Thirteen Economic Facts About Social Mobility and The Role of Education

The Hamilton Project has released this short, readable, but data-packed report  on growing income  and wealth inequalities and growing achievement gaps between low and high income children.

They cannot provide data that more high-wage jobs would be created to employ the newly educated should we find the political will to close those educational gaps, but reports like this are a good way to broaden understanding of how growing inequalities are ending the American Dream of opportunity for all through success in school.

Inequality is Even Bad for People Indifferent to Inequality

It’s too easy, when teaching about class and economic inequality,  for the conversations to turn to what to do for them, as if  economic justice were primarily a matter of charity.

The Equality Trust is compiling very good resources for shifting that conversation beyond talk of safety nets and foodbanks.   Their data (based primarily in the UK but also based on studies in the U.S.) makes clear that everyone is harmed in unequal societies.

One example:  They document the correlation between income inequality in a state and the rates at which young people in that state drop out.   I can imagine sparking all sorts of conversations with students about possible explanations for this data (including, likely, conversations about the limits of correlational analysis, but those are always good conversations, too).

The Trust is working on compiling studies on the effects of inequality on areas from health care to global warming.

I’m updating my course websites with many of these links.

“The Rising Cost of Adequate”

My reading these days is done in snatches on the bus, but while stuck in traffic last week, I finished Robert Frank’s brilliant small book Falling Behind: How Rising Inequality Harms the Middle Class.

Frank opens with an intriguing thought experiment:

You’re given the choice between two worlds: World A in which you own a 4,000 square foot house but everyone else owns a 6,000 square foot house and World B, in which you own a 3,000 square foot house but everyone else lives in a 2,000 square foot house.

According to “the standard, neoclassical model of choice”, Frank argues, World A, in which everyone can consume more, is the obvious logical choice.

Yet most people, when asked, choose World B.

In chapters whimsically illustrated by graphs, photos, and cartoons, Frank demonstrates that there is much more at stake here than simple envy or greed. He acknowledges the psychic reality: that with ever-more lavish consumption at the higher ranks, the costs of simply “adequate” has risen, and the bar at which people feel relative deprivation is set ever higher (even while he also argues that owning many things does not make the wealthy happier).

Yet in times of limited access to important goods, decisions about buying a house are also decisions about whether one’s children will attend the best schools or merely mediocre schools, whether streets will be in good repair, whether drinking water will be clean, whether fire fighters will be well-equipped.

And as long as a relatively small number of people at the top of the income ladder can easily afford to outbid most everyone else for access to homes where all of these services can be taken for granted, those clamoring for their place on the rungs below will find themselves paying ever more for housing (and for cars that will be safe in collisions with the luxury vehicles of the wealthy, and for interview clothes that will position them as “one of us” on first impression).

The consequences, Frank argues, are that the middle class is working longer hours, commuting longer from more “affordable” neighborhoods, going further into debt, and withdrawing their support for public services so that more of their income can go to personal consumption rather than to taxes.

With sales of $2000 watches growing at double digit rates, Frank suggests, taxing consumption rather than income could help to level the playing field. Persons who might otherwise build an 80,000 square foot house, he argues, would suffer little if they instead lived in 60,000 square feet, but dampening the competitive frenzy for owning The Most could free up resources for rebuilding a crumbling national infrastructure, for reinvesting in public education, for personal leisure among the frenzied workforce.

I find his argument compelling, and a welcome perspective to deliberations about inequality that are more conventionally framed only in moral terms.

But I am certainly not an economist. So I wonder: is a consumption tax workable? Are there arguments against a consumption tax that Frank is missing? Are there other viable options for ending the frenzy of competitive consumption?

Private and Public Safety Nets

There was an interesting article in yesterday’s NYT on corporations that have decided that when it comes to workers, they can no longer “afford decency for decency’s sake”.

The article notes that along with declining health insurance benefits and the disappearance of pensions, companies have now begun to lay-off more experienced (and more highly paid) workers in the name of efficiency.

And when workers can no longer anticipate rising wages over a long-term commitment to a company, they also can no longer expect to finance a home, pay for their children’s education or care for elderly parents.

The article fairly points out that European companies have never been as involved in the the health care of employees or in the well-being of the elderly as American companies have historically been.

In the end though, the author notes

It would also be foolish to pretend nothing is changing. The corporate safety net of the 20th century is going away, and a fundamentally different private sector will require a fundamentally different public sector.

Yet it seems that so many of us who might provide political support for such changes in the public sector have not yet caught on that the private sector has changed so dramatically in the global economy. So many of us still believe that hard work will be rewarded, that anyone can prosper, that learning more in school will position us for rewarding and high-paying jobs.

It will be interesting to see how some of these issues play out in the upcoming presidential campaign.