert J. Gordon, The New York Times, September 7, 2013
As thousands of high school graduates head off to college in the next few weeks, they’ll see a lot more women than men on campus — specifically, they’ll see three female students for every two male students they spot. These scenes are dramatically different from the ones their grandparents would have seen in the 1960′s when the percentages were reversed.
The surge in women’s college enrollment appears in their graduation figures.While only about 30 percent of women (and men) older than 25 have a college degree, in recent years, women have earned about 57 percent of bachelor’s degrees. Mark J. Perry, an economics professor at the University of Michigan and scholar at the American Enterprise Institute, estimates that there are now about 4.35 million more women with college degrees in the United States than men.
That’s some progress.
Yet, progress in college degrees received (women also earn a larger share of master’s and doctor’s degrees than men do) has not turned into progress in paychecks received.
In 2011, women working full-time earned about 77 cents for each dollar that a man earned, according to data compiled by the U.S. Census Bureau and the Bureau of Labor Statistics.The gap has narrowed over time, which is good news. But, as President Obama said on the 50th anniversary of the passage of the Equal Pay Act making it illegal to discriminate in pay on the basis of sex, “does anybody here think that’s good enough?”
I sure don’t.
So, after all these years, why does the pay gap still exist? Is it because women choose to become social workers rather than rocket scientists, as some have noted? Or is it because they have decided to stay home with the kids and stop working or to work part time, as others have noted?
On the first point, rocket scientists certainly do make more than teachers. The median wage for an aerospace engineer in 2012 was $103,720, almost double the $53,400 a typical elementary school teacher could expect to make that year. It’s also true that only about 14 percent of architects and engineers are women, while more than 80 percent of elementary and middle school teachers are women. Over all occupations, women’s wages would be lower than men’s wages due to differences in occupational choices.
On the second point, fathers are more likely to work full-time than mothers. Nearly 40 percent of mothers worked part-time or not at all compared with 3 percent of fathers, according to a study by the American Association of University Women. Women who leave the labor force don’t gain much work experience so that when they return to work, they’re likely to make less than another person, male or female, with the same qualifications who has an unbroken career record.
Again, the data support this assertion. Judith Warner recently wrote for the New York Times Magazine about the cost to mothers when they leave their careers to spend more time with their families. Warner found that the women she interviewed who had returned to the work force a decade after leaving their jobs to take care of their kids were generally in lower paying, less prestigious jobs than the ones they left.
A separate study found that women who returned to work after an extended time off were paid 16 percent less than before they left the work force, while another study Warner cites found that only one-quarter of women who returned to the work force took a traditional hard-driving job, such as banking, compared with the two-thirds of women who were employed in such jobs before taking time off.
One final factor helps explain the pay gap: kids. In a paper published in the late 1990s, Columbia University professor of social work and public affairs Jane Waldfogel showed that having children has a negative impact on a woman’s wages, while it has no or even a positive effect on a man’s wages. The fact that the pay gap between women without children and women with children is larger than the pay gap between men and women further highlights the negative impact of kids on earnings. Waldfogel noted that it’s as true in 1998 as Victor Fuchs reported a decade earlier, that “the greatest barrier to economic equality is children.”
The research shows that having kids is bad for your paycheck. What the research doesn’t seem to show, however, is that many moms may actually not care.
By: Joanne Weiner, She The People, The Washington Post, August, 13, 2013
“Hoping For The Best”: In The Race For The Future, Virginia Foxx And House Republicans Are Willing To Tolerate Defeat
There’s been a fair amount of talk on Capitol Hill recently about student loans and interest rates, which led to an unsatisfying compromise in the Senate. But as part of the larger discussion, a notable lawmaker said something interesting that stood out for me.
Getting American kids into college without saddling them with massive debt shouldn’t be the government’s job, according to a prominent House Republican and possible 2014 Senate candidate. “It is not the role of the Congress to make college affordable and accessible,” Rep. Virginia Foxx (R-NC) said Wednesday morning during a committee markup of legislation that would halt federal officials from regulating for-profit educational institutions.
Foxx likened federal standards for things like the definition of a credit-hour to totalitarianism.
Well, sure, of course she did. She’s Virginia Foxx.
But it’s worth noting that there’s nothing inherently incorrect about her views on the federal role in higher education. It’s an inherently subjective question — some people believe federal policymakers have a role in making college affordable and accessible, some don’t. Foxx has her opinions on the matter, I have mine.
I’ve long hoped, however, that this generates a larger conversation about the future of the United States as a global superpower. There’s a spirited competition underway, and we have real rivals who’d be delighted to see us settle for second place. To remain on top, we’re going to need an educated workforce and electorate, and with this in mind, it makes sense if Americans were represented by a Congress that prioritized access to affordable higher-ed.
Or perhaps the nation prefers Foxx’s vision: some states will help young people get degrees; some won’t; Congress doesn’t care. Under this approach, education is of relative importance, but it’s just not a national priority.
Long-time readers have no doubt seen me mention this before, but I often think about some specific remarks President Obama made in 2009. He’d just returned from a trip to East Asia, and Obama shared an anecdote about a luncheon he attended with the then-president of South Korea.
“I was interested in education policy — they’ve grown enormously over the last 40 years. And I asked him, what are the biggest challenges in your education policy? He said, ‘The biggest challenge that I have is that my parents are too demanding.’ He said, ‘Even if somebody is dirt poor, they are insisting that their kids are getting the best education.’ He said, ‘I’ve had to import thousands of foreign teachers because they’re all insisting that Korean children have to learn English in elementary school.’ That was the biggest education challenge that he had, was an insistence, a demand from parents for excellence in the schools.
“And the same thing was true when I went to China. I was talking to the mayor of Shanghai, and I asked him about how he was doing recruiting teachers, given that they’ve got 25 million people in this one city. He said, ‘We don’t have problems recruiting teachers because teaching is so revered and the pay scales for teachers are actually comparable to doctors and other professions.’
“That gives you a sense of what’s happening around the world. There is a hunger for knowledge, an insistence on excellence, a reverence for science and math and technology and learning. That used to be what we were about.”
Right. The United States used to be about a lot of things.
But as we discussed in April, many American policymakers have shifted their focus away from insisting on excellence and towards, well, a Virginia Foxx-like attitude. Countries like South Korea and China can have their hunger for knowledge; we’ll just keep cutting education spending and hope for the best.
We’re the wealthiest country on the planet by an order of magnitude, so maybe we can just coast for a while, neglecting key priorities. Maybe we can stop looking at areas like education, energy, health care, and transportation as national problems — the way our competitors do — and can instead hope states figure something out. Someday. With some elusive resources.
Put it this way: while some countries are insisting on excellence in education, our country shrugs its shoulders while kids get thrown out of pre-schools because of budget cuts and young adults get priced out of college. Which side of the ocean is preparing for the future?
By: Steve Benen, The Maddow Blog, July 26, 2013